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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 (MARK ONE)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the year ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 001-33554
 PROS HOLDINGS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    76-0168604(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)3100 Main Street, Suite 900
    
    77002Houston, Texas
    
    (Zip code)(Address of principal executive offices)
 Registrants telephone number, including area code:
(713) 335-5151
Securities Registered Pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share
    
    New York Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 o þ
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



PROS Holdings, Inc.
Annual Report on Form 10-K
Table of Contents
 PagePart IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk factors
    
    
    10Item 1B.
    
    Unresolved staff comments
    
    
    22Item 2.
    
    Properties
    
    
    22Item 3.
    
    Legal proceedings
    
    
    22Item 4.
    
    Submission of matters to a vote of security holders
    
    
    22Part IIItem 5.
    
    Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities
    
    
    23Item 6.
    
    Selected financial data
    
    
    25Item 7.
    
    Management's discussion and analysis of financial condition and results of operationsItem 7A.
    
    Quantitative and qualitative disclosures about market risk
    
    
    37Item 8.
    
    Financial statements and supplementary data
    
    
    37Item 9.
    
    Changes in and disagreements with accountants on accounting and financial disclosure
    
    
    37Item 9A.
    
    Controls and procedures
    
    
    38Item 9B.
    
    Other information
    
    
    38Part IIIItem 10.
    
    Directors, executive officers and corporate governance
    
    
    38Item 11.
    
    Executive compensation
    
    
    38Item 12.
    
    Security ownership of certain beneficial owners and management and related stockholder matters
    
    
    38Item 13.
    
    Certain relationships, related transactions and director independence
    
    
    38Item 14.
    
    Principal accountant fees and services
    
    
    38Part IVItem 15.
    
    Exhibits and financial statement schedules
    
    
    39EX-23.1EX-31.1EX-31.2EX-32.1
  1




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SIGNIFICANT RELATIONSHIPS REFERENCED IN THIS ANNUAL REPORT
  CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
   
 Part I
 
 Item 1. Business
 Overview
   2




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Industry background
    Our solution
    
    
    Scientific analytics. Our scientific analytics software product provides dynamic
visibility into pricing data and performance across pricing the different segments of a
business including markets, customers, products, distribution channels, divisions, etc.
These analytics help companies understand the pocket margin and its components and
locate detrimental pricing trends and underperforming segments of their businesses that
might otherwise be hard to identify.
 3




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
    
    Pricing execution.Our pricing execution software products (deal optimizer and
price optimizer) help companies set and implement pricing policies throughout an
enterprise and improve execution through pricing decision and negotiation support. Our
software products give our customers the ability to propagate pricing decisions to
users or to another enterprise application, such as a CRM or ERP application. Our
execution software products allow our customers to strategically manage a large number
of prices, which helps to institutionalize pricing best practices and enforce
compliance with pricing policies.
    
    Pricing optimization.Our pricing optimization software products provide
companies with pricing-related predictive analytics in the form of science-based price
guidance in order to offer frontline sales representatives easy-to-use guidelines that
help them in quoting a profitable price and to optimize their pricing decision-making.
Using market and company data, our optimization software products enable our customers
to forecast and determine an optimal price within a given set of objectives, such as
maximizing market share, revenue or profit.
 Products
  
    
    Science-based approach to pricing.Our software products enable our customers to
apply advanced pricing science to identify and address their unique and complex pricing
challenges. Our software products include a variety of advanced pricing analytics and
forecasting and optimization engines that incorporate our pricing expertise and support
real-time, high volume, individually priced transactions with accurate pricing
information.
    
    Improved business insight.Our software products enable our customers to gain
insight into their business strategy, segment and product profitability and pricing
challenges. As a result, our customers can identify and characterize the relative
attractiveness of products, customers, geographies and even individual transactions
based on sales volume and overall profitability.
    
    Enhanced planning and decision making.Our software products enhance our customers
ability to process and implement pricing policies in a systematic manner. As a result,
they are able to pursue more sophisticated and effective pricing strategies and make
more informed pricing decisions. Additionally, our software products help companies
implement best practices uniformly throughout an enterprise, from sales to marketing to
finance.
  4




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Scientific analytics
  
    
    determine pocket price and pocket margins by discrete metrics, such as by
customer, product, channel, plant, sales territory and country;
    
    understand how various price and cost elements contribute to the pocket margin;
    
    identify and understand detrimental pricing trends;
    
    understand the components of margin variance, including price, cost, volume,
product mix and exchange rate effects;
    
    understand differences in segment purchasing behavior;
    
    proactively monitor pricing performance and market conditions; and
    
    determine how individual customers contribute to overall revenue and
profitability.
 5




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Pricing execution
  Price Optimizer.
 
    
    create and manage pricing policies and rules that are aligned with corporate
strategies;
    
    automatically generate mass price updates when pricing inputs change, including
costs, competitor prices, market indices, supply availability or demand metrics;
    
    set up and manage field pricing and discounting guidelines based on pricing
policies and benchmarks; and
    
    manage pricing approval and exception thresholds and the pricing approval
workflow to ensure consistency in the pricing process and maintain transaction
histories.
 Deal Optimizer.
 
    
    more accurately understand transaction economics including the impact of
discounts, rebates, allowances, shipping terms, payment terms, replacement costs and
other factors that can influence the profitability of a transaction;
    
    communicate price targets, price floors and profitability guidelines to
appropriate decision-makers within an organization;
    
    consider important transaction context to aid in better price negotiations,
including insight into customer price history and willingness-to-pay, current and
planned inventory levels and recent trends in demand, supply, cost or competition; and
    
    evaluate transaction scenarios and allow comparisons to previous transactions
and peer group benchmarks based on relevant metrics.
 Pricing optimization
  
    
    analyze and understand factors that influence demand in conjunction with price;
    
    understand customer or segment price elasticities and customer indifferences
which supports the ability to cluster customers into segments based on purchasing
behavior;
    
    construct and execute price testing to systematically manage and evaluate
results of price changes;
    
    forecast demand and response to demand using a library of forecasting
algorithms that support a vast number of business scenarios and that consider relevant
variables; and
    
    run optimization algorithms and apply appropriate methodology to recommend
optimized prices or other business controls.
 6




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Technology
 Software architecture.
 Optimization.
 Configuration vs. customization.
 Performance and scalability.
 Data integration.
 User interface.
 Platform support.
 Science and research
   Services
 Pricing and implementation professional services
  7




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Customer support
  Customers
  Backlog
      8




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Sales and marketing
   Competition
  
    
    ability to offer integrated high-value solutions;
    
    pricing focus and domain expertise;
    
    organizational change management expertise;
    
    product architecture, functionality, performance, reliability and scalability;
    
    breadth and depth of product offerings;
    
    time to value for the customer;
    
    services organization and customer support;
    
    existing enterprise relationships;
    
    large and referenceable customer base;
    
    vendor viability; and
    
    price.
    9




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Intellectual property
  Research and development
  Employees
  Where you can find additional information
  Annual CEO Certification
  
 Item 1A. Risk factors
  10




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Risks relating to our business and industry:
 The continued deterioration of general U. S. and global economic conditions could adversely
affect our sales and operating results.
    A significant or prolonged economic downturn in industries in which we focus, may result in
our customers or prospects reducing or postponing spending on the products we offer.
  A weakening economy and changing business conditions could result in substantial defaults or
slowing of payments by our customers on our accounts receivable which could have a significant
negative impact on our business, results of operations, financial condition or liquidity.
  We focus exclusively on the pricing and revenue optimization software market, and if this
market develops more slowly than we expect, our business will be harmed.
  11




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Any downturn in sales to our target markets of manufacturing, distribution, services, hotel
and cruise, and airline would adversely affect our operating results.
  
    
    the possibility that it may be more difficult than we currently anticipate to implement
our software products in our target industries;
    
    the possibility that it may be more difficult than we currently anticipate to increase
our customer base in our target industries;
    
    the possibility that it may take more time to train our personnel in the implementation
of our software products in our target industries; and
    
    our limited experience implementing our software products in certain of our target
industries.
  Our software products require implementation projects that are subject to significant risks
and delays, the materialization of which could negatively impact the effectiveness of our
solutions, resulting in harm to our reputation, business and financial performance.
  12




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Competition from vendors of pricing solutions and enterprise applications as well as from
companies internally developing their own solutions could adversely affect our ability to sell our
software products and could result in pressure to price our software products in a manner that
reduces our margins and harms our operating results.
  
    
    pricing and revenue optimization software vendors, including a number of vendors that
provide pricing and revenue optimization software for specific industries; and
    
    large enterprise application providers that have developed offerings that include pricing
and revenue optimization functionality.
   We are subject to a lengthy sales cycle and delays or failures to complete sales may harm our
business and cause our revenue and operating income to decline in the future.
  13




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Our revenue recognition is primarily based upon our ability to estimate the efforts required
to complete our implementation projects, which may be difficult to estimate.
  Failure to sustain our historical maintenance and support renewal rates and pricing would
adversely affect our operating result.
  We might not generate increased business from our current customers, which could limit our
revenue in the future.
  If our cost estimates for fixed-fee arrangements do not accurately anticipate the cost and
complexity of implementing our software products, our profitability could be reduced and we could
experience losses on these arrangements.
  Our revenue recognition policy may cause any decreases in sales not to be reflected in our
revenue immediately.
  14




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If we fail to develop or acquire new pricing and revenue optimization functionality to enhance
our existing software products, we will not be able to grow our business and it could be harmed.
  
    
    rapid technological developments;
    
    newly emerging and changing customer requirements; and
    
    frequent product introductions, updates and functional enhancements.
   Defects or errors in our software products could harm our reputation, impair our ability to
sell our products and result in significant costs to us.
  
    
    lost or delayed market acceptance and sales of our software products;
    
    delays in payment to us by customers;
    
    injury to our reputation;
    
    diversion of our resources;
    
    legal claims, including product liability claims, against us;
    
    increased maintenance and support expenses; and
    
    increased insurance costs.
  15




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If we fail to retain our key personnel or if we fail to attract additional qualified
personnel, our operating results could be adversely affected.
  Intellectual property litigation and infringement claims may cause us to incur significant
expense or prevent us from selling our software products.
  
    
    incur substantial expenses and expend significant management efforts to defend such
claims;
    
    pay damages, potentially including treble damages, if we are found to have willfully
infringed such parties patents or copyrights;
    
    cease making, licensing or using products that are alleged to incorporate the intellectual
property of others;
    
    distract management and other key personnel from performing their duties for us;
    
    enter into potentially unfavorable royalty or license agreements in order to obtain the
right to use necessary technologies; and
    
    expend additional development resources to redesign our products.
   16




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If we fail to protect our proprietary rights and intellectual property adequately, our
business and prospects may be harmed.
      We use open source software in our products that may subject our software products to general
release or require us to re-engineer our products, which may cause harm to our business.
  17




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We utilize third-party software that we incorporate into our software products, and impaired
relations with these third parties, defects in third-party software or a third partys inability or
failure to enhance their software over time could adversely affect our operating performance and
financial condition.
  New accounting standards or interpretations of existing accounting standards, including those
related to revenue recognition, could adversely affect our operating results.
  Our international sales subject us to risks that may adversely affect our operating results.
  
    
    economic conditions in various parts of the world;
    
    unexpected changes in regulatory requirements;
    
    less protection for intellectual property rights in some countries;
    
    new and different sources of competition;
    
    multiple, conflicting and changing tax laws and regulations that may affect both our
international and domestic tax liabilities and result in increased complexity and costs;
    
    if we were to establish international offices, the difficulty of managing and staffing
such international offices and the increased travel, infrastructure and legal compliance
costs associated with multiple international locations;
    
    difficulties in enforcing contracts and collecting accounts receivable, especially in
developing countries;
    
    if more contracts become denominated in local currency, fluctuations in exchange rates;
and
    
    tariffs and trade barriers, import/export controls and other regulatory or contractual
limitations on our ability to sell or develop our products in certain foreign markets.
  18




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We may enter into acquisitions that may be difficult to integrate, fail to achieve our
strategic objectives, disrupt our business, dilute stockholder value or divert management
attention.
  
    
    difficulties in integrating the operations and personnel of the acquired companies;
    
    difficulties in maintaining acceptable standards, controls, procedures and policies;
    
    potential disruption of ongoing business and distraction of management;
    
    inability to maintain relationships with customers of the acquired business;
    
    impairment of relationships with employees and customers as a result of any integration
of new management and other personnel;
    
    difficulties in incorporating acquired technology and rights into our products and
services;
    
    unexpected expenses resulting from the acquisition; and
    
    potential unknown liabilities associated with acquired businesses.
   Our operations might be affected by the occurrence of a natural disaster or other catastrophic
event in Houston, Texas.
  Our ability to raise capital in the future may be limited, and our failure to raise capital
when needed could prevent us from executing our strategy.
  19




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We incur significant increased costs as a result of operating as a public company, and our
management will be required to devote substantial time to new compliance initiatives.
   Risks relating to ownership of our common stock:
 Market volatility may affect our stock price and the value of your investment.
   
    
    variations in our quarterly or annual operating results;
    
    decreases in market valuations of comparable companies;
    
    fluctuations in stock market prices and volumes;
    
    decreases in financial estimates by equity research analysts;
    
    announcements by our competitors of significant contracts, new products or product
enhancements, acquisitions, distribution partnerships, joint ventures or capital
commitments;
    
    departure of key personnel;
    
    changes in governmental regulations and standards affecting the software industry and our
products;
    
    sales of common stock or other securities by us in the future;
    
    damages, settlements, legal fees and other costs related to litigation, claims and other
contingencies;
    
    deterioration of the general U. S. and global economic condition; and
    
    other risks described elsewhere in this section.
 20




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Shares of our common stock are relatively illiquid
  If equity research analysts cease to publish research or reports about us or if they issue
unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
  Anti-takeover provisions in our Certificate of Incorporation and Bylaws and under Delaware law
could make an acquisition of us, which may be beneficial to our stockholders, more difficult and
may prevent attempts by our stockholders to replace or remove our current management.
  
    
    the division of our board of directors into three classes to be elected on a staggered
basis, one class each year;
    
    a prohibition on actions by written consent of our stockholders;
    
    the elimination of the right of stockholders to call a special meeting of stockholders;
    
    a requirement that stockholders provide advance notice of any stockholder nominations of
directors or any proposal of new business to be considered at any meeting of stockholders;
    
    a requirement that a supermajority vote be obtained to amend or repeal certain provisions
of our certificate of incorporation; and
    
    the ability of our board of directors to issue preferred stock without stockholder
approval.
  We do not intend to pay dividends on our common stock in the foreseeable future.
  21




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Item 1B. Unresolved staff comments
  
 Item 2. Properties
  
 Item 3. Legal proceedings
    
 Item 4. Submission of matters to a vote of security holders
  22




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Part II
 
 Item 5. Market for registrants common equity, related stockholders matters and issuer purchases of equity securities
 Market information and dividends
  Price Range ofCommon StockLow
    
    HighFor the year ended December 31, 2008First Quarter
    
    $
    10.40
    
    
    $
    15.51Second Quarter
    
    $
    9.53
    
    
    $
    13.50Third Quarter
    
    $
    6.50
    
    
    $
    12.45Fourth Quarter
    
    $
    3.13
    
    
    $
    9.40For the year ended December 31, 2009First Quarter
    
    $
    3.03
    
    
    $
    7.10Second Quarter
    
    $
    3.96
    
    
    $
    8.89Third Quarter
    
    $
    6.70
    
    
    $
    8.55Fourth Quarter
    
    $
    7.22
    
    
    $
    10.64
  23




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Performance graph
   
 
 (1)
    
    The graph assumes that $100 was invested on June 28, 2007, in our common
stock (at the closing price on the date of our initial public offering), the S&P 500
and the NASDAQ Computer Index and further assumes all dividends were reinvested. No
cash dividends have been paid on our common stock for the periods presented above. 6/28/2007
    
    6/30/2007
    
    9/30/2007
    
    12/31/2007
    
    3/31/2008
    
    6/30/2008
    
    9/30/2008
    
    12/31/2008
    
    3/31/2009
    
    6/30/2009
    
    9/30/2009
    
    12/31/2009PRO
    
    $
    100.00
    
    
    $
    101.95
    
    
    $
    92.14
    
    
    $
    149.77
    
    
    $
    95.80
    
    
    $
    85.73
    
    
    $
    71.68
    
    
    $
    43.89
    
    
    $
    35.50
    
    
    $
    61.98
    
    
    $
    64.27
    
    
    $
    79.01S&P 500
    
    $
    100.00
    
    
    $
    99.84
    
    
    $
    101.56
    
    
    $
    97.67
    
    
    $
    87.98
    
    
    $
    85.14
    
    
    $
    77.48
    
    
    $
    60.08
    
    
    $
    53.07
    
    
    $
    61.15
    
    
    $
    70.31
    
    
    $
    74.17NASDAQ Computer Index
    
    $
    100.00
    
    
    $
    99.51
    
    
    $
    105.33
    
    
    $
    111.31
    
    
    $
    88.88
    
    
    $
    93.22
    
    
    $
    78.74
    
    
    $
    59.34
    
    
    $
    62.20
    
    
    $
    77.17
    
    
    $
    90.17
    
    
    $
    101.37
 Issuer purchase of equity securities
   24




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Equity Compensation Plan Information
  I
    
    
    II
    
    
    IIINumber of securitiesremaining availablefor future issuanceNumber of securities to be
    
    
    Weighted-average
    
    
    under plansissued upon exercise of
    
    
    exercise price of
    
    
    (excluding securitiesPlan Category
    
    outstanding options
    
    
    outstanding options
    
    
    listed in Column (I))Equity compensation plans approved by security holders
    
    
    
    
    
    $
    
    
    
    
    Equity compensation plans not approved by security holders
    
    
    3,687,527
    
    
    
    8.52
    
    
    
    35,857Total
    
    
    3,687,527
    
    
    $
    8.52
    
    
    
    35,857
  
 Item 6. Selected financial data
  Year Ended December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005Selected consolidated statement of operations data:Total revenue
    
    $
    68,783
    
    
    $
    75,588
    
    
    $
    62,079
    
    
    $
    46,027
    
    
    $
    35,130Gross profit
    
    
    50,138
    
    
    
    56,336
    
    
    
    44,135
    
    
    
    30,422
    
    
    
    21,749Income from operations
    
    
    7,367
    
    
    
    13,933
    
    
    
    11,006
    
    
    
    6,829
    
    
    
    3,339Net income
    
    
    5,516
    
    
    
    10,757
    
    
    
    10,517
    
    
    
    7,025
    
    
    
    3,440Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    (460
    )
    
    
    (852
    )Net earnings attributable to common stockholders
    
    $
    5,516
    
    
    $
    10,757
    
    
    $
    10,435
    
    
    $
    6,565
    
    
    $
    2,587Net earnings attributable to common
stockholders per share:Basic
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.45
    
    
    $
    0.33
    
    
    $
    0.19Diluted
    
    $
    0.21
    
    
    $
    0.40
    
    
    $
    0.45
    
    
    $
    0.32
    
    
    $
    0.16Weighted average number of shares:Basic
    
    
    25,711
    
    
    
    26,121
    
    
    
    23,026
    
    
    
    19,649
    
    
    
    13,891Diluted
    
    
    26,431
    
    
    
    26,569
    
    
    
    23,434
    
    
    
    20,604
    
    
    
    20,012
 December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005Selected consolidated balance sheet data:Cash and cash equivalents
    
    $
    62,449
    
    
    $
    51,979
    
    
    $
    44,378
    
    
    $
    42,540
    
    
    $
    38,490Working capital
    
    
    50,755
    
    
    
    41,741
    
    
    
    33,917
    
    
    
    27,575
    
    
    
    27,079Total assets
    
    
    85,329
    
    
    
    76,967
    
    
    
    68,980
    
    
    
    63,046
    
    
    
    50,290Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,283
    
    
    
    25,269Total stockholders equity
    
    $
    55,039
    
    
    $
    43,752
    
    
    $
    33,688
    
    
    $
    10,677
    
    
    $
    4,044
 25




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Item 7. Managements discussion and analysis of financial condition and results of operations
 Overview
      Background
  26




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Trends and uncertainties
  
    
    Difficult economic conditions.We believe the market for pricing and margin
optimization software is underpenetrated and in the early innovator stage of adoption.
The world economies were in a recession for the past year. Prior to the recession, the
market demand for our software products had been increasing over the past several
years; however, the current economy continues to be challenging which may have a
negative impact on the adoption of pricing and margin optimization software. We believe
our solutions provide value to our customers during periods of growth as well as in
recessions, but it is uncertain the extent to which a slowdown in technology investment
will effect our business.
    
    Variability in revenue among industries and geography.Historically a substantial
portion of our revenue has come from the airline industry. However, as we began to
diversify our product offering, we saw our revenue growth driven by increases in sales
to non-airline industry customers in manufacturing, distribution, services and hotel and
cruise. From a geographical standpoint, we have diversification in revenue with 59% of
revenue in 2009 outside the United States. The current economic environment could
change our trends of revenue within industries and across geographies if certain
industries or geographies are more impacted than others.
    
    Research and experimentation tax credit. At the end of 2009, Congress recessed
without reinstating the Research & Experimentation, or R&E, tax credit beyond the
current expiration date of December 31, 2009. Since its enactment in 1981, Congress has
reinstated on a retroactive basis the R&E tax credit several times. However, unless the
R&E tax credit is reinstated, we will record Federal income taxes in 2010 at the enacted
federal rate of 35%, net of other tax credits that may benefit us, if any.
 Discussion of consolidated financial information
 Revenue:
  License and implementation revenue.
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Maintenance and support revenue.
  Revenue distribution
  Cost of revenue
 Cost of license and implementation revenue.
 Cost of maintenance and support revenue.
 Operating expenses
 Selling, general and administrative.
 Research and development.
 28




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Income taxes
    Deferred revenue and unbilled receivables
  Critical accounting policies and estimates
   Revenue recognition
 License and implementation.
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Maintenance and support.
 Allowance for doubtful accounts
  Share-based compensation
  Stock options.
  Restricted stock units.
 30




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##### Table of Contents



Accounting for income taxes
    Results of operations
 Comparison of year ended December 31, 2009 with year ended December 31, 2008
 Revenue:
 Year Ended December 31,2009
    
    
    2008As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of total revenue
    
    
    Amount
    
    
    of total revenue
    
    
    Variance $
    
    
    Variance %License and implementation
    
    $
    43,684
    
    
    
    64%
    
    
    $
    53,923
    
    
    
    71%
    
    
    $
    (10,239
    )
    
    
    (19)%Maintenance and support
    
    
    25,099
    
    
    
    36%
    
    
    
    21,665
    
    
    
    29%
    
    
    
    3,434
    
    
    
    16%Total
    
    $
    68,783
    
    
    
    100%
    
    
    $
    75,588
    
    
    
    100%
    
    
    $
    (6,805
    )
    
    
    (9)%
 License and implementation.
 Maintenance and support.
 31




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##### Table of Contents



Cost of revenue and gross profit:
 Year Ended December 31,2009
    
    
    2008As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of related revenue
    
    
    Amount
    
    
    of related revenue
    
    
    Variance $
    
    
    Variance %Cost of license and
implementation
    
    $
    13,893
    
    
    
    32%
    
    
    $
    14,894
    
    
    
    28%
    
    
    $
    (1,001
    )
    
    
    (7)%Cost of maintenance and
support
    
    
    4,752
    
    
    
    19%
    
    
    
    4,358
    
    
    
    20%
    
    
    
    394
    
    
    
    9%Total cost of revenue
    
    $
    18,645
    
    
    
    27%
    
    
    $
    19,252
    
    
    
    25%
    
    
    $
    (607
    )
    
    
    (3)%Gross profit
    
    $
    50,138
    
    
    
    73%
    
    
    $
    56,336
    
    
    
    75%
    
    
    $
    (6,198
    )
    
    
    (11)%
 Cost of license and implementation.
 Cost of maintenance and support.
 Gross profit.
 Operating expenses:
 Year Ended December 31,2009
    
    
    2008As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of total revenue
    
    
    Amount
    
    
    of total revenue
    
    
    Variance $
    
    
    Variance %Selling, general and administrative
    
    $
    22,635
    
    
    
    33%
    
    
    $
    22,094
    
    
    
    29%
    
    
    $
    541
    
    
    
    2%Research and development
    
    
    20,136
    
    
    
    29%
    
    
    
    20,309
    
    
    
    27%
    
    
    
    (173
    )
    
    
    (1)%Total operating expenses
    
    $
    42,771
    
    
    
    62%
    
    
    $
    42,403
    
    
    
    56%
    
    
    $
    368
    
    
    
    1%
 Selling, general and administrative expenses.
 Research and development expenses.
 32




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##### Table of Contents



Other income (expense):
 Year Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    Variance $
    
    
    Variance %Interest income
    
    $
    196
    
    
    $
    1,112
    
    
    $
    (916
    )
    
    
    (82)%Other income
    
    $
    196
    
    
    $
    1,112
    
    
    $
    (916
    )
    
    
    (82)%
 Interest income.
 Income tax provision:
 Year Ended December 31,(Dollars in thousands)
    
    2009
    
    2008
    
    Variance $
    
    Variance %Effective tax rate
    
    
    27
    %
    
    
    28
    %
    
    
    n/a
    
    
    
    1%Income tax provision
    
    $
    2,047
    
    
    $
    4,288
    
    
    $
    (2,241
    )
    
    
    (52)%
 Income tax provision.
 Comparison of year ended December 31, 2008 with year ended December 31, 2007
 Revenue:
 Year Ended December 31,2008
    
    
    2007As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of total revenue
    
    
    Amount
    
    
    of total revenue
    
    
    Variance $
    
    
    Variance %License and implementation
    
    $
    53,923
    
    
    
    71%
    
    
    $
    43,159
    
    
    
    70%
    
    
    $
    10,764
    
    
    
    25%Maintenance and support
    
    
    21,665
    
    
    
    29%
    
    
    
    18,920
    
    
    
    30%
    
    
    
    2,745
    
    
    
    15%Total
    
    $
    75,588
    
    
    
    100%
    
    
    $
    62,079
    
    
    
    100%
    
    
    $
    13,509
    
    
    
    22%
 License and implementation.
 Maintenance and support.
 33




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##### Table of Contents



Cost of revenue and gross profit:
 Year Ended December 31,2008
    
    
    2007As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of related revenue
    
    
    Amount
    
    
    of related revenue
    
    
    Variance $
    
    
    Variance %Cost of license and
implementation
    
    $
    14,894
    
    
    
    28%
    
    
    $
    13,227
    
    
    
    31%
    
    
    $
    1,667
    
    
    
    13%Cost of maintenance and
support
    
    
    4,358
    
    
    
    20%
    
    
    
    4,717
    
    
    
    25%
    
    
    
    (359
    )
    
    
    (8)%Total cost of
revenue
    
    $
    19,252
    
    
    
    25%
    
    
    $
    17,944
    
    
    
    29%
    
    
    $
    1,308
    
    
    
    7%Gross profit
    
    $
    56,336
    
    
    
    75%
    
    
    $
    44,135
    
    
    
    71%
    
    
    $
    12,201
    
    
    
    28%
 Cost of license and implementation.
 Cost of maintenance and support.
 Gross profit.
 Operating expenses:
 Year Ended December 31,2008
    
    
    2007As a percentage
    
    
    
    
    
    
    As a percentage(Dollars in thousands)
    
    Amount
    
    
    of total revenue
    
    
    Amount
    
    
    of total revenue
    
    
    Variance $
    
    
    Variance %Selling, general and administrative
    
    $
    22,094
    
    
    
    29%
    
    
    $
    16,292
    
    
    
    26%
    
    
    $
    5,802
    
    
    
    36%Research and development
    
    
    20,309
    
    
    
    27%
    
    
    
    16,837
    
    
    
    27%
    
    
    
    3,472
    
    
    
    21%Total operating expenses
    
    $
    42,403
    
    
    
    56%
    
    
    $
    33,129
    
    
    
    53%
    
    
    $
    9,274
    
    
    
    28%
 Selling, general and administrative expenses.
 Research and development expenses.
 34




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##### Table of Contents



Other income (expense):
 Year Ended December 31,(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    Variance $
    
    
    Variance %Interest income
    
    $
    1,112
    
    
    $
    1,623
    
    
    $
    (511
    )
    
    
    (31
    )%Interest expense
    
    
    
    
    
    
    (869
    )
    
    
    869
    
    
    
    (100
    )%Other income (expense), net
    
    $
    1,112
    
    
    $
    754
    
    
    $
    358
    
    
    
    47
    %
 Interest income.
 Interest expense.
 Income tax provision:
 Year Ended December 31,(Dollars in thousands)
    
    2008
    
    2007
    
    Variance $
    
    Variance %Effective tax rate
    
    
    28
    %
    
    
    11
    %
    
    
    n/a
    
    
    
    17
    %Income tax provision
    
    $
    4,288
    
    
    $
    1,243
    
    
    $
    3,045
    
    
    
    
 Income tax provision.
 Liquidity and capital resources:
    35




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##### Table of Contents



For the Year Ended December 31,(Dollars in thousands)
    
    2009
    
    2008
    
    2007Net cash provided by operating activities
    
    $
    11,463
    
    
    $
    13,823
    
    
    $
    10,024Net cash used in investing activities
    
    
    (1,111
    )
    
    
    (1,208
    )
    
    
    (1,678
    )Net cash provided by (used in) financing activities
    
    
    118
    
    
    
    (5,014
    )
    
    
    (6,508
    )Cash and cash equivalents (end of period)
    
    $
    62,449
    
    
    $
    51,979
    
    
    $
    44,378
 Cash flow analysis:
    Stock repurchases
  36




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##### Table of Contents



Contractual obligations
  Payment due by periodLess than(Dollars in thousands)

    
    1 year
    
    
    1 to 3 years
    
    
    3 to 5 years
    
    
    TotalOperating leases
    
    $
    1,282
    
    
    $
    746
    
    
    $
    
    
    
    $
    2,028Total contractual obligations
    
    $
    1,282
    
    
    $
    746
    
    
    $
    
    
    
    $
    2,028
  Off-balance sheet arrangements
  Recently issued accounting pronouncements
  
 Item 7A. Quantitative and qualitative disclosures about market risk
 Foreign currency risk
  
 Item 8. Financial statements and supplementary data
  
 Item 9. Change in and disagreements with accountants on accounting and financial disclosure
  37




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##### Table of Contents



Item 9A. Controls and procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and that our receipts
and expenditures are being made only in accordance with authorizations of our management
and members of our board of directors; and
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on our financial statements.
     Managements plan for remediation
  
    
    formalize and document the existing contract review by the legal department in which
non-standard terms and conditions for each new sales contract are identified;
    
    implement a new checklist to enhance the documentation and evaluation of revenue
recognition criteria for each new sales contract to provide for more in-depth analysis and
ensure appropriate revenue recognition for  each contract; and
    
    design and implement additional training programs to provide our personnel with an
improved level of knowledge of the complexities related to software revenue recognition
and the application of GAAP commensurate with their responsibilities and our financial
reporting requirements.
  Changes in Internal Control over Financial Reporting
  
 Item 9B. Other information
  
 Part III
 
 Item 10. Directors, executive officers and corporate governance
  
 Item 11. Executive compensation
  
 Item 12. Security ownership of certain beneficial owners and management and related stockholder matters
  
 Item 13. Certain relationships, related transactions and director independence
  
 Item 14. Principal accountant fees and services
  38




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##### Table of Contents



Part IV
 
 Item 15. Exhibits and financial statements schedules
 (a)(1) Financial Statements
  (a)(2) Financial Statement Schedules
   (a)(3) Exhibits
  3.1
    
    
    Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.1.1 of the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).3.2
    
    
    Amended and Restated Bylaws (incorporated by reference to Exhibit
3.3 of the Registrants Form 8-K filed with the Securities and
Exchange Commission on August 27, 2008).4.1
    
    
    Specimen certificate for shares of common stock (incorporated by
reference to the exhibit of the same number to the Registrants
Form S-1 Registration Statement (Registration No. 333-141884),
declared effective by the Securities and Exchange Commission on
June 27, 2007).10.1
    
    
    1999 Equity Incentive Plan, as amended to date, and form of stock
option agreement (incorporated by reference to the exhibit 10.2
to the Registrants Form S-1 Registration Statement (Registration
No. 333-141884), declared effective by the Securities and
Exchange Commission on June 27, 2007).10.2
    
    
    2007 Equity Incentive Plan and form of stock option agreement
(incorporated by reference to the exhibit 10.3 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).10.3
    
    
    Stock Purchase and Stockholders Agreement, dated June 8, 1998, by
and among Registrant (as successor in interest to PROS Strategic
Solutions, Inc.) and certain stockholders (incorporated by
reference to the exhibit 10.4 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.3.1
    
    
    Amendment to Stock Purchase and Stockholders Agreement dated
March 26, 2007 by and among Registrant (as successor in interest
to PROS Strategic Solutions, Inc.) and certain stockholders.
(incorporated by reference to the exhibit 10.4.1 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).10.5
    
    
    Registration Rights Agreement, dated May 25, 1999, by and between
Registrant (as successor in interest to PROS Strategic Solutions,
Inc.) and David Samuel Coats (incorporated by reference to the
exhibit 10.6 to the Registrants Form S-1 Registration Statement
(Registration No. 333-141884), declared effective by the
Securities and Exchange Commission on June 27, 2007).10.6
    
    
    Registration Rights Agreement, dated April 13, 2000, by and
between Registrant (as successor in interest to PROS Strategic
Solutions, Inc.) and Robert Salter (incorporated by reference to
the exhibit 10.7 to the Registrants Form S-1 Registration
Statement (Registration No. 333-141884), declared effective by
the Securities and Exchange Commission on June 27, 2007).10.7
    
    
    Registration Rights Agreement, dated June 8, 2007, by and among
Registrant, Mariette M. Woestemeyer and Ronald F. Woestemeyer
(incorporated by reference to the exhibit 10.8 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).
 39




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##### Table of Contents



10.8
    
    
    Office Lease, dated January 31, 2001, by and between PROS Revenue
Management L.P. and Houston Community College System
(incorporated by reference to the exhibit 10.10 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).10.8.1
    
    
    First Amendment to Office Lease, dated May 31, 2006, by and
between PROS Revenue Management L.P. and Houston Community
College System (incorporated by reference to the exhibit 10.10.1
to the Registrants Form S-1 Registration Statement (Registration
No. 333-141884), declared effective by the Securities and
Exchange Commission on June 27, 2007).10.9*
    
    
    Employment Agreement, dated September 30, 2005, by and between
PROS Revenue Management L.P. and Albert E. Winemiller
(incorporated by reference to the exhibit 10.11 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).10.9.1*
    
    
    Immediately Exercisable Stock Option Grant, dated April 2, 2007,
by and between Registrant and Albert E. Winemiller (incorporated
by reference to the exhibit 10.11.1 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.9.2*
    
    
    Amendment No.1 to Employment Agreement, dated April 2, 2007, by
and between Registrant and Albert E. Winemiller (incorporated by
reference to the exhibit 10.11.2 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.9.3*
    
    
    Amendment No. 2 to Employment Agreement, dated March 24, 2009, by
and between PROS Revenue Management L.P. and Albert E. Winemiller
(incorporated by reference to the exhibit 10.4 to the
Registrants Form 8-K filed the Securities and Exchange
Commission on March 26, 2009).10.10*
    
    
    Employment Agreement, dated September 30, 2005, by and between
PROS Revenue Management L.P. and Charles H. Murphy (incorporated
by reference to the exhibit 10.12 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.10.1*
    
    
    Immediately Exercisable Incentive Stock Option Grant, dated
September 30, 2005, by and between Registrant and Charles H.
Murphy (incorporated by reference to the exhibit 10.12.1 to the
Registrants Form S-1 Registration Statement (Registration No.
333-141884), declared effective by the Securities and Exchange
Commission on June 27, 2007).10.10.2*
    
    
    Immediately Exercisable Stock Option Grant, dated April 2, 2007,
by and between Registrant and Charles H. Murphy (incorporated by
reference to the exhibit 10.12.2 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.10.3*
    
    
    Amendment No.1 to Employment Agreement, dated April 2, 2007, by
and between Registrant and Charles H. Murphy (incorporated by
reference to the exhibit 10.12.3 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.10.4*
    
    
    Amendment No. 2 to Employment Agreement, dated March 24, 2009, by
and between PROS Revenue Management L.P. and Charles H. Murphy.
(incorporated by reference to the exhibit 10.4 to the
Registrants Form 8-K filed the Securities and Exchange
Commission on March 26, 2009).10.11*
    
    
    Employment Agreement, dated January 15, 1999, by and between PROS
Revenue Management L.P. and Ronald F. Woestemeyer (incorporated
by reference to the exhibit 10.12 to the Registrants Form S-1
Registration Statement (Registration No. 333-141884), declared
effective by the Securities and Exchange Commission on June 27,
2007).10.11.1*
    
    
    Amendment No. 1 to Employment Agreement, dated February 2, 2004,
by and between PROS Revenue Management L.P. and Ronald F.
Woestemeyer (incorporated by reference to the exhibit 10.13.1 to
the Registrants Form S-1 Registration Statement (Registration
No. 333-141884), declared effective by the Securities and
Exchange Commission on June 27, 2007).10.12*
    
    
    Form of Indemnification Agreement entered into among Registrant,
its affiliates and its directors and officers (incorporated by
reference to the exhibit number 10.16 to the Registrants Form
S-1 Registration Statement (Registration No. 333-141884),
declared effective by the Securities and Exchange Commission on
June 27, 2007).10.13*
    
    
    Employment Agreement, dated April 24, 2008, by and between PROS
Revenue Management L.P. and Andres Reiner  Senior Vice-President
Product Development. (incorporated by reference to the exhibit
10.17 to the Registrants Form 10-Q filed the Securities and
Exchange Commission on August 7, 2008).10.13.1*
    
    
    Amendment No. 1 to Employment Agreement, dated March 24, 2009, by
and between PROS Revenue Management L.P. and Andres Reiner -
Senior Vice-President Product Development. (incorporated by
reference to the exhibit 10.1 to the Registrants Form 8-K filed
the Securities and Exchange Commission on March 26, 2009).
 40




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##### Table of Contents



21.1
    
    
    List of Subsidiaries (incorporated by reference to the exhibit of
the same number to the Registrants Form S-1 Registration
Statement (Registration No. 333-141884), declared effective by
the Securities and Exchange Commission on June 27, 2007).23.1#
    
    
    Consent of PricewaterhouseCoopers LLP (filed herewith).31.1#
    
    
    Certification of Chief Executive Officer pursuant to Exchange Act
Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes Oxley Act of 2002(filed herewith).31.2#
    
    
    Certification of Chief Financial Officer pursuant to Exchange Act
Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002(filed herewith).32.1#
    
    
    Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002(filed herewith).
 
 
    
    Constitutes management contracts or compensatory arrangements#
    
    Filed with this report. 41




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##### Table of Contents



Signatures
  PROS Holdings Inc.By:
    /s/ Albert E. WinemillerAlbert E. WinemillerPresident and Chief Executive Officer   Signatures
    
    Title
    
    Date/s/ Albert E. Winemiller

Albert E. Winemiller
    
    President, Chief Executive Officer
And Chairman of the
Board(Principal Executive Officer)
    
    March 9, 2010/s/ Charles H. Murphy

Charles H. Murphy
    
    Executive Vice President and Chief
Financial Officer (Principal
Accounting Officer)
    
    March 9, 2010/s/ Ronald F. Woestemeyer

Ronald Woestemeyer
    
    Executive Vice President, Strategic
Business Planning and Director
    
    March 9, 2010/s/ Ellen Keszler
    
    Director
    
    March 9, 2010Ellen Keszler/s/ Greg B. Petersen
    
    Director
    
    March 9, 2010Greg B. Petersen/s/ William Russell
    
    Director
    
    March 9, 2010William Russell/s/ Timothy V. Williams
    
    Director
    
    March 9, 2010Timothy V. Williams/s/ Mariette M. Woestemeyer
    
    Director
    
    March 9, 2010Mariette M. Woestemeyer
 42




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##### Table of Contents



PROS Holdings, Inc.
Index to the Consolidated Financial Statements
 PageReport of independent registered public accounting firm
    
    
    F-2Consolidated balance sheets at December 31, 2009 and 2008
    
    
    F-3Consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007
    
    
    F-4Consolidated statements of cash flows for the years ended December 31, 2009, 2008 and 2007
    
    
    F-5Consolidated statements of redeemable preferred stock and stockholders equity for the years ended December 31, 2009, 2008 and 2007
    
    
    F-6Notes to the consolidated financial statements
    
    
    F-7Schedule II  valuation and qualifying accounts
    
    
    F-22




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
   
 F-2




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##### Table of Contents



PROS Holdings, Inc.
 
 Consolidated Balance Sheets
 (In thousands, except share amounts)
 December 31,2009
    
    
    2008Assets:Current assets:Cash and cash equivalents
    
    $
    62,449
    
    
    $
    51,979Accounts and unbilled receivables, net of allowance
of $1,300 and $1,900, respectively
    
    
    12,035
    
    
    
    16,552Prepaid and other current assets
    
    
    4,143
    
    
    
    3,238Total current assets
    
    
    78,627
    
    
    
    71,769Property and equipment, net
    
    
    2,959
    
    
    
    2,901Other long term assets, net
    
    
    3,743
    
    
    
    2,297Total assets
    
    $
    85,329
    
    
    $
    76,967Liabilities and Stockholders Equity:Current liabilities:Accounts payable
    
    $
    1,198
    
    
    $
    1,088Accrued liabilities
    
    
    3,199
    
    
    
    3,293Accrued payroll and other employee benefits
    
    
    4,510
    
    
    
    4,493Deferred revenue
    
    
    14,099
    
    
    
    16,288Other current liabilities
    
    
    4,866
    
    
    
    4,866Total current liabilities
    
    
    27,872
    
    
    
    30,028Long-term deferred revenue
    
    
    2,418
    
    
    
    3,187Commitments and contingencies (Note 10)Stockholders equity:Preferred stock, $0.001 par value, 5,000,000 shares authorized
none issued
    
    
    
    
    
    
    Common stock, $0.001 par value, 75,000,000 shares
authorized, 30,163,508 and 30,095,846 shares issued, respectively,
25,745,923 and 25,678,261 shares outstanding, respectively
    
    
    30
    
    
    
    30Additional paid-in capital
    
    
    63,439
    
    
    
    57,668Treasury stock, 4,417,585 common shares, at cost
    
    
    (13,938
    )
    
    
    (13,938
    )Retained earnings (deficit)
    
    
    5,508
    
    
    
    (8
    )Total stockholders equity
    
    
    55,039
    
    
    
    43,752Total liabilities and stockholders equity
    
    $
    85,329
    
    
    $
    76,967
 The accompanying notes are an integral part of these consolidated financial statements.
 F-3




---



##### Table of Contents



PROS Holdings, Inc.
 
 Consolidated Statements of Operations
 (In thousands, except share and per share data)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Revenue:License and implementation
    
    $
    43,684
    
    
    $
    53,923
    
    
    $
    43,159Maintenance and support
    
    
    25,099
    
    
    
    21,665
    
    
    
    18,920Total revenue
    
    
    68,783
    
    
    
    75,588
    
    
    
    62,079Cost of revenue:License and implementation
    
    
    13,893
    
    
    
    14,894
    
    
    
    13,227Maintenance and support
    
    
    4,752
    
    
    
    4,358
    
    
    
    4,717Total cost of revenue
    
    
    18,645
    
    
    
    19,252
    
    
    
    17,944Gross profit
    
    
    50,138
    
    
    
    56,336
    
    
    
    44,135Operating expenses:Selling, general and administrative
    
    
    22,635
    
    
    
    22,094
    
    
    
    16,292Research and development
    
    
    20,136
    
    
    
    20,309
    
    
    
    16,837Income from operations
    
    
    7,367
    
    
    
    13,933
    
    
    
    11,006Other income:Interest income
    
    
    196
    
    
    
    1,112
    
    
    
    1,623Interest expense
    
    
    
    
    
    
    
    
    
    
    (869
    )Income before income tax provision
    
    
    7,563
    
    
    
    15,045
    
    
    
    11,760Income tax provision
    
    
    2,047
    
    
    
    4,288
    
    
    
    1,243Net income
    
    
    5,516
    
    
    
    10,757
    
    
    
    10,517Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    (82
    )Net income attributable to common stockholders
    
    $
    5,516
    
    
    $
    10,757
    
    
    $
    10,435Net earnings attributable to common
stockholders per share:Basic
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.45Diluted
    
    $
    0.21
    
    
    $
    0.40
    
    
    $
    0.45Weighted average number of shares:Basic
    
    
    25,710,569
    
    
    
    26,120,613
    
    
    
    23,026,163Diluted
    
    
    26,430,817
    
    
    
    26,569,074
    
    
    
    23,433,981
 The accompanying notes are an integral part of these consolidated financial statements.
 F-4




---



##### Table of Contents



PROS Holdings, Inc.
 
 Consolidated Statements of Cash Flows
 (In thousands)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Operating activities:Net income
    
    $
    5,516
    
    
    $
    10,757
    
    
    $
    10,517Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation
    
    
    1,283
    
    
    
    1,363
    
    
    
    1,182Stock based compensation
    
    
    5,475
    
    
    
    4,021
    
    
    
    1,601Deferred income taxes
    
    
    (1,563
    )
    
    
    (821
    )
    
    
    (1,871
    )Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    418Provision for doubtful
accounts
    
    
    (566
    )
    
    
    288
    
    
    
    360Amortization of
capitalized costs
    
    
    203
    
    
    
    1,120
    
    
    
    1,088Changes in operating assets and liabilities:Accounts receivable
    
    
    4,377
    
    
    
    (669
    )
    
    
    (183
    )Unbilled receivables
    
    
    1,932
    
    
    
    (1,064
    )
    
    
    (1,284
    )Prepaid expenses and
other
    
    
    (639
    )
    
    
    (260
    )
    
    
    (1,515
    )Accounts payable,
accrued liabilities and accrued payroll
    
    
    (1,597
    )
    
    
    (340
    )
    
    
    (221
    )Deferred revenue
    
    
    (2,958
    )
    
    
    (572
    )
    
    
    (68
    )Net cash provided by operating activities
    
    
    11,463
    
    
    
    13,823
    
    
    
    10,024Investing activities:Purchases of property and equipment
    
    
    (1,111
    )
    
    
    (1,208
    )
    
    
    (1,678
    )Net cash used in investing activities
    
    
    (1,111
    )
    
    
    (1,208
    )
    
    
    (1,678
    )Financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    20,000Payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (20,000
    )Proceeds from initial public offering, net of underwriters costs
    
    
    
    
    
    
    
    
    
    
    52,365Dividend on common stock
    
    
    
    
    
    
    
    
    
    
    (41,328
    )Proceeds from follow on offering
    
    
    
    
    
    
    
    
    
    
    1,028Redemption of redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    (17,365
    )Exercise of stock options
    
    
    118
    
    
    
    286
    
    
    
    709Exercise of stock warrants
    
    
    
    
    
    
    
    
    
    
    410Initial public offering costs
    
    
    
    
    
    
    
    
    
    
    (1,793
    )Secondary offering costs
    
    
    
    
    
    
    (300
    )
    
    
    (116
    )Purchase of treasury stock
    
    
    
    
    
    
    (5,000
    )
    
    
    Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (418
    )Net cash provided by (used in) financing activities
    
    
    118
    
    
    
    (5,014
    )
    
    
    (6,508
    )Net increase in cash and cash
equivalents
    
    
    10,470
    
    
    
    7,601
    
    
    
    1,838Cash and cash equivalents:Beginning of period
    
    
    51,979
    
    
    
    44,378
    
    
    
    42,540End of period
    
    $
    62,449
    
    
    $
    51,979
    
    
    $
    44,378Supplemental disclosure of cash flow information:Cash paid during period for:Taxes
    
    $
    4,407
    
    
    $
    4,895
    
    
    $
    3,412Interest
    
    $
    
    
    
    $
    
    
    
    $
    869
 The accompanying notes are an integral part of these consolidated financial statements.
 F-5




---



##### Table of Contents



PROS Holdings, Inc.
 
 Consolidated Statements of Redeemable Preferred Stock and Stockholders Equity
 (In thousands, except share data)
 Preferred StockSeries AConvertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    Common
    
    
    
    
    
    
    
    
    
    Accumulated
    
    TotalRedeemable
    
    Redeemable
    
    Common Stock
    
    Paid-In
    
    Stock
    
    Treasury Stock
    
    (Deficit)
    
    StockholdersShares
    
    Amount
    
    Shares
    
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Warrants
    
    Shares
    
    Amount
    
    Earnings
    
    EquityBalances at December 31, 2006
    
    
    
    
    
    
    2,627,282
    
    
    
    
    17,283
    
    
    
    19,733,689
    
    
    
    23
    
    
    
    7,812
    
    
    
    226
    
    
    
    3,847,040
    
    
    
    (8,938
    )
    
    
    11,553
    
    
    
    10,676Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    962,050
    
    
    
    2
    
    
    
    707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    709Accretion of redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    (82
    )Redemption of redeemable preferred stock
    
    
    
    
    
    
    (2,627,282
    )
    
    
    
    (17,365
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    
    
    
    
    636
    
    
    
    (226
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410Follow on offering, net of issuance costs incurred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,000
    
    
    
    
    
    
    
    613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,601Issuance of common stock in connection with the initial public offering, net of issuance costs incurred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,118,750
    
    
    
    5
    
    
    
    50,567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,572Common stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,575
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,753
    )
    
    
    (41,328
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,517
    
    
    
    10,517Balance at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,079,489
    
    
    
    30
    
    
    
    53,361
    
    
    
    
    
    
    
    3,847,040
    
    
    
    (8,938
    )
    
    
    (10,765
    )
    
    
    33,688Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,317
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,021Stock repurchase program
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (570,545
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570,545
    
    
    
    (5,000
    )
    
    
    
    
    
    
    (5,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,757
    
    
    
    10,757Balance at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,678,261
    
    
    
    30
    
    
    
    57,668
    
    
    
    
    
    
    
    4,417,585
    
    
    
    (13,938
    )
    
    
    (8
    )
    
    
    43,752Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,662
    
    
    
    
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118Tax
impact of exercise of non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,475Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,516
    
    
    
    5,516Balance at December 31, 2009
    
    
    
    $
    
    
    
    
    
    
    $
    
    
    
    
    25,745,923
    
    
    $
    30
    
    
    $
    63,439
    
    
    $
    
    
    
    
    4,417,585
    
    
    $
    (13,938
    )
    
    $
    5,508
    
    
    $
    55,039
 The accompanying notes are an integral part of these consolidated financial statements.
 F-6




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##### Table of Contents



PROS Holdings, Inc.
 
 Notes to Consolidated Financial Statements
 1. Organization and summary of significant accounting policies
 Nature of operations
  Initial public offering
   Follow on offering
  Principles of consolidation and basis of presentation
   F-7




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##### Table of Contents



Dollar amounts
  Use of estimates
  Cash and cash equivalents
  Financial instruments
  Prepaid expenses and other assets
  Property and equipment, net
  Treasury stock
  F-8




---



##### Table of Contents



Revenue recognition
       Foreign currency
  Research and development
  F-9




---



##### Table of Contents



Impairment of long-lived assets
  Software development costs
  Share-based compensation
  Stock options.
  Restricted stock units.
  Product warranties
  F-10




---



##### Table of Contents



Income taxes
   Earnings per share
  Recent accounting pronouncements
  2. Accounts receivable and contracts in progress
  December 31,2009
    
    
    2008Accounts receivable
    
    $
    11,112
    
    
    $
    14,297Unbilled receivables
    
    
    2,223
    
    
    
    4,155Total receivables
    
    
    13,335
    
    
    
    18,452Less: allowance for doubtful accounts
    
    
    (1,300
    )
    
    
    (1,900
    )Accounts receivable, net
    
    $
    12,035
    
    
    $
    16,552
  F-11




---



##### Table of Contents



December 31,2009
    
    
    2008Costs and estimated earnings
recognized to date
    
    $
    67,549
    
    
    $
    79,436Progress billings to date
    
    
    (81,843
    )
    
    
    (94,756
    )Total
    
    $
    (14,294
    )
    
    $
    (15,320
    )
   December 31,2009
    
    
    2008Unbilled receivables
    
    $
    2,223
    
    
    $
    4,155Deferred revenue
    
    
    (16,517
    )
    
    
    (19,475
    )Total
    
    $
    (14,294
    )
    
    $
    (15,320
    )
  3. Earnings per share
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007Numerator:Net income attributable to
common stockholders
    
    $
    5,516
    
    
    $
    10,757
    
    
    $
    10,435Denominator:Weighted average shares (basic)
    
    
    25,711
    
    
    
    26,121
    
    
    
    23,026Dilutive effect of stock options and restricted stock units
    
    
    720
    
    
    
    448
    
    
    
    408Weighted average shares (diluted)
    
    
    26,431
    
    
    
    26,569
    
    
    
    23,434Basic earnings per share
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.45Diluted earnings per share
    
    $
    0.21
    
    
    $
    0.40
    
    
    $
    0.45
  4. Property and equipment, net
 F-12




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##### Table of Contents



Estimated
    
    
    December 31,useful life
    
    
    2009
    
    
    2008Furniture and fixtures
    
    7-10 years
    
    $
    1,909
    
    
    $
    1,947Computers and equipment
    
    3-10 years
    
    
    7,560
    
    
    
    6,639Software
    
    2-5 years
    
    
    1,720
    
    
    
    1,688Leasehold improvements
    
    Shorter of lease
 term or useful life
    
    
    1,038
    
    
    
    1,038Less: accumulated depreciation
    
    
    
    
    
    
    (9,268
    )
    
    
    (8,411
    )Property and equipment, net
    
    
    
    
    
    $
    2,959
    
    
    $
    2,901
  5. Fair value measurements
        6. Debt
 .
 F-13




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##### Table of Contents



7. Stockholders equity
 Preferred stock financing
  Series A preferred stock
  Redeemable preferred stock
    Common stock dividends
  Common stock warrants
  Stock repurchase
  F-14




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##### Table of Contents



8. Share-based compensation
 Employee share-based compensation plans:
   For the Year Ended December 31,Award type
    
    2009
    
    2008Stock option
    
    
    2,356
    
    
    
    2,537Restricted stock unit
    
    
    1,332
    
    
    
    350
 1999 plan.
 2007 plan.
   F-15




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##### Table of Contents



Stock Options:
  Number of shares
    
    
    Weighted average
    
    
    Aggregate(in thousands)
    
    under option
    
    
    exercise price
    
    
    intrinsic value (1)Outstanding, December 31, 2008
    
    
    2,522
    
    
    $
    10.18Granted
    
    
    
    
    
    
    Forfeited
    
    
    (103
    )
    
    
    11.10Exercised
    
    
    (63
    )
    
    
    1.89Outstanding, December 31, 2009
    
    
    2,356
    
    
    $
    10.34
    
    
    $
    5,337Exercisable December 31, 2009
    
    
    1,411
    
    
    $
    9.31
    
    
    $
    3,892
 
 (1)
    
    The aggregate intrinsic value was calculated based on the positive difference between
the estimated fair value of the Companys common stock on December 31, 2009 of $10.35 and
the exercise price of the underlying options.  2008Volatility
    
    
    48.0
    %Risk-free interest rate
    
    
    3.0
    %Expected option life in years
    
    
    4.6Dividend yield
    
    
    
    Options outstanding
    
    
    Options exercisableOutstanding as of
    
    
    Weighted average
    
    
    
    
    
    
    Exercisable as of
    
    
    Weighted averageDecember 31, 2009
    
    
    remaining contractual
    
    
    Weighted average
    
    
    December 31, 2009
    
    
    remaining contractual
    
    
    Weighted averageRange of exercise prices

    
    (in thousands)
    
    
    life (in years)
    
    
    exercise price
    
    
    (in thousands)
    
    
    life (in years)
    
    
    exercise price$0.26-$1.00
    
    
    87
    
    
    
    5.8
    
    
    $
    0.61
    
    
    
    87
    
    
    
    5.8
    
    
    $
    0.61$1.01-$3.00
    
    
    13
    
    
    
    1.2
    
    
    $
    2.95
    
    
    
    13
    
    
    
    1.2
    
    
    $
    2.95$3.01-$6.00
    
    
    979
    
    
    
    7.2
    
    
    $
    6.00
    
    
    
    665
    
    
    
    7.2
    
    
    $
    6.00$6.01-$11.00
    
    
    191
    
    
    
    7.8
    
    
    $
    10.08
    
    
    
    125
    
    
    
    7.8
    
    
    $
    10.45$11.01-$16.73
    
    
    1,086
    
    
    
    8.1
    
    
    $
    15.19
    
    
    
    521
    
    
    
    8.1
    
    
    $
    14.882,356
    
    
    
    7.6
    
    
    $
    10.34
    
    
    
    1,411
    
    
    
    7.6
    
    
    $
    9.31
 Restricted Stock Units:
  F-16




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##### Table of Contents



Weighted averageNumber of
    
    
    grant date(in thousands)
    
    shares
    
    
    fair valueUnvested at December 31, 2008
    
    
    350
    
    
    $
    5.51Granted
    
    
    991
    
    
    
    5.32Vested
    
    
    (5
    )
    
    
    Forfeited
    
    
    (4
    )
    
    
    4.60Unvested at December 31, 2009
    
    
    1,332
    
    
    $
    5.27
  9. Income taxes
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    3,328
    
    
    $
    4,739
    
    
    $
    2,987State and Foreign
    
    
    282
    
    
    
    370
    
    
    
    1273,610
    
    
    
    5,109
    
    
    
    3,114Deferred:Federal
    
    
    (1,563
    )
    
    
    (821
    )
    
    
    (1,871
    )Income tax provision
    
    $
    2,047
    
    
    $
    4,288
    
    
    $
    1,243
  Year Ended December 31,2009
    
    
    2008
    
    
    2007Provision at the U.S. federal statutory rate
    
    $
    2,647
    
    
    $
    5,266
    
    
    $
    4,116Increase (decrease) resulting from:State income taxes, net of federal taxes
    
    
    119
    
    
    
    177
    
    
    
    58Foreign income taxes, net of federal taxes
    
    
    99
    
    
    
    98
    
    
    
    25Nondeductible expenses
    
    
    117
    
    
    
    129
    
    
    
    101Domestic production activities
    
    
    (98
    )
    
    
    (178
    )
    
    
    (144
    )Incremental benefits for tax credits
    
    
    (783
    )
    
    
    (981
    )
    
    
    (998
    )Change in tax rate/income subject
to lower tax rates and other
    
    
    (109
    )
    
    
    (259
    )
    
    
    (111
    )Change in valuation allowance
    
    
    55
    
    
    
    36
    
    
    
    (1,804
    )$
    2,047
    
    
    $
    4,288
    
    
    $
    1,243
   F-17




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##### Table of Contents



2009
    
    
    2008Current deferred tax asset:Accruals not currently deductible
    
    $
    2,313
    
    
    $
    2,216Total current deferred tax asset
    
    
    2,313
    
    
    
    2,216Noncurrent deferred tax asset:Property and equipment
    
    
    (387
    )
    
    
    (108
    )Share-based compensation
    
    
    3,801
    
    
    
    2,056FTC carryforwards
    
    
    178
    
    
    
    123Total noncurrent deferred tax assets
    
    
    3,592
    
    
    
    2,071Less: valuation allowance
    
    
    (178
    )
    
    
    (123
    )Total non current deferred tax assets
    
    
    3,414
    
    
    
    1,948Total net deferred tax asset
    
    $
    5,727
    
    
    $
    4,164
    10. Commitments and contingencies
 Litigation:
  F-18




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##### Table of Contents



Indemnification:
  Lease commitments:
   11. Segment and geographic information
    F-19




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##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007Revenue
    
    
    Percent
    
    
    Revenue
    
    
    Percent
    
    
    Revenue
    
    
    PercentThe Americas:United States of America
    
    $
    28,305
    
    
    
    41%
    
    
    $
    35,091
    
    
    
    46%
    
    
    $
    22,777
    
    
    
    36%Other
    
    
    3,786
    
    
    
    6%
    
    
    
    3,751
    
    
    
    5%
    
    
    
    5,304
    
    
    
    9%Subtotal
    
    
    32,091
    
    
    
    47%
    
    
    
    38,842
    
    
    
    51%
    
    
    
    28,081
    
    
    
    45%Europe, the
Middle East and Africa:United Kingdom
    
    
    3,708
    
    
    
    6%
    
    
    
    6,321
    
    
    
    8%
    
    
    
    7,135
    
    
    
    12%Germany
    
    
    3,588
    
    
    
    5%
    
    
    
    3,469
    
    
    
    5%
    
    
    
    2,513
    
    
    
    4%Other
    
    
    18,840
    
    
    
    27%
    
    
    
    17,070
    
    
    
    23%
    
    
    
    14,321
    
    
    
    23%Asia Pacific
    
    
    10,556
    
    
    
    15%
    
    
    
    9,886
    
    
    
    13%
    
    
    
    10,029
    
    
    
    16%Subtotal
    
    
    36,692
    
    
    
    53%
    
    
    
    36,746
    
    
    
    49%
    
    
    
    33,998
    
    
    
    55%Total revenue
    
    $
    68,783
    
    
    
    100%
    
    
    $
    75,588
    
    
    
    100%
    
    
    $
    62,079
    
    
    
    100%
 12. Concentrations of credit risk
   13. Related-party transactions
  14. Employee retirement savings plan
  F-20




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##### Table of Contents



15. Quarterly results (Unaudited)
  Quarters EndedDecember 31,
  
    

    September 30,
  
    

    June 30,
  
    

    March 31,
  
    

    December 31,
  
    

    September 30,
  
    

    June 30,
  
    

    March 31,(Dollars in thousands, except per share data)
    
    2009
    
    2009
    
    2009
    
    2009
    
    2008
    
    2008
    
    2008
    
    2008Total revenue
    
    $
    16,921
    
    
    $
    16,510
    
    
    $
    17,326
    
    
    $
    18,026
    
    
    $
    19,765
    
    
    $
    19,291
    
    
    $
    18,612
    
    
    $
    17,920Gross profit
    
    $
    12,304
    
    
    $
    12,219
    
    
    $
    12,407
    
    
    $
    13,208
    
    
    $
    14,630
    
    
    $
    14,422
    
    
    $
    13,957
    
    
    $
    13,327Income from operations
    
    $
    1,551
    
    
    $
    1,088
    
    
    $
    2,073
    
    
    $
    2,655
    
    
    $
    3,805
    
    
    $
    3,393
    
    
    $
    3,205
    
    
    $
    3,530Net income
    
    $
    1,192
    
    
    $
    798
    
    
    $
    1,536
    
    
    $
    1,990
    
    
    $
    3,585
    
    
    $
    2,359
    
    
    $
    2,241
    
    
    $
    2,572Net earnings attributable to common
stockholders per share:Basic
    
    $
    0.05
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.10Diluted
    
    $
    0.04
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.10
 16. Subsequent events
  F-21




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Schedule II
Valuation and Qualifying Accounts
 Balance at
    
    Additions
charged to
    
    
    
    
    
    Balance atbeginning
    
    costs and
    
    
    
    
    
    end ofof period
    
    expenses
    
    Deductions (1)
    
    periodAllowance for doubtful
accounts2009
    
    $
    1,900
    
    
    $
    (566
    )
    
    $
    (34
    )
    
    $
    1,3002008
    
    $
    1,550
    
    
    $
    288
    
    
    $
    62
    
    
    $
    1,9002007
    
    $
    1,190
    
    
    $
    395
    
    
    $
    (35
    )
    
    $
    1,550Valuation allowance2009
    
    $
    123
    
    
    $
    99
    
    
    $
    (44
    )
    
    $
    1782008
    
    $
    87
    
    
    $
    99
    
    
    $
    (63
    )
    
    $
    1232007
    
    $
    1,891
    
    
    $
    
    
    
    $
    (1,804
    )
    
    $
    87
 
 (1)
    
    Represents uncollectible accounts written off, net of
recoveries for allowance for doubtful accounts, and the utilization of tax
assets that previously had a valuation allowance for deferred tax assets F-22