Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


FORM 10-Q

 


 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2007

OR

 

¨ 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 0-24343

 


Answerthink, Inc.

(Exact name of Registrant as specified in its charter)

 


 

FLORIDA   65-0750100

(State or other jurisdiction of

Incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

1001 Brickell Bay Drive, Suite 3000

Miami, Florida

  33131
(Address of principal executive offices)   (Zip Code)

(305) 375-8005

(Registrant’s telephone number, including area code)

 


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.    YES   x     NO   ¨

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ¨     Accelerated Filer   x     Non-Accelerated Filer   ¨

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ¨     NO   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of July 30, 2007, there were 45,326,290 shares of common stock outstanding.

 



Table of Contents

Answerthink, Inc.

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

  
  Consolidated Balance Sheets as of June 29, 2007 and December 29, 2006 ( unaudited )    3
  Consolidated Statements of Operations for the Quarters and Six Months Ended June 29, 2007 and June 30, 2006 ( unaudited )    4
  Consolidated Statements of Cash Flows for the Quarters and Six Months Ended June 29, 2007 and June 30, 2006 ( unaudited )    5
  Notes to Consolidated Financial Statements ( unaudited )    6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   12

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   15

Item 4. Controls and Procedures

   15

PART II OTHER INFORMATION

Item 1. Legal Proceedings

   17

Item 5. Other Information

   17

Item 6. Exhibits

   17

SIGNATURES

   18

INDEX TO EXHIBITS

   19

 

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PART I-FINANCIAL INFORMATION

 

Item 1. Financial Statements

Answerthink, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

     June 29,     December 29,  
     2007     2006  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 20,865     $ 19,585  

Accounts receivable and unbilled revenue, net of allowance of $2,079 and $1,851 at June 29, 2007 and December 29, 2006, respectively

     34,905       35,818  

Prepaid expenses and other current assets

     2,326       1,558  
                

Total current assets

     58,096       56,961  

Restricted cash

     600       600  

Property and equipment, net

     5,110       5,183  

Other assets

     3,212       3,870  

Goodwill, net

     68,278       66,652  
                

Total assets

   $ 135,296     $ 133,266  
                

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 4,935     $ 5,427  

Accrued expenses and other liabilities

     28,943       24,773  
                

Total current liabilities

     33,878       30,200  

Accrued expenses and other liabilities, non-current

     4,338       4,611  
                

Total liabilities

     38,216       34,811  
                

Commitments and contingencies

     —         —    

Shareholders’ equity:

    

Preferred stock, $.001 par value, 1,250,000 shares authorized, none issued and outstanding

     —         —    

Common stock, $.001 par value, 125,000,000 shares authorized; 44,515,183 and 44,659,255 shares issued and outstanding at June 29, 2007 and December 29, 2006, respectively

     52       52  

Additional paid-in capital

     281,457       279,621  

Treasury stock, at cost, 7,666,583 and 7,157,655 shares at June 29, 2007 and December 29, 2006, respectively

     (25,616 )     (23,867 )

Accumulated deficit

     (160,071 )     (158,703 )

Accumulated other comprehensive income

     1,258       1,352  
                

Total shareholders’ equity

     97,080       98,455  
                

Total liabilities and shareholders’ equity

   $ 135,296     $ 133,266  
                

The accompanying notes are an integral part of the consolidated financial statements.

 

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Answerthink, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

     Quarter Ended     Six Months Ended  
     June 29,
2007
    June 30,
2006
    June 29,
2007
    June 30,
2006
 

Revenues:

        

Revenues before reimbursements

   $ 40,505     $ 43,950     $ 76,666     $ 88,846  

Reimbursements

     5,007       5,046       8,723       9,981  
                                

Total revenues

     45,512       48,996       85,389       98,827  

Costs and expenses:

        

Cost of service:

        

Personnel costs before reimbursable expenses (includes $360 and $326 and $624 and $546 of stock compensation expense in the quarters and six months ended June 29, 2007 and June 30, 2006, respectively)

     23,267       24,996       44,783       51,460  

Reimbursable expenses

     5,007       5,046       8,723       9,981  
                                

Total cost of service

     28,274       30,042       53,506       61,441  

Selling, general and administrative costs (includes $701 and $819 and $1,445 and $1,675 of stock compensation expense in the quarters and six months ended June 29, 2007 and June 30, 2006, respectively)

     15,843       16,603       33,347       34,396  

Restructuring costs

     —         —         —         6,313  

Loss from misappropriation, net of collections

     —         23       (350 )     302  
                                

Total costs and operating expenses

     44,117       46,668       86,503       102,452  
                                

Income (loss) from operations

     1,395       2,328       (1,114 )     (3,625 )

Other income (expense):

        

Interest income

     215       163       455       353  

Interest expense

     (91 )     (38 )     (93 )     (143 )
                                

Income (loss) before income taxes

     1,519       2,453       (752 )     (3,415 )

Income taxes

     68       332       135       697  
                                

Net income (loss)

   $ 1,451     $ 2,121     $ (887 )   $ (4,112 )
                                

Basic net income (loss) per common share:

        

Net income (loss) per common share

   $ 0.03     $ 0.05     $ (0.02 )   $ (0.09 )

Weighted average common shares outstanding

     44,713       44,626       44,746       44,572  

Diluted net income (loss) per common share:

        

Net income (loss) per common share

   $ 0.03     $ 0.05     $ (0.02 )   $ (0.09 )

Weighted average common and common equivalent shares outstanding

     45,834       46,594       44,746       44,572  

The accompanying notes are an integral part of the consolidated financial statements.

 

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Answerthink, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 29,     June 30,  
     2007     2006  

Cash flows from operating activities:

    

Net loss

   $ (887 )   $ (4,112 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Write-off of leasehold improvements

     —         715  

Depreciation and amortization

     1,773       3,098  

Provision for doubtful accounts

     99       330  

Gain on foreign currency translation

     (431 )     (391 )

Non-cash compensation expense

     2,069       2,221  

Gain on sale of property and equipment

     (18 )     (27 )

Changes in assets and liabilities:

    

Decrease (increase) in accounts receivable and unbilled revenue

     700       (1,822 )

Decrease (increase) in prepaid expenses and other assets

     (297 )     223  

Decrease in accounts payable

     (489 )     (687 )

Increase (decrease) in accrued expenses and other liabilities

     1,345       (812 )
                

Net cash provided by (used in) operating activities

     3,864       (1,264 )

Cash flows from investing activities:

    

Purchases of property and equipment

     (1,052 )     (1,345 )

Proceeds from sales of property and equipment

     24       29  

Decrease in restricted cash

     —         3,657  

Proceeds from calls, sales and maturities of marketable investments

     —         5,000  

Cash used in acquisition of business, net of cash acquired

     —         (8,783 )
                

Net cash used in investing activities

     (1,028 )     (1,442 )

Cash flows from financing activities:

    

Repayments of borrowings

     —         (1,101 )

Repayment of loan payable

     —         (3,657 )

Proceeds from issuance of common stock

     221       752  

Repurchases of common stock

     (1,774 )     —    
                

Net cash used in financing activities

     (1,553 )     (4,006 )
                

Effect of exchange rate on cash

     (3 )     (126 )
                

Net increase (decrease) in cash and cash equivalents

     1,280       (6,838 )

Cash and cash equivalents at beginning of period

     19,585       18,103  
                

Cash and cash equivalents at end of period

   $ 20,865     $ 11,265  
                

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 3     $ 22  

Cash paid for income taxes

   $ 120     $ —    

The accompanying notes are an integral part of the consolidated financial statements.

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The consolidated financial statements of Answerthink , Inc. (“Answerthink” or the “Company”) include the accounts of the Company and all of its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries which we are required to consolidate. We consolidate the assets, liabilities, and results of operations of entities in accordance with Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements , Statement of Financial Accounting Standards (“SFAS”) No. 94, Consolidation of All Majority-Owned Subsidiaries – an amendment of ARB No. 51, with related amendments of Accounting Principles Board (“APB”) Opinion No. 18 and ARB No. 43, Chapter 12 , and the Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities , as revised.

In the opinion of management, the accompanying consolidated financial statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 29, 2006 included in the Form 10-K filed by the Company with the Securities and Exchange Commission. The consolidated results of operations for the quarter and six months ended June 29, 2007 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

2. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. With regard to common stock subject to vesting requirements or restricted stock units issued to employees, the calculation includes only the vested portion of such stock. Accordingly, common shares outstanding for the basic net income (loss) per share computation are lower than actual shares outstanding.

Net income (loss) per common share assuming dilution is computed by dividing net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.

Potentially dilutive shares were excluded from the diluted loss per share calculation for the six months ended June 29, 2007 and June 30, 2006 because their effects would have been anti-dilutive to the net loss incurred by the Company.

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

2. Net Income (Loss) Per Common Share (continued)

 

The following table reconciles basic and diluted weighted average shares:

 

     Quarter Ended    Six Months Ended
     June 29,    June 30,    June 29,    June 30,
     2007    2006    2007    2006

Basic weighted average common shares outstanding

   44,713,211    44,626,086    44,745,510    44,572,281

Effect of dilutive securities:

           

Unvested restricted stock units issued to employees

   1,037,076    1,711,979    —      —  

Common stock issuable upon the exercise of stock options

   83,962    256,095    —      —  
                   

Dilutive weighted average common shares outstanding

   45,834,249    46,594,160    44,745,510    44,572,281
                   

Dilutive securities not included in diluted weighted average common shares outstanding:

           

Unvested restricted stock units issued to employees

   —      —      953,215    1,708,596

Common stock issuable upon the exercise of stock options

   —      —      77,701    291,751
                   
   —      —      1,030,916    2,000,347
                   

Approximately 1.6 million and 1.5 million stock options were excluded from the computations of diluted net income per common share for the quarters ended June 29, 2007 and June 30, 2006, respectively, as their stock price was higher than the Company’s average stock price.

3. Comprehensive Gain (Loss)

The Company accounts for comprehensive gain (loss) under SFAS No. 130, Reporting Comprehensive Income . Comprehensive gain (loss) is summarized below (in thousands):

 

     Quarter Ended     Six Months Ended  
     June 29,     June 30,     June 29,     June 30,  
     2007     2006     2007     2006  

Net income (loss)

   $ 1,451     $ 2,121     $ (887 )   $ (4,112 )

Change in cumulative foreign currency on translation adjustment

     (3 )     (209 )     (99 )     (290 )

Change in net unrealized gain on marketable investments

     5       21       5       48  
                                

Comprehensive gain (loss)

   $ 1,453     $ 1,933     $ (981 )   $ (4,354 )
                                

4. Loss from Misappropriation, net of Collections

As described in the Form 8-K filed on November 1, 2006, on or about October 26, 2006, the Company learned of a misappropriation by its former UK disbursement agent in 2006, which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The Company and its former disbursement agent have agreed to settlement terms that, if satisfied, would include the full repayment of the misappropriation. In connection with the settlement, the agent made an initial cash payment to the Company in January 2007 of $350 thousand and has agreed to make additional payments to the Company on or before August 31, 2007 that, when taken together with the initial payment, approximate $2.6 million (at current foreign currency exchange rates). If the payments are not received by this date, the Company can foreclose certain assets pledged by the agent. The agent has guaranteed to pay any amount by which the initial payment, additional cash payments and the net proceeds from the sale of the pledged assets fall below approximately $2.6 million (at current foreign currency exchange rates). This shortfall amount would be repaid in annual installments of not less than approximately $0.1 million per year (at current foreign currency exchange rates) beginning in 2007, together with interest thereon accruing from January 1, 2008.

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

4. Loss from Misappropriation, net of Collections (continued)

 

The Company cannot predict whether the former disbursement agent will satisfy the terms of the settlement agreement. Due to this uncertainty, any amounts recovered as a result of the Company’s claim will be accounted for as income in the period collected.

5. Restructuring

The Company recorded restructuring costs of $10.9 million and $5.6 million in fiscal years 2002 and 2001, respectively, for reductions in consultants and functional support personnel and for the closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services throughout 2001 and 2002. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated demand for its services.

In 2004 and 2003, the Company recorded restructuring costs of $3.7 million and $4.9 million, respectively, to increase existing reserves to account for potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease excess facilities. The 2004 and 2003 restructuring costs consisted of additions of $1.8 million and $3.1 million to the 2002 restructuring accrual and $1.9 million and $1.8 million to the 2001 restructuring accrual, respectively. Also in 2004, the 2002 restructuring accrual was reduced by $370 thousand relating to the final settlement of a lease obligation which was recorded as income from discontinued operations in the consolidated statement of operations for year ended December 31, 2004.

In 2005, the Company recorded restructuring costs of $2.9 million which related to $1.1 million for the consolidation of additional facilities and related exit costs not included in previously established reserves, primarily as a result of the REL acquisition on November 29, 2005, and $1.8 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities, of which $1.1 million is specifically related to the increase of previously established reserves in order to reflect the negotiated buyout of our New York City lease obligation. As a result of the buyout, the Company was fully released from $20.0 million of future lease obligations, assigned two subleases to the lessor, wrote-off a $1.4 million receivable from the lessor, and paid $3.1 million in cash to the lessor. The remaining $700 thousand related to increases in the reserves to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. The 2005 restructuring costs of $1.8 million related to previously established reserves, which consisted of additions of $1.2 million and $600 thousand to the 2002 and 2001 restructuring accruals, respectively.

In 2006, the Company recorded restructuring costs of $6.3 million, which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a result of the REL Consultancy Group (“REL”) acquisition and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shifts to a proprietary best practice and intellectual capital and strategic advisory services firm.

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

5. Restructuring (continued)

 

The following tables set forth the detail and activity in the restructuring expense accruals during the six months ended June 29, 2007 (in thousands):

2001 Restructuring Accrual

 

     Accrual          Accrual
     Balance at          Balance at
     December 29,          June 29,
     2006    Expenditures     2007

Closure and consolidation of facilities and related exit costs

   $ 2,126    $ (227 )   $ 1,899
                     

2002 Restructuring Accrual

 

     Accrual          Accrual
     Balance at          Balance at
     December 29,          June 29,
     2006    Expenditures     2007

Closure and consolidation of facilities and related exit costs

   $ 3,717    $ (316 )   $ 3,401
                     

2005 Restructuring Accrual

 

     Accrual          Accrual
     Balance at          Balance at
     December 29,          June 29,
     2006    Expenditures     2007

Severance and other employee costs

   $ 147    $ (140 )   $ 7

Closure and consolidation of facilities and related exit costs

     1,276      (185 )     1,091
                     
   $ 1,423    $ (325 )   $ 1,098
                     

6. Accounts Receivable and Unbilled Revenue, Net

Accounts receivable and unbilled revenues, net consisted of the following (in thousands):

 

     June 29,     December 29,  
     2007     2006  

Accounts receivable

   $ 33,212     $ 32,974  

Unbilled revenue

     3,772       4,695  

Allowance for doubtful accounts

     (2,079 )     (1,851 )
                
   $ 34,905     $ 35,818  
                

7. Loan Payable

At June 29, 2007 and December 29, 2006, the Company did not have any outstanding loans. At December 30, 2005, the Company had a loan with a financial institution of $3.7 million which was repaid in March 2006.

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

8. Income Taxes

Effective December 30, 2006, the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes . FIN No. 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

As a result of the implementation of FIN No. 48, the Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, the Company adjusted the estimated value of its uncertain tax positions by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and included in the non-current portion of accrued expenses and other liabilities in the consolidated balance sheet as of June 29, 2007. The amount of unrecognized tax positions did not materially change as of June 29, 2007 and the Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of June 29, 2007.

The Company files federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most probable outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years through 2002. All significant state, local, and foreign matters have been concluded for years through 2002.

9. Stock Based Compensation

During the quarter and six months ended June 29, 2007, the Company issued 290,500 and 528,000 restricted stock units, respectively, at a weighted average grant-date fair value of $3.60 and $3.43, respectively. Additionally, during the quarter and six months ended June 29, 2007, 123,333 and 362,324 shares issued in connection with an acquisition and restricted stock units were forfeited at a weighted average grant-date fair value of $4.80 and $4.28, respectively. As of June 29, 2007, the Company had 2,069,830 restricted stock units outstanding.

10. Shareholders’ Equity

Treasury Stock

On July 30, 2002, the Company announced that its Board of Directors approved the repurchase of up to $5.0 million of the Company’s common stock. In 2003, 2004 and 2005, the Board of Directors approved the repurchase of an additional $25.0 million of the Company’s common stock, thereby increasing the total program size to $30.0 million. Under the repurchase plans, the Company

 

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Answerthink, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)

 

10. Shareholders’ Equity (continued)

 

may buy back shares of its outstanding stock from time to time on the open market or through privately negotiated transactions subject to market conditions and trading restrictions. During the quarter ended June 29, 2007, the Company repurchased 509 thousand shares of its common stock at a cost of approximately $1.75 million. As of June 29, 2007, the Company had repurchased 7.7 million shares of its common stock at an average price of $3.34 per share.

11. Litigation

The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the financial position, cash flows or results of operations of the Company.

12. Geographic and Service Group Information

Revenues were attributed to geographic areas as follows (in thousands):

 

     Quarter Ended    Six Months Ended
     June 29,
2007
   June 30,
2006
   June 29,
2007
  

June 30,

2006

Total Revenues:

           

Domestic

   $ 35,712    $ 42,424    $ 68,869    $ 86,523

Foreign

     9,800      6,572      16,520      12,304
                           

Total

   $ 45,512    $ 48,996    $ 85,389    $ 98,827
                           

Long-lived assets were attributed to geographic areas as follows (in thousands):

 

    

June 29,

2007

  

December 29,

2006

         

Long-Lived Assets:

           

Domestic

   $ 57,039    $ 57,148      

Foreign

     19,561      18,557      
                   

Total

   $ 76,600    $ 75,705      
                   

As of June 29, 2007 and December 29, 2006, foreign assets included $19.1 million and $18.3 million, respectively, of goodwill and intangible assets related to REL.

The Company’s revenue was derived from the following service groups (in thousands):

 

     Quarter Ended    Six Months Ended
    

June 29,

2007

  

June 30,

2006

  

June 29,

2007

  

June 30,

2006

The Hackett Group:

           

Benchmarking and Business Transformation

   $ 23,292    $ 22,372    $ 42,595    $ 45,349

Membership Advisory Programs

     3,863      3,194      7,476      5,430

Best Practice Solutions

     18,357      23,430      35,318      48,048
                           

Total Revenues

   $ 45,512    $ 48,996    $ 85,389    $ 98,827
                           

13. Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current year presentation.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and the information incorporated by reference in it include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our business and industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward-looking statements include, among others, our ability to effectively integrate acquisitions into our operations, our ability to attract additional and retain existing business, the timing of projects and the potential for contract cancellation by our customers, changes in expectations regarding our industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, foreign currency fluctuations and changes in general economic conditions and interest rates. An additional description of our risk factors is set forth in our Annual Report on Form 10-K for the year ended December 29, 2006. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

OVERVIEW

Answerthink, Inc. is a leading business and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, the world’s leading repository of enterprise business process performance metrics and best practice intellectual capital, our business and technology solutions help clients improve performance and maximize returns on technology investments.

The Hackett Group, a strategic advisory firm and an Answerthink company, is a world leader in best practice research, benchmarking, business transformation and working capital management services that empirically define and enable world-class enterprise performance. Only The Hackett Group empirically defines world-class performance in Sales, General and Administrative and supply chain activities with analysis gained through 4,000 benchmark studies over 15 years and work with 2,700 of the world’s leading companies.

Answerthink’s combined capabilities include business advisory programs, benchmarking, business transformation, working capital management, business applications and business intelligence, with corresponding offshore support. Answerthink was formed on April 23, 1997.

 

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Results of Operations

The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to revenues of such results.

 

     Quarter Ended     Six Months Ended  
     June 29, 2007     June 30, 2006     June 29, 2007     June 30, 2006  

Revenues:

                  

Revenues before reimbursements

   $ 40,505    89.0 %   $ 43,950    89.7 %   $ 76,666     89.8 %   $ 88,846     89.9 %

Reimbursements

     5,007    11.0 %     5,046    10.3 %     8,723     10.2 %     9,981     10.1 %
                                                      

Total revenues

     45,512    100.0 %     48,996    100.0 %     85,389     100.0 %     98,827     100.0 %

Costs and expenses:

                  

Cost of service:

                  

Personnel costs before reimbursable expense

     23,267    51.1 %     24,996    51.0 %     44,783     52.4 %     51,460     52.1 %

Reimbursable expenses

     5,007    11.0 %     5,046    10.3 %     8,723     10.2 %     9,981     10.1 %
                                                      

Total cost of service

     28,274    62.1 %     30,042    61.3 %     53,506     62.6 %     61,441     62.2 %

Selling, general and administrative costs

     15,843    34.8 %     16,603    33.9 %     33,347     39.1 %     34,396     34.8 %

Restructuring costs

     —      0.0 %     —      —         —       0.0 %     6,313     6.4 %

Loss from misappropriation, net of collections

     —      0.0 %     23    0.0 %     (350 )   (0.4 )%     302     0.3 %
                                                      

Total costs and operating expenses

     44,117    96.9 %     46,668    95.2 %     86,503     101.3 %     102,452     103.7 %
                                                      

Income (loss) from operations

     1,395    3.1 %     2,328    4.8 %     (1,114 )   (1.3 )%     (3,625 )   (3.7 )%

Other income:

                  

Interest income, net

     124    0.2 %     125    0.2 %     362     0.4 %     210     0.3 %
                                                      

Income (loss) before income taxes

     1,519    3.3 %     2,453    5.0 %     (752 )   (0.9 )%     (3,415 )   (3.4 )%

Income tax expense

     68    0.1 %     332    0.7 %     135     0.2 %     697     0.7  %
                                                      

Net income (loss)

   $ 1,451    3.2 %   $ 2,121    4.3 %   $ (887 )   (1.1 )%   $ (4,112 )   (4.1 )%
                                                      

Quarter and Six Months Ended June 29, 2007 versus Quarter and Six Months Ended June 30, 2006

Revenues. Revenues for the quarter ended June 29, 2007 decreased 7% to $45.5 million from $49.0 million in the quarter ended June 30, 2006. Revenues in the six months ended June 29, 2007 decreased 14% to $85.4 million from $98.8 million in the six months ended June 30, 2006. The quarter and six month decrease in revenues was attributable to a decline in our Best Practice Solutions group of $5.1 million and $12.8 million, respectively, primarily due to the exit of our Lawson and low margin SAP staff augmentation contracts at the end of 2006 and decreased revenue from our Business Intelligence practice. The quarter decrease was partially offset by a 6% or a $1.6 million increase in revenues generated from The Hackett Group due to a 4% increase in our Benchmarking and Business Transformation group and a 21% increase in our Membership Advisory Programs group.

Reimbursements as a percentage of revenues during the quarters and six months ended June 29, 2007 and June 30, 2006 were comparable at 11% to 10% and 10%, respectively.

During the quarters and six months ended June 29, 2007 and June 30, 2006, no customer accounted for revenues equal to or greater than 5% of total revenues.

Cost of Service. Cost of service primarily consists of salaries, benefits and incentive compensation for consultants and reimbursable expenses associated with projects. Cost of service decreased 6% to $28.3 million in the quarter ended June 29, 2007 from $30.0 million in the quarter ended June 30, 2006. Cost of service decreased 13% to $53.5 million in the six months ended June 29, 2007 from $61.4 million in the six months ended June 30, 2006. The quarter and six month decrease was primarily attributable to a 23% and 26% decrease in the Best Practice Solutions group average billable headcount, respectively, as a result of our exit from our Lawson and low margin SAP staff augmentation contracts. The Best Practice Solutions group average billable headcount was 293 and 290 in the quarter and six months ended June 29, 2007, respectively, from 380 and 392 in the quarter and six months ended June 30, 2006, respectively.

Cost of service as a percentage of revenues during the quarters and six months ended June 29, 2007 and June 30, 2006 was comparable at 62% to 61% and 63% to 62%, respectively.

 

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Selling, General and Administrative. Selling, general and administrative costs decreased by 5% to $15.8 million in the quarter ended June 29, 2007 from $16.6 million in the quarter ended June 30, 2006. Selling, general and administrative costs decreased 3% to $33.3 million in the six months ended June 29, 2007 from $34.4 million in the six months ended June 30, 2006. The decrease in selling, general and administrative costs for the quarter and six months was primarily attributable to a $585 thousand and $1.3 million reduction in depreciation and amortization expense, respectively, due to fully amortized assets for the quarter and six month periods. The six month decrease was partially offset by severance costs of approximately $343 thousand (at current foreign currency exchange rates) and professional fees of $239 thousand incurred in conjunction with the misappropriation of funds.

Restructuring Costs. We recorded restructuring costs for the six months ended June 30, 2006 of $6.3 million which was comprised of $2.8 million relating to the 2005 restructuring for the consolidation of additional facilities and related exit costs primarily as a result of the REL Consultancy Group (“REL”) acquisition and $3.5 million for increases in previously established reserves in 2002 and 2001 for the closure and consolidation of facilities to account for higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease facilities based on current market conditions. Included in the $2.8 million is a further reduction of occupied space in our technology-focused facility in Philadelphia and related severance costs for a senior executive as the Company’s primary business model shifts to a proprietary best practice intellectual capital and strategic advisory services firm. We did not record any restructuring costs for the quarter and six months ended June 29, 2007.

Loss from Misappropriation, net of Collections. The loss from misappropriation, net of collections of $350 thousand for the six months ended June 29, 2007, related to collections received on funds that were misappropriated by our former UK disbursement agent. We learned of a misappropriation by our former UK disbursement agent in 2006, which related to funds earmarked for payroll taxes due to the United Kingdom Inland Revenue. The disbursement agent had been utilized from early 2003 to January 2006 to make payroll, payroll tax and vendor disbursements in our UK operations.

Income Taxes. We recorded income taxes of $68 thousand and $135 thousand for the quarter and six months ended June 29, 2007, respectively. This amount reflected an estimated annual 4.5% and 18.0% tax rate for the quarter and six months ended June 29, 2007, respectively, for certain U.S. federal and state taxes. For the quarter and six months ended June 30, 2006, we recorded income taxes of $332 thousand and $697 thousand, respectively, which reflected an estimated annual tax rate for 2006 of 13.5% and 20.4% for certain U.S. federal and state taxes. The 2006 income taxes were related to federal and state taxes for REL’s U.S. entity, which could not be offset against our federal net operating loss carryforward.

Effective December 30, 2006, we adopted FIN No. 48, Accounting for Uncertainty in Income Taxes . As a result of the implementation of FIN No. 48, we performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established by FIN No. 48. In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on December 30, 2006, we adjusted the estimated value of our uncertain tax positions by recognizing additional liabilities totaling $481 thousand through a charge to retained earnings, which primarily related to potential state and federal tax exposure. The $481 thousand liability included $311 thousand, which was not expected to be paid within one year, and as such was classified as a non-current liability and included in the non-current portion of accrued expenses and other liabilities in the consolidated balance sheet as of June 29, 2007. The amount of unrecognized tax positions did not materially change as of June 29, 2007 and we do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.

Penalties and tax-related interest expense are reported as a component of income tax expense. As of December 30, 2006, the total amount of accrued income tax-related interest and penalties was $26 thousand and $237 thousand, respectively. The liability for the payment of interest and penalties did not materially change as of June 29, 2007.

Liquidity and Capital Resources

We have funded our operations primarily with cash flows generated from operations and the proceeds from our initial public offering. At June 29, 2007, we had $20.9 million in cash and cash equivalents, compared to $19.6 million at December 29, 2006. At June 29, 2007 and December 29, 2006, we had $600 thousand on deposit with a financial institution as collateral for letters of credit and have classified these deposits as restricted cash in the accompanying consolidated balance sheets.

Net cash provided by operating activities was $3.9 million for the six months ended June 29, 2007, compared to net cash used in operating activities of $1.3 million for the comparable period in 2006. During the six months ended June 29, 2007, net cash provided by operating activities was primarily attributable to the net collections of accounts receivable and unbilled revenue of $0.7 million,

 

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which resulted in a decrease in Days Sales Outstanding of 15 days and an increase in accrued expenses and other liabilities. During the six months ended June 30, 2006, net cash used in operating activities was primarily attributable to an increase of $1.8 million in accounts receivable and unbilled revenues accounting for an increase in Days Sales Outstanding of 7 days.

Net cash used in investing activities was $1.0 million for the six months ended June 29, 2007, compared to $1.4 million for the six months ended June 30, 2006. Cash used in investing activities in 2007 was primarily attributable to $1.1 million of purchases related to computer software and equipment and the build-out of new office space in the UK. Cash used in investing activities in the six months ended June 30, 2006 was primarily attributable to $1.3 million used for the purchase of property and equipment and $8.8 million used for the acquisition of businesses, mostly related to deferred consideration paid in 2006 for our acquisition of REL and EZ Commerce Global Solutions, Inc., partially offset by maturities of marketable investments of $5.0 million and a decrease in restricted cash of $3.7 million.

Net cash used in financing activities was $1.6 million for the six months ended June 29, 2007, compared to $4.0 million for the six months ended June 30, 2006. Cash used in financing activities in 2007 was primarily attributable to the buyback of $1.8 million of our common stock including $25 thousand which did not settle until July, at an average price of $3.44 per share. Partially offsetting the 2007 share buybacks were proceeds from the sale of stock as a result of exercises of stock sold through our Employee Stock Purchase Plan of $170 thousand and exercises of stock options of $26 thousand. During the six months ended June 30, 2006, cash used in financing activities was primarily for the repayment of the Employee Benefit Trust loan of $3.7 million and the repayment of bank overdrafts of $1.1 million, partially offset by $752 thousand from proceeds from the sale of stock as a result of exercises of stock options as well as the sale of stock through our Employee Stock Purchase Plan.

On July 30, 2002, we announced that our Board of Directors approved the repurchase of up to $5.0 million of our common stock. In 2003, 2004 and 2005, our Board of Directors approved the repurchase of an additional $25.0 million of our common stock, thereby increasing the total program size to $30.0 million. Under the repurchase plan, we may buy back shares of our outstanding stock from time to time either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. During the quarter ended June 29, 2007, we repurchased 509 thousand shares at an average price of $3.44. As of June 29, 2007, we had repurchased 7.7 million shares of our common stock at an average price of $3.34 per share.

We currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. We may decide to raise additional funds in order to fund expansion, to develop new or further enhance products and services, to respond to competitive pressures, or to acquire complementary businesses or technologies. There is no assurance, however, that additional financing will be available when needed or desired.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

At June 29, 2007, our exposure to market risk related primarily to changes in interest rates on our investment portfolio. Our marketable investments consist primarily of short-term fixed interest rate securities. We invest only with high credit quality issuers and we do not use derivative financial instruments in our investment portfolio. We do not believe that a significant increase or decrease in interest rates would have a material impact on the fair value of our investment portfolio.

Exchange Rate Sensitivity

We face exposure to adverse movements in foreign currency exchange rates, as a portion of our revenues, expenses, assets and liabilities are denominated in currencies other than the U.S. Dollar, primarily the British pound and the euro. These exposures may change over time as business practices evolve. Currently, we do not hold any derivative contracts that hedge our foreign currency risk, but we may adopt such strategies in the future.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) pursuant to Rule 13a-14(c) and Rule 15d-14(c) under the Securities Exchange Act of 1934. Based upon that evaluation, the CEO and CFO concluded that our Disclosure Controls are effective in timely alerting them to material information required to be included in our periodic SEC filings.

 

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Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II-OTHER INFORMATION

 

Item 1. Legal Proceedings

We are involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse effect on our financial position cash flows or results of operations.

 

Item 5. Other Information

None.

 

Item 6. Exhibits

See Index to Exhibits on page 19, which is incorporated herein by reference.

The Exhibits listed in the accompanying Index to Exhibits are filed as part of this report.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    Answerthink, Inc.
Date: July 31, 2007    

/s/ Grant M. Fitzwilliam

    Grant M. Fitzwilliam
    Executive Vice President, Finance and Chief Financial Officer

 

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INDEX TO EXHIBITS

 

Exhibit No.

  

Exhibit Description

  3.1+

   Second Amended and Restated Articles of Incorporation of the Registrant, as amended

  3.2+

   Amended and Restated Bylaws of the Registrant, as amended

10.7

   Amended Employment Agreement between Answerthink, Inc. and Grant M. Fitzwilliam

10.8

   Employment Agreement between Answerthink, Inc. and Robert A. Ramirez

31.1

   Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

   Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

   Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

+ Incorporated herein by reference to the Company’s Form 10-K for the year ended December 29, 2000

 

19

Exhibit 10.7

FIRST AMENDMENT

TO EMPLOYMENT AGREEMENT

AMENDMENT made effective the 1st day of August, 2007 to the Employment Agreement dated November 9, 2005, between Answerthink, Inc. (the “Company”) and Grant Fitzwilliam (the “Executive”).

WHEREAS the Company and the Executive have entered into the Employment Agreement dated November 9, 2005 (the “Employment Agreement”); and

WHEREAS the Company and the Executive desire to amend the Employment Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

1. A new Section 5(f) shall be added to the Employment Agreement and shall read as follows:

(f) Restricted Stock Units . Except as otherwise provided herein, all restricted stock units previously granted by the Company to the Executive, except for those restricted stock units issued on February 16, 2007, shall continue to vest according to their respective vesting schedules notwithstanding a termination of the Executive’s employment.

2. All other provisions of the Employment Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of the day and year first hereinabove written.


            Answerthink, Inc.
Attest:        
By:  

 

    By:  

 

      Name:  
      Title:  
      Grant M. Fitzwilliam
Attest:        
By:  

 

   

/s/ Grant M. Fitzwilliam

Exhibit 10.8

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“Agreement”) is entered into and is made effective the 1st day of August, 2007 (the “Effective Date”), by and between Answerthink, Inc., a Florida corporation (the “Company”), and Robert A. Ramirez (the “Executive”).

WHEREAS, the Company and the Executive have entered into that certain Compliance Agreement dated as of March 30, 1998, as amended (the “ 1998 Employment Agreement”);

WHEREAS, the Company and the Executive desire to amend and restate the 1998 Employment Agreement in its entirety and declare the 1998 Employment Agreement null and void; and

WHEREAS. Executive desires to be employed by the Company, on the terms and conditions set forth herein from and after the Effective Date; and

WHEREAS, the duly authorized Compensation Committee of the board of directors of the Company (the “Board”) has approved and authorized the entry into this Agreement with the Executive.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

1. Employment Agreement . On the terms and conditions set forth in this Agreement, the Company agrees to employ the Executive and the Executive agrees to be employed by the Company for the Employment Period set forth in Section 2 hereof and in the position and with the duties set forth in Section 3 hereof. Terms used herein with initial capitalization are defined in Section 21 below.

2. Term . The initial term of employment under this Agreement shall be for a three-year period commencing on the Effective Date (the “Initial Term”). The term of employment shall be automatically renewed for an additional consecutive 12-month period (the “Extended Term”) as of the first and every subsequent anniversary of the Effective Date, unless and until either party provides written notice to the other party in accordance with Section 11 hereof not less than 90 days before such anniversary date that such party is terminating the term of employment under this Agreement, which termination shall be effective as of the end of such Initial Term or Extended Term, as the case may be, or until such term of employment is otherwise terminated as hereinafter set forth. Such Initial Term and all such Extended Terms are collectively referred to herein as the “Employment Period.” The parties’ obligations under Sections 7, 9 and 10 hereof shall survive the expiration or termination of the Employment Period.

3. Position and Duties . The Executive shall serve as Executive Vice President, Chief Financial Officer of the Company during the Employment Period. As the Executive Vice President, Chief Financial Officer of the Company, the Executive shall render executive, policy and other management services to the Company of the type customarily performed by persons serving in a similar officer capacity. The Executive shall report to the Chief Executive Officer of the Company, except as otherwise determined by the


Chief Executive Officer or the Board. The Executive shall also perform such duties as the Chief Executive Officer or the Board may from time to time reasonably determine and assign to the Executive. During the Employment Period, there shall be no material change in the duties and responsibilities of the Executive from those previously in effect, other than as provided herein, unless the parties otherwise agree in writing. The Executive shall devote the Executive’s reasonable best efforts and substantially full business time to the performance of the Executive’s duties and the advancement of the business and affairs of the Company.

4. Place of Performance . In connection with the Executive’s employment by the Company, the Executive shall be based at the principal executive offices of the Company, except as otherwise agreed by the Executive and the Company and except for reasonable travel on Company business. If the Executive is required to relocate his place of employment to a location more than 50 miles from his location as of the date of this Agreement, the Company shall pay or reimburse the Executive for the reasonable moving and relocation expenses incurred by him to establish a personal residence at the new location, including reasonable traveling and temporary living expenses.

5. Compensation .

(a) Base Salary. During the Employment Period, the Company shall pay to the Executive an annual base salary (the “Base Salary”), which initially shall be at the rate of $275,000.00 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Board. If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the Employment Period. The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

(b) Bonus. During the Employment Period, the Executive may also be eligible to earn an annual bonus pursuant to a bonus plan adopted by the Board for each fiscal year.

(c) Benefits. During the Employment Period, the Executive will be entitled to such other benefits approved by the Board and made available to employees. Nothing contained in this Agreement shall prevent the Company from changing carriers or from effecting modifications in insurance coverage for the Executive.

(d) Vacation; Holidays. The Executive shall be entitled to all public holidays observed by the Company and vacation days in accordance with the applicable vacation policies for senior executives of the Company, which shall be taken at a reasonable time or times.

(e) Withholding Taxes and Other Deductions. To the extent required by law, the Company shall withhold from any payments due Executive under this Agreement any applicable federal, state or local taxes and such other deductions as are prescribed by law or Company policy.

6. Expenses . The Executive is expected and is authorized to incur reasonable expenses in the performance of his duties hereunder, including the costs of entertainment, travel, and similar business expenses incurred in the performance of his duties. The Company shall reimburse the Executive for all such expenses promptly upon periodic presentation by the Executive of an itemized account of such expenses.

 


7. Confidentiality; Work Product .

(a) Information. The Executive acknowledges that the information, observations and data obtained by the Executive concerning the business and affairs of the Company and its Subsidiaries and their predecessors during the course of the Executive’s performance of services for, or employment with, any of the foregoing persons (whether or not compensated for such services) are the property of the Company and its Subsidiaries, including information concerning acquisition opportunities in or reasonably related to the business or industry of the Company or its Subsidiaries of which the Executive becomes aware during such period. Therefore, the Executive agrees that he will not at any time (whether during or after the Employment Period) disclose to any unauthorized person or, directly or indirectly, use for the Executive’s own account, any of such information, observations or data without the Board’s consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of the Executive’s acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company and its Subsidiaries. The Executive agrees to deliver to the Company at the termination of the Executive’s employment, or at any other time the Company may request in writing (whether during or after the Employment Period), all memoranda, notes, plans, records, reports and other documents, regardless of the format or media (and copies thereof), relating to the business of the Company and its Subsidiaries and their predecessors (including, without limitation, all acquisition prospects, lists and contact information) which the Executive may then possess or have under the Executive’s control.

(b) Inventions and Patents. The Executive acknowledges that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the actual or anticipated business, research and development or existing or future products or services of the Company or its Subsidiaries that are conceived, developed, made or reduced to practice by the Executive while employed by the Company or any of its predecessors (“Work Product”) belong to the Company and the Executive hereby assigns, and agrees to assign, all of the above to the Company. Any copyrightable work prepared in whole or in part by the Executive in the course of the Executive’s work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” the Executive hereby assigns and agrees to assign to Company all right, title and interest, including without limitation, copyright in and to such copyrightable work. The Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company’s ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).

(c) Enforcement. The Executive acknowledges that the restrictions contained in Section 7(a) hereof are reasonable and necessary, in view of the nature of the Company’s business, in order to protect the legitimate interests of the Company,


and that any violation thereof would result in irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 7(a) hereof, the Company shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any such confidential information. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including, without limitation, recovery of damages from the Executive.

8. Termination of Employment .

(a) Permitted Terminations. The Executive’s employment hereunder may be terminated during the Employment Period without any breach of this Agreement only under the following circumstances:

(i) Death. The Executive’s employment hereunder shall terminate upon the Executive’s death;

(ii) By the Company. The Company may terminate the Executive’s employment:

(A) If the Executive shall have been unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for more than three consecutive months; or

(B) For Cause; or

(iii) By the Executive. The Executive may terminate employment for Good Reason.

(b) Termination. Any termination of the Executive’s employment by the Company or the Executive (other than because of the Executive’s death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. Termination of the Executive’s employment shall take effect on the Date of Termination.

9. Compensation Upon Termination .

(a) Death. If the Executive’s employment is terminated during the Employment Period as a result of the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of such estate, the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.

 


(b) Disability. If the Company terminates the Executive’s employment during the Employment Period because of the Executive’s disability pursuant to Section 8(a)(ii)(A) hereof, the Company shall pay the Executive the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan of program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement; provided, that payments so made to the Executive during any period that the Executive is unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental illness or other similar incapacity shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any such payment.

(c) By the Company with Cause or by the Executive without Good Reason.

If the Company terminates the Executive’s employment during the Employment Period for Cause pursuant to Section 8(a)(ii)(B) hereof or if the Executive voluntarily terminates the Executive’s employment during the Employment Period other than for Good Reason, the Company shall pay the Executive the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.

(d) By the Company without Cause or by the Executive for Good Reason.

If the Company terminates the Executive’s employment during the Employment Period other than for Cause, disability or death pursuant to Section 8(a)(i) or (ii) hereof, or the Executive terminates his employment during the Employment Period for Good Reason pursuant to Section 8(a)(iii) hereof, the Company shall pay the Executive (A) the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due; and

(B) subject to Sections 9(e) and 9(f) hereof:

(i) No Change of Control. Except as provided in Section 9(d)(ii) hereof, during the six-month period commencing on the Date of Termination (the “Initial Period”), the Company shall pay the Executive an aggregate amount equal to Executive’s Base Salary, payable in equal installments on the Company’s regular salary payment dates, and any other amounts that would have been payable to or on behalf of the Executive under Section 5(c) hereof (the “Severance Payments”). In


addition, the Company shall have the option, by delivering written notice to the Executive in accordance with Section 11 hereof within 90 days after the Date of Termination, to extend the severance period to the first anniversary of the Date of Termination (the “Extended Period”). During the Extended Period, the Company will continue to make Severance Payments at the same annual rate to the Executive. Notwithstanding the foregoing and without in any way modifying the provisions of Sections 7 and 10 hereof, from and after the first date that Executive becomes employed with another Person or provides services as a consultant or other self-employed individual, the Company, at its option, may eliminate or otherwise reduce the amount of Severance Payments otherwise required to be made pursuant to this Section 9(d)(i) to the extent of the compensation and benefits received by the Executive from such other employment or self-employment; or

(ii) Change of Control. If such termination is in anticipation of, in connection with or within one year after the date of a Change of Control, the Company shall pay the Executive an aggregate amount equal to Executive’s Base Salary, payable in equal installments on the Company’s regular salary payment dates, and any other amounts that would have been payable to or on behalf of the Executive under Section 5(c) hereof (the “Severance Payments”) from the Date of Termination through the first anniversary of the Date of Termination at the time such payments would otherwise have been due in accordance with the Company’s normal payroll practices, and the Company shall have no further obligations to the Executive under this Agreement. In addition, in such event, the Executive’s rights with respect to stock options, shares of restricted stock and restricted stock units previously granted by the Company, deferred and incentive compensation or bonus amounts awarded by the Company and other contingent or deferred compensation awards or grants made by the Company, or otherwise made in connection with the Executive’s employment hereunder, shall be fully vested and nonforfeitable as of the Date of Termination, except to the extent inconsistent with the terms of any such plan or arrangement that is intended to qualify under Section 401(a) or 423 of the Code. For purposes of Section 10 hereof, the “Initial Period” shall be the first 24 months following the Date of Termination.

(e) Parachute Limitations. Notwithstanding any other provision of this Agreement or of any other agreement, contract or understanding heretofore or hereafter entered into by the Executive with the Company or any subsidiary or affiliate thereof, except an agreement, contract or understanding hereafter entered into that expressly modifies or excludes application of this Section 9(e) (the “Other Agreements”), and notwithstanding any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company (or any subsidiary or affiliate thereof) for the direct or indirect compensation of the Executive (including groups or classes of participants or beneficiaries of which the Executive is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Executive (a “Benefit Plan”), if the Executive is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended (the “Code”)), the Executive shall not have any right to receive any payment or benefit under this Agreement, any Other Agreement or any Benefit Plan (i) to the extent that such payment or benefit, taking into account all other rights, payments or benefits to or for the


Executive under this Agreement, all Other Agreements and all Benefit Plans, would cause any payment or benefit to the Executive under this Agreement, any Other Agreement or any Benefit Plan to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amount received by the Executive under this Agreement, all Other Agreements and all Benefit Plans would be less than the maximum after-tax amount that could be received by the Executive without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such payment or benefit under this Agreement, any Other Agreement or any Benefit Plan would cause the Executive to be considered to have received a Parachute Payment that would have the adverse after-tax effect described in clause (ii) of the preceding sentence, then the Executive shall have the right, in the Executive’s sole discretion, to designate those rights, payments or benefits under this Agreement, any Other Agreement and any Benefit Plan that should be reduced or eliminated so as to avoid having the payment or benefit to the Executive under this Agreement be deemed to be a Parachute Payment.

(f) Mitigation. The Company’s obligation to continue to provide the Executive with benefits pursuant to Section 9(d)(i) or (ii) above shall cease if the Executive becomes eligible to participate in benefits substantially similar to those provided under this Agreement as a result of the Executive’s subsequent employment during the period that the Executive is entitled to receive Severance Payments.

(g) Liquidated Damages. The parties acknowledge and agree that damages which will result to the Executive for termination by the Company without Cause or by the Executive for Good Reason shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. The Executive agrees that, except for such other payments and benefits to which the Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that the Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, the Executive will execute a release of claims in a form reasonably satisfactory to the Company.

10. Noncompetition and Nonsolicitation .

(a) Noncompetition. The Executive acknowledges that in the course of his employment with the Company and its Subsidiaries and their predecessors, he has and will continue to become familiar with the trade secrets of, and other confidential information concerning, the Company and its Subsidiaries, that the Executive’s services will be of special, unique and extraordinary value to the Company and its Subsidiaries and that the Company’s ability to accomplish its purposes and to successfully pursue its business plan and compete in the marketplace depend substantially on the skills and expertise of the Executive. Therefore, and in further consideration of the compensation being paid to the Executive hereunder, the Executive agrees that, during the Employment Period and any Initial Period or Extended Period, so long as Severance Payments are being made or during any


portion of the Initial or Extended Period that Severance Payments are not required to be made pursuant to the last sentence of Section 9(d)(i) hereof (the “Noncompete Period”), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Company, its Subsidiaries, or any business in which the Company or its Subsidiaries has commenced negotiations or has requested and received information relating to the acquisition of such business within eighteen months prior to the termination of the Executive’s employment with the Company, in any country where the Company, its Subsidiaries, or other aforementioned business conducts business.

(b) Nonsolicitation. During the Employment Period and for two years following the Date of Termination, the Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way willfully interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary or (iii) initiate or engage in any discussions regarding an acquisition of, or the Executive’s employment (whether as an employee, an independent contractor or otherwise) by, any businesses in which the Company or any of its Subsidiaries has entertained discussions or has requested and received information relating to the acquisition of such business by the Company or its Subsidiaries upon or within the 18-month prior to the Date of Termination.

(c) Enforcement. If, at the time of enforcement of this Section 10, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because the Executive’s services are unique and because the Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of any provision of this Agreement. Therefore, in the event a breach or threatened breach by the Executive of any provision of this Agreement, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security).

11. Notices . All notices, demands, requests or other communication required or permitted to be given or made hereunder shall be in writing an shall be delivered, telecopied or mailed by first class registered or certified mail, postage prepaid, addressed as follows:

(a) If to the Company: Ted Fernandez, Chief Executive Officer, Answerthink, Inc. 1001 Brickell Bay Drive, Suite 3000, Miami, FL 33131. Copy to: General Counsel.

(b) If to the Executive: Robert A. Ramirez, 3416 Andersen Road, Coral Gables, Florida 33134.


or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

12. Severability . The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.

13. Survival . It is the express intention and agreement of the parties hereto that the provisions of Sections 7, 9 and 10 hereof shall survive the termination of employment of the Executive. In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

14. Assignment . The rights and obligations of the parties to this Agreement shall not be assignable or delegable, except that (i) in the event of the Executive’s death, the personal representative or legatees or distributees of the Executive’s estate, as the case may be, shall have the right to receive any amount owing and unpaid to the Executive hereunder and (ii) the rights and obligations of the Company hereunder shall be assignable and delegable in connection with any subsequent merger, consolidation, sale of all or substantially all of the assets of the Company or similar reorganization of a successor corporation.

15. Binding Effect . Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.

16. Amendment; Waiver . This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.

17. Headings . Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

18. Governing Law . This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Florida (but not including the choice of law rules thereof).

 


19. Entire Agreement; 1998 Employment Agreement Amended . By mutual consent, effective as of the Effective Date, the parties hereby declare the 1998 Employment Agreement null and void and of no further force or effect. This Agreement constitutes the entire agreement between the parties respecting the employment of Executive, there being no representations, warranties or commitments except as set forth herein.

20. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

21. IRC Section 409A Savings Clause . If any provision of this Agreement contravenes any regulations or guidance promulgated under Section 409A of the Code, the Company may reform this Agreement or any provision hereof to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code.

22. Definitions .

“Agreement” means this Employment Agreement.

“Base Salary” is defined in Section 5(a) above.

“Beneficial Owner” means a beneficial owner within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

“Benefit Plan” is defined in Section 9(e) above.

“Board” means the board of directors of the Company.

“Cause” means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute, (iii) substantial and repeated failure to perform duties of the office held by the Executive as reasonably directed by the Board, and such failure is not cured within 30 days after the Executive receives notice thereof from the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any breach of Section 7 or 10 of this Agreement.

“Change in Control” means (A) any Person, other than any Person who is a Beneficial Owner of the Company’s securities before the Offering Date, becomes, after the Offering Date, the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities; (B) during any two-year period, individuals who at the beginning of such period constitute the Board (including, for this purpose, any director who after the beginning of such period filled a vacancy on the Board caused by the resignation, mandatory retirement, death, or


disability of a director and whose election or appointment was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period) cease for any reason to constitute a majority thereof; (C) notwithstanding clauses (A) or (E) of this paragraph, the Company consummates a merger or consolidation of the Company with or into another corporation, the result of which is that the Persons who were stockholders of the Company at the time of the execution of the agreement to merge or consolidate own less than 80% of the total equity of the corporation surviving or resulting from the merger or consolidation or of a corporation owning, directly or indirectly, 100% of the total equity of such surviving or resulting corporation; or (D) the sale in one or a series of transactions of all or substantially all of the assets of the Company; (E) any Person has commenced a tender or exchange offer, or entered into an agreement or received an option to acquire beneficial ownership of 40% or more of the total number of voting shares of the Company, unless the Board has made a determination that such action does not constitute and will not constitute a material change in the Persons having control of the Company; or (F) there is a change of control in the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act other than in circumstances specifically covered by clauses (A) through (E) above.

“Code” is defined in Section 9(e) above.

“Company” means Answerthink, Inc. and its successors and assigns.

“Date of Termination” means (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated because of the Executive’s disability pursuant to Section 8(a)(ii)(A) hereof, 30 days after Notice of Termination, provided that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during such 30-day period; (iii) if the Executive’s employment is terminated by the Company for Cause pursuant to Section 8(a)(ii)(B) hereof or by the Executive for Good Reason pursuant to Section 8(a)(iii) hereof, the date specified in the Notice of Termination; or (iv) if the Executive’s employment is terminated during the Employment Period other than pursuant to Section 8(a), the date on which Notice of Termination is given.

“Employment Period” is defined in Section 2 above.

“Executive” means Robert A. Ramirez.

“Extended Period” is defined in Section 9(d)(i) above.

“Extended Term” is defined in Section 2 above.

“Good Reason” means (i) the Company’s failure to perform or observe any of the material terms or provisions of this Agreement, and the continued failure of the Company to cure such default within 30 days after written demand for performance has been given to the Company by the Executive, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; or (ii) a material reduction in the scope of the Executive’s responsibilities and duties.


“Initial Period” is defined in Section 9(d) above.

“Initial Term” is defined in Section 2 above.

“Noncompete Period” is defined in Section 10(a) above.

“Notice of Termination” is defined in Section 8(b) above.

“Offering Date” means the date of the completion of an initial public offering of the Company’s Common Stock.

“Other Agreements” is defined in Section 9(e) above.

“Parachute Payment” is defined in Section 9(e) above.

“Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Severance Payments” is defined in Section 9(d) above.

“Subsidiary” means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

“Work Product” is defined in Section 7(b) above.

 


IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

 

ANSWERTHINK, INC.     Attest:
      By:  

 

By:  

 

     
Name:  

 

     
Title:  

 

     
THE EXECUTIVE:     Attest:
      By:  

 

 

/s/ Robert A. Ramirez

     
Robert A. Ramirez      

Exhibit 31.1

CERTIFICATION

I, Ted A. Fernandez, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Answerthink, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 31, 2007

  /s/ Ted A. Fernandez
 

Ted A. Fernandez

Chairman of the Board and Chief Executive Officer

Answerthink, Inc.

 

Exhibit 31.2

CERTIFICATION

I, Grant M. Fitzwilliam, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Answerthink, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 31, 2007

  /s/ Grant M. Fitzwilliam
 

Grant M. Fitzwilliam

Executive Vice President, Finance and Chief Financial Officer Answerthink, Inc.

 

Exhibit 32

ANSWERTHINK, INC

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Answerthink, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Ted A. Fernandez, Chairman of the Board and Chief Executive Officer, and Grant M. Fitzwilliam, Executive Vice President and Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

 

  (1) The Report fully complies with the requirements of section 13 (a) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

/s/ Ted A. Fernandez

Ted A. Fernandez
Chairman of the Board and Chief Executive Officer
July 31, 2007

/s/ Grant M. Fitzwilliam

Grant M. Fitzwilliam
Executive Vice President, Finance and Chief Financial Officer
July 31, 2007

A signed original of this statement required by Section 906 has been provided to Answerthink, Inc. and will be retained by Answerthink, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.