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IGATE Reports Resilient 2012; Net Income Up 110% Year Over Year

Stocks in this article: IGTE

Forward-Looking Statements

Statements contained in this press release regarding the benefits of the Patni acquisition, the business outlook, the demand for the products and services, and all other statements in this release other than recitation of historical facts are forward-looking statements. Words such as "expect", "potential", "believes", "anticipates", "plans", "intends" and other similar expressions are intended to identify such forward-looking statements. Forward-looking statements in the press release include, without limitation, forecasts of market growth, future revenues, future expectations concerning growth of business, cost competitiveness and expansion of global reach following the acquisition, and other matters that involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others: difficulties encountered in integrating business; whether certain market segments grow as anticipated; the competitive environment in the information technology services industry and competitive responses to the Company's acquisition of Patni; and whether iGATE can successfully provide services/products and the degree to which these gain market acceptance. Furthermore, in connection with the Patni acquisition, the Company has borrowed significant amounts, including through the issuance of high yield notes, and will need to use a significant portion of its cash flows to service such indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past. Additional risks relating to the Company are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as well as the Company's other reports filed with the Securities and Exchange Commission and risks related to the business of Patni as set forth in Patni's Annual Report on Form 20-F for the fiscal year ended December 31, 2011. Actual results may differ materially from those contained in the forward-looking statements in this press release. Any forward-looking statements are based on information currently available to the Company and it assumes no obligation to update these statements as circumstances change. This document does not constitute an offer to purchase or to sell securities in any jurisdiction.

iGATE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
     
    December 31,  December 31,
  2012 2011
   (unaudited)  (audited)
     
ASSETS    
Current assets:    
Cash and cash equivalents  $ 95,155  $ 75,440
Restricted cash  3,072  -- 
Short-term investments  510,816  354,528
Accounts receivable, net  163,027  172,711
Unbilled revenues  72,901  45,223
Prepaid expenses and other current assets  31,710  18,752
Prepaid income taxes  8,541  8,341
Deferred tax assets  16,447  20,574
Foreign exchange derivative contracts  782  277
Receivable from Mastech Holdings Inc.  --   187
Total current assets  902,451  696,033
     
Deposits and other assets  25,372  32,102
Prepaid income taxes  26,072  18,481
Property and equipment, net  167,252  175,672
Leasehold land  86,933  90,339
Deferred tax assets  31,024  30,456
Goodwill  493,141  511,060
Intangible assets, net  144,428  160,706
Total assets  $ 1,876,673  $ 1,714,849
     
LIABILITIES, REDEEMABLE NON CONTROLLING INTEREST, PREFERRED STOCK AND EQUITY    
     
Current liabilities:    
Accounts payable  $ 7,799  $ 7,857
Line of credit  77,000  57,000
Term loans  35,000  -- 
Accrued payroll and related costs  54,802  71,913
Other accrued liabilities  78,351  77,988
Accrued income taxes  6,855  3,993
Foreign exchange derivative contracts  7,516  12,471
Deferred revenue  17,890  22,412
Total current liabilities  285,213  253,634
     
Other long-term liabilities  3,265  4,610
Senior notes  770,000  770,000
Term Loans  263,500  -- 
Foreign exchange derivative contracts  --   6,739
Accrued income taxes  17,272  17,672
Deferred tax liabilities  57,675  58,992
Total liabilities   1,396,925  1,111,647
     
Redeemable non controlling interest  32,422  -- 
     
Series B Preferred stock  378,474  349,023
     
Shareholders' equity:    
Common Stock, par value $0.01 per share  585  577
Common stock in treasury, at cost  (14,714)  (14,714)
Additional paid-in capital  185,340  201,281
Retained earnings  172,224  104,493
Accumulated other comprehensive loss  (274,583)  (214,641)
Total iGATE Corporation shareholders' equity   68,852  76,996
Non controlling interest  --   177,183
Total equity  68,852  254,179
Total liabilities, redeemable non controlling interest, preferred stock and equity  $ 1,876,673  $ 1,714,849
 
iGATE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands)
         
         
  Three Months ended Year ended
  December 31, December 31,
   2012   2011   2012  2011
  (unaudited) (unaudited) (unaudited) (audited)
         
Revenues  $ 271,582  $ 267,707  $ 1,073,930  $ 779,646
         
Cost of revenues (exclusive of depreciation and amortization)  161,430  159,941  649,810  483,504
         
Gross margin  110,152  107,766  424,120  296,142
         
Selling, general and administrative expense  43,431  42,582  170,779  151,497
         
Depreciation and amortization  9,625  13,703  46,382  38,735
         
Income from operations   57,096  51,481  206,959  105,910
         
Other income (loss), net  (18,330)  (14,151)  (74,702)  (21,638)
         
Income before income taxes  38,766  37,330  132,257  84,272
         
Income tax expense   6,592  16,904  30,599  24,218
         
Net income  32,174  20,426  101,658  60,054
         
Noncontrolling interest  --   5,149  4,476  8,586
         
Net income attributable to iGATE Corporation  32,174  15,277  97,182  51,468
         
Accretion to Preferred Stock  109  88  404  302
Preferred dividend  7,457  7,016  29,047  22,147
Net income attributable to iGATE common shareholders  $ 24,608  $ 8,173  $ 67,731  $ 29,019
 
iGATE CORPORATION
Earnings Per Share
(Amounts in thousands, except per share data)
           
           
    Three Months Ended December 31, Year Ended December 31,
    2012 2011 2012 2011
    (unaudited) (unaudited) (unaudited) (audited)
           
Net income attributable to iGATE common shareholders    $ 24,608  $ 8,173  $ 67,731  $ 29,019
Add: Dividends on Series B Preferred Stock    7,457  7,016  29,047  22,147
     32,065  15,189  96,778  51,166
           
Less: Dividends paid on          
Series B Preferred Stock [A]  7,457  7,016  29,047  22,147
Undistributed Income     $ 24,608  $ 8,173  $ 67,731  $ 29,019
           
Basic and Diluted allocation of Undistributed Income           
 Common stock [B]  18,542  6,240  51,036  22,157
 Unvested restricted stock [C]  15  24  40  84
 Series B Preferred Stock [D]  6,051  1,909  16,655  6,778
     $ 24,608  $ 8,173  $ 67,731  $ 29,019
           
Shares outstanding:          
Common stock    57,543  56,706  57,543  56,706
Unvested restricted stock     45  214  45  214
Series B Preferred Stock    18,778  17,347  18,778  17,347
     76,366  74,267  76,366  74,267
           
Weighted average shares outstanding:          
Common stock [E]  57,499  56,671  57,183  56,523
Unvested restricted stock  [F]  45  213  45  217
Participating preferred stock [G]  18,778  17,347  18,778  17,347
     76,322  74,231  76,006  74,087
           
Weighted average common stock outstanding    57,499  56,671  57,183  56,523
Dilutive effect of stock options and restricted shares outstanding    1,614  1,390  1,638  1,420
Dilutive weighted average shares outstanding [H]  59,113  58,061  58,821  57,943
           
Distributed earnings per share:          
Participating preferred stock [I=A/G]  $ 0.40  $ 0.40  $ 1.55  $ 1.28
           
Undistributed earnings per share:          
Common stock [J=B/E]  $ 0.32  $ 0.11  $ 0.89  $ 0.39
Unvested restricted stock [K=C/F]  $ 0.32  $ 0.11  $ 0.89  $ 0.39
Participating preferred stock [L=D/G]  $ 0.32  $ 0.11  $ 0.89  $ 0.39
           
           
Basic earnings per share from operations          
Common Stock [J]  $ 0.32  $ 0.11  $ 0.89  $ 0.39
Unvested restricted stock [K]  $ 0.32  $ 0.11  $ 0.89  $ 0.39
Participating preferred stock [I+L]  $ 0.72  $ 0.51  $ 2.44  $ 1.67
           
Diluted earnings per share from operations [[B+C]/H]  $ 0.31  $ 0.11  $ 0.87  $ 0.38
           
The number of outstanding participative convertible preferred stock for which the earnings per share exceeded the earnings per share of common stock aggregated to 18.8 million and 17.3 million for the three and twelve months ended December 31,2012 and 2011, respectively.These shares were excluded from the computation of diluted earnings per share because they were anti-dilutive.
 
iGATE CORPORATION
Reconciliation of Net Income, Net of Tax, to Adjusted EBITDA
(Amounts in thousands)
         
  Three Months ended Year ended
  December 31, December 31,
  2012 2011 2012 2011
  (unaudited) (unaudited) (unaudited) (audited)
         
Net income  $ 32,174  $ 20,426  $ 101,658  $ 60,054
         
Adjustments        
         
Depreciation and amortization  9,625  13,703  46,382  38,735
Interest expenses  21,267  17,774  83,416  50,608
Income tax expense   6,592  16,904  30,599  24,218
Other income, net  (4,823)  (7,393)  (28,798)  (15,894)
Foreign exchange loss/(gain)  1,886  3,770  20,084  (13,076)
Stock Based Compensation  3,004  1,869  12,274  10,737
Acquisition expenses  --   --   --   10,914
Severance expenses  --   --   --   6,164
Delisting expenses  1,497  997  5,029  997
Merger and reorganization expenses  708  --   1,472  -- 
Adjusted EBITDA (a non-GAAP measure)  $ 71,930  $ 68,050  $ 272,116  $ 173,457
         
         
The Company presents the non-GAAP financial measures EBITDA and adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes that the presentation of these measures will enhance investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry.
 
iGATE CORPORATION
Reconciliation of Selected GAAP Measures to Non-GAAP Measures
(Amounts in thousands, except per share data)
         
         
  Three Months ended Year ended
  December 31, December 31,
  2012 2011  2012  2011
  (unaudited) (unaudited)  (unaudited)  (audited)
GAAP Net income attributable to iGATE common shareholders  $ 24,608  $ 8,173  $ 67,731  $ 29,019
         
Adjustments        
Preferred dividend and accretion to preferred stock  7,566  7,104  29,451  22,449
Amortization of Intangible assets, net of taxes  1,870  2,551  7,988  6,191
Stock Based Compensation, net of taxes  2,044  1,804  8,485  8,530
Acquisition expenses, net of taxes  --   --   --   10,914
Delisting expenses, net of taxes  1,023  997  3,477  997
Merger and reorganization expenses  708  --   1,472  -- 
Forex (gain) / loss on acquisition hedging and remeasurement, net of taxes  (1,504)  (724)  3,755  (15,975)
Severance cost, net of taxes  --   222  --   4,897
         
Non-GAAP Net income attributable to iGATE common shareholders  $ 36,315  $ 20,127  $ 122,359  $ 67,022
         
Weighted average shares outstanding, Basic  57,544  56,884  57,228  56,740
Add back: assumed preferred stock conversion  18,778  17,347  18,778  17,347
Non-GAAP shares outstanding , Basic  76,322  74,231  76,006  74,087
         
Weighted average dilutive common shares outstanding  59,113  58,061  58,821  57,943
Add back: assumed preferred stock conversion  18,778  17,347  18,778  17,347
Weighted average dilutive common equivalent shares outstanding  77,891  75,408  77,599  75,290
         
Basic EPS (GAAP) to Basic EPS (Non-GAAP):        
Basic EPS (GAAP)  $ 0.32  $ 0.11  $ 0.89  $ 0.39
Preferred dividend and accretion to preferred stock 0.10 0.10 0.39 0.30
Amortization of Intangible assets, net of taxes 0.03 0.04 0.10 0.08
Stock Based Compensation, net of taxes 0.03 0.02 0.11 0.12
Acquisition expenses, net of taxes 0.00 0.00 0.00 0.15
Delisting expenses, net of taxes 0.01 0.01 0.05 0.01
Merger and reorganization expenses 0.01 0.00 0.02 0.00
         
Forex (gain) / loss on acquisition hedging and remeasurement, net of taxes (0.02) (0.01) 0.05 (0.22)
Severance cost, net of taxes 0.00 0.00 0.00 0.07
Basic EPS (Non-GAAP)  $ 0.48  $ 0.27  $ 1.61  $ 0.90
         
Diluted EPS (GAAP) to Diluted EPS (Non-GAAP):        
Diluted EPS (GAAP)  $ 0.31  $ 0.11  $ 0.87  $ 0.38
Preferred dividend and accretion to preferred stock 0.10 0.10 0.38 0.30
Amortization of Intangible assets, net of taxes 0.03 0.04 0.10 0.08
Stock Based Compensation, net of taxes 0.03 0.02 0.11 0.11
Acquisition expenses, net of taxes 0.00 0.00 0.00 0.15
Delisting expenses, net of taxes 0.01 0.01 0.05 0.01
Merger and reorganization expenses 0.01 0.00 0.02 0.00
         
Forex (gain) / loss on acquisition hedging and remeasurement, net of taxes (0.02) (0.01) 0.05 (0.21)
Severance cost, net of taxes 0.00 0.00 0.00 0.07
Diluted EPS (Non-GAAP)  $ 0.47  $ 0.27  $ 1.58  $ 0.89

Non-GAAP Disclosure of Adjusted EBITDA

iGATE presents Adjusted EBITDA as a supplemental measure of its performance. iGATE defines Adjusted EBITDA as net income plus (i) depreciation and amortization, (ii) interest expense, (iii) income tax expense, minus (iv) other income, net plus (v) foreign exchange loss, (vi) stock based compensation (vii) acquisition expenses (viii) severance expenses, (ix) delisting expenses and (x) merger and reorganization expenses. iGATE eliminated the impact of the above because it does not consider them as indicative of its ongoing operating performance. These adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons iGATE considers them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future iGATE may incur expenses that are the same as or similar to some of the adjustments in this presentation. iGATE's presentation of Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.

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