FX Alliance Inc.

CIK:0001529979|SEC Filings

Earnings Per Share

6 Months Ended

Jun. 30, 2012

Note 8. Earnings Per Share

Prior to the completion of the Company’s initial public offering, the holders of the Company’s Series A Preferred Stock were entitled to participate with common stockholders in the distribution of earnings through dividends. Therefore, the Company applies the two-class method in calculating earnings per common share. The two-class method requires net income, after accretions in the carrying value of Series A Preferred Stock, to be allocated between the common and preferred stockholders based on their respective rights to receive dividends, whether or not declared. Basic earnings per common share is then calculated by dividing net income allocated to common stockholders, after the reduction for earnings allocated to Series A Preferred Stock, by the weighted-average common shares issued and outstanding.

Diluted earnings per common share is calculated by dividing net income allocated to common stockholders by the weighted-average number of common shares issued and outstanding for each period plus amounts representing the dilutive effect of outstanding stock options and restricted stock, and the dilution resulting from the conversion of Series A Preferred Stock. The Company calculates dilutive potential common shares using the treasury stock method, the if-converted method and the two-class method.

The following table sets forth the computation of the basic and diluted earnings per common share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012			2011
Basic earnings per common share
Net income	$	6,219	$	6,235		$	10,843		$	11,380
Accretion of Series A Preferred Stock	—		(1,824		)	(864		)	(3,616		)
Allocated earnings to Series A Preferred Stock	—		(1,130		)	(412		)	(1,988		)
Net income allocated to common stockholders	6,219		3,281			9,567			5,776
Basic weighted-average common shares outstanding	28,336,566		21,043,899			26,769,958			21,043,899
Basic earnings per common share	$	0.22	$	0.16		$	0.36		$	0.27
Diluted earnings per common share
Net income allocated to common stockholders	$	6,219	$	3,281		$	9,567		$	5,776
Basic weighted-average common shares outstanding	28,336,566		21,043,899			26,769,958			21,043,899
Effect of dilutive potential common shares:
Series A Preferred Stock	—		—			—			—
Stock options and restricted stock	1,097,231		539,090			942,720			473,491
Diluted weighted-average shares outstanding	29,433,797		21,582,989			27,712,678			21,517,390
Diluted earnings per share	$	0.21	$	0.15		$	0.35		$	0.27

The following table shows the weighted-average number of anti-dilutive shares excluded from the diluted EPS calculation for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Options to purchase common stock	437,846	1,747,669	346,412	2,362,360
Conversion of Series A Preferred Stock	—	7,240,738	1,551,587	7,240,738
Total options and conversion of Series A Preferred Stock	437,846	8,988,407	1,897,999	9,603,098

The following table sets forth the computation of pro forma basic and diluted earnings per common share assuming the conversion of the Series A Preferred Stock at the beginning of each period:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Pro forma basic earnings per common share
Net income allocated to common stockholders	$	6,219	$	3,281	$	9,567	$	5,776
Accretion of Series A Preferred Stock	—		1,824		864		3,616
Allocated earnings to Series A Preferred Stock	—		1,130		412		1,988
Net income	$	6,219	$	6,235	$	10,843	$	11,380
Weighted-average common shares outstanding	28,336,566		21,043,899		26,769,958		21,043,899
Adjustment to reflect assumed effect of conversion of Series A Preferred Stock	—		7,240,738		1,551,587		7,240,738

Pro forma weighted-average common shares outstanding	28,336,566		28,284,637		28,321,545		28,284,637
Pro forma basic earnings per common share	$	0.22	$	0.22	$	0.38	$	0.40
Pro forma diluted earnings per common share
Net income allocated to common stockholders	$	6,219	$	3,281	$	9,567	$	5,776
Accretion of Series A Preferred Stock	—		1,824		864		3,616
Allocated earnings to Series A Preferred Stock	—		1,130		412		1,988
Net income	$	6,219	$	6,235	$	10,843	$	11,380
Basic weighted-average common shares outstanding	28,336,566		21,043,899		26,769,958		21,043,899
Effect of dilutive potential common shares:
Adjustment to reflect assumed effect of conversion of Series A Preferred Stock	—		7,240,738		1,551,587		7,240,738
Stock options and restricted stock	1,097,231		539,090		942,720		473,491
Pro forma diluted weighted-average shares outstanding	29,433,797		28,823,727		29,264,265		28,758,128
Pro forma diluted earnings per share	$	0.21	$	0.22	$	0.37	$	0.40

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities:
Net Income	$ 10,843	$ 11,380
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,227	4,866
Stock-based compensation	1,947	2,817
Bad debt expense		171
Amortization of deferred financing costs	104
Deferred taxes	1,762	(1,397)
Deferred rent	(262)	250
Changes in operating assets and liabilities:
Increase in accounts receivable	(3,408)	(2,462)
Decrease in income taxes receivable	1,770
Increase in prepaid and other assets	(130)	(862)
Decrease in accounts payable and accrued expenses	(2,322)	(1,080)
Decrease in accrued compensation	(3,705)	(4,260)
Increase in income tax payable	799	3,970
Decrease in deferred revenues	(60)	(47)
Net cash provided by operating activities	12,565	13,346
Cash flows from investing activities
Purchases of property and equipment	(2,947)	(1,763)
Capitalization of software development costs	(6,048)	(4,221)
Purchase of investments available-for-sale	(90)	(129)
Acquisition, net of cash acquired		2,342
Net cash used in investing activities	(9,085)	(3,771)
Cash flows from financing activities
Proceeds from stock option exercises	1,118
Windfall tax benefits from stock-based compensation	55
Dividends paid	(70,018)
Payment of deferred financing costs	(831)
Net cash used in financing activities	(69,676)
Net increase (decrease) in cash and cash equivalents	(66,196)	9,575
Cash and cash equivalents
Beginning of the year	127,722	96,682
End of period	61,526	106,257
Supplemental disclosures of cash flow information:
Income taxes paid, net	$ 2,794	$ 5,960

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets
Cash and cash equivalents	$ 61,526	$ 127,722
Investments available-for-sale	7,241	7,077
Accounts receivable, net	16,531	13,122
Income taxes receivable	5,979	7,748
Deferred income taxes	5,010	5,390
Prepaid expenses and other current assets	2,323	2,284
Total current assets	98,610	163,343
Software development costs (net of accumulated amortization of $43,924 and $40,886 as of June 30, 2012 and December 31, 2011, respectively)	22,756	19,746
Property and equipment (net of accumulated depreciation of $23,606 and $21,614 as of June 30, 2012 and December 31, 2011, respectively)	12,334	11,379
Deferred income taxes, net of current portion	9,858	11,298
Intangible assets, net	1,819	2,016
Goodwill	2,999	2,999
Other assets	2,546	1,730
Total assets	150,922	212,511
Current liabilities
Accounts payable and accrued expenses	3,670	5,985
Accrued compensation	9,870	13,575
Income taxes payable	1,722	924
Deferred revenues	226	287
Total current liabilities	15,488	20,771
Long term liabilities
Deferred rent	2,743	3,011
Commitments and Contingencies
Redeemable Convertible Series A Preferred Stock, $0.0001 par value, Authorized-0 and 7,240,738 shares as of June 30, 2012 and December 31, 2011, respectively; Issued and outstanding-0 and 7,240,738 shares as of June 30, 2012 and December 31, 2011, respectively		109,276
Stockholders' Equity
Preferred stock, $0.0001 par value, Authorized-20,000,000 and 0 shares as of June 30, 2012 and December 31, 2011, respectively; Issued and outstanding-0 shares as of June 30, 2012 and December 31, 2011
Common stock, $0.0001 par value, Authorized-150,000,000 and 35,000,000 shares as of June 30, 2012 and December 31, 2011, respectively; Issued and outstanding-28,443,941 and 21,053,899 shares as of June 30, 2012 and December 31, 2011, respectively	3	2
Additional paid-in capital	123,051	17,144
Accumulated other comprehensive income, net of tax	78	33
Retained earnings	9,559	62,274
Total stockholders' equity	132,691	79,453
Total liabilities, redeemable convertible preferred stock and stockholders' equity	$ 150,922	$ 212,511