##### 



United States Securities and Exchange Commission
 Washington, DC 20549
 _______________
 Form 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the quarterly period ended June 30, 2005
 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: 0-21213
 LCC International, Inc.
   Delaware
    
    54-1807038(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification Number)Incorporation or Organization)7925 Jones Branch Drive, McLean, VA
    
    22102(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (703) 873-2000
 Not Applicable
 
  o þ
 þ o
 o þ
 
 þ o




---



##### 



EXPLANATORY NOTE
(Unaudited)
   2




---



##### 



LCC International, Inc. and Subsidiaries
 Quarterly Report on Form 10-Q
For the quarter ended June 30, 2005
 INDEX
 PageNumberPART I:
    
    FINANCIAL INFORMATION
    
    4ITEM 1:
    
    FINANCIAL STATEMENTS
    
    4Condensed consolidated statements of operations for the three months and six months ended June
30, 2004 and 2005 (unaudited)
    
    4Condensed consolidated balance sheets as of December 31, 2004 (restated) and June 30, 2005 (unaudited)
    
    5Condensed consolidated statements
of cash flows for the six months ended June 30, 2004
(unaudited) and 2005 (unaudited)
    
    6Notes to condensed consolidated financial statements (unaudited)
    
    7ITEM 2:
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    14ITEM 3:
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    25ITEM 4:
    
    CONTROLS AND PROCEDURES
    
    25PART II:
    
    OTHER INFORMATION
    
    27ITEM 1:
    
    Legal proceedings
    
    27ITEM 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    27ITEM 3:
    
    Defaults upon senior securities
    
    27ITEM 4:
    
    Submission of matters to a vote of security holders
    
    27ITEM 5:
    
    Other information
    
    28ITEM 6:
    
    Exhibits and reports on Form 8-K
    
    28
 3




---



##### 



PART I: FINANCIAL INFORMATION
 Item 1: Financial Statements
 LCC International, Inc. and Subsidiaries
 Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005REVENUES
    
    $
    52,618
    
    
    $
    42,697
    
    
    $
    97,667
    
    
    $
    88,106COST OF REVENUES (exclusive of depreciation shown separately below)
    
    
    42,639
    
    
    
    39,038
    
    
    
    80,736
    
    
    
    76,315GROSS PROFIT
    
    
    9,979
    
    
    
    3,659
    
    
    
    16,931
    
    
    
    11,791OPERATING (INCOME) EXPENSE:Sales and marketing
    
    
    1,884
    
    
    
    2,022
    
    
    
    3,652
    
    
    
    4,280General and administrative
    
    
    6,600
    
    
    
    7,476
    
    
    
    12,833
    
    
    
    14,963Restructuring charge (recovery)
    
    
    (924
    )
    
    
    759
    
    
    
    (924
    )
    
    
    759Depreciation and amortization
    
    
    613
    
    
    
    724
    
    
    
    1,369
    
    
    
    1,4428,173
    
    
    
    10,981
    
    
    
    16,930
    
    
    
    21,444OPERATING INCOME (LOSS)
    
    
    1,806
    
    
    
    (7,322
    )
    
    
    1
    
    
    
    (9,653
    )OTHER INCOME (EXPENSE):Interest income
    
    
    52
    
    
    
    35
    
    
    
    111
    
    
    
    75Interest expense
    
    
    (41
    )
    
    
    (45
    )
    
    
    (92
    )
    
    
    (127
    )Other
    
    
    369
    
    
    
    (12
    )
    
    
    521
    
    
    
    (480
    )380
    
    
    
    (22
    )
    
    
    540
    
    
    
    (532
    )INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
    
    
    2,186
    
    
    
    (7,344
    )
    
    
    541
    
    
    
    (10,185
    )PROVISION FOR INCOME TAXES
    
    
    872
    
    
    
    796
    
    
    
    781
    
    
    
    1,677NET INCOME (LOSS)
    
    $
    1,314
    
    
    $
    (8,140
    )
    
    $
    (240
    )
    
    $
    (11,862
    )NET INCOME (LOSS) PER SHARE:Basic
    
    $
    0.05
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    (0.48
    )Diluted
    
    $
    0.05
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    (0.48
    )WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET INCOME (LOSS)
PER SHARE:Basic
    
    
    24,381
    
    
    
    24,425
    
    
    
    24,325
    
    
    
    24,461Diluted
    
    
    25,281
    
    
    
    24,425
    
    
    
    24,325
    
    
    
    24,461
  4




---



##### 



LCC International, Inc. and Subsidiaries
 Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 December 31,
    
    
    June 30,2004
    
    
    2005(Restated)
    
    
    (Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    21,930
    
    
    $
    13,046Restricted cash
    
    
    1,162
    
    
    
    1,101Receivables, net of allowance for doubtful accounts of $620 and $314 at
December 31, 2004 and June 30, 2005, respectively:Trade accounts receivable
    
    
    46,214
    
    
    
    43,495Unbilled receivables
    
    
    28,696
    
    
    
    28,792Due from related parties and affiliates
    
    
    80
    
    
    
    21Deferred income taxes, net
    
    
    290
    
    
    
    471Prepaid expenses and other current assets
    
    
    1,586
    
    
    
    1,748Prepaid tax receivable and prepaid taxes
    
    
    683
    
    
    
    683Total current assets
    
    
    100,641
    
    
    
    89,357Property and equipment, net
    
    
    4,218
    
    
    
    3,738Investments in affiliates
    
    
    677
    
    
    
    637Deferred
income taxes, net
    
    
    858
    
    
    
    677Goodwill
    
    
    12,246
    
    
    
    11,227Other intangibles
    
    
    602
    
    
    
    440Other assets
    
    
    1,565
    
    
    
    1,231$
    120,807
    
    
    $
    107,307LIABILITIES AND SHAREHOLDERS EQUITY:Current liabilities:Line of credit
    
    $
    147
    
    
    $
    Accounts payable
    
    
    19,790
    
    
    
    17,024Accrued expenses
    
    
    21,840
    
    
    
    24,400Accrued employee compensation and benefits
    
    
    4,850
    
    
    
    4,893Deferred revenue
    
    
    985
    
    
    
    932Income taxes payable
    
    
    1,570
    
    
    
    1,751Accrued restructuring current
    
    
    1,562
    
    
    
    2,051Other current liabilities
    
    
    239
    
    
    
    395Total current liabilities
    
    
    50,983
    
    
    
    51,446Accrued restructuring non-current
    
    
    1,339
    
    
    
    897Other liabilities
    
    
    780
    
    
    
    708Total liabilities
    
    
    53,102
    
    
    
    53,051Shareholders equity:Preferred
stock: 10,000 shares authorized; 0 shares issued and outstanding
    
    
    
    
    
    
    Class A
common stock, $0.01 par value: 70,000 shares authorized; 20,209 and 20,384 shares issued and outstanding at
December 31, 2004 and June 30, 2005, respectively
    
    
    202
    
    
    
    204Class B
common stock, $0.01 par value: 20,000 shares authorized; 4,428 shares issued and outstanding at
December 31, 2004 and June 30, 2005
    
    
    44
    
    
    
    44Paid-in capital
    
    
    107,773
    
    
    
    108,230Accumulated deficit
    
    
    (42,913
    )
    
    
    (54,775
    )Subtotal
    
    
    65,106
    
    
    
    53,703Accumulated other comprehensive income  foreign currency translation adjustments
    
    
    3,481
    
    
    
    1,435Treasury stock (159,209 shares)
    
    
    (882
    )
    
    
    (882
    )Total shareholders equity
    
    
    67,705
    
    
    
    54,256$
    120,807
    
    
    $
    107,307
  5




---



##### 



LCC International, Inc. and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Six Months EndedJune 30,2004
    
    
    2005Cash flows from operating activities:Net Loss
    
    $
    (240
    )
    
    $
    (11,862
    )Adjustments
to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,369
    
    
    
    1,442Provision for doubtful accounts
    
    
    100
    
    
    
    139Loss on equity method investment
    
    
    464
    
    
    
    168Non-cash Compensation
    
    
    
    
    
    
    27Restructuring charge (recovery)
    
    
    (924
    )
    
    
    759Changes in operating assets and liabilities:Trade, unbilled, and other receivables
    
    
    (20,411
    )
    
    
    2,564Accounts payable and accrued expenses
    
    
    11,418
    
    
    
    (163
    )Other current assets and liabilities
    
    
    (1,213
    )
    
    
    1Other non-current assets and liabilities
    
    
    (894
    )
    
    
    (1,221
    )Net cash used in operating activities
    
    
    (10,331
    )
    
    
    (8,146
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,014
    )
    
    
    (928
    )Proceeds from disposals of property and equipment
    
    
    30
    
    
    
    3Investments
    
    
    (360
    )
    
    
    (125
    )Net cash used in investing activities
    
    
    (2,344
    )
    
    
    (1,050
    )Cash flows from financing activities:Borrowings on line of credit
    
    
    10,242
    
    
    
    2,243Payments on line of credit
    
    
    (10,780
    )
    
    
    (2,411
    )Proceeds from issuance of common stock, net
    
    
    47
    
    
    
    61Proceeds from exercise of options
    
    
    836
    
    
    
    371Proceeds/purchases of short-term investments
    
    
    520
    
    
    
    Decrease in restricted cash
    
    
    28
    
    
    
    48Net cash provided by financing activities
    
    
    893
    
    
    
    312Net decrease in cash and cash equivalents
    
    
    (11,782
    )
    
    
    (8,884
    )Cash and cash equivalents at beginning of period
    
    
    28,943
    
    
    
    21,930Cash and cash equivalents at end of period
    
    $
    17,161
    
    
    $
    13,046Supplemental disclosures of cash flow information:Cash paid during the period for:Income taxes
    
    $
    182
    
    
    $
    1,301Interest
    
    
    
    
    
    
    16
  6




---



##### 



LCC International, Inc. and Subsidiaries
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (1) Description of Operations
   (2) Basis of Presentation
   7




---



##### 



(3) Equity-Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation. Accounting for Stock-Based Compensation-Transition and Disclosure Amendment of
SFAS Statement No. 123
  Three Months
    
    
    Six Months EndedEnded June 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income (loss):Net income (loss) as reported
    
    $
    1,314
    
    
    $
    (8,140
    )
    
    $
    (240
    )
    
    $
    (11,862
    )Deduct total stock-based
employee compensation
expense determined under
fair value based method
    
    
    (459
    )
    
    
    (292)
    )
    
    
    (2,171
    )
    
    
    (709
    )Pro forma net income (loss)
    
    $
    855
    
    
    $
    (8,432

    )
    
    $
    (2,411
    )
    
    $
    (12,571
    )Net income (loss) per share:As reportedBasic
    
    $
    0.05
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    (0.48
    )Diluted
    
    $
    0.05
    
    
    $
    (0.33
    )
    
    $
    (0.01
    )
    
    $
    (0.48
    )Pro formaBasic
    
    $
    0.04
    
    
    $
    (0.35
    )
    
    $
    (0.10
    )
    
    $
    (0.51
    )Diluted
    
    $
    0.03
    
    
    $
    (0.35

    )
    
    $
    (0.10
    )
    
    $
    (0.51

    )
 (4) Other Comprehensive Income (Loss)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income (loss)
    
    $
    1,314
    
    
    $
    (8,140
    )
    
    $
    (240
    )
    
    $
    (11,862
    )Other comprehensive income (loss), before tax
    
    
    (328
    )
    
    
    (1,144
    )
    
    
    (389
    )
    
    
    (2,046
    )Income tax provision related to items of comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss), net of tax
    
    
    (328
    )
    
    
    (1,144
    )
    
    
    (389
    )
    
    
    (2,046
    )Comprehensive income (loss)
    
    $
    986
    
    
    $
    (9,284
    )
    
    $
    (629
    )
    
    $
    (13,908
    )
 (5) Related Party Transactions
   8




---



##### 



(6) Restructuring Charge
   9




---



##### 



Severance
    
    
    Facilities
    
    
    Total(in thousands)Restructuring charge
    
    $
    1,030
    
    
    $
    12,492
    
    
    $
    13,522Reclassification of deferred rent
    
    
    
    
    
    
    639
    
    
    
    6391,030
    
    
    
    13,131
    
    
    
    14,161Charges against the provision:Payments for excess office space, net of sublease income
    
    
    
    
    
    
    (2,152
    )
    
    
    (2,152
    )Severance and associated costs paid
    
    
    (878
    )
    
    
    
    
    
    
    (878
    )Leasehold improvements and other assets written-off
    
    
    
    
    
    
    (1,461
    )
    
    
    (1,461
    )Other
    
    
    
    
    
    
    53
    
    
    
    53Restructuring payable as of December 31, 2002
    
    $
    152
    
    
    $
    9,571
    
    
    $
    9,723Reversal of excess severance
    
    
    (152
    )
    
    
    
    
    
    
    (152
    )Reversal for reoccupied space
    
    
    
    
    
    
    (385
    )
    
    
    (385
    )Additional charge for reduction of sublease income
    
    
    
    
    
    
    535
    
    
    
    535Restructuring charge
    
    
    (152
    )
    
    
    150
    
    
    
    (2
    )Charges against the provision:Payments for excess office space, net of sublease income
    
    
    
    
    
    
    (2,971
    )
    
    
    (2,971
    )Leasehold improvements and other assets written-off
    
    
    
    
    
    
    (564
    )
    
    
    (564
    )Other
    
    
    
    
    
    
    149
    
    
    
    149Restructuring payable as of December 31, 2003
    
    $
    
    
    
    $
    6,335
    
    
    $
    6,335Reversal for reoccupied space
    
    
    
    
    
    
    (1,166
    )
    
    
    (1,166
    )Charges against the provision:Payments for excess office space, net of sublease income
    
    
    
    
    
    
    (2,131
    )
    
    
    (2,131
    )Leasehold improvements and other assets written-off
    
    
    
    
    
    
    (214
    )
    
    
    (214
    )Other
    
    
    
    
    
    
    77
    
    
    
    77Restructuring payable as of December 31, 2004
    
    $
    
    
    
    $
    2,901
    
    
    $
    2,901Restructuring
charge
    
    
    752
    
    
    
    281
    
    
    
    1,033Reversal for
reoccupied space
    
    
    
    
    
    
    (274
    )
    
    
    (274
    )752
    
    
    
    7
    
    
    
    759Charges against the provision:Payments for excess office space, net of sublease income
    
    
    
    
    
    
    (562
    )
    
    
    (562
    )Severance
and associated costs paid
    
    
    (92
    )
    
    
    
    
    
    
    (92
    )Other
    
    
    
    
    
    
    (58
    )
    
    
    (58
    )Restructuring payable as of June 30, 2005
    
    $
    660
    
    
    $
    2,288
    
    
    $
    2,948
  December 31,
    
    
June 30,2004
(Restated)
    
    
2005Accrued
restructuring current
    
    
    1,562
    
    
    
    
    2,051Accrued
restructuring
    
    
    1,339
    
    
    
    
    897Accrued
restructuring total
    
    
    2,901
    
    
    
    
    2,948
 10




---



##### 



(7) Investments
   (8) Line of Credit
  (9) Commitments and Contingencies
  11




---



##### 



(10) Segment reporting
 Disclosures about Segments of an Enterprise and Related Information
   Americas
    
    
    EMEA
    
    
    Segment Total2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005Three Months Ended June 30,Revenues:From external customers
    
    $
    32,748
    
    
    $
    17,276
    
    
    $
    17,828
    
    
    $
    25,001
    
    
    $
    50,576
    
    
    $
    42,277Inter-segment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    32,748
    
    
    $
    17,276
    
    
    $
    17,828
    
    
    $
    25,001
    
    
    $
    50,576
    
    
    $
    42,277Income (loss) before taxes
    
    
    3,738
    
    
    
    (4,110

    )
    
    
    154
    
    
    
    1,621

    
    
    
    3,892
    
    
    
    (2,489
    )Total assets
    
    
    47,351
    
    
    
    35,371

    
    
    
    56,291
    
    
    
    59,830

    
    
    
    103,642
    
    
    
     95,201
 Americas
    
    
    EMEA
    
    
    Segment Total2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005Six Months Ended June 30,Revenues:From external customers
    
    $
    59,738
    
    
    $
    39,507

    
    
    $
    35,056
    
    
    $
    47,362
    
    
    $
    94,794
    
    
    $
    86,869Inter-segment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    59,738
    
    
    $
    39,507

    
    
    $
    35,056
    
    
    $
    47,362
    
    
    $
    94,794
    
    
    $
    86,869Income (loss) before taxes
    
    
    5,835
    
    
    
    (3,537
    )

    
    
    (728
    )
    
    

    2,483

    
    
    
    5,107
    
    
    
    (1,054
    )
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues:Revenues for reportable segments
    
    $
    50,576
    
    
    $
    42,277

    
    
    $
    94,794
    
    
    $
    86,869Revenues for non-reportable segments
    
    
    2,042
    
    
    
    420

    
    
    
    2,873
    
    
    
    1,237Total consolidated revenues
    
    $
    52,618
    
    
    $
    42,697

    
    
    $
    97,667
    
    
    $
    88,106Assets:Assets for reportable segments
    
    
    
    
    
    
    
    
    
    $
    103,642
    
    
    $
    95,201Assets not attributable to reportable segments:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    13,739
    
    
    
    7,264Restricted cash
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    233Short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Receivables
    
    
    
    
    
    
    
    
    
    
    2,686
    
    
    
    1,119Deferred and prepaid taxes
    
    
    
    
    
    
    
    
    
    
    4,909
    
    
    
    1,831Property and equipment
    
    
    
    
    
    
    
    
    
    
    951
    
    
    
    660Investments
    
    
    
    
    
    
    
    
    
    
    644
    
    
    
    623Prepaid and other
    
    
    
    
    
    
    
    
    
    
    642
    
    
    
    37623,793
    
    
    
    12,106Total consolidated assets
    
    
    
    
    
    
    
    
    
    $
    127,435
    
    
    $
    107,307
 12




---



##### 





Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Income (loss) before income taxes for reportable segments
    
    $
    3,892
    
    
    $
    (2,489
    )
    
    $
    5,107
    
    
    $
    (1,054
    )Restructuring
(charge) recovery
    
    
    924
    
    
    
    (759
    )
    
    
    924
    
    
    
    (759
    )Income (loss) before income taxes for non-reportable segments
    
    
    (2,630
    )
    
    
    (4,096
    )
    
    
    (5,490
    )
    
    
    (8,372
    )Income (loss) from operations before income taxes
    
    $
    2,186
    
    
    $
    (7,344
    )
    
    $
    541
    
    
    $
    (10,185
    )


(11) Receivables




(12) Subsequent
Event




13




---



##### 



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
   Americas:
    
    The Americas region provides the
full range of service offerings to
wireless operators and equipment
vendors through a network of project
offices in North America and South
America. In the second quarter of
2005, Americas generated
approximately 40% of our total
revenue. The decision was made to
move the headquarters for the
Americas region from Los Angeles,
California to our headquarters in
McLean, Virginia. This transition
was completed in the second quarter.EMEA:
    
    Based in London, the Europe, Middle
East and Africa region is
responsible for operations in the
U.K., Italy, Netherlands, Algeria,
Germany, Spain, Greece, Pakistan,
Saudi Arabia and the Middle East.
EMEA also undertakes projects
throughout its region and we have
recently established a marketing
office in Dubai. In the second
quarter of 2005, EMEA generated
approximately 59% of our total
revenue.Nonreportable segment:
    
    This includes our operations in
Asia, the Wireless Institute and LCC
Wireline. The decision was made to
wind down and dissolve the Wireline
business. In the second quarter of
2005, these combined operations
generated approximately 1% of our
total revenues. We provide training
to our engineers and customers
through our Wireless Institute,
which covers the latest technologies
developed and employed throughout
the world.
  14




---



##### 



Trends That Have Affected or May Affect Results of Operations and Financial Condition
  
    
    project related revenues derived from a limited set of customers in each market where we do business;
    
    the acceleration or the delay associated with the introduction of new technologies and services by our customers;
    
    the management and the services composition of our fixed price contracts;
    
    the impact of the percentage of subcontracted work (versus self perform work) on our
large programs and the associated margin degradation; and
    
    increased spending by wireless service providers in the areas of network design,
deployment and optimization.
   15




---



##### 



Results of Operations
  Revenues, Cost of Revenues and Gross Margins
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in
    
    
    (in
    
    
    (in
    
    
    (inthousands)
    
    
    thousands)
    
    
    thousands)
    
    
    thousands)Revenues:Americas
    
    $
    32,748
    
    
    $
    17,276
    
    
    $
    59,738
    
    
    $
    39,507EMEA
    
    
    17,828
    
    
    
    25,001
    
    
    
    35,056
    
    
    
    47,362Non-reportable segment
    
    
    2,042
    
    
    
    420
    
    
    
    2,873
    
    
    
    1,237$
    52,618
    
    
    $
    42,697
    
    
    $
    97,667
    
    
    $
    88,106
 16




---



##### 





(% of
    
    
    (% of
    
    
    (% of
    
    
    (% ofrevenue)
    
    
    revenue)
    
    
    revenue)
    
    
    revenue)Cost of revenues:Americas
    
    $
    27,510
    
    
    
    84.0
    %
    
    $
    19,680
    
    
    
    113.9
    %
    
    $
    50,896
    
    
    
    85.2
    %
    
    $
    39,704
    
    
    
    100.5
    %EMEA
    
    
    13,689
    
    
    
    76.8
    
    
    
    18,976
    
    
    
    75.9
    
    
    
    27,834
    
    
    
    79.4
    
    
    
    35,658
    
    
    
    75.3Non-reportable segment
    
    
    1,440
    
    
    
    70.5
    
    
    
    382
    
    
    
    91.0
    
    
    
    2,006
    
    
    
    69.8
    
    
    
    953
    
    
    
    77.0$
    42,639
    
    
    
    81.0
    %
    
    $
    39,038
    
    
    
    91.4
    %
    
    $
    80,736
    
    
    
    82.7
    %
    
    $
    76,315
    
    
    
    86.6
    %Gross margins:Americas
    
    $
    5,238
    
    
    
    16.0
    %
    
    $
    (2,404
    )
    
    
    -13.9
    %
    
    $
    8,842
    
    
    
    14.8
    %
    
    $
    (197
    )
    
    
    -0.5
    %EMEA
    
    
    4,139
    
    
    
    23.2
    
    
    
    6,025
    
    
    
    24.1
    
    
    
    7,222
    
    
    
    20.6
    
    
    
    11,704
    
    
    
    24.7Non-reportable segment
    
    
    602
    
    
    
    29.5
    
    
    
    38
    
    
    
    9.0
    
    
    
    867
    
    
    
    30.2
    
    
    
    284
    
    
    
    23.0$
    9,979
    
    
    
    19.0
    %
    
    $
    3,659
    
    
    
    8.6
    %
    
    $
    16,931
    
    
    
    17.3
    %
    
    $
    11,791
    
    
    
    13.4
    %


Americas










17




---



##### 



EMEA
    Non-reportable segments
   18




---



##### 



Operating Expense
 Three Months Ended
    
    
    Six-Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)
    
    
    (in thousands)Sales and marketingAmericas
    
    $
    795
    
    
    $
    720
    
    
    $
    1,655
    
    
    $
    1,264EMEA
    
    
    817
    
    
    
    1,211
    
    
    
    1,525
    
    
    
    2,787Nonreportable
segments
    
    
    272
    
    
    
    91
    
    
    
    472
    
    
    
    2291,884
    
    
    
    2,022
    
    
    
    3,652
    
    
    
    4,280Bad debt expense (recovery)Americas
    
    
    100
    
    
    
    60
    
    
    
    100
    
    
    
    60EMEA
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    4Nonreportable
segments
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    75100
    
    
    
    125
    
    
    
    100
    
    
    
    139General and administrativeAmericas
    
    
    481
    
    
    
    786
    
    
    
    1,011
    
    
    
    1,759EMEA
    
    
    2,774
    
    
    
    2,738
    
    
    
    5,534
    
    
    
    5,344Nonreportable
segments
    
    
    3,245
    
    
    
    3,827
    
    
    
    6,188
    
    
    
    7,7216,500
    
    
    
    7,351
    
    
    
    12,733
    
    
    
    14,824Restructuring chargeAmericas
    
    
    (29
    )
    
    
    641
    
    
    
    (29
    )
    
    
    641EMEA
    
    
    (567
    )
    
    
    
    
    
    
    (567
    )
    
    
    Nonreportable
segments
    
    
    (328
    )
    
    
    118
    
    
    
    (328
    )
    
    
    118(924
    )
    
    
    759
    
    
    
    (924
    )
    
    
    759Depreciation and amortizationAmericas
    
    
    117
    
    
    
    147
    
    
    
    235
    
    
    
    270EMEA
    
    
    394
    
    
    
    488
    
    
    
    921
    
    
    
    992Nonreportable
segments
    
    
    102
    
    
    
    89
    
    
    
    213
    
    
    
    180613
    
    
    
    724
    
    
    
    1,369
    
    
    
    1,442TotalAmericas
    
    
    1,464
    
    
    
    2,354
    
    
    
    2,972
    
    
    
    3,994EMEA
    
    
    3,418
    
    
    
    4,427
    
    
    
    7,413
    
    
    
    9,127Nonreportable
segments
    
    
    3,291
    
    
    
    4,200
    
    
    
    6,545
    
    
    
    8,323$
    8,173
    
    
    $
    10,981
    
    
    $
    16,930
    
    
    $
    21,444
    19




---



##### 



Other Income and Expense
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    

June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)
    
    
    (in thousands)Interest
income:Americas
    
    $
    10
    
    
    $
    10
    
    
    $
    19
    
    
    $
    19EMEA
    
    
    10
    
    
    
    5
    
    
    
    13
    
    
    
    11Nonreportable
segments
    
    
    32
    
    
    
    20
    
    
    
    79
    
    
    
    4552
    
    
    
    35
    
    
    
    111
    
    
    
    75Interest
expense:Americas
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (3
    )EMEA
    
    
    (41
    )
    
    
    (35
    )
    
    
    (89
    )
    
    
    (105
    )Nonreportable
segments
    
    
    
    
    
    
    (8
    )
    
    
    (1
    )
    
    
    (19
    )(41
    )
    
    
    (45
    )
    
    
    (92
    )
    
    
    (127
    )Other:Gain (loss) on equity investmentAmericas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EMEA
    
    
    
    
    
    
    (103
    )
    
    
    
    
    
    
    (103
    )Nonreportable
segments
    
    
    766
    
    
    
    591
    
    
    
    766
    
    
    
    591766
    
    
    
    488
    
    
    
    766
    
    
    
    488Impairment of assetsAmericas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EMEA
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonreportable
segments
    
    
    (181
    )
    
    
    
    
    
    
    (182
    )
    
    
    (181
    )
    
    
    
    
    
    
    (182
    )
    
    
    OtherAmericas
    
    
    (17
    )
    
    
    (1
    )
    
    
    (23
    )
    
    
    (3
    )EMEA
    
    
    31
    
    
    
    156
    
    
    
    106
    
    
    
    103Nonreportable
segments
    
    
    (230
    )
    
    
    (655
    )
    
    
    (146
    )
    
    
    (1,068
    )(216
    )
    
    
    (500
    )
    
    
    (63
    )
    
    
    (968
    )Total otherAmericas
    
    
    (17
    )
    
    
    (1
    )
    
    
    (23
    )
    
    
    (3
    )EMEA
    
    
    31
    
    
    
    53
    
    
    
    106
    
    
    
    Nonreportable
segments
    
    
    355
    
    
    
    (64
    )
    
    
    438
    
    
    
    (477
    )369
    
    
    
    (12
    )
    
    
    521
    
    
    
    (480
    )Total other
income (expense):Americas
    
    
    (7
    )
    
    
    7
    
    
    
    (6
    )
    
    
    13EMEA
    
    
    
    
    
    
    23
    
    
    
    30
    
    
    
    (94
    )Nonreportable
segments
    
    
    387
    
    
    
    (52
    )
    
    
    516
    
    
    
    (451
    )$
    380
    
    
    $
    (22
    )
    
    $
    540
    
    
    $
    (532
    )
    20




---



##### 



Income (Loss) Before Taxes
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(in thousands)
    
    (in thousands)Segment Income Before TaxesAmericas
    
    $
    3,738
    
    
    $
    (4,110
    )
    
    $
    5,835
    
    
    $
    (3,537
    )EMEA
    
    
    154
    
    
    
    1,621
    
    
    
    (728
    )
    
    
    2,483Nonreportable Segments
    
    
    (2,630
    )
    
    
    (4,096
    )
    
    
    (5,490
    )
    
    
    (8,372
    )1,262
    
    
    
    (6,585
    )
    
    
    (383
    )
    
    

(9,426
    )Restructuring (Charge) RecoveryAmericas
    
    
    29
    
    
    
    (641
    )
    
    
    29
    
    
    
    (641
    )EMEA
    
    
    567
    
    
    
    
    
    
    
    567
    
    
    
    Nonreportable Segments
    
    
    328
    
    
    
    (118
    )
    
    
    328
    
    
    
    (118
    )924
    
    
    
    (759
    )
    
    
    924
    
    
    
    (759
    )Income (Loss) Before TaxesAmericas
    
    
    3,767
    
    
    
    (4,751
    )
    
    
    5,864
    
    
    
    (4,178
    )EMEA
    
    
    721
    
    
    
    1,621
    
    
    
    (161
    )
    
    
    2,483Nonreportable Segments
    
    
    (2,302
    )
    
    
    (4,214
    )
    
    
    (5,162
    )
    
    
    (8,490
    )$
    2,186
    
    
    $
    (7,344
    )
    
    $
    541
    
    
    $
    (10,185
    ) 21




---



##### 



Tax Expense
  Net Income (Loss)
   Liquidity and Capital Resources
  Sources and Uses of Cash
 Six Months EndedJune 30, 2004
    
    
    June 30, 2005(in thousands)Net cash used in operating activities
    
    $
    (10,331
    )
    
    $
    (8,146
    )Net cash used in investing activities
    
    
    (2,344
    )
    
    
    (1,050
    )Net cash provided by (used in) financing activities
    
    
    893
    
    
    
    312Net decrease in cash and cash equivalents
    
    $
    (11,782
    )
    
    $
    (8,884
    )
   22




---



##### 



Cash Requirements
 December 31, 2004
    
    
    June 30, 2005(in
thousands)(Restated)Cash and cash equivalents
    
    $
    21,930
    
    
    $
    13,046Restricted cash
    
    
    1,162
    
    
    
    1,101Total cash and short-term investments
    
    $
    23,092
    
    
    $
    14,147Line of credit
    
    $
    147
    
    
    $
    Working capital
    
    $
    49,658
    
    
    $
    37,911
    Critical Accounting Policies
  
    
    revenue recognition;
    
    allowance for doubtful accounts;
    
    accounting for income taxes; and
    
    restructuring charge.
 Revenue recognition
  23




---



##### 



Allowance for doubtful accounts
  Accounting for income taxes
   Restructuring Charge
   Related Party Transactions
  24




---



##### 



Item 3: Quantitative and Qualitative Disclosures about Market Risk
      Item 4: Controls and Procedures   (a) Evaluation of disclosures controls and procedures
   25




---



##### 




    
    We have instituted a requirement that Company personnel responsible for preparing an
estimate of the percentage-of-completion of the Companys fixed price contracts for
financial reporting purposes confirm in writing to the Chief Financial Officer on a
monthly basis that such personnel have confirmed the accuracy of such estimate with the
project managers with firsthand knowledge of the performance status of the contracts.
    
    We have reassigned responsibility within the accounting department for preparation
and review of the calculation of the percentage of completion for large fixed price
contracts. The person to whom the responsibility has now been assigned is more
experienced in accounting for large fixed price contracts. This person will be
supervised by the new VP Finance for the Americas who will review the calculations
monthly with the preparer and with the project manager responsible for the project.
    
    We have consolidated all contract administration functions under the Chief Financial
Officer.
    
    We have increased the required scrutiny of revenue and cost recognition calculations
made with respect to all customer contracts. Monthly contract reviews for the Americas
region will be attended by the CEO, the CFO and the senior executive responsible for the
Americas. More detailed contract reporting is being developed which will allow for more
detailed review.
    
    We realigned the reporting relationships of all regional financial management such
that they now report directly to the Chief Financial Officer.
 26




---



##### 



PART II: OTHER INFORMATION
 Item 1: Legal Proceedings
  Item 2: Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
  Item 3: Defaults Upon Senior Securities
  Item 4: Submission of Matters to a Vote of Security Holders
  Proposal 1 
 Term
    
    
    
    
    
    Votes
    
    BrokerElected Director
    
    Expires
    
    Votes For(1)
    
    Withheld(1)
    
    Non-Votes(1)Mark D. Ein
    
    
    2005
    
    
    
    18,300,686
    (A)
    
    
    463,857
    (A)
    
    
    0
    (A)44,275,770
    (B)
    
    
    0
    (B)
    
    
    0
    (B)Julie A. Dobson
    
    
    2005
    
    
    
    18,300,436
    (A)
    
    
    463,607
    (A)
    
    
    0
    (A)44,275,770
    (B)
    
    
    0
    (B)
    
    
    0
    (B)Susan Ness
    
    
    2005
    
    
    
    18,298,586
    (A)
    
    
    465,707
    (A)
    
    
    0
    (A)44,275,770
    (B)
    
    
    0
    (B)
    
    
    0
    (B)Rajendra Singh
    
    
    2005
    
    
    
    17,997,413
    (A)
    
    
    766,880
    (A)
    
    
    0
    (A)44,275,770
    (B)
    
    
    0
    (B)
    
    
    0
    (B)Neera Singh
    
    
    2005
    
    
    
    17,995,163
    (A)
    
    
    769,130
    (A)
    
    
    0
    (A)44,275,770
    (B)
    
    
    0
    (B)
    
    
    0
    (B)
 Proposal 2 
 Votes
    
    
    
    Votes
    
    
    
    Votes
    
    
    
    BrokerFor(1)
    
    
    
    Against(1)
    
    
    
    Abstaining(1)
    
    
    
    Non-Votes(1)16,446,052(A)
    
    
    
    39,826(A)
    
    
    
    6,050(A)
    
    
    
    0(A)44,275,770(B)
    
    
    
    0(B)
    
    
    

0(B)
    
    
    
    0(B)
 27




---



##### 



Note (1):
    
    The shareholders are entitled to vote as a single class, with each share of the
Companys Class A Common Stock having one vote and each share of the Companys Class B Common
Stock having ten votes. (A) shows votes represented by the Companys Class A Common Stock and
(B) shows votes represented by the Companys Class B Common Stock. Item 5: Other Information
  Item 6: Exhibits and Reports on Form 8-K
  11
    
    
    
    Calculation of Net Income Per Share31.1
    
    
    
    Certification of Chief Executive Officer pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    
    Certification of Chief Financial Officer pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    
    Certification of Chief 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 Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
       28




---



##### 



29




---



##### 



Signature

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.

|                 |  |                                                                                                                                                                   
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|December 5, 2005 |  | /s/ Charles R. Waldron
    -----------------------------------------------
    Charles R. Waldron
    Senior Vice President, Chief Financial Officer and Treasurer

30