SM&A Reports Financial Results for Q1 2008

  
    
  
  
    
      SM&A (Nasdaq:WINS), 
      the world's foremost management consulting firm providing solutions to 
      PURSUE, WIN and profitably PERFORM on competitive procurements projects, 
      today announced financial results for the first quarter ended March 31, 
      2008.
    
    
      Revenue for the first quarter of 2008 increased 7.6% to $25.4 million, a 
      record for first quarter revenues, compared to $23.6 million in the 
      first quarter of the previous year. Net income for the quarter was $0.5 
      million, or $0.03 per fully diluted share versus net income of $1.5 
      million, or $0.08 per fully diluted share in the comparable quarter of 
      2007. Financial results for the quarter were impacted by charges 
      associated with a company-wide off-site training conference held every 
      other year and the current on-going proxy contest totaling $1.2 million. 
      Results for the quarter were also impacted by an $876,000 earn-out 
      payment earned by the principal of an acquired business which the 
      Company recognized as expense, under generally accepted accounting 
      principals (GAAP). The contingent payment earned under the acquisition 
      agreement. Excluding the aforementioned charges, net income on a 
      tax-effected basis for the first quarter would have been $1.7 million, 
      or $0.09 per fully diluted share compared with non-GAAP fully diluted 
      EPS of $0.09 in the immediately preceding quarter and non-GAAP fully 
      diluted EPS of $0.10 in the first quarter of 2007. During the quarter 
      the Company made an initial investment of approximately $500,000 to 
      establish its Strategic Advisors subsidiary.
    
    
      (See Exhibit A for additional information.)
    
    
      Competition Management:
    
    
      Competition Management revenue for the quarter was $13.3 million 
      compared to $14.4 million in the first quarter of 2007. While the level 
      of activity within Competition Management was solid in the first 
      quarter, there were fewer large Federal procurement opportunities in the 
      first quarter of 2008 as compared to the first quarter of 2007. Large 
      Federal procurement opportunities have the tendency to drive higher 
      revenue levels due to the larger and more complex proposals that are 
      required. Large Federal procurement opportunities trends have been 
      variable and have traditionally contributed to inconsistent Competition 
      Management revenue within SM&A. Competition Management represented 52% 
      of total quarterly revenue compared with 61% of total quarterly revenue 
      last year. WIN incentives earned were $226,000 for the three months 
      ended March 31, 2008; there were no WIN incentives earned in the same 
      period of the prior year.
    
    
      “We are pleased with the results of the 
      Competition Management segment during the quarter,” 
      said Cathy McCarthy, president and chief executive officer of SM&A. “Competition 
      Management revenues traditionally fluctuate on a quarterly basis based 
      on the timing of project starts and completions and the number and size 
      of projects within the quarter. The company continues to achieve its 
      traditional 85% cumulative WIN rate. We believe that the Competition 
      Management revenue achieved in the first quarter is in line with our 
      expectation to meet our annual revenue growth objective.”
    
    
      Program Services:
    
    
      Program Services revenue for the quarter increased 31.5% to $12.1 
      million, the highest in the Company’s history, 
      compared with $9.2 million for the same period of the prior year and 
      $11.6 million in the immediately preceding quarter. This was the fifth (5th) 
      consecutive quarter of revenue growth for the segment. Program Services 
      accounted for 48% of total quarterly revenues, compared to 39% of total 
      quarterly revenue in the first quarter of 2007. Program Services revenue 
      has been positively impacted by the acquisitions of Project Planning, 
      Inc. (PPI) and Performance Management Associates, Inc. (PMA) in 2007.
    
    
      Ms. McCarthy commented, “The Company’s 
      strategic plan calls for the accelerated growth of the Program Services 
      business while maintaining measured growth and the quality of the Company’s 
      flagship Competition Management business. The 31.5% increase in Program 
      Services revenue during the quarter is a strong testament to the benefit 
      of diversification that will offset some of the uneven quarterly revenue 
      results inherent in the Competition Management business. We believe that 
      strong growth in Program Services will continue in the coming quarters 
      and provide greater visibility and predictability of our revenues.”
    
    
      Strategic Advisors:
    
    
      The addition of Peter Pace, General USMC (ret.), to our company as 
      president and CEO of our Strategic Advisors subsidiary, has provided the 
      predictive results and opportunities we anticipated when he joined SM&A. 
      General Pace has been well received by both our employees and our 
      clients. He has already raised the Company’s 
      profile in our customer community beyond what has been achievable in 
      many years. He has provided numerous opportunities for introduction to 
      potential customers in new markets at the CEO level that were previously 
      unattainable to us. Although Pete has only been with SM&A for four 
      months, his presence is already providing us with opportunities to 
      develop strategic relationships with our key clients around strategy 
      development and advisory services.
    
    
      SM&A Strategic Advisors has also provided a supportive organization for 
      the development of our Strategic Business Intelligence initiative, which 
      is part of our strategic plan.
    
    
      “We are particularly pleased,” 
      continued Ms. McCarthy, “with the progress 
      that General Pace has made in expanding the scope of future 
      opportunities and in setting the stage for SM&A to be a vital component 
      to the success of our clients in the winning of, and in the efficient 
      execution of major contract procurements in the years ahead.”
    
    
      Revenue by Market Vertical:
    
    
      Revenue from aerospace and defense ("A&D") clients totaled $19.5 million 
      for the first quarter of 2008, the third highest quarter in the Company’s 
      history, compared to $19.9 million in the first quarter last year. 
      Revenue from non-A&D clients was $5.9 million, compared to $3.7 million 
      in the first quarter last year. Non-A&D business represented 23% of 
      total first quarter revenue, compared with 16% a year ago. More 
      importantly, the Company is building momentum in the Program Services 
      business in the non-A&D market, as well as in its Competition Management 
      business. The further diversification of revenues is attributable to the 
      Company’s ongoing efforts to more fully 
      implement its strategic business plan.
    
    
      SG&A Expenses:
    
    
      SG&A expenses were $9.0 million in the quarter. Included in the SG&A 
      expense was $1.1 million related to a company-wide off-site training 
      conference held every other year, $876,000 related to an earn-out 
      payment by the principal of an acquired business and $60,000 associated 
      with the current on-going proxy contest. Stock-based compensation 
      expense totaled $421,000. Excluding the aforementioned expenses, 
      operating SG&A expenses were $6.5 million, or 25.6% of first quarter 
      2008 revenue comparing favorably with 25.8% on an operating basis in the 
      immediately preceding quarter and compared to 24.5% on an operating 
      basis in the first quarter of 2007. During the quarter the Company made 
      an initial investment of approximately $500,000 to establish its 
      Strategic Advisors subsidiary.
    
    
      (See Exhibit B for additional information.)
    
    
      Ms. McCarthy, continued, “During the quarter 
      we improved productivity on an Account Executive basis. Revenue per 
      Account Executive (in the field for at least 9 months) increased 
      significantly by 31.5%. We believe this enhanced level of productivity 
      bodes well for the rest of the year. As we have previously disclosed, 
      our expectation is that the second half of fiscal year 2008 should be 
      stronger than the first half.”
    
    
      Jim Eckstaedt, executive vice president and chief financial officer of 
      SM&A, said, “We are pleased that our 
      focus on managing operational costs during the quarter we were able to 
      hold our expense in check while making an investment in Strategic 
      Advisors. With the events of recent quarters - specifically the 
      management transition, the proxy contest, and their attendant costs - 
      approaching resolution, going forward we believe we are better 
      positioned to achieve more efficiencies as we continue the 
      implementation of our strategic plan.”
    
    
      Stock Buyback:
    
    
      The Board of Directors is committed to effectively deploying cash and 
      has reaffirmed its approval to repurchase shares of SM&A. During the 
      quarter the Company purchased 241,200 shares of its stock in the open 
      market at a total cost of $1.0 million, or an average price of $4.29 per 
      share. The Company purchased close to the daily maximum volume limit 
      under SEC rules during the quarter. The Company currently has 
      approximately $4.8 million remaining in the share repurchase 
      authorization. Cash and investments totaled $10.7 million at March 31, 
      2008.
    
    
      Acquisitions:
    
    
      “We are very pleased with the seamless 
      integration into SM&A of our 2007 acquisitions, PPI and PMA; as well as 
      the financial results that the integrated operations are currently 
      exhibiting,” continued Mr. Eckstaedt. “PPI 
      and PMA, contributed $3.8 million of total revenues in the first 
      quarter, of which $2.0 million is considered non-organic, compared with 
      $1.1 million during the comparable quarter a year ago from PPI alone 
      from partial quarter operations. Amortization of intangibles associated 
      with the two acquisitions was $111,000 in the quarter. Commencing with 
      the next quarterly financial report, PPI will be considered fully 
      integrated and will be categorized as part of organic operations. PMA 
      will be considered organic with the announcement of the operational 
      results for the upcoming fourth quarter. We are excited with the 
      possibilities going forward.”
    
    
      Evolution of SM&A:
    
    
      We are in the process of transforming SM&A from a small proposal 
      consulting firm into a winning “Project 
      Lifecycle Consulting Company”. Within this 
      transformation we have three overriding goals: First, to provide our 
      clients products and services to enable their success in the pursuit, 
      proposal, and performance phases. Second, we strive to create 
      shareholder value by increasing revenue, earnings per share and free 
      cash flow at a greater rate than revenue growth. Third, to establish a 
      company environment that values and establishes SM&A as an employer of 
      choice.
    
    
      As SM&A’s historical performance 
      indicates, relying solely on traditional Competition Management and 
      opportunistic/unstructured Program Services leads to a business with 
      limited revenue predictability and growth.
    
    
      We seek to become, through Project Lifecycle Consulting, the company of 
      choice to provide successful “Winning” 
      projects. Our mission is to support our clients every step along the way 
      as a value added partner. This would include the early identification of 
      opportunities and the strategy to position our clients to take full 
      advantage of those opportunities, the development and delivery of the 
      proposal strategy and specific proposal documents, and to provide 
      discreet capabilities designed to assist clients start-up and 
      performance to contractual technical, cost, and schedule objectives. 
      PURSUE – WIN – 
      PERFORM.
    
    
      Within this transformation, the Competition Management element remains 
      as the flagship offering of SM&A. Competition Management business 
      continues to be a very strategic area within SM&A. Continued excellence 
      within Competition Management will create the client relationships 
      necessary for the anticipated growth within Program Services.
    
    
      We believe that Program Services represents a significantly larger 
      addressable market than Competition Management. Our plan includes the 
      development and acquisition of a comprehensive set of Program Services 
      offerings that allows penetration into this considerably larger market 
      and significantly improves our Competition Management offering due to 
      the improved domain expertise.
    
    
      This is a transformation process that requires infrastructure and 
      cultural changes. Without this transformation sustainable shareholder 
      value cannot, and will not, be achieved. We are dedicated to becoming an 
      industry leader by providing leading-edge services which are only 
      offered in this comprehensive life cycle approach.
    
    
      “We have enormous confidence in the abilities 
      of the employees of SM&A to implement the programs and initiatives we 
      are putting in place”, Ms McCarthy said. “We 
      are extremely optimistic about the future of our company. We believe its 
      best years are yet ahead.”
    
    
      2008 Guidance:
    
    
      The Company reiterates its expectation of revenue growth of 
      approximately 10% in 2008 over the $98.3 million reported in 2007. The 
      Company anticipates earnings per share for full year 2008 to be 
      approximately $0.36 per share, including proxy costs. The increase in 
      earnings guidance is attributable to an anticipated decrease in SG&A 
      spending.
    
    
      Gross margin is expected to be between 39% and 40%. SG&A expenses 
      including stock-based compensation and excluding the full effect for the 
      additional earn-out expense related to the PPI acquisition is now 
      estimated to be approximately 27% of revenue. The full year impact of 
      the earn-out expense related to the PPI acquisition is estimated to be 
      approximately $2.0 million or $0.06 per share. Cost associated with the 
      proxy contest, which is included in the SG&A percentage above is 
      estimated to be in the range of $450,000 to $500,000. Excluding the full 
      effect for the additional earn-out expense, stock-based compensation and 
      proxy contest costs, operating SG&A is estimated to be approximately 25% 
      of revenue. The full year tax rate is estimated at 42%.
    
    
      Disclosure of Certain Financial 
      Information
    
    
      In an effort to be transparent and to provide more meaningful 
      comparative SG&A and diluted EPS, including the recurring stock-based 
      compensation expense disclosure to our shareholders, we’ve 
      provided a reconciliation of GAAP and non-GAAP information.
    
    
      Conference Call and Webcast:
    
    
      The Company will host a conference call at 1:30 p.m. Pacific Time on 
      Thursday, May 8, to discuss the Company's first quarter 2008 financial 
      results. The dial-in number for the conference call is 800-257-6566 for 
      domestic participants and 303-262-2193, for international participants. 
      The call will also be accessible via live webcast at the homepage of www.smawins.com 
      by clicking on the Investor Relations tab and webcast link. A replay of 
      the conference call will be available at www.smawins.com 
      or by dialing 800-405-2236 or 303-590-3000, reference access code 
      11113199#. The call replay will be available for seven days.
    
    
      Note: A slide presentation providing selected financial data 
      discussed during the conference call can be accessed at www.smawins.com 
      by clicking on the Investor Relations tab.
    
    
      About SM&A:
    
    
      SM&A is the world's foremost management consulting firm providing 
      leadership and mentoring solutions to PURSUE for business capture, WIN 
      competitive procurements and profitably PERFORM on the projects and 
      programs won. Our proven processes, people and tools have delivered 
      significant top-line and bottom-line growth across markets, products and 
      services. From the largest aerospace and defense contractors, through 
      the major software providers, to healthcare and financial/audit service 
      providers, SM&A is the partner many companies turn to WHEN THEY MUST WIN.
    
    
      ALL STOCKHOLDERS OF SM&A ARE ADVISED TO READ THE DEFINITIVE PROXY 
      STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY 
      SM&A FOR USE AT THE 2008 ANNUAL MEETING OF STOCKHOLDERS OF SM&A. THEY 
      CONTAIN IMPORTANT INFORMATION REGARDING THE ELECTION OF DIRECTORS AND 
      OTHER MATTERS. THE DEFINITIVE PROXY STATEMENT AND FORM OF PROXY HAVE 
      BEEN MAILED TO STOCKHOLDERS OF RECORD OF SM&A ALONG WITH OTHER RELEVANT 
      DOCUMENTS. THEY ARE AVAILABLE AT NO CHARGE ON THE SEC’S 
      WEBSITE AT HTTP://WWW.SEC.GOV IN 
      ADDITION, SM&A WILL PROVIDE COPIES OF THE DEFINITIVE PROXY STATEMENT 
      WITHOUT CHARGE UPON REQUEST.
    
    
      Some statements made in this news release refer to future actions, 
      strategies, or results that involve a number of risks and uncertainties. 
      Any number of factors could cause actual results to differ materially 
      from expectations, including a shift in demand for SM&A's Competition 
      Management and Program Services; fluctuations in the size, timing, and 
      duration of client engagements; delays, cancellations, or shifts in 
      emphasis for competitive procurement activities; declines in future 
      defense, information technology, homeland security, new systems, and 
      research and development expenditures aerospace and defense industries 
      along with System Integration and Information Technology industries, and 
      other risk factors listed in SM&A's SEC reports, including the report on 
      Form 10-K for the year ended December 31, 2007. Actual results may 
      differ materially from those expressed or implied. The company does not 
      undertake any duty to update forward-looking statement.
    
    
      
        
          
            SM&A
          
          
            CONDENSED CONSOLIDATED BALANCE SHEETS
          
          
            (in thousands)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            March 31,2008
          
        
        
           
        
        
          
            December 31,2007
          
        
      
      
        
          
            ASSETS
          
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
          Current assets:
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          3,251
        
        
        
        
        
        
          $
        
        
          5,422
        
        
        
      
      
        
          Investments
        
        
        
        
        
        
          7,455
        
        
        
        
        
        
        
        
          10,610
        
        
        
      
      
        
          Accounts receivable, net
        
        
        
        
        
        
          22,373
        
        
        
        
        
        
        
        
          18,171
        
        
        
      
      
        
          Prepaid expenses and other current assets
        
        
        
        
           
        
        
          2,772
        
        
           
        
        
        
        
           
        
        
          2,011
        
        
           
        
      
      
        
          Total current assets
        
        
        
        
        
        
          35,851
        
        
        
        
        
        
        
        
          36,214
        
        
        
      
      
        
          Fixed assets, net
        
        
        
        
        
        
          3,306
        
        
        
        
        
        
        
        
          3,399
        
        
        
      
      
        
          Goodwill
        
        
        
        
        
        
          8,374
        
        
        
        
        
        
        
        
          8,278
        
        
        
      
      
        
          Intangibles, net
        
        
        
        
        
        
          1,781
        
        
        
        
        
        
        
        
          1,892
        
        
        
      
      
        
          Other assets
        
        
        
        
           
        
        
          1,369
        
        
           
        
        
        
        
           
        
        
          895
        
        
           
        
      
      
        
        
        
        
        
          $
        
        
          50,681
        
        
           
        
        
        
        
          $
        
        
          50,678
        
        
           
        
      
      
        
          
            LIABILITIES AND STOCKHOLDERS’ 
            EQUITY
          
        
        
        
        
        
        
        
        
        
      
      
        
          
            Current liabilities:
          
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable
        
        
        
        
          $
        
        
          2,156
        
        
        
        
        
        
          $
        
        
          1,925
        
        
        
      
      
        
          Accrued compensation and related benefits
        
        
        
        
        
        
          4,992
        
        
        
        
        
        
        
        
          3,508
        
        
        
      
      
        
          Accrued contingent consideration
        
        
        
        
        
        
          —
        
        
        
        
        
        
        
        
          1,750
        
        
        
      
      
        
          Other current liabilities
        
        
        
        
           
        
        
          138
        
        
           
        
        
        
        
           
        
        
          127
        
        
           
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          7,286
        
        
        
        
        
        
        
        
          7,310
        
        
        
      
      
        
          Other liabilities
        
        
        
        
           
        
        
          748
        
        
           
        
        
        
        
           
        
        
          785
        
        
           
        
      
      
        
          Total liabilities
        
        
        
        
        
        
          8,034
        
        
        
        
        
        
        
        
          8,095
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Commitments and contingencies
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders’ equity:
        
        
        
        
        
        
        
        
        
      
      
        
          Preferred stock
        
        
        
        
        
        
          —
        
        
        
        
        
        
        
        
          —
        
        
        
      
      
        
          Common stock
        
        
        
        
        
        
          2
        
        
        
        
        
        
        
        
          2
        
        
        
      
      
        
          Additional paid-in capital
        
        
        
        
        
        
          46,048
        
        
        
        
        
        
        
        
          45,450
        
        
        
      
      
        
          Treasury stock
        
        
        
        
        
        
          (2,540
        
        
          )
        
        
        
        
        
        
          (1,506
        
        
          )
        
      
      
        
          Accumulated deficit
        
        
        
        
           
        
        
          (863
        
        
          )
        
        
        
        
           
        
        
          (1,363
        
        
          )
        
      
      
        
          Total stockholders’ equity
        
        
        
        
           
        
        
          42,647
        
        
           
        
        
        
        
           
        
        
          42,583
        
        
           
        
      
      
        
        
        
        
        
          $
        
        
          50,681
        
        
           
        
        
        
        
          $
        
        
          50,678
        
        
           
        
      
    
    
      
        
          
            SM&A
          
          
            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
          
          
            (in thousands, except per share amounts)
          
          
            (UNAUDITED)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            Three Months Ended
          
          
            March 31,
          
        
      
      
        
        
        
        
        
          2008
        
        
           
        
        
          2007
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenue
        
        
        
        
          $
        
        
          25,423
        
        
        
        
          $
        
        
          23,624
        
      
      
        
          Cost of revenue
        
        
        
        
           
        
        
          15,685
        
        
        
        
           
        
        
          14,417
        
      
      
        
          Gross margin
        
        
        
        
        
        
          9,738
        
        
        
        
        
        
          9,207
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
           
        
        
          8,957
        
        
        
        
           
        
        
          6,894
        
      
      
        
          
            Operating income
          
        
        
        
        
        
        
          781
        
        
        
        
        
        
          2,313
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Interest income, net
        
        
        
        
           
        
        
          95
        
        
        
        
           
        
        
          143
        
      
      
        
          Income before income taxes
        
        
        
        
        
        
          876
        
        
        
        
        
        
          2,456
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax expense
        
        
        
        
           
        
        
          376
        
        
        
        
           
        
        
          1,005
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
          $
        
        
          500
        
        
        
        
          $
        
        
          1,451
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income per share:
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $
        
        
          0.03
        
        
        
        
          $
        
        
          0.08
        
      
      
        
          Diluted
        
        
        
        
          $
        
        
          0.03
        
        
        
        
          $
        
        
          0.08
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Shares used in calculating net income per share:
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
        
        
          18,990
        
        
        
        
        
        
          18,609
        
      
      
        
          Diluted
        
        
        
        
        
        
          19,100
        
        
        
        
        
        
          18,800
        
      
    
    
      
        
          
            Exhibit A
          
          
             
          
          
            SM&A
          
          
            DILUTED EPS NON-GAAP RECONCILIATION
          
          
            (in millions, except per share amounts)
          
          
            (UNAUDITED)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          Three Months Ended
        
      
      
        
        
        
        
        
          March 31,2008
        
        
           
        
        
          March 31,2007
        
        
           
        
        
          December 31,2007
        
      
      
        
        
        
        
        
           
        
        
          $
        
        
           
        
        
          PerShare
        
        
        
        
           
        
        
          $
        
        
           
        
        
          PerShare
        
        
        
        
           
        
        
          $
        
        
           
        
        
          PerShare
        
      
      
        
          Diluted EPS (as reported)
        
        
        
        
        
        
           
        
        
          $
        
        
          0.03
        
        
        
        
        
        
        
        
           
        
        
          $
        
        
          0.08
        
        
        
        
        
        
        
        
           
        
        
          $
        
        
          0.05
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          PPI earn-out
        
        
        
        
          $
        
        
          0.9
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
          $
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
          $
        
        
          1.0
        
        
        
        
        
        
          0.03
        
        
        
      
      
        
          Proxy contest cost
        
        
        
        
        
        
          0.1
        
        
        
        
        
        
          0.00
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Company-wide offsite
        
        
        
        
        
        
          1.1
        
        
        
        
        
        
          0.03
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Myers retirement
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          0.5
        
        
        
        
        
        
          0.02
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Myers legal fees
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
          0.2
        
        
        
        
        
        
          0.01
        
        
        
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Management transition
        
        
        
        
           
        
        
          -
        
        
           
        
        
           
        
        
          -
        
        
           
        
        
        
        
           
        
        
          -
        
        
           
        
        
           
        
        
          -
        
        
           
        
        
        
        
           
        
        
          0.4
        
        
           
        
        
           
        
        
          0.01
        
        
           
        
      
      
        
          Subtotal
        
        
        
        
          $
        
        
          2.1
        
        
          
             
          
        
        
           
        
        
          0.06
        
        
           
        
        
        
        
          $
        
        
          0.7
        
        
           
        
        
           
        
        
          0.02
        
        
           
        
        
        
        
          $
        
        
          1.4
        
        
           
        
        
           
        
        
          0.04
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-GAAP EPS (as adjusted)
        
        
        
        
        
        
        
        
          $
        
        
          0.09
        
        
           
        
        
        
        
        
        
        
        
          $
        
        
          0.10
        
        
           
        
        
        
        
        
        
        
        
          $
        
        
          0.09
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Tax rate
        
        
        
        
        
        
        
        
        
        
          42.9
        
        
          %
        
        
        
        
        
        
        
        
        
        
          40.9
        
        
          %
        
        
        
        
        
        
        
        
        
        
          45.5
        
        
          %
        
      
      
        
          
            Shares used in calculating net income per diluted Share
          
        
        
        
        
        
        
        
        
        
        
          19,100
        
        
        
        
        
        
        
        
        
        
        
        
          18,800
        
        
        
        
        
        
        
        
        
        
        
        
          19,113
        
        
        
      
      
        
           
        
      
      
        
          
            Note: Sum of columns may not equal totals due to rounding. Per 
            share data is shown net of tax.
          
        
      
    
    
      
        
          
            Exhibit B
          
          
             
          
          
            SM&A
          
          
            SG&A NON-GAAP RECONCILIATION
          
          
            (in millions)
          
          
            (UNAUDITED)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          Three Months Ended
        
      
      
        
        
        
        
        
          March 31,2008
        
        
           
        
        
          March 31,2007
        
        
           
        
        
          December 31,2007
        
      
      
        
        
        
        
        
           
        
        
          $
        
        
           
        
        
          %
        
        
           
        
        
        
        
           
        
        
          $
        
        
           
        
        
          %
        
        
           
        
        
        
        
           
        
        
          $
        
        
           
        
        
          %
        
        
           
        
      
      
        
          Revenue
        
        
        
        
          $
        
        
          25.4
        
        
           
        
        
          100
        
        
          %
        
        
        
        
          $
        
        
          23.6
        
        
           
        
        
          100
        
        
          %
        
        
        
        
          $
        
        
          24.1
        
        
           
        
        
          100
        
        
          %
        
      
      
        
        
        
        
        
           
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
           
        
      
      
        
          SG&A (as reported)
        
        
        
        
           
        
        
          9.0
        
        
           
        
        
          35.2
        
        
          %
        
        
        
        
           
        
        
          6.9
        
        
           
        
        
          29.2
        
        
          %
        
        
        
        
           
        
        
          8.0
        
        
           
        
        
          33.2
        
        
          %
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Less:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          PPI Earn-Out
        
        
        
        
           
        
        
          0.9
        
        
           
        
        
          3.4
        
        
          %
        
        
        
        
           
        
        
          -
        
        
           
        
        
          0.0
        
        
          %
        
        
        
        
           
        
        
          1.0
        
        
           
        
        
          4.0
        
        
          %
        
      
      
        
          SG&A less PPI earn-out
        
        
        
        
           
        
        
          8.1
        
        
           
        
        
          31.8
        
        
          %
        
        
        
        
           
        
        
          6.9
        
        
           
        
        
          29.2
        
        
          %
        
        
        
        
           
        
        
          7.0
        
        
           
        
        
          29.2
        
        
          %
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Less:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Stock-based compensation
        
        
        
        
        
        
          0.4
        
        
        
        
          1.7
        
        
          %
        
        
        
        
        
        
          0.4
        
        
        
        
          1.7
        
        
          %
        
        
        
        
        
        
          0.4
        
        
        
        
          1.8
        
        
          %
        
      
      
        
          Proxy contest cost
        
        
        
        
        
        
          0.1
        
        
        
        
          0.2
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
      
      
        
          Company-wide offsite
        
        
        
        
        
        
          1.1
        
        
        
        
          4.3
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
      
      
        
          Myers retirement
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
        
        
        
        
        
          0.5
        
        
        
        
          2.1
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
      
      
        
          Myers legal fees
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
        
        
        
        
        
          0.2
        
        
        
        
          0.8
        
        
          %
        
        
        
        
        
        
          -
        
        
        
        
          0.0
        
        
          %
        
      
      
        
          Management transition
        
        
        
        
           
        
        
          -
        
        
           
        
        
          0.0
        
        
          %
        
        
        
        
           
        
        
          -
        
        
           
        
        
          0.0
        
        
          %
        
        
        
        
           
        
        
          0.4
        
        
           
        
        
          1.6
        
        
          %
        
      
      
        
          Subtotal
        
        
        
        
          $
        
        
          1.6
        
        
        
        
          6.2
        
        
          %
        
        
        
        
          $
        
        
          1.1
        
        
        
        
          4.7
        
        
          %
        
        
        
        
          $
        
        
          0.8
        
        
        
        
          3.4
        
        
          %
        
      
      
        
        
        
        
        
           
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
           
        
      
      
        
          Non-GAAP SG&A (as adjusted)
        
        
        
        
          $
        
        
          6.5
        
        
           
        
        
          25.6
        
        
          %
        
        
        
        
          $
        
        
          5.8
        
        
           
        
        
          24.5
        
        
          %
        
        
        
        
          $
        
        
          6.2
        
        
           
        
        
          25.8
        
        
          %