##### 



United States Securities and Exchange Commission
 Washington, DC 20549
 
 Form 10-Q/A
 Amendment
No.1
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the quarterly period ended March 31, 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
(State or Other Jurisdiction of
Incorporation or Organization)
    
    54-1807038
(I.R.S. Employer Identification Number)7925 Jones Branch Drive, McLean, VA
(Address of Principal Executive Offices)
    
    22102
(Zip Code)
 Registrants telephone number, including area code: (703) 873-2000
 Not Applicable
 
  þ o
 þ o
 o o
 
 o o




---



##### 



EXPLANATORY NOTE
( Dollars in thousands)
(Unaudited)
        
    
    Expanded the MD&A captions for operating expense and other income (expense) to include
segment information, so that the reader may reconcile segment profitability in MD&A to the
segment reporting footnote under SFAS 131.
    
    Revised the Statement of Operations to read Cost of revenue (exclusive of depreciation shown separately below).
    
    Disclosed in greater detail any events leading to changes in restructuring accruals.
 2




---



##### 



LCC International, Inc. and Subsidiaries
 Quarterly Report on Form 10-Q/A
For the quarter ended March 31, 2005
 INDEX
 PageNumberPART I:
    
    FINANCIAL
INFORMATION
    
    
    4ITEM 1:
    
    FINANCIAL STATEMENT
    
    
    4Condensed consolidated statements of operations for the three months ended March 31, 2004 and 2005 (restated and unaudited)
    
    
    4Condensed consolidated balance sheets as of December 31, 2004 (restated) and March 31, 2005 (restated and unaudited)
    
    
    5Condensed consolidated statements of cash flows for the three months ended March 31, 2004 and 2005 (restated and unaudited)
    
    
    6Notes to condensed consolidated financial statements
    
    
    7ITEM 2:
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    13ITEM 3:
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    21ITEM 4:
    
    CONTROLS AND PROCEDURES
    
    
    22PART II:
    
    OTHER INFORMATION
    
    
    23ITEM 1:
    
    Legal proceedings
    
    
    23ITEM 2:
    
    Changes in securities
    
    
    23ITEM 3:
    
    Defaults upon senior securities
    
    
    23ITEM 4:
    
    Submission of matters to a vote of security holders
    
    
    23ITEM 5:
    
    Other information
    
    
    23ITEM 6:
    
    Exhibits and reports on Form 8-K
    
    
    24
 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 EndedMarch 31,2004
    
    
    2005RestatedREVENUES
    
    $
    45,049
    
    
    $
    45,409COST OF REVENUES (exclusive of depreciation shown below)
    
    
    38,097
    
    
    
    37,277GROSS PROFIT
    
    
    6,952
    
    
    
    8,132OPERATING EXPENSES:Sales and marketing
    
    
    1,768
    
    
    
    2,258General and administrative
    
    
    6,233
    
    
    
    7,487Depreciation and amortization
    
    
    756
    
    
    
    7188,757
    
    
    
    10,463OPERATING LOSS
    
    
    (1,805
    )
    
    
    (2,331
    )OTHER INCOME (EXPENSE):Interest income
    
    
    59
    
    
    
    40Interest expense
    
    
    (51
    )
    
    
    (82
    )Other
    
    
    152
    
    
    
    (468
    )160
    
    
    
    (510
    )LOSS FROM OPERATIONS BEFORE INCOME TAXES
    
    
    (1,645
    )
    
    
    (2,841
    )EXPENSE (BENEFIT) FOR INCOME TAXES
    
    
    (91
    )
    
    
    881NET LOSS
    
    $
    (1,554
    )
    
    $
    (3,722
    )NET LOSS PER SHARE:Basic
    
    $
    (0.06
    )
    
    $
    (0.15
    )Diluted
    
    $
    (0.06
    )
    
    $
    (0.15
    )WEIGHTED AVERAGE SHARES USED IN CALCULATION OF NET LOSS PER SHARE:Basic
    
    
    24,275
    
    
    
    24,418Diluted
    
    
    24,275
    
    
    
    24,418
  4




---



##### 



LCC International, Inc. and Subsidiaries
 
 Condensed Consolidated Balance Sheets
(In thousands, except per share data)
 December 31,
    
    
    March 31,2004
    
    
    2005Restated
    
    
    Restated(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    21,930
    
    
    $
    16,901Restricted cash
    
    
    1,162
    
    
    
    1,032Receivables, net of allowance for doubtful accounts of $620 and $317 at
December 31, 2004 and March 31, 2005, respectively:Trade accounts receivable
    
    
    46,214
    
    
    
    33,806Unbilled receivables
    
    
    28,696
    
    
    
    37,631Due from related parties and affiliates
    
    
    80
    
    
    
    97Deferred income taxes, net
    
    
    290
    
    
    
    290Prepaid expenses and other current assets
    
    
    1,586
    
    
    
    1,227Prepaid tax receivable and prepaid taxes
    
    
    683
    
    
    
    684Total current assets
    
    
    100,641
    
    
    
    91,668Property and equipment, net
    
    
    4,218
    
    
    
    3,766Investments in affiliates
    
    
    677
    
    
    
    653Deferred income taxes, net
    
    
    858
    
    
    
    858Goodwill
    
    
    12,246
    
    
    
    11,896Other intangibles
    
    
    602
    
    
    
    531Other assets
    
    
    1,565
    
    
    
    1,472$
    120,807
    
    
    $
    110,844LIABILITIES AND SHAREHOLDERS EQUITY:Current liabilities:Line of credit
    
    $
    147
    
    
    $
    Accounts payable
    
    
    19,790
    
    
    
    14,462Accrued expenses
    
    
    21,840
    
    
    
    22,326Accrued employee compensation and benefits
    
    
    4,850
    
    
    
    5,473Deferred revenue
    
    
    985
    
    
    
    499Income taxes payable
    
    
    1,570
    
    
    
    1,105Accrued restructuring current
    
    
    1,562
    
    
    
    1,427Other current liabilities
    
    
    239
    
    
    
    222Total current liabilities
    
    
    50,983
    
    
    
    45,514Accrued restructuring non-current
    
    
    1,339
    
    
    
    1,252Other liabilities
    
    
    780
    
    
    
    744Total liabilities
    
    
    53,102
    
    
    
    47,510Shareholders 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 20,301 shares issued and outstanding at
December 31, 2004 and March 31, 2005, respectively
    
    
    202
    
    
    
    203Class B common stock, $0.01 par value:20,000 shares authorized; 4,428 and 4,428 shares issued and outstanding at
December 31, 2004 and March 31, 2005, respectively
    
    
    44
    
    
    
    44Paid-in capital
    
    
    107,773
    
    
    
    108,025Accumulated deficit
    
    
    (42,913
    )
    
    
    (46,635
    )Subtotal
    
    
    65,106
    
    
    
    61,637Accumulated other comprehensive income  foreign currency translation adjustments
    
    
    3,481
    
    
    
    2,579Treasury stock (159,209 shares)
    
    
    (882
    )
    
    
    (882
    )Total shareholders equity
    
    
    67,705
    
    
    
    63,334$
    120,807
    
    
    $
    110,844
  5




---



##### 



LCC International, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Three Months EndedMarch 31,2004
    
    
    2005RestatedCash flows from operating activities:Net loss
    
    $
    (1,554
    )
    
    $
    (3,722
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    756
    
    
    
    718Provision for doubtful accounts
    
    
    
    
    
    
    15Restructuring charge (recovery)Loss on equity method investment
    
    
    97
    
    
    
    28Changes in operating assets and liabilities:Trade, unbilled, and other receivables
    
    
    (6,212
    )
    
    
    3,453Accounts payable and accrued expenses
    
    
    2,298
    
    
    
    (4,219
    )Other current assets and liabilities
    
    
    (223
    )
    
    
    (662
    )Other non-current assets and liabilities
    
    
    (1,235
    )
    
    
    (668
    )Net cash used in operating activities
    
    
    (6,073
    )
    
    
    (5,057
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (460
    )
    
    
    (174
    )Investments
    
    
    (360
    )
    
    
    Net cash used in investing activities
    
    
    (820
    )
    
    
    (174
    )Cash flows from financing activities:Payments on line of credit
    
    
    (5,813
    )
    
    
    (2,411
    )Borrowings on line of credit
    
    
    5,531
    
    
    
    2,243Proceeds from issuance of common stock, net
    
    
    22
    
    
    
    30Proceeds from exercise of options
    
    
    682
    
    
    
    223Decrease of short-term investments
    
    
    520
    
    
    
    Decrease in restricted cash
    
    
    159
    
    
    
    117Net cash provided by (used in) financing activities
    
    
    1,101
    
    
    
    202Net decrease in cash and cash equivalents
    
    
    (5,792
    )
    
    
    (5,029
    )Cash and cash equivalents at beginning of period
    
    
    28,943
    
    
    
    21,930Cash and cash equivalents at end of period
    
    $
    23,151
    
    
    $
    16,901Supplemental disclosures of cash flow information:Cash paid during the quarter for:Income taxes
    
    $
    182
    
    
    $
    1,288Interest
    
    $
    
    
    
    $
    6
  6




---



##### 



LCC International, Inc. and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 (1) Restatement
    Condensed Consolidated Statement of Operations
 Three Months EndedMarch 31, 2005PreviouslyReported
    
    
    Adjustments
    
    
    RestatedRevenue:
    
    $
    42,512
    
    
    $
    2,897
    
    
    $
    45,409Cost of revenues (exclusive of
depreciation shown below)
    
    
    33,586
    
    
    
    3,691
    
    
    
    37,277Gross
Profit
    
    
    8,926
    
    
    
    (794
    )
    
    
    8,132Operating expenses:Sales and
marketing
    
    
    2,258
    
    
    
    
    
    
    
    2,258General and
administrative
    
    
    7,377
    
    
    
    110
    
    
    
    7,487Restructuring
chargeDepreciation and
amortization
    
    
    718
    
    
    
    
    
    
    
    718Total operating
expenses
    
    
    10,353
    
    
    
    110
    
    
    
    10,463Operating income
(loss)
    
    
    (1,427
    )
    
    
    (904
    )
    
    
    (2,331
    )Other income (expense)Interest
income
    
    
    (40
    )
    
    
    
    
    
    
    (40
    )Interest
expense
    
    
    82
    
    
    
    
    
    
    
    82Other
    
    
    468
    
    
    
    
    
    
    
    468Total other (income)
expense
    
    
    510
    
    
    
    
    
    
    
    510Income (loss) before
tax
    
    
    (1,937
    )
    
    
    (904
    )
    
    
    (2,841
    )Provision (benefit) for
taxes
    
    
    809
    
    
    
    72
    
    
    
    881Net income
(loss)
    
    $
    (2,746
    )
    
    $
    (976
    )
    
    $
    (3,722
    )
 7




---



##### 



Condensed Consolidated Balance Sheet
 Three Months EndedMarch 31, 2005PreviouslyReported
    
    
    Adjustments

    
    RestatedTrade accounts receivable
    
    $
    33,838
    
    
    $
    (32
    )
    
    $
    33,806Unbilled
receivables
    
    
    40,646
    
    
    
    (3,015
    )
    
    
    37,631Due from related parties and
affiliates
    
    
    109
    
    
    
    (12
    )
    
    
    97Deferred income taxes,
net
    
    
    1,148
    
    
    
    (858
    )
    
    
    290Total current assets
    
    
    95,584
    
    
    
    (3,916
    )
    
    
    91,668Total
assets
    
    
    113,902
    
    
    
    (3,058
    )
    
    
    110,844Accrued
expenses
    
    
    23,647
    
    
    
    (1,321
    )
    
    
    22,326Income taxes
payable
    
    
    1,253
    
    
    
    (148
    )
    
    
    1,105Total current
liabilities
    
    
    46,597
    
    
    
    (1,083
    )
    
    
    45,514Total
liabilities
    
    
    48,593
    
    
    
    (1,083
    )
    
    
    47,510Accumulated
deficit
    
    
    (44,660
    )
    
    
    (1,975
    )
    
    
    (46,635
    )Total liabilities and
shareholders
equity
    
    $
    113,902
    
    
    $
    (3,058
    )
    
    $
    110,844
 Condensed Consolidated Statement of Cash Flows
 Three Months EndedMarch 31, 2005Previously
    
    RestatementReported
    
    Adjustments
    
    RestatedCash flows from
operating
activities:Net income
(loss)
    
    
    (2,746
    )
    
    
    (976
    )
    
    
    (3,722
    )Adjustments to
reconcile net
income (loss) to
net cash used in
operating
activitiesDepreciations and
amortization
    
    
    718
    
    
    
    
    
    
    
    718Provision
(recovery) for
doubtful
accounts
    
    
    15
    
    
    
    
    
    
    
    15Loss on equity
method
investment
    
    
    28
    
    
    
    
    
    
    
    28Restructuring
charge
(recovery)Changes in
operating assets
and
liabilities:Trade, unbilled and
other
receivables
    
    
    6,078
    
    
    
    (2,625
    )
    
    
    3,453Accounts payable
and accrued
expenses
    
    
    (7,730
    )
    
    
    3,511
    
    
    
    (4,219
    )Other current and
non-current assets
and
liabilities
    
    
    (627
    )
    
    
    (35
    )
    
    
    (662
    )Other
non-current
assets and
liabilities
    
    
    (683
    )
    
    
    15
    
    
    
    (668
    )Net cash used in
operating
activities
    
    
    (4,947
    )
    
    
    (110
    )
    
    
    (5,057
    )
 (2) Description of Operations
   (3) Basis of Presentation
   8




---



##### 



(4) Equity-Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation.
  Three Months EndedMarch 31,2004
    
    
    2005(Restated)(in thousands, exceptper share data)Net loss as reported
    
    $
    (1,554
    )
    
    $
    (3,722
    )Deduct total stock-based employee compensation expense determined under fair value based method
    
    
    (637
    )
    
    
    (453
    )Pro forma net loss
    
    $
    (2,191
    )
    
    $
    (4,175

    )Net loss per shareAs reported:Basic
    
    $
    (0.06
    )
    
    $
    (0.15
    )Diluted
    
    $
    (0.06
    )
    
    $
    (0.15
    )Pro forma:Basic
    
    $
    (0.09
    )
    
    $
    (0.17
    )Diluted
    
    $
    (0.09
    )
    
    $
    (0.17
    )
 (5) Other Comprehensive Income (Loss)
  2004
    
    
    2005(Restated)Net loss
    
    $
    (1,554
    )
    
    $
    (3,722
    )Other comprehensive loss, before tax
    
    
    (61
    )
    
    
    (902
    )Income tax benefit related to items of comprehensive loss
    
    
    
    
    
    
    Other comprehensive loss, net of tax
    
    
    (61
    )
    
    
    (902
    )Comprehensive loss
    
    $
    (1,615
    )
    
    $
    (4,624
    )
 (6) Related Party Transactions
   9




---



##### 



(7) Restructuring Charge
   10




---



##### 



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
    
    
    $
    2,901Charges against the provision:Payments for excess office space, net of sublease income
    
    
    
    
    
    
    (212
    )
    
    
    (212
    )Other
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )Restructuring payable as of March 31, 2005
    
    $
    
    
    
    $
    2,679
    
    
    $
    2,679
  December 31,
    
    
    March 31,2004
    
    
    2005Accrued restructuring current
    
    $
    1,562
    
    
    $
    1,427Accrued restructuring
    
    
    1,339
    
    
    
    1,252Accrued restructuring total
    
    $
    2,901
    
    
    $
    2,679
 (8) Investments
  11




---



##### 



(9) Line of Credit
  (10) Commitments and Contingencies
  (11) Segment reporting
 Disclosures about Segments of an Enterprise and Related Information
   Americas
    
    
    EMEA
    
    
    Segment Total2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005(Restated)
    
    
    
    
    
    
    (Restated)
    
    
    
    
    
    
    (Restated)Three Months Ended March 31,Revenues:From external customers
    
    $
    26,990
    
    
    $
    22,231
    
    
    $
    17,228
    
    
    $
    22,361
    
    
    $
    44,218
    
    
    $
    44,592Inter-segment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    26,990
    
    
    $
    22,231
    
    
    $
    17,228
    
    
    $
    22,361
    
    
    $
    44,218
    
    
    $
    44,592Income (loss) before taxes
    
    $
    2,099
    
    
    $
    573
    
    
    $
    (885
    )
    
    $
    862
    
    
    $
    1,214
    
    
    $
    1,435Total assets
    
    $
    39,286
    
    
    $
    37,247
    
    
    $
    52,588
    
    
    $
    58,799
    
    
    $
    91,874
    
    
    $
    96,046
 12




---



##### 



Three Months EndedMarch 31,2004
    
    
    2005(Restated)Revenues:Revenues for reportable segments
    
    $
    44,218
    
    
    $
    44,592Revenues for non-reportable segments
    
    
    831
    
    
    
    817Total consolidated revenues
    
    
    45,049
    
    
    
    45,409AssetsAssets for reportable segments
    
    $
    91,874
    
    
    $
    96,046Assets not attributable to reportable segments:Cash and cash equivalents
    
    
    18,618
    
    
    
    9,856Restricted Cash
    
    
    
    
    
    
    232Receivables
    
    
    913
    
    
    
    1,175Deferred and prepaid taxes
    
    
    5,823
    
    
    
    1,831Property and equipment
    
    
    971
    
    
    
    741Investments
    
    
    1,026
    
    
    
    636Prepaid and Other
    
    
    771
    
    
    
    327Total consolidated assets
    
    $
    119,996
    
    
    $
    110,844
 (12) Receivables
  
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
   Restatement
  Overview
  13




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##### 



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
first quarter of 2005, Americas generated
approximately 49% of our total revenue The
decision has been made to move the headquarters for
the Americas region from Los Angeles, California to
LCC headquarters in McLean, Virginia. This
transition should be complete by third quarter of
2005.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, Saudi Arabia and the Middle East. In the
first quarter of 2005, EMEA generated approximately
49% of our total revenue.Nonreportable segments
    
    This includes our operations in Asia, the Wireless
Institute and LCC Wireline. The decision has been
made to wind down and dissolve the Wireline
business. In the first quarter of 2005, these
combined operations generated approximately 2% of
our total revenues. Our operations in Asia comprise
representative offices in Beijing and New Delhi,
India. We provide training to our engineers and
customers through our Wireless Institute, which
covers the latest technologies developed and
employed throughout the world.
       14




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##### 



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;
    
    our customers have faced difficulties in obtaining financing to fund the development,
expansion and upgrade of their networks;
    
    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 degradations; and
    
    increased spending by wireless service providers in the areas of network design,
deployment and optimization.
       15




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##### 



Three Months Ended March 31, 2005
Compared to
Three Months Ended March 31, 2004
 Results of Operations
  Revenues, Cost of Revenues and Gross Margins
 Three Months EndedMarch 31, 2004
    
    
    March 31, 2005(Restated)(in thousands)
    
    
    
    
    
    
    (in thousands)Revenues:Americas
    
    $
    26,990
    
    
    
    
    
    
    $
    22,231EMEA
    
    
    17,228
    
    
    
    
    
    
    
    22,361Nonreportable segments
    
    
    831
    
    
    
    
    
    
    
    817$
    45,049
    
    
    
    
    
    
    $
    45,409Cost of revenues:
    
    
    
    
    
    (% of revenue)
    
    
    
    
    
    (% of revenue)Americas
    
    $
    23,386
    
    
    
    86.6
    %
    
    $
    20,024
    
    
    
    90.1
    %EMEA
    
    
    14,145
    
    
    
    82.1
    
    
    
    16,682
    
    
    
    74.6Nonreportable segments
    
    
    566
    
    
    
    68.1
    
    
    
    571
    
    
    
    69.9$
    38,097
    
    
    
    84.6
    %
    
    $
    37,277
    
    
    
    82.1
    %Gross margins:Americas
    
    $
    3,604
    
    
    
    13.4
    %
    
    
    2,207
    
    
    
    9.9
    %EMEA
    
    
    3,083
    
    
    
    17.9
    
    
    
    5,679
    
    
    
    25.4Nonreportable segments
    
    
    265
    
    
    
    31.9
    
    
    
    246
    
    
    
    30.1$
    6,952
    
    
    
    15.4
    %
    
    $
    8,132
    
    
    
    17.9
    %
 Americas
   EMEA
  16




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##### 



Nonreportable segments
  Operating Expenses
 Three Months EndedMarch 31,2004
    
    
    2005(Restated)(in thousands)Sales and marketingAmericas
    
    $
    859
    
    
    $
    544EMEA
    
    
    709
    
    
    
    1,576Nonreportable segments
    
    
    200
    
    
    
    1381,768
    
    
    
    2,258Bad debt expense (recovery)Americas
    
    
    
    
    
    
    EMEA
    
    
    
    
    
    
    14Nonreportable segments
    
    
    
    
    
    
    
    
    
    
    14General and administrativeAmericas
    
    
    531
    
    
    
    973EMEA
    
    
    2,761
    
    
    
    2,606Nonreportable segments
    
    
    2,941
    
    
    
    3,8946,233
    
    
    
    7,473Depreciation and amortizationAmericas
    
    
    118
    
    
    
    123EMEA
    
    
    527
    
    
    
    504Nonreportable segments
    
    
    111
    
    
    
    91756
    
    
    
    718TotalAmericas
    
    
    1,508
    
    
    
    1,640EMEA
    
    
    3,997
    
    
    
    4,700Nonreportable segments
    
    
    3,252
    
    
    
    4,123Total
    
    $
    8,757
    
    
    $
    10,463
   17




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##### 



Other Income and Expense
 Three Months EndedMarch 31, 2004
    
    
    March 31, 2005(Restated)(in thousands)Interest incomeAmericas
    
    $
    9
    
    
    $
    9EMEA
    
    
    5
    
    
    
    6Nonreportable segments
    
    
    45
    
    
    $
    2559
    
    
    
    40Interest expenseAmericas
    
    
    (1
    )
    
    
    (1
    )EMEA
    
    
    (50
    )
    
    
    (70
    )Nonreportable segments
    
    
    
    
    
    
    (11
    )(51
    )
    
    
    (82
    )OtherAmericas
    
    
 (5
    )
    
    
 (2
    )EMEA
    
    
 74
    
    
    
 (53
    )Nonreportable segments
    
    
 83
    
    
    
 (413
    )152
    
    
    
 (468
    )TotalAmericas
    
    
 3
    
    
    
 6EMEA
    
    
 29
    
    
    
 (117
    )Nonreportable segments
    
    
 128
    
    
    
 (399
    )$
 160
    
    
    $
 (510
    )
  Three
Months EndedMarch 31, 2004
    
    
    March 31, 2005(Restated)(in thousands)Income (loss) before taxesSegment income before taxesAmericas
    
    $
    2,099
    
    
    $
    573EMEA
    
    
    (885
    )
    
    
    862Nonreportable segments
    
    
    (2,859
    )
    
    
    (4,276
    )$
    (1,645
    )
    
    $
    (2,841
    )
 Tax Benefit or (Expense)
  18




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##### 



Net Income or (Loss)
   Liquidity and Capital Resources
  Sources and Uses of Cash
 Three Months EndedMarch 31, 2004
    
    
    March 31, 2005(Restated)(in thousands)Net cash used in operating activities
    
    $
    (6,073
    )
    
    $
    (5,057
    )Net cash used in investing activities
    
    
    (820
    )
    
    
    (174
    )Net cash provided by (used in) financing activities
    
    
    1,101
    
    
    
    202Net decrease in cash and cash equivalents
    
    $
    (5,792
    )
    
    $
    (5,029
    )
   Cash Requirements
 December 31, 2004
    
    
    March 31, 2005(Restated)(in thousands)Cash and cash equivalents
    
    $
    21,930
    
    
    $
    16,901Restricted cash
    
    
    1,162
    
    
    
    1,032Total cash and short-term investments
    
    $
    23,092
    
    
    $
    17,933Line of credit
    
    $
    147
    
    
    $
    Working capital
    
    $
    49,658
    
    
    $
    46,154
   19




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##### 



Critical Accounting Policies
  
    
    revenue recognition;
    
    allowance for doubtful accounts;
    
    accounting for income taxes; and
    
    restructuring charge.
 Revenue recognition
  Allowance for doubtful accounts
  Accounting for income taxes
  20




---



##### 



Restructuring charge
  Related Party Transactions
  
 Item 3: Quantitative and Qualitative Disclosures about Market Risk
     21




---



##### 



Item 4: Controls and Procedures (as restated)
     
    
    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 has confirmed the accuracy of such estimate with the
project managers with firsthand knowledge of the performance status of the contracts.
 22




---



##### 




    
    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.
    
    During the second quarter of 2005, we realigned the reporting relationships of all
regional financial management such that they now report directly to the Chief Financial
Officer.
  
 PART II: OTHER INFORMATION
 
 Item 1: Legal Proceedings
  
 Item 2: Changes in Securities
  
 Item 3: Defaults Upon Senior Securities
  
 Item 4: Submission of Matters to a Vote of Security Holders
  
 Item 5: Other Information
  23




---



##### 



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.
        24




---



##### 



Signature
  November
23, 2005
    
    /s/ Charles R. WaldronCharles R. WaldronSenior Vice President, Chief FinancialOfficer and Treasurer
 25