SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 0-27876
JDA SOFTWARE GROUP,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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86-0787377
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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14400
North 87th Street
Scottsdale, Arizona 85260
(Address
of principal executive offices, including zip code)
Registrants
telephone number, including area code:
(480) 308-3000
Securities registered pursuant to Section 12(b) of the
Act:
NONE
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.01 par value
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
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 requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12-b-2
of the Exchange
Act Yes o No þ
The approximate aggregate market value of the registrants
common stock held by non-affiliates of the registrant (based on
the closing sales price of such stock as reported by the NASDAQ
Stock Market) on June 30, 2009 was $447,182,136. The number
of shares of common stock, $0.01 par value per share,
outstanding as of March 5, 2010 was 41,534,345.
DOCUMENTS
INCORPORATED BY REFERENCE
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Documents
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Form 10-K Reference
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Portions of the Proxy Statement for the registrants 2010
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Items 10, 11, 12, 13 and 14 of Part III
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Annual Meeting of Stockholders are incorporated by
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reference into Part III of this
Form 10-K
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TABLE OF CONTENTS
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PART I |
Item 1B. Unresolved Staff Comments -- None |
Item 2. Properties |
Item 3. Legal Proceedings |
Item 4. Removed and Reserved |
PART II |
Item 5. Market for Registrants Common Equity and Related Stockholder Matters |
Item 6. Selected Financial Data |
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
Item 8. Financial Statements and Supplementary Data |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure - |
Item 9A. Controls and Procedures |
Item 9B. Other Information -- None |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
PART III |
Item 10. Board of Directors, Executive Officers and Corporate Governance |
Item 11. Executive Compensation |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. Certain Relationships and Related Transactions, and Director Independence |
Item 14. Principal Accountant Fees and Services |
PART IV |
Item 15. Exhibits and Financial Statement Schedules |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
JDA SOFTWARE GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS |
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME |
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS) |
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS |
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS |
JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Years Ended December 31, 2009 (in thousands, except percentages, shares, per share amounts or as otherwise stated) |
EX-10.1 |
EX-10.5 |
EX-21.1 |
EX-23.1 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
This Annual Report on
Form 10-K
contains forward-looking statements reflecting managements
current forecast of certain aspects of our future. It is based
on current information that we have assessed but which by its
nature is dynamic and subject to rapid and even abrupt changes.
Forward looking statements include statements regarding future
operating results, liquidity, capital expenditures, product
development and enhancements, numbers of personnel, strategic
relationships with third parties, and strategy. The
forward-looking statements are generally accompanied by words
such as plan, estimate,
expect, intend, believe,
should, would, could,
anticipate or other words that convey uncertainty of
future events or outcomes. Our actual results could differ
materially from those stated or implied by our forward-looking
statements due to risks and uncertainties associated with our
business. These risks are described throughout this Annual
Report on
Form 10-K,
which you should read carefully. We would particularly refer you
to Item 1A. Risk Factors for an extended
discussion of the risks confronting our business. The
forward-looking statements in this Annual Report on
Form 10-K
should be considered in the context of these risk factors. We
disclaim any obligation to update information contained in any
forward-looking statement.
PART I
Recent
Developments
On January 28, 2010, we completed the acquisition of
i2 Technologies, Inc. (i2) for approximately
$600.0 million, which includes cash consideration of
approximately $432.0 million and the issuance of
approximately 6.2 million shares of our common stock with
an acquisition date fair value of approximately
$168.0 million, or $26.88 per share, determined on the
basis of the closing market price of our common stock on the
date of acquisition (the Merger). The combination of
JDA and i2 creates a market leader in the supply chain
management market. We believe this combination provides JDA with
(i) a strong, complementary presence in new markets such as
discrete manufacturing and transportation; (ii) enhanced
scale; (iii) a more diversified, global customer base of
over 6,000 customers; (iv) a comprehensive product suite
that provides
end-to-end
supply chain management (SCM) solutions;
(v) incremental revenue opportunities associated with
cross-selling of products and services among our existing
customer base; and (vi) an ability to increase
profitability through net cost synergies in the first six to
nine months after the Merger.
Under the terms of the Merger Agreement, each issued and
outstanding share of i2 common stock was converted into the
right to receive $12.70 in cash and 0.2562 of a share of JDA
common stock (the Merger Consideration). Holders of
i2 common stock did not receive any fractional JDA shares in the
Merger. Instead, the total number of shares that each holder of
i2 common stock received in the Merger was rounded down to the
nearest whole number, and JDA paid cash for any resulting
fractional share determined by multiplying the fraction by
$26.65, which represents the average closing price of JDA common
stock on Nasdaq for the five consecutive trading days ending
three days prior to the effective date of the Merger.
Each outstanding option to acquire i2 common stock was canceled
and terminated at the effective time of the Merger and converted
into the right to receive the Merger Consideration with respect
to the number of shares of i2 common stock that would have been
issuable upon a net exercise of such option, assuming the market
value of the i2 common stock at the time of such exercise was
equal to the value of the Merger Consideration as of the close
of trading on the day immediately prior to the effective date of
the Merger. Any outstanding option with a per share exercise
price that was greater than or equal to such amount was
cancelled and terminated and no payment was made with respect
thereto. In addition, each i2 restricted stock unit award
outstanding immediately prior to the effective time of the
Merger was fully vested and cancelled, and each holder of such
awards became entitled to receive the Merger Consideration for
each share of i2 common stock into which the vested portion of
the awards would otherwise have been convertible. Each i2
restricted stock award was vested immediately prior to the
effective time of the Merger and was entitled to receive the
Merger Consideration.
Each outstanding share of i2s Series B Preferred
Stock was converted into the right to receive $1,100 per share
in cash, which is equal to the stated change of control
liquidation value of each such share plus all accrued and unpaid
dividends thereon through the effective date of the Merger.
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Throughout Part I of this Annual Report on
Form 10-K,
except as otherwise specified, we have described our business as
currently operated, giving effect to our acquisition of i2.
Overview
We are a leading provider of sophisticated enterprise software
solutions designed to enable planning, optimization and
execution of merchandising and supply chain processes for
manufacturers, wholesalers and distributors, and retailers, as
well as government and aerospace defense contractors.
Additionally, we provide pricing, yield management and demand
management software solutions for travel, transportation,
hospitality and media organizations. We believe we have the
broadest and deepest suite of software products and services for
supply chain management. Our software offerings are highly
tailored to industry-specific needs and are integrated to
provide a complete set of solutions for our customers. These
attributes, we believe, position us well against both broad
enterprise resource planning (ERP) competitors and
point solution providers, and promote customer loyalty.
Industry
Overview
Organizations rely on various types of enterprise software
solutions to optimize their business processes in order to
enhance revenue growth and control expenses. The enterprise
software market includes both vertically-specialized solutions
such as SCM solutions, as well as horizontal business
applications such as ERP suites, business intelligence
applications, customer relationship management (CRM)
solutions, analytical applications and other financial and
operational software.
SCM solutions represent a distinct subset of the broader
enterprise software applications market. SCM software manages
the utilization of assets and labor, the flow and allocation of
materials and products and the management of information,
finances and other resources across global supply chains, from
manufacturers to distribution centers and transportation
networks to the retail store and consumer. SCM software is used
to reduce costs by improving the efficiency of supply chain
flows and increase revenue by matching the supply of goods with
actual customer demand more accurately. For example, SCM
software enables companies to offer differentiated products
targeted to specific end markets while, at the same time,
ensuring the availability of appropriate sales personnel and
programs to help consumers make their purchases.
The SCM market is expected to grow by approximately 5% annually,
from approximately $6.3 billion of revenues in 2008 to
approximately $8.2 billion in 2013, according to
Gartners September 2009 publication entitled
Forecast: Enterprise Software Markets, Worldwide,
2008-2013,
3Q09 Update. The SCM software market is segmented into the
following categories
(sub-segment
size in 2008 is noted in parentheses):
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Supply Chain Planning (Approximately $2.3
Billion): Provides planning, what-if analysis
capabilities and management of real-time demand commitments to
optimize the delivery of goods and services and relay
information from suppliers to customers;
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Supply Chain Execution (Approximately $1.8
Billion): Performs the efficient procurement and
supply of goods, service and information across enterprise
boundaries to meet customer-specific demand;
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Procurement (Approximately $2.0
Billion): Creates an optimal set of suppliers and
establishes the terms of trade to balance cost, quality and
risk; and
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Service Parts Planning (Approximately $0.2
Billion): Enables service organizations to help
manage the growing number of parts and part locations.
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Key growth drivers for the SCM market include:
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Increased Global Competition: Increased global
competition and the current economic downturn have led to price
pressure and shortened product life cycles. As a result,
companies currently face pressure to generate greater value
throughout the supply chain. Many companies have begun to use
low-cost, highly-skilled offshore resources to maintain margins,
but coordinating these offshore resources with the delivery of
goods and services in onshore markets can be challenging due to
longer lead times. The globalization of supply chains furthers
demand for effective supply chain management.
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Business Intelligence Trends in Enterprise
Software: Recent trends related to the
enhancement of business intelligence throughout the enterprise,
which emphasizes the importance of real-time information and
analytic tools, have driven the need for advanced supply chain
solutions that can provide the right type of information, report
it in a way that facilitates decision-making, and do so in a
timely manner.
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Continued Shift from Niche Vendor
Offerings: We believe that companies are
increasing their demand for integrated planning and execution
software suites which connect previously disconnected decision
making processes, rather than specialized, narrow applications.
JDAs SCM solutions are a leading example of an integrated
planning and execution suite in the field of SCM.
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Trend Towards Enterprise Software Solutions Focused on
Industry Verticals: Companies have begun to place
significant value on packaged business software products focused
on specific industry verticals, as opposed to general software
functionality. Since SCM software must consider the specific
components and attributes of an industrys supply chain,
SCM software is, by its very nature, vertically-focused.
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Shift Towards Subscription-Based Software
Delivery: Subscription-based software offerings
are a growth area in enterprise software generally because they
represent a deployment model that can be easier to implement
than traditional license-based software. Subscription-based
offerings currently represent 15% of the overall supply chain
software market, according to Gartners July 2009
publication entitled Dataquest Insight: Supply Chain
Management Software Market Share Analysis, Worldwide,
2008. Key areas of these deployments include procurement
and sourcing components of SCM software.
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Product
Overview
We market our software products as modular yet integrated suites
that are designed to give our customers one synchronized view of
product demand across their enterprise and extended supply
chain. Our integrated suites of software products combine the
functionality of planning, optimization, execution and analysis
applications to enable our customers to develop an integrated
enterprise plan to track and optimize the flow of inventory
through the supply chain while optimizing their resources,
operating efficiencies and financial results. Our customers can
select individual products from our suites and implement them on
a stand-alone basis or they can implement various combinations
of our products to create an integrated solution. This
flexibility provides speed to value which is highly desirable in
the current economic environment.
Our product suites include the following:
Planning
and Optimization Solutions
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Demand Management solutions to establish the
demand plan leveraged by most of our planning suite. The
establishment of an accurate demand plan at every level of the
supply chain is the basis of improved balancing of supply with
demand and the foundation for optimized profits. Our demand
planning solutions enable companies to plan demand for products
and other resources such as labor. Improved demand planning
reduces inventory working capital costs and increases revenues
by reducing lost sales;
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Allocation, Replenishment and
Fulfillment solutions optimize the planning and
execution of orders to meet the requirements of the demand plan;
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Merchandise Planning solutions enable
businesses to establish strategic plans and expand those
strategies into detailed buying and resourcing plans that
support the requirements of the demand plan. Our merchandise
planning solutions also help businesses develop metrics,
including sales, margins or turns across functional
organizations, to optimize strategic financial and operating
planning activities;
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Assortment Management solutions enable
businesses to plan, manage and optimize localized assortment
offerings matched to specific consumer demand. Our assortment
management solutions support the definition of assortment
strategies, assortment optimization and
end-to-end
assortment execution through the supply chain;
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Space and Category Management solutions that
enable the planning and execution of category and merchandise
plans, which determine the physical allocation of shelf space
and the presentation of
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merchandise in stores designed to achieve demand-driven
precision merchandising and assortment management;
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Price Optimization and Revenue
Management solutions that enable a variety of
industries to optimize their profits by managing the pricing and
availability of finite time sensitive capacity, such as hotel
rooms, as well as physical inventory;
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Transportation Planning solutions that enable
companies to plan the sourcing of transportation capacity to
optimize the movement of goods through the supply chain in the
most cost effective manner to meet the requirements of the
demand plan;
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Supply and Manufacturing solutions that enable
companies to optimize the utilization of manufacturing resources
and materials to the creation of products to satisfy the needs
of the demand plan across the supply chain network;
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Network and Inventory Optimization solutions
that enable organizations to plan the flow of goods
end-to-end
through the various nodes in their supply chain to achieve
maximum profitability, optimize service levels, respond to
unexpected changes in demand and maximize profits;
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Supplier Relationship Management solutions
that enable companies to manage how they source products for
their manufacturing processes to ensure optimal pricing, terms
and the most efficient use of raw material or
sub-assemblies; and
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Workforce Planning solutions designed to
optimize the allocation of labor to support the execution of the
sales, distribution or production plan.
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Transaction
Systems
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Merchandise Operations Systems that enable
retailers to manage their inventory, product mix, pricing and
promotional execution at the corporate level and enhance the
productivity and accuracy of warehouse processes;
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Transportation and Logistics
Management solutions that are designed to enable
manufacturers, distributors, retailers, shippers, consignees,
carriers, trading partners and logistics service providers to
effectively manage the complexities of transportation and
logistics, including multiple modes of transport such as by air,
rail, sea and road;
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Contract Manufacturing solutions for
manufacturers of aerospace and defense products including order
management, repair management and financial management; and
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Store Systems that provide retailers with
point-of-sale,
labor management and back office applications to capture,
analyze and transmit certain sales, store inventory and other
operational information to corporate level merchandise
operations systems.
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Our software solutions also include a comprehensive set of tools
for advanced decision support and analysis covering strategic
business planning, forecasting, promotional planning,
distribution planning, manufacturing planning and scheduling,
price and revenue optimization, inventory optimization,
collaborative synchronization of inventory, distribution,
production and material plans, category management and workforce
management. Many of our products can be and are sold to multiple
customer types and most of our products are sold across each of
our geographic regions.
Business
Segments
We organize and manage our operations by type of customer across
the following reportable business segments:
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Retail. This reportable business segment
includes all revenues related to applications and services sold
to retail customers.
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Manufacturing and Distribution. This
reportable business segment includes all revenues related to
applications and services sold to manufacturing and distribution
companies, including process manufacturers, consumer goods
manufacturers, life sciences companies, high tech organizations,
oil and gas companies, automotive producers and other discrete
manufacturers involved with government, aerospace and defense
contracts.
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Services Industries. This reportable business
segment, which is outside of the SCM market, includes all
revenues related to applications and services sold to customers
in service industries such as travel, transportation,
hospitality, media and telecommunications. The services
industries segment is centrally managed by a team that has
global responsibilities for this market.
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Disclosures of certain financial information regarding our
business segments and geographic regions are included in our
consolidated financial statements as of December 31, 2009
and 2008, and for each of the years in the three-year period
ended December 31, 2009, which are included elsewhere
herein. Prior to the acquisition, i2 operated in one reportable
business segment, supply chain management solutions. We intend
to divide this business segment between our Retail and
Manufacturing and Distribution reportable business
segments.
Business
Opportunities and Growth Strategies
Since our founding in 1985, JDA has expanded from a provider of
inventory management software solutions for the retail industry
to a global leader in supply chain management software solutions
serving multiple end-markets such as retail, consumer,
manufacturing and wholesale/distribution. The company has grown
through a combination of organic growth and acquisitions.
JDA plans to continue to expand through a combination of organic
growth and acquisition, and intends to implement the following
strategies:
Focus on Core Competency: Supply chain
products and services help customers cut costs by improving
efficiency and growing revenues by better matching demand with
supply. Even in the current economic environment, our customers
continue to license and purchase JDAs products because of
their high return on investment, creating a business opportunity
for the company. We plan to continue to focus on the supply
chain management space, utilizing our deep expertise and
expanding our product offerings and end-markets.
Increase Add-On Sales to Existing Customers: A
significant portion of our sales are from existing customers. We
plan to pursue additional sales opportunities with these
customers by both cross-selling JDA and i2 products and
offerings and up-selling additional products and services.
Invest in New Business Opportunities: We will
continue to invest in growth initiatives that fit into our
strategy of focusing on our core SCM competency, expanding our
presence globally, and broadening our product and service
offerings. For example, we expect to grow our managed services
business to provide customers more value from their investments
in JDA products at a lower total cost of ownership.
Expand Margins Through New Low-Cost Delivery
Models: In 2008, we outlined a strategy to expand
our operations in India and create a Center of Excellence
(CoE) in Hyderabad, India. We
continue to execute plans to grow the size and capabilities of
this CoE facility. The CoE is designed to
complement and enhance our existing on-shore business model
across multiple activities including research and development,
customer support, services and internal administration,
supporting our growth with high quality services at a lower cost
structure. As a result of our acquisition of i2, our CoE
capabilities and capacity have been significantly expanded
with the addition of a second location in Bangalore, India.
Expand Marketing and Indirect Sales
Alliances: We will continue to develop and expand
our marketing and indirect sales alliances, which help promote
JDA solutions globally. We will also utilize, to a greater
extent, our JDA Alliance Connection program, first launched in
2007. This program is designed to provide increased value to our
sales agents and distributors and to maximize their ability to
generate additional revenues for both themselves and JDA.
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Product
Strategy
In January 2007, we announced the adoption of our JDA Enterprise
Architecture platform. This platform provides the strategic
technology base we use to integrate and develop new solutions
for our target markets. The JDA Enterprise Architecture was
developed utilizing core assets acquired in our acquisition of
Manugistics Group, Inc. in 2006. Customer acceptance of the JDA
Enterprise Architecture has generally been positive, and we plan
to expand the use of this platform over time to provide an
increasingly seamless solution for our customers. Since adoption
of the JDA Enterprise Architecture in 2007, we have continued
with our strategy of integrating our solutions with this
technology.
The JDA Enterprise Architecture is designed to support our
advanced planning, optimization and execution solutions via a
common platform for user interfaces, master and operational
data, security, exception management, workflow, analysis and
reporting. The JDA Enterprise Architecture features a grid
computing facility that utilizes parallel processing. This
architecture has demonstrated the ability to scale, enabling the
largest global customers to solve their complex business
challenges and accommodate the large number of stock keeping
units (SKUs), time horizons and optimization
decisions that reduce costs and improve sales. We believe the
JDA Enterprise Architecture provides our customers with better
visibility of key performance indicators and one
view of demand across all supply chain planning,
optimization and execution activities, thereby allowing more
profitable and informed decisions in manufacturing, sourcing,
supply chain planning, distribution, merchandising, logistics,
promotions, replenishment, shelf optimization and in-store
management. The JDA Enterprise Architecture is architected
primarily using Java J2EE technology.
In 2009, our product strategy focused on, and in 2010 the
combined companys product strategy will continue to focus
on, innovations that provide advanced capabilities that enhance
our comprehensive solution suite to enable our customers to
implement an Integrated Planning and Execution
solution. Integrated Planning and Execution represents the
ability for our customers to coordinate their decision making
activities across the enterprise through certain common
processes, such as a single time-phased demand plan for the
whole enterprise. It also represents the ability to ensure that
supply chain planning systems are constantly in synchronization
with execution systems and activities across the enterprise.
This strategy requires a broad and integrated suite of planning
solutions that can interoperate, as well as the ability to
transform those plans into action through execution systems. Our
products provide all of these capabilities, and we believe the
breadth and depth of our solution offerings is a distinct
competitive advantage, as we believe our competitors, even those
with far greater financial resources at their disposal, will
struggle to replicate the capabilities of the JDA Enterprise
Architecture and the functionality of our solution suite in a
reasonable period of time. We also believe our ability to offer
customers flexibility in their deployment approach provides a
distinct competitive advantage as customers can implement
individual solutions on a stand-alone basis or implement various
combinations of our products to create an integrated solution.
Following the acquisition of i2, we believe it may take several
years to fully implement a convergence strategy in our product
suite. We currently expect to announce a multi-year product
roadmap for the combined product suites during the first half of
2010; however, we do not expect to make any significant changes
to our existing or acquired product offerings during the coming
year as a result of this process. We also anticipate that we can
begin to issue new product releases in 2011 that bring together
and combine the two product suites, and over time, we will
create convergent offerings that include the broad functionality
of both the JDA and i2 offerings while eliminating areas of
overlap. We currently expect to continue the support of all
existing products of both JDA and i2 until the convergence
strategy is complete.
Investment
Protection Program
We have established an Investment Protection Program to protect
our customers investment in JDA products as we migrate to
new technology platforms. Under the Investment Protection
Program, existing maintenance paying customers are provided with
the right to
like-for-like
functionality in a new technology platform without the need to
pay an additional license fee subject to certain conditions,
including a requirement that the new solution has no more than
minimal differences in price, features and functionality from
the existing products. Customers will pay any required
third-party charges associated with the new technology platform.
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Services
We expanded the overall value proposition and operating
effectiveness of our services offerings in 2009 by combining
them under a single global organization called JDA Services. The
various service units share resources, work load, effort,
strategy, business development and customer interactions. The
key components of our services are as follows:
Maintenance
Services
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Customer Support Solutions. We offer
comprehensive customer support solutions to help customers
optimize their investment in our products. Our standard
maintenance services agreement entitles customers to receive
unspecified new product releases (exclusive of those that
introduce significant new functionality), comprehensive error
diagnosis and correction, global phone, email and internet
support, a customer relationship management portal that provides
24/7 self-service for managing and reporting issues, and access
to an online user community and searchable solution
knowledge-base. Customers have the option of choosing
maintenance service programs that extend hours of coverage,
incorporate support for custom configurations, or provide
special attention through periods of high activity or upgrade
processing. In addition, we have a Platinum offering that
includes 24x7 support for critical issues on certain of our
products, annual strategic planning meetings, technical and
functional health checks, and customized training. The vast
majority of our customers have participated in one or more of
our customer support solutions programs. Support renewal trends
in our install-base remain strong with our average annualized
retention rate for 2009 at approximately 92%.
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Consulting
Services
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Implementation Services. Our implementation
services group consists of project managers, business
consultants, systems analysts and technical personnel with
extensive retail, manufacturing, and distribution industry
experience. The implementation services group assists our
customers in all phases of systems implementation, including
program and project management, business process analysis and
design, systems planning and design, customer-specific
configuration of application modules and
on-site
implementation or conversion from existing systems. We also
offer a variety of post-implementation services designed to
maximize our customers return on their software
investment, which include enhanced utilization reviews, system
and process health checks, upgrade assessment and planning and
executive strategic planning sessions. Implementation services
are generally billed bi-weekly on an hourly basis or pursuant to
the terms of a fixed price contract. In addition, we augment our
services on large-scale implementations and extensive business
process re-engineering projects with third-party business
partners, consulting firms and system integrators.
Implementation engagements have typically ranged from one month
for certain Space & Category Management solutions to
over two years for our larger Merchandise Operations Systems,
Demand Management and Allocation, Replenishment &
Fulfillment solutions; however, the time required to complete a
project can vary significantly based on the size and supply
chain complexity of the customer as well as the number and type
of applications being implemented.
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Strategic Business Services. We offer
Strategic Business Services that provide high-level strategic
consulting and assistance to our customers before, during and
after the implementation of technology by aligning and
integrating business activities, organizational structure,
performance measures and systems processes to achieve maximum
effectiveness.
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Technical Services. We provide a range of
technical services that enable our customers to optimize the
interactions between our software solutions and industry
standard technologies including database software, operating
systems, middleware, and hardware and networks. We also offer
specific performance tuning and re-engineering services to
enhance throughput and response time of our solutions, and to
optimize the use of networks and storage devices.
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Training Services. We offer a comprehensive
education and training program for our customers, associates and
business partners through our Education Services. Education
Services include multimodal process and solution training,
role-based certification tracks, benchmarking surveys and
services and best practice/
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business strategy information. Education Services features a
curriculum for each of our software solutions, and prepaid
bundled training packages that range from basic overviews,
implementation and technical/developer classes to business
process education and key topics and techniques for the supply
chain. Courses are offered at our in-house classroom facilities,
and through customized
on-site
classes. In addition, we offer JDALearn.com, a web-based
education alternative sold on a subscription basis, which
provides online learning in areas such as replenishment and
allocation, category management, space and floor planning, and
merchandise planning. We also license our training content and
provide services to customize the content to fit specific
customer needs.
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Managed Services. Our Managed Services, which
we began offering in late 2009, expands our existing hosted
services and includes: (i) outsourced operations for
information technology, data and application management and
hosting; (ii) workforce augmentation; (iii) management
of process and user information; (iv) business process
execution services including analysis and recommendations; and
(v) business optimization services such as network design,
demand classification, inventory policy and channel clustering.
We also offer enhanced support services that provide customers
with difficult to find technical and database administration
skills, and an outsource alternative to help desk and other
information technology services. We believe our Managed Services
offering provides customers with effective alternatives to
reduce their costs of operation, operate effectively with
constrained resources, leverage outside domain expertise to
augment their personnel and improve the value they derive from
their JDA products.
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Sales and
Marketing
We market our products and services primarily through our direct
sales force, and have created dedicated sales organizations in
each of our geographic regions, as well as the Services
Industries business unit. As of December 31, 2009, our
direct sales force was located in 28 sales and support offices
in major cities throughout the Americas, Europe and
Asia/Pacific, and our overall global sales and marketing
organization consisted of 242 employees, including 75 quota
carrying sales representatives. After giving effect to our
acquisition of i2, our direct sales force is located in 47
regional sales and support offices in major cities throughout
the Americas, Europe and Asia/Pacific, and our overall global
sales and marketing organization consists of 327 employees,
including approximately 90 quota carrying sales representatives.
We continue to develop a network of value-added resellers, or
VARs, and other marketing and indirect sales alliances that
support and help us attain our goals. We use VARs extensively in
our European and Asian regions and we believe this model helps
us to achieve a stronger presence in those geographies within
these diverse markets where we do not have direct operations.
Our Alliance Connection program, first launched in 2007, is
designed to provide increased value to our partners and to
maximize their ability to generate additional revenues for
themselves and JDA. Our partners enable us to operate with
broader international coverage than would be possible if we
undertook all of our sales activities directly. JDA has also
been expanding relationships with systems integrators to assist
with delivery of services on many of our larger projects
involving larger Tier One customers. In 2008 we developed a
JDA Certified Project Program which is designed to ensure
consistent quality of projects regardless of whether JDA
undertakes part or all of a customer engagement.
Sales to new customers have historically required between three
and twelve months. Sales cycles are typically longer for larger
dollar projects, large multi-national organizations and
companies in certain geographic regions. During the past several
years, we have noted an increased requirement for senior
executive, board of directors or significant equity investor
approval for larger dollar contracts that have lengthened the
traditional time from selection to the execution of a software
agreement. We believe our ability to offer a comprehensive
portfolio of integrated software applications that customers can
install independently or as a complete solution, has created
increased cross-selling opportunities to existing customers.
Competition
We believe that although our markets are subject to intense
competition, the number of competitors in many of our
application markets has decreased over the past five years. We
believe the principal competitive factors in our markets are
(i) feature and functionality, (ii) the depth of
planning and optimization provided, (iii) available
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deployment models that accelerate the time to value,
(iv) product reputation, (v) performance and
scalability, (vi) the quality of customer base,
(vii) the perception of vendor viability,
(viii) ability to implement, (ix) retail and supply
chain industry expertise, (x) total cost of ownership,
(xi) technology platform and (xii) quality of customer
support across multiple regions for global customers.
We have two types of competitors: the first type being composed
of Oracle Corporation (Oracle) and SAP AG, two large
horizontal software companies that have each increased their
presence in the retail and manufacturing marketplace over the
past few years, and the second type being the smaller point
solution providers who typically focus on limited solution
areas. We believe that Oracle and SAP AG represent our more
important long-term competitors as we expand our product
offerings and compete
head-to-head
with them on broader system selection opportunities. We also
expect Oracle and SAP AG to provide more aggressive competition
for us due to the strength of their brands, financial size and
overall market positions.
Proprietary
Rights
Our success and competitive position is dependent in part upon
our ability to develop and maintain the proprietary aspect of
our technology. The reverse engineering, unauthorized copying,
or other misappropriation of our technology could enable third
parties to benefit from our technology without paying
for it.
We rely on a combination of copyrights, trade secrets,
trademarks, confidentiality procedures, contractual restrictions
and patents to protect our proprietary technology. We seek to
protect the source code to our software, documentation and other
written materials under trade secret and copyright laws.
Effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. We license
our software products under signed license agreements that
impose restrictions on the licensees ability to utilize
the software and do not permit the re-sale, sublicense or other
transfer of the software. Finally, we seek to avoid disclosure
of our intellectual property by requiring employees and
independent consultants to execute confidentiality agreements
with us and by restricting access to our source code.
We license and integrate technology from third parties in
certain of our software products. Examples of third-party
software imbedded in our products include the following: the
WebLogic application from BEA Systems, Inc. (acquired by Oracle)
or the IBM Websphere applications for use in most of the JDA
Enterprise Architecture platform solutions; the Data Integrator
application from Business Object S.A (acquired by SAP), which is
used in certain of the products acquired from Manugistics,
Cognos (acquired by IBM) for use in JDA Reporting and JDA
Analytics; iLog CPlex (acquired by IBM) for use in certain of
our transportation and network optimization applications; the
Uniface client/server application development technology from
Compuware, Inc. for use in Portfolio Merchandise Management;
certain applications from Silvon Software, Inc. for use in
Merchandise Performance Analysis and Java technologies which are
owned by Sun Microsystems but are currently subject to a
proposed acquisition by Oracle and Clearcase (acquired by IBM)
for use in certain of our Demand Management, Allocation,
Replenishment and Fulfillment, Transportation and Logistics
Management and Store Systems applications. Our third party
licenses generally require us to pay royalties and fulfill
confidentiality obligations. We also resell Oracle database
licenses.
Our standard software license agreements contain an infringement
indemnity clause under which we agree to indemnify and hold
harmless our customers and business partners against liability
and damages arising from claims of various intellectual property
infringement by our products. These terms constitute a form of
guarantee that is subject to the disclosure requirements, but
not the initial recognition or measurement provisions of
Accounting Standard Codification (ASC)
460 Guarantees. We have never lost an
infringement claim and our costs to defend such lawsuits have
been insignificant. Although it is possible that in the future
third parties may claim that our current or potential future
software solutions infringe on their intellectual property
rights, we do not currently expect a significant impact on our
business, operating results, or financial condition.
Employees
As of December 31, 2009, we had 1,847 employees: 925
were based in the Americas region, 200 were based in Europe, and
722 were based in the Asia/Pacific region, including 598 in
India. Of the total, 242 were engaged in sales and marketing,
456 were in consulting services, 297 were engaged in customer
support services, 607 were in
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product development, and 245 perform administrative functions.
After the acquisition of i2, we have 2,969 employees, of
which 1,321 were based in the Americas region, 287 were based in
Europe, and 1,361 were based in the Asia/Pacific region,
including 1,130 in India. Of this total, 327 are engaged in
sales and marketing, 1,007 are engaged in consulting services,
406 are engaged in customer support services, 869 are engaged in
product development, and 360 perform administrative functions.
Our employees in Germany are represented by a Works Council.
Although there are no formal employee representative bodies in
other countries, the employees of certain of our foreign
subsidiaries are covered by national, regional or sectoral
collective agreements as required by statute or standard local
practice. We believe that our relations with our employees are
good and we have never had a work stoppage.
Available
Information
Our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those filed or furnished pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, are available free of charge from our website
at www.jda.com, as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
Securities and Exchange Commission.
We operate in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section
describes material risks and uncertainties that we believe may
adversely affect our business, financial condition, results of
operations or the market price of our stock. This section should
be read in conjunction with the audited Consolidated Financial
Statements and Notes thereto, and Managements Discussion
and Analysis of Financial Condition and Results of Operations
contained elsewhere in this
Form 10-K.
Risks
Related To Our Business
We may
not remain profitable.
We had net income of $26.3 million and $3.1 million
for the years ended December 31, 2009 and 2008,
respectively. We may not be able to sustain such profitability
in the future. Our ability to sustain profitability will depend,
in part, on our ability to:
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attract and retain an adequate client base;
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manage effectively a larger and more global business;
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react to changes, including technological changes, in the
markets we target or operate in;
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deploy our services in additional markets or industry segments;
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respond to competitive developments and challenges;
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attract and retain experienced and talented personnel; and
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establish strategic business relationships.
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We may not be able to do any of these successfully, and our
failure to do so is likely to have a negative impact on our
operating results and cash flows, which could affect our ability
to make payments on the notes.
We have a
substantial amount of debt, which could impact our ability to
obtain future financing or pursue our growth strategy.
After the acquisition of i2, we have $275 million of
long-term debt. Our cash flow from operations, without the cash
flow from i2, was $96.5 million and $47.1 million in
2009 and 2008, respectively. Our indebtedness could have
significant adverse effects on our business, including the
following:
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we must use a substantial portion of our cash flow from
operations to pay interest on our indebtedness, which will
reduce the funds available to us for operations and other
purposes;
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our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes
may be impaired;
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our high level of indebtedness could place us at a competitive
disadvantage compared to our competitors that may have
proportionately less debt;
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our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate may be limited;
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our high level of indebtedness may make us more vulnerable to
economic downturns and adverse developments in our
business; and
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our ability to fund a change of control offer may be limited.
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The instruments governing the notes contain, and the instruments
governing any indebtedness we may incur in the future may
contain, restrictive covenants that limit our ability to engage
in activities that may be in our long-term best interests. Our
failure to comply with these covenants could result in an event
of default which, if not cured or waived, could result in the
acceleration of all or a portion of our outstanding indebtedness.
Payments
on our indebtedness will require a significant amount of
cash.
As a result of financial, business, economic and other factors,
many of which we cannot control, our business may not generate
sufficient cash flow from operations in the future and our
currently anticipated growth in revenue and cash flow may not be
realized, either or both of which could result in our being
unable to repay indebtedness, including our outstanding notes,
or to fund other liquidity needs. If we do not have sufficient
cash resources in the future, we may be required to refinance
all or part of our then existing debt, sell assets or borrow
more money. There can be no assurance that we will be able to
accomplish any of these alternatives on terms acceptable to us
or at all. In addition, the terms of existing or future debt
agreements may restrict us from adopting any of these
alternatives.
We may be
able to incur substantial additional indebtedness that could
further exacerbate the risks associated with our
indebtedness.
We may incur substantial additional indebtedness in the future.
Although the indenture governing our outstanding notes contains
restrictions on our incurrence of additional debt, these
restrictions are subject to a number of qualifications and
exceptions, and we could incur substantial additional secured or
unsecured indebtedness, which may include a credit facility that
may include financial ratio requirements and covenants. If we
incur additional debt, the risks related to our leverage and
debt service requirements would increase.
We may
not receive significant revenues from our current research and
development efforts, which may limit our business from
developing in ways that we currently anticipate.
Developing and localizing software is expensive and the
investment in product development often involves a long payback
cycle. We have made and expect to continue making significant
investments in software research and development and related
product opportunities. If product life cycles shorten or key
technologies upon which we depend change rapidly, we may need to
make high levels of expenditures for research and development
that could adversely affect our operating results if not offset
by corresponding revenue increases. We believe that we must
continue to dedicate a significant amount of resources to our
research and development efforts to maintain our competitive
position. However, it is difficult to estimate when, if ever, we
will receive significant revenues from these investments.
We may
misjudge when software sales will be realized, which may
materially reduce our revenue and cash flow and adversely affect
our business.
Software license revenues in any quarter depend substantially
upon contracts signed and the related shipment of software in
that quarter. Because of the timing of our sales, we typically
recognize the substantial majority of our software license
revenues in the last weeks or days of the quarter. In addition,
it is difficult to forecast the timing of large individual
software license sales with a high degree of certainty due to
the extended length of the sales cycle
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and the generally more complex contractual terms that may be
associated with such licenses that could result in the deferral
of some or all of the revenue to future periods. Our customers
and potential customers, especially for large individual
software license sales, are increasingly requiring that their
senior executives, board of directors and significant equity
investors approve such purchases without the benefit of the
direct input from our sales representatives. As a result, we may
have less visibility into the progression of the selection and
approval process throughout our sales cycles, which in turn
makes it more difficult to predict the quarter in which
individual sales will occur, especially in large sales
opportunities.
We are also at risk of having pending transactions abruptly
terminated if the boards of directors or executive management of
our customers decide to withdraw funding from information
technology projects as a result of a deep or prolonged global
economic downturn and credit crisis. If this type of behavior
becomes commonplace among existing or potential customers then
we may face a significant reduction in new software sales. In
the last year we have seen an increasing number of our prospects
indicate to us that they can sign agreements prior to the end of
our quarter, when in fact their approval process precludes them
from being able to complete the transaction until after the end
of our quarter. In addition, because of the current economic
downturn, we may need to increase our use of alternate licensing
models that reduce the amount of software revenue we recognize
upon shipment of our software.
Each of these circumstances add to the difficulty of accurately
forecasting the timing of deals. We expect to experience
continued difficulty in accurately forecasting the timing of
deals. If we receive any significant cancellation or deferral of
customer orders, or if we are unable to conclude license
negotiations by the end of a fiscal quarter, our quarterly
operating results will be lower than anticipated.
In addition to the above, we may be unable to recognize revenues
associated with certain projects assumed in the acquisition of
i2 in accordance with our expectations. i2 historically
recognized a significant portion of revenues from sales of
software solutions and development projects over time using the
percentage of completion method of contract accounting. Failure
to complete project phases in accordance with the overall
project plan can create variability in our expected revenue
streams if we are not able to recognize revenues related to
particular projects because of delays in development.
We may
face liability if our products are defective or if we make
errors implementing our products.
Our software products are highly complex and sophisticated. As a
result, they could contain design defects, software errors or
security problems that are difficult to detect and correct. In
particular, it is common for complex software programs such as
ours to contain undetected errors, particularly in early
versions of our products. Errors are discovered only after the
product has been implemented and used over time with different
computer systems and in a variety of applications and
environments. Despite extensive testing, we have in the past
discovered certain defects or errors in our products or custom
configurations only after our software products have been used
by many clients.
In addition, implementation of our products may involve
customer-specific configuration by third parties or us, and may
involve integration with systems developed by third parties. Our
clients may occasionally experience difficulties integrating our
products with other hardware or software in their particular
environment that are unrelated to defects in our products. Such
defects, errors or difficulties may cause future delays in
product introductions, result in increased costs and diversion
of development resources, require design modifications or impair
customer satisfaction with our products. If clients experience
significant problems with implementation of our products or are
otherwise dissatisfied with their functionality or performance,
or if our products fail to achieve market acceptance for any
reason, our market reputation could suffer, and we could be
subject to claims for significant damages. There can be no
assurances that the contractual provisions in our customer
agreements that limit our liability and exclude consequential
damages will be enforced. Any such damages claim could impair
our market reputation and could have a material adverse affect
on our business, operating results and financial condition.
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We may
have difficulty implementing our software products, which would
harm our business and relations with customers.
Our software products are complex and perform or directly affect
mission-critical functions across many different functional and
geographic areas of the enterprise. Consequently, implementation
of our software products can be a lengthy process, and
commitment of resources by our clients is subject to a number of
significant risks over which we have little or no control. The
implementation time for certain of our applications can be
longer and more complicated than our other applications as they
typically:
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involve more significant integration efforts in order to
complete implementation;
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require the execution of implementation procedures in multiple
layers of software;
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offer a customer more deployment options and other configuration
choices;
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require more training; and
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may involve third party integrators to change business processes
concurrent with the implementation of the software.
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Delays in the implementations of any of our software products,
whether by our business partners or by us, may result in client
dissatisfaction, disputes with our customers, or damage to our
reputation.
Our
operating results may be adversely affected as a result of our
failure to meet contractual obligations under fixed-price
contracts within our estimated cost structure.
A portion of our consulting services revenues are derived under
fixed price arrangements that require us to provide identified
deliverables for a fixed fee. During the years ended
December 31, 2009 and 2008, approximately 15% of our
consulting services revenues were derived under fixed price
arrangements. Our failure to meet our contractual obligations
under fixed price contracts within our estimated cost structure
may result in our having to record the cost related to the
performance of services in the period that the services were
rendered, but delay the timing of revenue recognition to a
future period in which the obligations are met, which may cause
our operating results to suffer.
We may
have difficulty developing our new managed services offering,
which could reduce our future revenue growth
opportunities.
We have limited experience operating our applications for our
customers under our Managed Services offering, either on a
hosted or remote basis. We began these services in late 2009 and
through December 31, 2009 they represented a very small
part of our revenues. We have hired management personnel with
significant expertise in operating a managed services business
and we have begun to make capital expenditures for this
business. We may encounter difficulties developing our Managed
Services into a mature services offering, or the rate of
adoption by our customers may be slower than anticipated. If our
Managed Services business does not grow or operate as expected,
it could divert management resources, harm our strategy and
reduce opportunities for future revenue growth.
The
enforcement and protection of our intellectual property rights
may be expensive and could divert our valuable
resources.
We rely primarily on patent, copyright and trademark laws, as
well as nondisclosure and confidentiality agreements and other
methods, to protect our proprietary information, technologies
and processes. Policing unauthorized use of our products and
technologies is difficult and time-consuming. Unauthorized
parties may try to copy or reverse engineer portions of our
products, circumvent our security devices or otherwise obtain
and use our intellectual property. We cannot be certain that the
steps we have taken will prevent the misappropriation or
unauthorized use of our proprietary information and
technologies, particularly in foreign countries where the laws
may not protect our proprietary intellectual property rights as
fully or as readily as United States laws. We cannot be certain
that the laws and policies of any country, including the United
States, or the practices of any of the standards bodies, foreign
or domestic, with respect to intellectual property enforcement
or licensing will not be changed in a way detrimental to our
licensing program or to the sale or use of our products or
technology.
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We may need to litigate to enforce our intellectual property
rights, protect our trade secrets or determine the validity and
scope of proprietary rights of others. As a result of any such
litigation, we could lose our ability to enforce one or more
patents or incur substantial unexpected operating costs. Any
action we take to enforce our intellectual property rights could
be costly and could absorb significant management time and
attention, which, in turn, could negatively impact our operating
results. In addition, failure to protect our trademark rights
could impair our brand identity.
Third
parties may claim we infringe their intellectual property
rights, which would result in an increase in litigation and
other related costs.
We periodically receive notices or claims from others that we
are infringing upon their intellectual property rights,
especially patent rights. We expect the number of such claims
will increase as the functionality of products overlap and the
volume of issued software patents continues to increase.
Responding to any infringement claim, regardless of its
validity, could:
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be time-consuming, costly
and/or
result in litigation;
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divert managements time and attention from developing our
business;
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require us to pay monetary damages or involve settlement
payments, either of which could be significant;
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require us to enter into royalty and licensing agreements that
we would not normally find acceptable;
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require us to stop selling or to redesign certain of our
products; or
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require us to satisfy indemnification obligations to our
customers.
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If a successful claim is made against us and we fail to develop
or license a substitute technology, our business, results of
operations, financial condition or cash flows could be adversely
affected.
If we
lose access to critical third-party software or technology, our
costs could increase and the introduction of new products and
product enhancements could be delayed, potentially hurting our
competitive position.
We license and integrate technology from third parties in
certain of our software products. Examples of third-party
software embedded in our products include the following: the
WebLogic application from BEA Systems, Inc. (acquired by Oracle)
or the IBM Websphere applications for use in most of the JDA
Enterprise Architecture platform solutions; the Data Integrator
application from Business Object S.A (acquired by SAP), which is
used in certain of the products acquired from Manugistics,
Cognos (acquired by IBM) for use in JDA Reporting and JDA
Analytics; iLog CPlex (acquired by IBM) for use in certain of
our Transportation and Network Optimization applications; the
Uniface client/server application development technology from
Compuware, Inc. for use in Portfolio Merchandise Management;
certain applications from Silvon Software, Inc. for use in
Merchandise Performance Analysis and Java technologies which are
owned by Sun Microsystems but are currently subject to a
proposed acquisition by Oracle and Clearcase (acquired by IBM)
for use in certain of our Demand Management, Allocation,
Replenishment and Fulfillment, Transportation and Logistics
Management and Store systems applications. Our third-party
licenses generally require us to pay royalties and fulfill
confidentiality obligations. We also resell Oracle database
licenses. If we are unable to continue to license any of this
third party software, or if the third party licensors do not
adequately maintain or update their products, we would face
delays in the releases of our software until equivalent
technology can be identified, licensed or developed, and
integrated into our software products. These delays, if they
occur, could harm our business, operating results and financial
condition. It is also possible that intellectual property
acquired from third parties through acquisitions, mergers,
licenses, or otherwise obtained may not have been adequately
protected, or infringes another parties intellectual property
rights.
We may
face difficulties in our highly competitive markets, which may
make it difficult to attract and retain clients and grow
revenues.
The supply chain software market continues to consolidate and
this has resulted in larger, new competitors with significantly
greater financial and marketing resources and more numerous
technical resources than we
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possess. This could create a significant competitive advantage
for our competitors and negatively impact our business. It is
difficult to estimate what long term effect these acquisitions
will have on our competitive environment. We have encountered
competitive situations with certain enterprise software vendors
where, in order to encourage customers to purchase licenses of
their specific applications and gain market share, we suspect
they have also offered to license at no charge certain of their
retail
and/or
supply chain software applications that compete with our
solutions. If large competitors such as Oracle, SAP AG and other
large private companies are willing to license their retail,
supply chain
and/or other
applications at no charge, it may result in a more difficult
competitive environment for our products. We cannot guarantee
that we will be able to compete successfully for customers or
acquisition targets against our current or future competitors,
or that competition will not have a material adverse effect on
our business, operating results and financial condition.
We encounter competitive products from a different set of
vendors in many of our primary product categories. We believe
that while our markets are subject to intense competition, the
number of competitors in many of our application markets has
decreased over the past five years. We believe the principal
competitive factors in our markets are feature and
functionality, the depth of planning and optimization provided
and available deployment models. We compete on the basis of the
reputation of our products, the performance and scalability of
our products, the quality of our customer base, our ability to
implement, our retail and supply chain industry expertise, our
lower total cost of ownership, technology platform and quality
of customer support across multiple regions for global customers.
The competitive markets in which we compete could put pressure
on us to reduce our prices. If our competitors offer deep
discounts on certain products, we may need to lower prices or
offer other favorable terms in order to compete successfully.
Any such changes would likely reduce margins and would adversely
affect our operating results. Our software license updates and
product support fees are generally priced as a percentage of our
new license fees. Our competitors may offer a lower percentage
pricing on product updates and support, which could put pressure
on us to further discount our new license prices. Any
broadly-based changes to our prices and pricing policies could
cause new software license and services revenues to decline or
be delayed as our sales force implements and our customers
adjust to the new pricing policies.
We have increased our off-shore resources through our
CoE. However, our consulting services business model is
currently largely based on relatively high-cost on-shore
resources and, although it has started to increase, utilization
of CoE consulting services resources in the Hyderabad
facility has been lower than planned.
We believe the primary reason for this
lower-than-expected
utilization may be due to slower internal adoption of our
planned mix of on-shore/off-shore services. Further, we face
competition from low-cost off-shore service providers and
smaller boutique consulting firms. This competition is expected
to continue and our on-shore hourly rates are much higher than
those offered by these competitors. As these competitors gain
more experience with our products, the quality gap between our
service offerings and theirs may diminish, resulting in
decreased revenues and profits from our consulting practice. In
addition, we face increased competition for services work from
ex-employees of JDA who offer services directly or through lower
cost boutique consulting firms. These competitive service
providers have taken business from JDA and while some are still
relatively small compared to our consulting services business,
if they grow successfully, it will be largely at our expense. We
continue to attempt to improve our competitive position by
further developing and increasing the utilization of our own
offshore consulting services group at our CoE facility in
Hyderabad, and this should be enhanced by the CoE
facility in Bangalore that we obtained in the i2 acquisition
since it has been in operation for a longer period of time;
however, we cannot guarantee these efforts will be successful or
enhance our ability to compete.
There are
many risks associated with international operations, which may
negatively impact our overall business and
profitability.
International revenues represented approximately 40% of our
total revenues in the three years ended December 31, 2009,
2008 and 2007, or 40%, 40% and 41% on a pro forma basis, after
giving effect to acquisition of i2, and we expect to generate a
significant portion of our revenues from international sales in
the future.
16
Our international business operations are subject to risks
associated with international activities, including:
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currency fluctuations, the impact of which could significantly
increase as a result of:
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Arrow Pointing Right our continuing expansion of the CoE in
India; and
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Arrow Pointing Right
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the acquisition of i2, as the majority of i2s
international expenses, including the compensation expense of
over 65% of its employees, will be denominated in currencies
other than the U.S. Dollar;
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higher operating costs due to the need to comply with local laws
or regulations;
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lower margins on consulting services;
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competing against low-cost service providers;
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unexpected changes in employment and other regulatory
requirements;
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tariffs and other trade barriers;
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costs and risks of adapting our products for use in foreign
countries;
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longer payment cycles in certain countries;
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potentially negative tax consequences;
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difficulties in staffing and managing geographically disparate
operations;
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greater difficulty in safeguarding intellectual property,
licensing and other trade restrictions;
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ability to negotiate and have enforced favorable contract
provisions;
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repatriation of earnings;
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the challenges of finding qualified management for our
international operations;
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general economic conditions in international markets; and
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developing and deploying the skills required to service our
broad set of product offerings across the markets we serve.
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We expect that an increasing portion of our international
software license, consulting services and maintenance services
revenues will be denominated in foreign currencies, subjecting
us to fluctuations in foreign currency exchange rates. If we
expand our international operations, exposures to gains and
losses on foreign currency transactions may increase. We use
derivative financial instruments, primarily forward exchange
contracts, to manage a majority of the foreign currency exchange
exposure associated with net short-term foreign denominated
assets and liabilities which exist as part of our ongoing
business operations but we do not hedge ongoing or anticipated
revenues, costs and expenses, including the additional costs we
expect to incur with the expansion of our CoE in
Hyderabad, India. We cannot guarantee that any currency exchange
strategy would be successful in avoiding exchange-related losses.
If we
experience expansion delays or difficulties with our Center of
Excellence in India, our costs may increase and our margins may
decrease.
We are continuing the expansion of our CoE facilities
located in Hyderabad and Bangalore, India. In order to take
advantage of cost efficiencies associated with Indias
lower wage scale, we expanded the CoE during 2008 beyond
a research and development center to include consulting
services, customer support and information technology resources.
We believe that a properly functioning CoE will be
important in achieving desired long-term operating results.
Although we have not yet fully utilized certain of the service
capabilities of the CoE, we believe progress is being
made. We are satisfied with the progress of our product
development, information technology and other administrative
support functions at the CoE. We are also beginning to
gain leverage from the CoE in our consulting services
business, and we expect the overall share of consulting services
work performed by the CoE will continue to increase. We
also believe there are additional opportunities to further
leverage the CoE in our customer support organization. If
we encounter any delays in our efforts to increase the
utilization of our services resources at
17
the CoE it may have an overall effect of reducing our
consulting services margins and negatively impacting our
operating results. Additional risks associated with our CoE
strategy include, but are not limited to:
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the
slower-than-expected
rate of internal adoption of our planned mix of
on-shore/off-shore services;
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unexpected increases in labor costs in India;
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increased risk of associate attrition due to the improvement of
the Indian economy and job market;
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terrorist activities in the region;
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inability to hire or retain sufficient personnel with the
necessary skill sets to meet our needs;
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economic, security and political conditions in India;
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inadequate facilities or communications infrastructure; and
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local law or regulatory issues.
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In addition, i2 conducted a large portion of its software
solutions development and services operations in Bangalore,
India and the distributed nature of its development and
consulting resources could create increased operational
challenges and complications for us based upon the above factors.
Economic,
political and market conditions can adversely affect our revenue
and profitability.
Our revenue and profitability depend on the overall demand for
our software and related services. Historically, events such as
terrorist attacks, natural catastrophes and contagious diseases
have created uncertainties in our markets and caused disruptions
in our sales cycles. A regional
and/or
global change in the economy or financial markets, such as the
current severe global economic downturn, could result in delay
or cancellation of customer purchases. A downturn in the
economy, such as the current global recession, may cause an
increase in customer bankruptcy reorganizations, liquidations
and consolidations, which may negatively impact our accounts
receivables and expected future revenues from such customers.
Current adverse conditions in credit markets, reductions in
consumer confidence and spending and the fluctuating commodities
and/or fuel
costs are examples of changes that have delayed or terminated
certain customer purchases. These adverse conditions have
delayed or terminated certain of our customer deals. A further
worsening or broadening or protracted extension of these
conditions would have a significant negative impact on our
operating results. In addition to the potential negative impact
of the economic downturn on our software sales, customers are
increasingly seeking to reduce their maintenance fees or to
avoid price increases. This has resulted in elevated levels of
maintenance attrition in recent periods. A prolonged economic
downturn may further increase our attrition rates, particularly
if many of our larger maintenance customers cease operations.
Because maintenance is our largest source of revenue, increases
in our attrition rates can have a significant adverse impact on
our operating results. Weak and uncertain economic conditions
could also impair our customers ability to pay for our
products or services. Any of these factors could adversely
impact our quarterly or annual operating results and our
financial condition.
We may be
unable to retain key personnel, which could materially impact
our ability to further develop our business.
While the rate of retention of our associates is high compared
to industry averages, our operations are dependent upon our
ability to attract and retain highly skilled associates and the
loss of certain key individuals to any of our competitors could
adversely impact our business. In addition, our performance
depends in large part on the continued performance of our
executive officers and other key employees, particularly the
performance and services of James D. Armstrong, our Chairman,
and Hamish N. Brewer, our Chief Executive Officer. Following our
acquisition of i2, our employees (including our employees who
were former employees of i2) may experience uncertainty as a
result of integration activities, which may adversely affect our
ability to attract and retain key personnel. We also must
continue to attract and motivate our other employees and keep
them focused on our strategies and goals, which effort may be
adversely affected as a result of the uncertainty and
difficulties with integrating i2 with JDA.
18
We do not have in place key person life insurance
policies on any of our employees. The loss of the services of
Mr. Armstrong, Mr. Brewer or other key executive
officers or employees without a successor in place, or any
difficulties associated with a successor, could negatively
affect our financial performance.
We may
have difficulty integrating future acquisitions, which would
reduce the anticipated benefits of those transactions.
We intend to continually evaluate potential acquisitions of
complementary businesses, products and technologies, including
those that are significant in size and scope. In pursuit of our
strategy to acquire complementary products, we have completed
eleven acquisitions over the past twelve years, including our
acquisitions of i2 in January 2010 and of Manugistics in July
2006. The risks we commonly encounter in acquisitions include:
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if we incur significant debt to finance a future acquisition and
our combined business does not perform as expected, we may have
difficulty complying with debt covenants;
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if we use our stock to make a future acquisition, it will dilute
existing shareholders;
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we may have difficulty assimilating the operations and personnel
of any acquired company;
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the challenge and additional investment involved to integrate
new products and technologies into our sales and marketing
process;
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we may have difficulty effectively integrating any acquired
technologies or products with our current products and
technologies, particularly where such products reside on
different technology platforms, or overlap with our products;
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our ongoing business may be disrupted by transition and
integration issues;
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customer purchases and projects may become delayed until we
publish a combined product roadmap, and once we do publish the
roadmap it may disrupt additional purchases and projects;
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the costs and complexity of integrating the internal information
technology infrastructure of each acquired business with ours
may be greater than expected and require capital investments;
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we may not be able to retain key technical and managerial
personnel from an acquired business;
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we may be unable to achieve the financial and strategic goals
for any acquired and combined businesses;
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we may have difficulty in maintaining controls, procedures and
policies during the transition and integration period following
a future acquisition;
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our relationships with partner companies or third-party
providers of technology or products could be adversely affected;
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our relationships with employees and customers could be impaired;
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our due diligence process may fail to identify significant
issues with product quality, product architecture, legal or tax
contingencies, customer obligations and product development,
among other things;
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as successor we may be subject to certain liabilities of our
acquisition targets; and
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we may be required to sustain significant exit or impairment
charges if products acquired in business combinations are
unsuccessful.
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Our failure to effectively integrate any future acquisition
would adversely affect the benefit of such transaction,
including potential synergies or sales growth opportunities, to
the extent in or the time frame anticipated.
19
Government
contracts are subject to unique costs, terms, regulations,
claims and penalties that could reduce their profitability to
us.
As a result of the acquisition of Manugistics, we acquired a
number of contracts with the U.S. government. Government
contracts entail many unique risks, including, but not limited
to, the following:
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early termination of contracts by the government;
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costly and complex competitive bidding process;
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required extensive use of subcontractors, whose work may be
deficient or not performed in a timely manner;
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significant penalties associated with employee misconduct in the
highly regulated government marketplace;
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changes or delays in government funding that could negatively
impact contracts; and
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onerous contractual provisions unique to the government such as
most favored customer provisions.
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These risks may make the contracts less profitable or cause them
to be terminated, which would adversely affect the business.
If we do
not identify, adopt and develop product architecture that is
compatible with emerging industry standards, our products will
be less attractive to customers.
The markets for our software products are characterized by rapid
technological change, evolving industry standards, changes in
customer requirements and frequent new product introductions and
enhancements. We continuously evaluate new technologies and when
appropriate implement into our products advanced technology such
as our current JDA Enterprise Architecture platform effort.
However, if we fail in our product development efforts to
accurately address in a timely manner, evolving industry
standards, new technology advancements or important third-party
interfaces or product architectures, sales of our products and
services may suffer.
Our software products can be licensed with a variety of popular
industry standard platforms and are authored in various
development environments using different programming languages
and underlying databases and architectures. There may be future
or existing platforms that achieve popularity in the marketplace
that may not be compatible with our software product design.
Developing and maintaining consistent software product
performance across various technology platforms could place a
significant strain on our resources and software product release
schedules, which could adversely affect our results of
operations.
We may be
impacted by shifts in consumer preferences affecting the
manufacturing, distribution and retail supply chain that could
reduce our revenues.
We are dependent upon and derive most of our revenue from the
supply chain linking manufacturers, distributors and retailers
to consumers, or consumer products supply chain vertical. If a
shift in spending occurs in this vertical market that results in
decreased demand for the types of solutions we sell, it would be
difficult to adjust our strategies and solution offerings
because of our dependence on these markets. If the consumer
products supply chain vertical experiences a decline in
business, it could have a significant adverse impact on our
business prospects, particularly if it is a prolonged decline.
The current economic downturn has caused declines in certain
areas of the consumer products supply chain. If economic
conditions continue to deteriorate or the failure rates of
customers in our target markets increase, we may experience an
overall decline in sales that would adversely impact our
business.
Risks
Related to the Acquisition of i2
We may
not realize the anticipated benefits of our acquisition of i2,
including potential synergies, due to challenges associated with
integrating the companies or other factors.
The success of our acquisition of i2 will depend in part on the
success of our management in integrating the operations,
technologies and personnel of i2 with JDA. Managements
inability to meet the challenges involved in integrating
successfully the operations of JDA and i2 or otherwise to
realize the anticipated benefits of the transaction could
seriously harm our results of operations. In addition, the
overall integration of the two companies
20
will require substantial attention from our management,
particularly in light of the geographically dispersed operations
of the two companies, which could further harm our results of
operations.
The challenges involved in integration include:
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integrating the two companies operations, processes,
people, technologies, products and services;
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coordinating and integrating sales and marketing and research
and development functions;
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demonstrating to our clients that the acquisition will not
result in adverse changes in business focus, products and
service deliverables (including customer satisfaction);
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assimilating and retaining the personnel of both companies and
integrating the business cultures, operations, systems and
clients of both companies; and
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consolidating corporate and administrative infrastructures and
eliminating duplicative operations and administrative functions.
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We may not be able to successfully integrate the operations of
i2 in a timely manner, or at all, and we may not realize the
anticipated benefits of the acquisition, including potential
synergies or sales or growth opportunities, to the extent or in
the time frame anticipated. The anticipated benefits and
synergies of the acquisition are based on assumptions and
current expectations, with limited actual experience, and assume
that we will successfully integrate and reallocate resources
among our facilities without unanticipated costs and that our
efforts will not have unforeseen or unintended consequences. In
addition, our ability to realize the benefits and synergies of
the business combination could be adversely impacted to the
extent that JDAs or i2s relationships with existing
or potential clients, suppliers or strategic partners is
adversely affected as a consequence of the transaction, as a
result of further weakening of global economic conditions, or by
practical or legal constraints on its ability to combine
operations. Furthermore, a portion of our ability to realize
synergies and cost savings depends on our ability to continue to
migrate work from certain of our on-shore facilities to our
off-shore facilities.
If we are
unable to successfully execute on any of our identified business
opportunities or other business opportunities that we determines
to pursue, we may not achieve the benefits of the acquisition
and our business may be harmed.
As a result of our acquisition of i2, we have approximately
3,000 employees. In order to pursue business opportunities,
we will need to continue to build our infrastructure, client
initiatives and operational capabilities. Our ability to do any
of these successfully could be affected by one or more of the
following factors:
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the ability of our technology and hardware, suppliers and
service providers to perform as we expect;
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our ability to execute our strategy and continue to operate a
larger, more diverse business efficiently on a global basis;
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our ability to effectively manage our third party relationships;
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our ability to attract and retain qualified personnel;
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our ability to effectively manage our employee costs and other
expenses;
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our ability to retain and grow revenues and profits from our
clients and the current portfolio of business with each client;
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technology and application failures and outages, security
breaches or interruption of service, which could adversely
affect our reputation and our relations with our clients;
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our ability to accurately predict and respond to the rapid
technological changes in our industry and the evolving service
and pricing demands of the markets we serve; and
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our ability to raise additional capital to fund our long-term
growth plans.
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Our failure to adequately address the above factors would have a
significant impact on our ability to implement our business plan
and our ability to pursue other opportunities that arise, which
might negatively affect our business.
21
i2 has
been, and we may be, subject to product quality and performance
claims, which could seriously harm our business.
From time to time prior to the acquisition, customers of i2 made
claims pertaining to the quality and performance of i2s
software and services, citing a variety of issues. Whether
customer claims regarding the quality and performance of
i2s products and services are founded or unfounded, they
may adversely impact customer demand and affect JDAs
market perception, its products and services. Any such damage to
our reputation could have a material adverse effect on our
business, results of operations, cash flow and financial
condition.
Risks
Related To Our Stock
Our
quarterly operating results may fluctuate significantly, which
could adversely affect the price of our stock.
Our quarterly operating results have varied in the past and are
expected to continue to vary in the future. If our quarterly or
annual operating results, particularly our software revenues,
fail to meet managements or analysts expectations,
the price of our stock could decline. Many factors may cause
these fluctuations, including:
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The difficulty of predicting demand for our software products
and services, including the size and timing of individual
contracts and our ability to recognize revenue with respect to
contracts signed in a given quarter, particularly with respect
to our larger customers;
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Changes in the length and complexity of our sales cycle,
including changes in the contract approval process at our
customers and potential customers that now require a formal
proposal process, a longer decision making period and additional
layers of customer approval, often including authorization of
the transaction by senior executives, boards of directors and
significant equity investors;
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Competitive pricing pressures and competitive success or failure
on significant transactions;
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Customer order deferrals resulting from the anticipation of new
products, economic uncertainty, disappointing operating results
by the customer, management changes, corporate reorganizations
or otherwise;
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The timing of new software product and technology introductions
and enhancements to our software products or those of our
competitors, and market acceptance of our new software products
and technology;
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Lack of desired features and functionality in our individual
products or our suite of products;
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Changes in the number, size or timing of new and renewal
maintenance contracts or cancellations;
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Unplanned changes in our operating expenses;
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Changes in the mix of domestic and international revenues, or
expansion or contraction of international operations;
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Our ability to complete fixed price consulting contracts within
budget;
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Foreign currency exchange rate fluctuations;
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Lower-than-anticipated
utilization in our consulting services group as a result of
increased competition, reduced levels of software sales, reduced
implementation times for our products, changes in the mix of
demand for our software products, mergers and consolidations
within our customer base, or other reasons; and
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Our limited ability to reduce costs in the short term to
compensate for any unanticipated shortfall in product or
services revenue.
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Charges to earnings resulting from past or future acquisitions,
including our acquisition of i2, or internal reorganizations may
also adversely affect our operating results. Under the
acquisition method of accounting, we allocate the total purchase
price to an acquired companys net tangible assets,
amortizable intangible assets and in-process research and
development based on their fair values as of the date of the
acquisition and record the excess of the purchase price over
those fair values as goodwill. Managements estimates of
fair value are based upon
22
assumptions believed to be reasonable but which are inherently
uncertain. In addition, we have not completed the valuation
analysis and calculations necessary to finalize the required
purchase price allocation. In addition to goodwill, the final
purchase price allocation may include allocations to intangible
assets such as trademarks and trade names, in-process research
and development, developed technology and customer-related
assets. As a result, we are unable to forecast at this time
certain operating results that will ultimately impact our GAAP
results for 2010, including the amount of potential amortization
on acquired intangibles and the amount of depreciation on
acquired property and equipment. As a result, any of the
following or other factors could result in material charges that
would adversely affect our results:
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Loss on impairment of goodwill
and/or other
intangible assets due to economic conditions or an extended
decline in the market price of our stock below book value;
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Changes in the useful lives or the amortization of identifiable
intangible assets;
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Accrual of newly identified pre-merger contingent liabilities,
in which case the related charges could be required to be
included in earnings in the period in which the accrual is
determined to the extent it is identified subsequent to the
finalization of the purchase price allocation;
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Charges to income to eliminate certain JDA pre-merger activities
that duplicate those of the acquired company or to reduce our
cost structure; and
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Changes in deferred tax assets and valuation allowances.
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In addition, fluctuations in the price of our common stock may
expose us to the risk of securities class action lawsuits.
Defending against such lawsuits could result in substantial
costs and divert managements attention and resources.
Furthermore, any settlement or adverse determination of these
lawsuits could subject us to significant liabilities.
Anti-takeover
provisions in our organizational documents and Delaware law
could prevent or delay a change in control.
Our certificate of incorporation, which authorizes the issuance
of blank check preferred stock and Delaware state
corporate laws which restrict business combinations between a
corporation and 15% or more owners of outstanding voting stock
of the corporation for a three-year period, individually or in
combination, may discourage, delay or prevent a merger or
acquisition that a JDA stockholder may consider favorable.
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Item 1B.
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Unresolved
Staff Comments
None
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We own our corporate office facility in Scottsdale, Arizona. The
corporate office facility includes a 136,000 square foot,
three-story office building, a two-story parking garage, and
approximately 8.8 acres of land upon which these structures
are located. The corporate office is used for certain of our
sales, marketing, consulting, customer support, training, and
product development functions, as well as executive and
administrative functions. As of December 31, 2009, we have
leased approximately 24,000 square feet of excess office
space in our corporate office facility, and have identified an
additional 13,000 square feet that is available for lease.
We currently lease office space in the Americas for 12 regional
sales and support offices across the United States and Latin
America, and for 15 other international sales and support
offices located in major cities throughout Europe, Asia,
Australia, Japan and the CoE facility in Hyderabad,
India. The leases are primarily non-cancelable operating leases
with initial terms ranging from one to 20 years that expire
at various dates through the year 2018. None of the leases
contain contingent rental payments; however, certain of the
leases contain scheduled rent increases and renewal options. We
expect that in the normal course of business most of these
leases will be renewed or that suitable additional or
alternative space will be available on commercially reasonable
terms as needed. We believe our existing facilities are adequate
for our current needs and for the foreseeable future. As of
December 31, 2009, we have sublet approximately
191,000 square feet of excess office space through 2012,
and have identified an additional 24,000 square feet that
we are trying to sublet.
23
In March 2007, we sold a 15,000 square foot office facility
in the United Kingdom for approximately $6.3 million and
recognized a gain of approximately $4.1 million.
In addition to the above, we assumed certain operating lease
obligations in connection with our acquisition of i2 on
January 28, 2010. These leases include office space in the
Americas for 5 regional sales and support offices across the
United States, Canada and Latin America, and for 14 other
international sales and support offices located in major cities
through Europe, Asia, Australia, Japan and Center of Excellence
facilities in Bangalore and Mumbai, India. The leases are
primarily non-cancelable operating leases with initial terms
generally ranging from one to seven years that expire at various
dates through the year 2014. None of the leases contain
contingent rental payments; however, certain of the leases
contain scheduled rent increases and renewal options. We expect
that in the normal course of business a portion of these leases
will be renewed or that suitable additional or alternative space
will be available on commercially reasonable terms as needed,
and others will be cancelled as we consolidate JDA and i2
offices. In addition, we assumed various leases on computers,
automobiles, and other office equipment under non-cancelable
operating leases with initial terms ranging from 12 to
48 months. Certain of the equipment leases contain renewal
options and we expect that in the normal course of business some
or all of these leases will be renewed or replaced by other
leases.
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Item 3.
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Legal
Proceedings
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We are involved in legal proceedings and claims arising in the
ordinary course of business. Although there can be no assurance,
management does not currently believe the disposition of these
matters will have a material adverse effect on our business,
financial position, results of operations or cash flows.
On April 29, 2009, i2 filed a lawsuit for patent
infringement against Oracle Corporation (NASDAQ: ORCL). The
lawsuit, filed in the United States District Court for the
Eastern District of Texas, alleges infringement of 11 patents
related to supply chain management, available to promise
software and other enterprise software applications. As a result
of our acquisition of i2 on January 28, 2010, i2 is now a
wholly-owned subsidiary of the Company. i2 incurred expenses
related to this matter of approximately $1.0 million for
the twelve months ended December 31, 2009.
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Item 4.
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Removed
and Reserved
|
24
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity and Related Stockholder
Matters
|
Our common stock trades on the NASDAQ Stock Market
(NASDAQ) under the symbol JDAS. The
following table sets forth, for the periods indicated, the high
and low sales prices per share of our common stock for the two
most recent fiscal years as reported on NASDAQ.
|
|
|
|
|
|
|
|
|
Year Ended 2009
|
|
High
|
|
|
Low
|
|
|
1st Quarter
|
|
$
|
13.64
|
|
|
$
|
9.04
|
|
2nd Quarter
|
|
|
16.15
|
|
|
|
10.62
|
|
3rd Quarter
|
|
|
23.87
|
|
|
|
14.71
|
|
4th Quarter
|
|
|
26.25
|
|
|
|
19.57
|
|
|
|
|
|
|
|
|
|
|
Year Ended 2008
|
|
High
|
|
|
Low
|
|
|
1st Quarter
|
|
$
|
20.74
|
|
|
$
|
15.65
|
|
2nd Quarter
|
|
|
20.82
|
|
|
|
16.96
|
|
3rd Quarter
|
|
|
20.14
|
|
|
|
14.88
|
|
4th Quarter
|
|
|
15.18
|
|
|
|
10.07
|
|
On March 5, 2010, the closing sale price for our common
stock was $29.44 per share. On this date, there were
approximately 272 holders of record of our common stock. This
figure does not reflect what we believe are more than 20,000
beneficial stockholders whose shares are held in nominee names
by brokers and other institutions. We have never declared or
paid any cash dividend on our common stock. Since we presently
intend to retain future earnings to finance the growth and
development of our business, we do not anticipate paying cash
dividends on our common stock in the foreseeable future.
See Item 1A for a discussion of factors which have and may
continue to impact our operating results and adversely affect
the market price of our common stock. See Item 12 for
information regarding securities authorized for issuance under
equity compensation plans.
25
Stock
Performance Graph
The graph below compares the cumulative total return on our
Common Stock with the NASDAQ Stock Market index
(U.S. companies) and the cumulative total return of NASDAQ
Computer and Data Processing Stocks (Peer Group) for the period
from December 31, 2004 to December 31, 2009. The
comparison assumes that $100 was invested on December 31,
2004 in our Common Stock and in each of the comparison indices,
and assumes reinvestment of dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company/Index Name
|
|
|
12/31/04
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
|
|
12/31/09
|
JDA Software Group, Inc.
|
|
|
$
|
100.00
|
|
|
|
$
|
124.87
|
|
|
|
$
|
101.07
|
|
|
|
$
|
150.15
|
|
|
|
$
|
96.37
|
|
|
|
$
|
185.95
|
|
NASDAQ Stock Market (US Companies)
|
|
|
|
100.00
|
|
|
|
|
102.13
|
|
|
|
|
112.18
|
|
|
|
|
121.67
|
|
|
|
|
58.64
|
|
|
|
|
84.30
|
|
Computer and Data Processing Stocks (Peer Group)
|
|
|
|
100.00
|
|
|
|
|
103.39
|
|
|
|
|
116.07
|
|
|
|
|
141.83
|
|
|
|
|
81.65
|
|
|
|
|
133.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The information contained in the Stock Performance Graph shall
not be deemed to be soliciting material or to be filed with the
SEC nor shall such information be incorporated by reference into
any future filing under the Securities Act of 1933, as amended,
or the Exchange Act, except to the extent we specifically
incorporate it by reference into such filing.
|
|
Item 6.
|
Selected
Financial Data
|
The following selected financial data should be read in
conjunction with our consolidated financial statements and
related notes and with Managements Discussion and
Analysis of Financial Condition and Results of Operations
included elsewhere herein. The selected consolidated financial
data presented below under the captions Consolidated
Statement of Operations Data and Consolidated
Balance Sheet Data for, and as of the end of, each of the
years in the five-year period ended December 31, 2009, are
derived from the consolidated financial statements of JDA
Software Group, Inc. The consolidated financial statements as of
December 31, 2009 and 2008, and for each of the years in
the three-year period ended December 31, 2009, together
with the report of the independent registered public accounting
firm, are included elsewhere herein.
26
Consolidated
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
88,786
|
|
|
$
|
92,898
|
|
|
$
|
73,599
|
|
|
$
|
48,971
|
|
|
$
|
58,508
|
|
Maintenance services
|
|
|
179,336
|
|
|
|
182,844
|
|
|
|
178,198
|
|
|
|
129,290
|
|
|
|
86,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
268,122
|
|
|
|
275,742
|
|
|
|
251,797
|
|
|
|
178,261
|
|
|
|
144,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
107,618
|
|
|
|
104,072
|
|
|
|
110,893
|
|
|
|
90,085
|
|
|
|
64,901
|
|
Reimbursed expenses
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
10,885
|
|
|
|
9,121
|
|
|
|
5,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
117,678
|
|
|
|
114,590
|
|
|
|
121,778
|
|
|
|
99,206
|
|
|
|
70,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
385,800
|
|
|
|
390,332
|
|
|
|
373,575
|
|
|
|
277,467
|
|
|
|
215,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
3,241
|
|
|
|
3,499
|
|
|
|
2,499
|
|
|
|
2,005
|
|
|
|
1,638
|
|
Amortization of acquired software technology
|
|
|
3,920
|
|
|
|
5,277
|
|
|
|
6,377
|
|
|
|
6,226
|
|
|
|
5,009
|
|
Cost of maintenance services
|
|
|
43,165
|
|
|
|
45,734
|
|
|
|
45,242
|
|
|
|
31,793
|
|
|
|
22,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
50,326
|
|
|
|
54,510
|
|
|
|
54,118
|
|
|
|
40,024
|
|
|
|
29,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
85,285
|
|
|
|
81,954
|
|
|
|
83,131
|
|
|
|
65,828
|
|
|
|
50,882
|
|
Reimbursed expenses
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
10,885
|
|
|
|
9,121
|
|
|
|
5,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
95,345
|
|
|
|
92,472
|
|
|
|
94,016
|
|
|
|
74,949
|
|
|
|
56,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
145,671
|
|
|
|
146,982
|
|
|
|
148,134
|
|
|
|
114,973
|
|
|
|
86,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
240,129
|
|
|
|
243,350
|
|
|
|
225,441
|
|
|
|
162,494
|
|
|
|
129,597
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
51,318
|
|
|
|
53,866
|
|
|
|
51,173
|
|
|
|
56,262
|
|
|
|
44,351
|
|
Sales and marketing
|
|
|
66,001
|
|
|
|
66,468
|
|
|
|
63,154
|
|
|
|
48,153
|
|
|
|
40,386
|
|
General and administrative
|
|
|
47,664
|
|
|
|
44,963
|
|
|
|
44,405
|
|
|
|
34,803
|
|
|
|
27,071
|
|
Amortization of intangibles
|
|
|
23,633
|
|
|
|
24,303
|
|
|
|
15,852
|
|
|
|
9,556
|
|
|
|
3,572
|
|
Restructuring charges
|
|
|
6,865
|
|
|
|
8,382
|
|
|
|
6,208
|
|
|
|
6,225
|
|
|
|
2,439
|
|
Acquisition-related costs
|
|
|
4,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of abandoned acquisition
|
|
|
|
|
|
|
25,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,713
|
|
Loss on impairment of trademarks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
|
|
200
|
|
Gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
(4,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
200,249
|
|
|
|
223,042
|
|
|
|
176,664
|
|
|
|
155,199
|
|
|
|
127,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
39,880
|
|
|
|
20,308
|
|
|
|
48,777
|
|
|
|
7,295
|
|
|
|
1,865
|
|
Interest expense and amortization of loan fees
|
|
|
(2,712
|
)
|
|
|
(10,349
|
)
|
|
|
(11,836
|
)
|
|
|
(7,645
|
)
|
|
|
(162
|
)
|
Finance costs on abandoned acquisition
|
|
|
767
|
|
|
|
(5,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other, net
|
|
|
1,253
|
|
|
|
2,791
|
|
|
|
3,476
|
|
|
|
3,857
|
|
|
|
2,799
|
|
Change in fair value of Series B Preferred Stock conversion
feature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
39,188
|
|
|
|
7,458
|
|
|
|
40,417
|
|
|
|
421
|
|
|
|
4,502
|
|
Income tax (provision) benefit
|
|
|
(12,849
|
)
|
|
|
(4,334
|
)
|
|
|
(13,895
|
)
|
|
|
(867
|
)
|
|
|
2,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
26,339
|
|
|
|
3,124
|
|
|
|
26,522
|
|
|
|
(466
|
)
|
|
|
6,960
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to increase the carrying amount of the Series B
Preferred Stock to its redemption value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Applicable to Common Shareholders
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
|
$
|
(11,344
|
)
|
|
$
|
6,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss) Per Share Applicable to Common
Shareholders
|
|
$
|
.51
|
|
|
$
|
.09
|
|
|
$
|
.79
|
|
|
$
|
(.39
|
)
|
|
$
|
.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share Applicable to Common
Shareholders
|
|
$
|
.50
|
|
|
$
|
.09
|
|
|
$
|
.76
|
|
|
$
|
(.39
|
)
|
|
$
|
.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES USED TO COMPUTE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share applicable to common
shareholders
|
|
|
34,936
|
|
|
|
34,339
|
|
|
|
33,393
|
|
|
|
29,232
|
|
|
|
28,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share applicable to common
shareholders
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
34,740
|
|
|
|
29,232
|
|
|
|
29,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Consolidated
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
75,974
|
|
|
$
|
32,696
|
|
|
$
|
95,288
|
|
|
$
|
53,599
|
|
|
$
|
71,035
|
|
Restricted cash(1)
|
|
|
287,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,472
|
|
Working capital(1)
|
|
|
345,672
|
|
|
|
32,139
|
|
|
|
67,863
|
|
|
|
41,103
|
|
|
|
119,032
|
|
Goodwill and other intangible assets(2)
|
|
|
254,936
|
|
|
|
282,489
|
|
|
|
311,355
|
|
|
|
345,000
|
|
|
|
103,436
|
|
Total assets(1),(2),(3)
|
|
|
821,666
|
|
|
|
524,776
|
|
|
|
622,225
|
|
|
|
624,744
|
|
|
|
330,572
|
|
Long-term debt(1),(2),(3)
|
|
|
272,250
|
|
|
|
|
|
|
|
92,536
|
|
|
|
137,813
|
|
|
|
|
|
Redeemable preferred stock(2)
|
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
Stockholders equity(4)
|
|
|
411,436
|
|
|
|
341,495
|
|
|
|
335,796
|
|
|
|
290,352
|
|
|
|
281,966
|
|
|
|
|
(1) |
|
The increase in restricted cash, total assets, working capital
and long term debt in 2009 resulted primarily from the net
proceeds from the sale of $275 million of five-year,
8.0% Senior Notes. The net proceeds from the sale of the
Senior Notes, together with cash on hand at JDA and i2, were
subsequently used, together with cash on hand at JDA and i2, to
fund the cash portion of the merger consideration in the
acquisition of i2 Technologies on January 28, 2010.
See the footnotes to the Consolidated Financial Statements for a
complete discussion of these transactions. |
|
(2) |
|
The increase in total assets in 2006 resulted primarily from the
goodwill and other intangible assets recorded in the acquisition
of Manugistics Group, Inc. To finance the acquisition, we
entered into a credit agreement for $175 million of
aggregate long-term loans and issued 50,000 shares of
Series B Preferred Stock for $50 million in cash to a
private equity investment firm. See the footnotes to the
Consolidated Financial Statements for a complete discussion of
these transactions. |
|
(3) |
|
The decrease in total assets in 2008 resulted primarily from the
payment of a $20 million one-time reverse termination fee
and $6.8 million of other finance and related costs
associated with an abandoned acquisition and the payment of
$99.6 million of long-term borrowings. See Item 7,
Managements Discussion and Analysis of Financial Condition
and Results of Operations and the footnotes to the Consolidated
Financial Statements for a complete discussion of these
transactions. |
|
(4) |
|
We have never declared or paid a cash dividend on our common
stock. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Managements discussion and analysis of financial condition
and results of operations contain certain forward-looking
statements that are made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward-looking statements include statements
concerning, among other things, our business strategy, including
anticipated trends and developments in and management plans for
our business and the markets in which we operate; future
financial results, operating results, revenues, gross margin,
operating expenses, products, projected costs and capital
expenditures; research and development programs; sales and
marketing initiatives; and competition. Forward-looking
statements are generally accompanied by words such as
will or expect and other words with
forward-looking connotations. All forward-looking statements
included in this
Form 10-K
are based upon information available to us as of the filing date
of this
Form 10-K.
We undertake no obligation to update any of these
forward-looking statements for any reason. These forward-looking
statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of
activity, performance, or achievements to differ materially from
those expressed or implied by these statements. These factors
include the matters discussed in the section entitled Risk
Factors elsewhere in this
Form 10-K.
You should carefully consider the risks and uncertainties
described under this section.
28
Significant
Trends and Developments in Our Business
Acquisition of i2 Technologies, Inc. On
January 28, 2010, we completed the acquisition of
i2 Technologies, Inc. (i2) for approximately
$600.0 million, which includes cash consideration of
approximately $432.0 million and the issuance of
approximately 6.2 million shares of our common stock with
an acquisition date fair value of approximately
$168.0 million, or $26.88 per share, determined on the
basis of the closing market price of our common stock on the
date of acquisition (the Merger). The combination of
JDA and i2 creates a market leader in the supply chain
management market. We believe this combination provides JDA with
(i) a strong, complementary presence in new markets such as
discrete manufacturing and transportation; (ii) enhanced
scale; (iii) a more diversified, global customer base of
over 6,000 customers; (iv) a comprehensive product suite
that provides
end-to-end
SCM solutions; (v) incremental revenue opportunities
associated with cross-selling of products and services among our
existing customer base; and (vi) an ability to increase
profitability through net cost synergies within twelve months
after the Merger.
The Merger will be accounted for using the acquisition method of
accounting with JDA identified as the acquirer. Under the
acquisition method of accounting, we will record all assets
acquired and liabilities assumed at their respective
acquisition-date fair values. We have not completed the
valuation analysis and calculations necessary to finalize the
required purchase price allocations. In addition to goodwill,
the final purchase price allocation may include allocations to
intangible assets such as trademarks and trade names, in-process
research and development, developed technology and
customer-related assets.
On December 10, 2009, we issued $275 million of
five-year, 8.0% Senior Notes (the Senior Notes)
at an initial offering price of 98.988%. The net proceeds from
the sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($6.5 million) were placed in escrow and subsequently used,
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2.
Through December 31, 2009, we expensed approximately
$4.8 million of costs related to the acquisition of i2.
These costs, which consist primarily of investment banking fees,
commitment fees on unused bank financing, legal and accounting
fees, are included in the consolidated statements of income
under the caption Acquisition-related costs.
Outlook for 2010. The following summarizes our
outlook for 2010. This information considers a full year of JDA
revenues and operating results and eleven months of i2 revenues
and operating results as the acquisition of i2 was completed on
January 28, 2010. Our business model contemplates running
the combined companies as an integrated business from the
completion of the acquisition and as such, we do not intend to
provide separate reporting of the results of operations of i2.
|
|
|
|
|
|
|
|
|
|
|
Outlook for 2010
|
|
|
|
Low End
|
|
|
High End
|
|
|
Software and subscription revenues
|
|
$
|
125 million
|
|
|
$
|
135 million
|
|
Total revenues
|
|
$
|
590 million
|
|
|
$
|
625 million
|
|
Adjusted EBITDA
|
|
$
|
160 million
|
|
|
$
|
170 million
|
|
Adjusted earnings per share
|
|
$
|
1.85
|
|
|
$
|
2.00
|
|
Cash flow from operations
|
|
$
|
100 million
|
|
|
$
|
110 million
|
|
We define EBITDA as GAAP net income (loss) before
interest expense, income tax provision (benefit), depreciation
and amortization. Adjusted EBITDA is defined as EBITDA for the
relevant period as adjusted by adding back additional amounts
consisting of (i) restructuring charges,
(ii) share-based compensation,
(iii) acquisition-related costs, (iv) interest income
and other non-operating income (expense), and (v) other
significant non-routine operating income and expense items that
may be incurred from
time-to-time.
Earnings per share is defined as net income divided by the
weighted average shares outstanding during the period. Adjusted
earnings per share excludes (i) amortization,
(ii) restructuring charges, (iii) share-based
compensation, (iv) acquisition-related costs and
(v) other significant non-routine operating and
non-operating income (expense) items that may be incurred from
time-to-time.
29
We have not provided an outlook for 2010 GAAP net income or GAAP
earnings per share, nor a reconciliation between the non-GAAP
measurements presented herein (i.e., Adjusted EBITDA and
Adjusted earnings per share) and the most directly comparable
GAAP measurements. We are still in the process of establishing
the fair value of, and allocated purchase price to, the acquired
assets and assumed liabilities in the acquisition of i2. This
allocation is likely to result in increased depreciation and
amortization which could affect GAAP earnings per share.
However, because Adjusted EBITDA is essentially determined
without regard to depreciation or amortization, among other
factors, we do not anticipate material changes to our outlook of
Adjusted EBITDA based on the valuation and allocation of the i2
transaction. Of course, any estimate is subject to the
limitation described herein, including the safe harbor statement
above.
We believe the weak economy will continue to drive an increased
awareness in our target markets of the need to focus on
achieving more process and operating efficiencies, including
decisions to invest in solutions that improve operating margins,
rather than make large infrastructure-type technology purchases.
This scenario favors our supply chain solution offerings, in
particular our planning and optimization applications, which can
provide a quick return on investment and are focused on some of
the largest profit drivers in our customers businesses.
Not only do our solutions enable companies to free up working
capital by improving inventory productivity, they can also
support increased sales by improving customer service levels and
optimizing pricing decisions. Our solutions also enable cost
reductions such as reduced labor and transportation costs. We
think the buying characteristics in the market are shifting to
an increased willingness to commit capital expenditures to
projects that will improve business results quickly. We believe
these trends have helped us achieve solid performance in a very
difficult market, and that our value proposition and singular
focus on the SCM market, competitive position, business model
and financial health are all in excellent condition.
Quarter-to-quarter
software sales will fluctuate due to the timing of large
transactions greater than $1.0 million (large
transactions), which can significantly impact the dollar
volume of software sales in any given quarter. We believe the
current trend in software sales is positive, and as we enter the
first half of 2010, our sales pipeline includes a strong
representation of both large transactions and mid-size software
sales opportunities ranging from $300,000 to $1.0 million
(mid-size sales opportunities). The overall volume
of i2 opportunities in the pipeline is relatively low compared
to JDA. This is in line with i2s historical business model
which emphasized growth through a services model that relied
heavily on a small number of large transactions combined with
subscription license revenues and significant post-sale
customization of the software. We intend to change this business
model and transition the i2 business toward the more traditional
software industry model that emphasizes the sale of software
that can be implemented with little or no post-sale
customization, together with a sustainable recurring maintenance
stream. We believe our service functions should focus on
customer delivery, customer satisfaction and reference-able
customers rather than large customization projects. We also
expect to focus on business development activities that will
compliment the larger i2 sales opportunities and expand the
pipeline of mid-size sales opportunities for the i2 solutions.
We believe it may take several years to fully implement a
convergence strategy in our product suite. We currently expect
to announce a multi-year product roadmap for the combined
product suites during the first half of 2010; however, we do not
expect to make any significant changes to our existing or
acquired product offerings during the coming year as a result of
this process. We also anticipate that we can begin to issue new
product releases in 2011 that bring together and combine the two
product suites, and over time, we will create convergent
offerings that include the broad functionality of both the JDA
and i2 offerings while eliminating areas of overlap. During this
time we will also focus on building relationships with the
traditional i2 discrete manufacturing customer base, the
majority of which have had little or no historical exposure to
JDA, and develop a combined business development and sales
execution strategy.
We have identified several key areas for potential cross-selling
and up-selling opportunities; however, we do not expect to see
material synergistic revenue growth from the i2 acquisition
during 2010. We believe there will be opportunities for future
revenue synergies in our retail customer base. i2 has developed
various supply chain and planning products for the retail
marketplace that offer certain distinct capabilities compared to
the existing JDA applications that are also targeted at this
market. We believe there are both cross-selling and up-selling
opportunities for these applications with the more than 1,500
customers in our retail customer base. We also believe there
will be opportunities to merge certain of the JDA and i2
solutions and build new product offerings for i2s discrete
30
manufacturing customers. There appears to be an increasing
interest among discrete manufacturers, especially those in areas
such as high tech, to obtain greater visibility and increased
information regarding how their products are being marketed and
sold at retail outlets.
There is also a difference between the way i2 classified certain
consulting implementation services in its financial results, and
the way we will classify the revenue of these services going
forward. Historically, i2 has reported a software
solutions total in its consolidated statements of
operation that included software license revenue as well as
service revenues for the installation and implementation work
necessary to modify and customize the software prior to its
intended use. Most of the on-going projects assumed in the
acquisition, as well as certain of the i2 software products that
will be marketed post-acquisition, require the contractual
delivery of significant customization services. In these
situations, JDA will follow its classification policy and report
all implementation services required to complete the on-going
projects and any agreed customization on new software sales as
consulting services.
Volatility in foreign currency exchange rates continues to
significantly impact our maintenance services revenue. For
example, unfavorable foreign exchange rate variances reduced
maintenance services revenues in 2009 by $7.4 million
compared to 2008. Excluding the impact of the unfavorable
foreign exchange rate variance, maintenance services revenues
increased approximately $3.9 million in 2009 compared to
2008 as maintenance revenues from new software sales, rate
increases on annual renewals and reinstatements of previously
suspended and cancelled maintenance agreements more than offset
decreases in recurring maintenance revenues due to attrition.
The 2010 outlook assumes a conservative view of maintenance
revenues. We believe foreign exchange rate volatility may
continue, and that we could also experience higher than normal
maintenance attrition from the effects of the economy and the
effects of the merger. Our average annualized maintenance
retention rate was approximately 92% in 2009 and i2s
annual maintenance retention rate was in the low 80% range
during 2009. Our 2010 outlook contemplates an average annualized
maintenance retention rate for the combined companies to be
about 90% in 2010 assuming a constant currency.
Consulting services revenue is a lagging indicator for the
company, and for the first time in several years, revenues from
our consulting services business improved in year-over-year
comparisons. We believe this improvement is due primarily to our
improved software sales performance over the past three years.
Our consulting margin results were 19% in both 2009 and 2008. A
key factor for improving our consulting margins in 2010 and
beyond will be our ability to more fully leverage the service
capabilities of the CoE and increase the volume of work
and implementation projects performed through this operation. We
realized an improvement in the volume of work and implementation
projects executed through the CoE in 2009 as
approximately 7% of all billable hours were delivered through
the CoE compared to less than 2% in 2008. With the i2
acquisition, we have added an additional CoE facility in
Bangalore, India. i2 has historically provided a significant
portion of its consulting work through their CoE
facility. Our 2010 outlook contemplates an overall increase
in the volume of work and billable hours through the CoE
facilities in 2010 in comparison to our historical results.
One of our primary initiatives in 2009 was the development of a
Managed Services offering which expands our existing
hosted services and includes: (i) outsourced operations for
information technology, data and application management and
hosting; (ii) workforce augmentation; (iii) management
of process and user information; (iv) business process
execution services including analysis and recommendations; and
(v) business optimization services such as network design,
demand classification, inventory policy and channel clustering.
We believe our Managed Services offering provides
customers with attractive and effective alternatives, to reduce
their costs of operation, operate effectively with constrained
resources, leverage outside domain expertise to augment their
personnel and to improve the value they derive from their JDA
products. We began signing new customer agreements for these
services in fourth quarter 2009, and we believe our Managed
Services business has the potential to improve organic
growth for us in 2010 and beyond. We believe the acquisition of
i2 will accelerate our business plan for Managed Services
through its existing managed services business. We currently
expect approximately $8.0 million in capital expenditures
in 2010 related to our Managed Services business.
We Will Continue to More Fully Leverage Our Centers of
Excellence. With the acquisition of i2, we now
have two CoE facilities, and over 1,100, or nearly 40%,
of our associates are based in India. The CoE facilities
are
31
designed to complement and enhance our existing on-shore
business model, not replace it. Our goal is to achieve all of
these benefits without sacrificing our capability to work
face-to-face with our customers. We expect the overall share of
consulting services work performed through the CoE
facilities will increase in 2010. We also believe there are
additional opportunities to further leverage the CoE in
our customer support organization.
We Expect to Realize Significant Cost Synergies as We
Integrate and Combine the Two Companies. We
expect to realize approximately $20 million in net cost
savings during 2010. This figure excludes about $6 to
$7 million of gross margin compressions from the effects of
revenue attrition, especially maintenance, during the
integration of i2. We are actively working on the integration of
the two companies and we believe we are on track to achieve
these synergies. We currently expect to be able to achieve
approximately 15% of the synergies in first quarter 2010, 25% in
both second and third quarter 2010, and the remaining 35% in
fourth quarter 2010.
Our 2010 outlook contemplates certain cost increases including a
$6.0 million
year-over-year
increase in merit compensation, reflecting the fact that neither
JDA nor i2 provided merit increases in 2009. In addition, we
have increased our bad debt estimate by about $2.0 million
which considers the potential impact of a continued recession
and the possible effects that may arise as a result of the
merger.
We Expect to Make Additional Strategic
Acquisitions. Acquisitions have been and we
expect they will continue to be an integral part of our overall
growth plan. We believe strategic acquisition opportunities will
allow JDA to continue to strengthen its position as a leading
supply chain management software and services provider. Our
intent is to seek acquisition opportunities that complement the
Companys supply chain software and services offerings. We
may make future acquisitions that are significant in relation to
the current size of JDA or smaller acquisitions that add
specific functionality to enhance our existing product suite. We
also believe the changes that were implemented in our executive
leadership structure during 2009 better position us to execute
our growth initiatives.
Share-Based Compensation Expense. We recorded
total share-based compensation expense of $8.1 million,
$4.3 million and $6.2 million related to equity awards
in 2009, 2008 and 2007, respectively and as of December 31,
2009 we have included $5.3 million of deferred compensation
in stockholders equity. A summary of total share-based
compensation by expense category for the years ended
December 31, 2009, 2008 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cost of maintenance services
|
|
$
|
590
|
|
|
$
|
319
|
|
|
$
|
445
|
|
Cost of consulting services
|
|
|
1,107
|
|
|
|
307
|
|
|
|
678
|
|
Product development
|
|
|
721
|
|
|
|
550
|
|
|
|
483
|
|
Sales and marketing
|
|
|
2,188
|
|
|
|
1,058
|
|
|
|
1,848
|
|
General and administrative
|
|
|
3,489
|
|
|
|
2,090
|
|
|
|
2,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
$
|
8,095
|
|
|
$
|
4,324
|
|
|
$
|
6,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In February 2010, the Board approved a stock-based incentive
program for 2010 (2010 Performance Program). The
2010 Performance Program provides for the issuance of
contingently issuable performance share awards under the 2005
Incentive Plan to executive officers and certain other members
of our management team, including new JDA Associates joining the
Company through the acquisition of i2, if we are able to achieve
a defined adjusted EBITDA performance threshold goal in 2010. A
partial pro-rata issuance of performance share awards will be
made if we achieve a minimum adjusted EBITDA performance
threshold. The 2010 Performance Program initially provides for
approximately 555,000 of targeted contingently issuable
performance share awards with a fair value of approximately
$15.1 million. The performance share awards, if any, will
be issued after the approval of our 2010 financial results in
January 2011 and will vest 50% upon the date of issuance with
the remaining 50% vesting ratably over a
24-month
period. Our performance against the defined performance
threshold goal will be evaluated on a quarterly basis throughout
2010 and share-based compensation will be recognized over the
requisite service period that runs from February 3, 2010
(the date of board approval) through January 2013. If we achieve
the defined performance threshold goal we would expect to
recognize approximately $10.1 million of the award as
share-based compensation in 2010.
In February 2010, the Board also approved a 2010 cash incentive
bonus plan (Incentive Plan) for our executive
officers, including those new executives joining the Company
through the acquisition of i2. The Incentive
32
Plan provides for approximately $4.1 million in targeted
cash bonuses if we are able to achieve a defined adjusted EBITDA
performance threshold goal in 2010. Amounts are payable
quarterly under the plan on the basis of the actual EBITDA
achieved by the Company for the applicable quarter of 2010. A
partial pro-rata cash bonus will be paid if we achieve a minimum
adjusted EBITDA performance threshold. There is no cap on the
maximum amount the executives can receive if the Company exceeds
the defined annualized operational and software performance
goals.
Our Financial Position is Strong and We Expect to Continue
Generating Positive Cash Flow from Operations. We
had working capital of $345.7 million at 2009 compared to
$32.1 million at December 31, 2008. The working
capital balance at December 31, 2009 and 2008 includes
$76.0 million and $32.7 million, respectively, in cash
and cash equivalents. In addition, working capital at
December 31, 2009 includes $287.9 million of
restricted cash, consisting primarily of net proceeds from the
issuance of the Senior Notes (see Contractual
Obligations), which together with cash on hand at JDA and
i2, was used to fund the cash portion of the merger
consideration in the acquisition of i2 on January 28, 2010.
Net accounts receivable were $68.9 million, or 58 days
sales outstanding (DSO), at December 31, 2009
compared to $79.4 million, or 67 DSO, at December 31,
2008. During 2009 we generated $96.5 million in cash flow
from operating activities and utilized $30.1 million to
repurchase redeemable preferred stock ($28.1 million) and
common stock ($2.0 million) held by Thoma Bravo.
We expect to increase our cash balance during 2010 through the
generation of between $100 million to $110 million of
operating cash flow, offset in part by approximately
$22 million of interest on the Senior Notes,
$20 million of capital expenditures, $10 million
related to the payment of transaction-related costs, and
$10 million of cash taxes primarily related to state, local
and foreign taxes. The increase in capital expenditures in 2010
is driven by the expansion of our Managed Services
offering (approximately $8 million) as well as the addition
of i2. While our Managed Services business requires more
capital than our other offerings, we expect this business to
produce a strong return on investment and form a major component
of our organic growth in coming years. Our weighted average
shares are expected to be between 41 and 42 million for
2010.
33
Results
of Operations
The following table sets forth certain selected financial
information expressed as a percentage of total revenues for the
periods indicated and certain gross margin data expressed as a
percentage of software license revenue, maintenance services
revenue, product revenues or services revenues, as appropriate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
|
23
|
%
|
|
|
24
|
%
|
|
|
19
|
%
|
Maintenance services
|
|
|
46
|
|
|
|
47
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
69
|
|
|
|
71
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
28
|
|
|
|
26
|
|
|
|
30
|
|
Reimbursed expenses
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
31
|
|
|
|
29
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Amortization of acquired software technology
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Cost of maintenance services
|
|
|
11
|
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
13
|
|
|
|
14
|
|
|
|
15
|
|
Cost of consulting services
|
|
|
22
|
|
|
|
21
|
|
|
|
22
|
|
Reimbursed expenses
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
25
|
|
|
|
24
|
|
|
|
25
|
|
Total cost of revenues
|
|
|
38
|
|
|
|
38
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
62
|
|
|
|
62
|
|
|
|
60
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
14
|
|
|
|
14
|
|
|
|
14
|
|
Sales and marketing
|
|
|
17
|
|
|
|
17
|
|
|
|
17
|
|
General and administrative
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
Amortization of intangibles
|
|
|
6
|
|
|
|
6
|
|
|
|
3
|
|
Restructuring charges
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Acquisition-related costs
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Costs of abandoned acquisition
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
52
|
|
|
|
57
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
10
|
|
|
|
5
|
|
|
|
13
|
|
Interest expense and amortization of loan fees
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Finance costs on abandoned acquisition
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Interest income and other, net
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
10
|
|
|
|
2
|
|
|
|
11
|
|
Income tax provision
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
7
|
%
|
|
|
1
|
%
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin on software licenses
|
|
|
96
|
%
|
|
|
96
|
%
|
|
|
97
|
%
|
Gross margin on maintenance services
|
|
|
76
|
%
|
|
|
75
|
%
|
|
|
75
|
%
|
Gross margin on product revenues
|
|
|
81
|
%
|
|
|
80
|
%
|
|
|
79
|
%
|
Gross margin on service revenues
|
|
|
19
|
%
|
|
|
19
|
%
|
|
|
23
|
%
|
34
The following table sets forth a comparison of selected
financial information, expressed as a percentage change between
2009 and 2008, and between 2008 and 2007. In addition, the table
sets forth cost of revenues and product development expenses
expressed as a percentage of the related revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
2009
|
|
|
2009 vs 2008
|
|
|
2008
|
|
|
2008 vs 2007
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
88,786
|
|
|
|
(4
|
)%
|
|
$
|
92,898
|
|
|
|
26
|
%
|
|
$
|
73,599
|
|
Maintenance
|
|
|
179,336
|
|
|
|
(2
|
)%
|
|
|
182,844
|
|
|
|
3
|
%
|
|
|
178,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
268,122
|
|
|
|
(3
|
)%
|
|
|
275,742
|
|
|
|
9
|
%
|
|
|
251,797
|
|
Service revenues
|
|
|
117,678
|
|
|
|
3
|
%
|
|
|
114,590
|
|
|
|
(6
|
)%
|
|
|
121,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
385,800
|
|
|
|
(1
|
)%
|
|
|
390,332
|
|
|
|
4
|
%
|
|
|
373,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
|
3,241
|
|
|
|
(7
|
)%
|
|
|
3,499
|
|
|
|
40
|
%
|
|
|
2,499
|
|
Amortization of acquired software technology
|
|
|
3,920
|
|
|
|
(26
|
)%
|
|
|
5,277
|
|
|
|
(17
|
)%
|
|
|
6,377
|
|
Maintenance services
|
|
|
43,165
|
|
|
|
(6
|
)%
|
|
|
45,734
|
|
|
|
1
|
%
|
|
|
45,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
50,326
|
|
|
|
(8
|
)%
|
|
|
54,510
|
|
|
|
1
|
%
|
|
|
54,118
|
|
Service revenues
|
|
|
95,345
|
|
|
|
3
|
%
|
|
|
92,472
|
|
|
|
(2
|
)%
|
|
|
94,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
145,671
|
|
|
|
(1
|
)%
|
|
|
146,982
|
|
|
|
(1
|
)%
|
|
|
148,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
240,129
|
|
|
|
(1
|
)%
|
|
|
243,350
|
|
|
|
8
|
%
|
|
|
225,441
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
51,318
|
|
|
|
(5
|
)%
|
|
|
53,866
|
|
|
|
5
|
%
|
|
|
51,173
|
|
Sales and marketing
|
|
|
66,001
|
|
|
|
(1
|
)%
|
|
|
66,468
|
|
|
|
5
|
%
|
|
|
63,154
|
|
General and administrative
|
|
|
47,664
|
|
|
|
6
|
%
|
|
|
44,963
|
|
|
|
1
|
%
|
|
|
44,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164,983
|
|
|
|
|
%
|
|
|
165,297
|
|
|
|
4
|
%
|
|
|
158,732
|
|
Amortization of intangibles
|
|
|
23,633
|
|
|
|
(3
|
)%
|
|
|
24,303
|
|
|
|
53
|
%
|
|
|
15,852
|
|
Restructuring charges
|
|
|
6,865
|
|
|
|
(18
|
)%
|
|
|
8,382
|
|
|
|
35
|
%
|
|
|
6,208
|
|
Acquisition-related costs
|
|
|
4,768
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of abandoned acquisition
|
|
|
|
|
|
|
(100
|
)%
|
|
|
25,060
|
|
|
|
100
|
%
|
|
|
|
|
Gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)%
|
|
|
(4,128
|
)
|
Operating income
|
|
$
|
39,880
|
|
|
|
96
|
%
|
|
$
|
20,308
|
|
|
|
(58
|
)%
|
|
$
|
48,777
|
|
Cost of Revenues as a% of related revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
|
4
|
%
|
|
|
|
|
|
|
4
|
%
|
|
|
|
|
|
|
3
|
%
|
Maintenance services
|
|
|
24
|
%
|
|
|
|
|
|
|
25
|
%
|
|
|
|
|
|
|
25
|
%
|
Product revenues
|
|
|
19
|
%
|
|
|
|
|
|
|
20
|
%
|
|
|
|
|
|
|
21
|
%
|
Service revenues
|
|
|
81
|
%
|
|
|
|
|
|
|
81
|
%
|
|
|
|
|
|
|
77
|
%
|
Product Development as a% of product revenues
|
|
|
19
|
%
|
|
|
|
|
|
|
20
|
%
|
|
|
|
|
|
|
20
|
%
|
35
The following tables set forth selected comparative financial
information on revenues, operating expenses and operating income
in our business segments and geographical regions, expressed as
a percentage change between 2009 and 2008, and between 2008 and
2007. In addition, the tables set forth the contribution of each
business segment and geographical region to total revenues in
2009, 2008 and 2007, expressed as a percentage of total
revenues, as well as the number of large transactions greater
than or equal to $1.0 million.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
Manufacturing & Distribution
|
|
Services Industries
|
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
Software licenses
|
|
|
(14
|
)%
|
|
|
40
|
%
|
|
|
(6
|
)%
|
|
|
6
|
%
|
|
|
96
|
%
|
|
|
23
|
%
|
Maintenance services
|
|
|
1
|
%
|
|
|
7
|
%
|
|
|
(6
|
)%
|
|
|
(2
|
)%
|
|
|
23
|
%
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
(5
|
)%
|
|
|
18
|
%
|
|
|
(6
|
)%
|
|
|
|
%
|
|
|
64
|
%
|
|
|
17
|
%
|
Service revenues
|
|
|
10
|
%
|
|
|
(10
|
)%
|
|
|
(20
|
)%
|
|
|
(5
|
)%
|
|
|
43
|
%
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
%
|
|
|
7
|
%
|
|
|
(9
|
)%
|
|
|
(1
|
)%
|
|
|
54
|
%
|
|
|
23
|
%
|
Product development
|
|
|
(1
|
)%
|
|
|
10
|
%
|
|
|
(5
|
)%
|
|
|
(6
|
)%
|
|
|
(25
|
)%
|
|
|
46
|
%
|
Sales and marketing
|
|
|
(2
|
)%
|
|
|
10
|
%
|
|
|
(10
|
)%
|
|
|
(5
|
)%
|
|
|
58
|
%
|
|
|
22
|
%
|
Operating income
|
|
|
(6
|
)%
|
|
|
22
|
%
|
|
|
(5
|
)%
|
|
|
(1
|
)%
|
|
|
332
|
%
|
|
|
450
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
Manufacturing & Distribution
|
|
Services Industries
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
Contribution to total revenues
|
|
|
54
|
%
|
|
|
54
|
%
|
|
|
52
|
%
|
|
|
38
|
%
|
|
|
41
|
%
|
|
|
43
|
%
|
|
|
8
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
# of Large Transactions
|
|
|
12
|
|
|
|
12
|
|
|
|
6
|
|
|
|
4
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
Europe
|
|
Asia/Pacific
|
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
2009 vs 2008
|
|
2008 vs 2007
|
|
Software licenses
|
|
|
(15
|
)%
|
|
|
59
|
%
|
|
|
|
%
|
|
|
(15
|
)%
|
|
|
79
|
%
|
|
|
(24
|
)%
|
Maintenance services
|
|
|
(1
|
)%
|
|
|
2
|
%
|
|
|
(6
|
)%
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
(6
|
)%
|
|
|
17
|
%
|
|
|
(4
|
)%
|
|
|
(3
|
)%
|
|
|
28
|
%
|
|
|
(4
|
)%
|
Service revenues
|
|
|
(8
|
)%
|
|
|
(7
|
)%
|
|
|
(14
|
)%
|
|
|
2
|
%
|
|
|
(2
|
)%
|
|
|
(14
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
(2
|
)%
|
|
|
9
|
%
|
|
|
(6
|
)%
|
|
|
(2
|
)%
|
|
|
17
|
%
|
|
|
(8
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
Europe
|
|
Asia/Pacific
|
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
Contribution to total revenues
|
|
|
69
|
%
|
|
|
69
|
%
|
|
|
66
|
%
|
|
|
21
|
%
|
|
|
22
|
%
|
|
|
24
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
# of Large Transactions
|
|
|
13
|
|
|
|
14
|
|
|
|
5
|
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
|
|
3
|
|
|
|
1
|
|
|
|
2
|
|
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
Software
Revenues
Software License Results by Region.
The following table summarizes software license revenues by
region for 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Region
|
|
2009
|
|
|
2008
|
|
|
$Change
|
|
|
%Change
|
|
|
Americas
|
|
$
|
57,169
|
|
|
$
|
67,046
|
|
|
$
|
(9,877
|
)
|
|
|
(15
|
)%
|
EMEA
|
|
|
18,684
|
|
|
|
18,646
|
|
|
|
38
|
|
|
|
|
%
|
Asia/Pacific
|
|
|
12,933
|
|
|
|
7,206
|
|
|
|
5,727
|
|
|
|
79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
88,786
|
|
|
$
|
92,898
|
|
|
$
|
(4,112
|
)
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
The decrease in software license revenues in the Americas region
in 2009 compared to 2008 is due primarily to a decrease in
license revenues recognized from large transactions. Notably, in
2008 we recognized a license sale in fourth quarter for
$11.5 million which was the largest license transaction in
our history.
The increase in software license revenues in the Asia/Pacific
region in 2009 compared to 2008 is due primarily to an increase
in license revenues recognized from large transactions,
including one large transaction in second quarter 2009 which was
the largest license transaction ever recognized in the
Asia/Pacific region.
Software License Results by Reportable Business Segment.
Retail. Software license revenues in this
reportable business segment decreased 14% in 2009 compared to
2008, due primarily to a decrease in the average sales price of
large transactions. There were 12 large transactions in this
reportable business segment in both 2009 and 2008. The 2008
software results include a large $11.5 million license that
represents the largest transaction in our history.
Manufacturing &
Distribution. Software license revenues in this
reportable business segment decreased 6% in 2009 compared to
2008, due primarily to a decrease in the size of large
transactions and a decrease in follow-on sales to existing
customers for new product or to expand the scope of an existing
license. There were four large transactions in this reportable
business segment in both 2009 and 2008.
Services Industries. Software license revenues
in this reportable business segment increased 96% in 2009
compared to 2008, due to an increase in the size of large
transactions. There were three large transactions in this
reportable business segment in both 2009 and 2008. Two of the
large transactions in 2009 are being recognized on a percentage
of completion basis and through December 31, 2009 we have
recognized approximately 72% of the related software license
fees.
Maintenance
Services
Maintenance services revenues decreased $3.5 million, or
2%, to $179.3 million in 2009 compared to
$182.8 million in 2008, and represented 46% and 47% of
total revenues, respectively, in these periods. Unfavorable
foreign exchange rate variances reduced maintenance services
revenues in 2009 by approximately $7.4 million compared to
2008 due primarily to the strengthening of the U.S. Dollar
against European currencies. Excluding the impact of the
unfavorable foreign exchange rate variance, maintenance services
revenues increased approximately $3.9 million in 2009
compared to 2008 as maintenance revenues from new software
sales, rate increases on annual renewals and reinstatements of
previously suspended and cancelled maintenance agreements more
than offset decreases in recurring maintenance revenues due to
attrition.
Service
Revenues
Service revenues, which include consulting services, hosting
services and training revenues, net revenues from our hardware
reseller business and reimbursed expenses, increased
$3.1 million, or 3%, to $117.7 million in 2009
compared to $114.6 million in 2008. The increase in 2009
compared to 2008 reflects increases in consulting services
revenue, utilization and realized average hourly billing rates
in the Americas region and the Services Industries
reportable business segment, offset in part by decreases in
consulting services revenue and lower realized average hourly
billing rates in the EMEA and Asia/Pacific regions and a
$741,000 decrease in non-consulting services (training and
hosting services, hardware sales and reimbursed expenses).
Fixed bid consulting services work represented 15% of total
consulting services revenue in both 2009 and 2008.
Cost of
Product Revenues
Cost of Software Licenses. The decrease in
cost of software licenses in 2009 compared to 2008 is due
primarily to a decrease in royalties on embedded third-party
software applications, offset in part by an increase in
royalties on certain third party applications that we resell. A
large portion of our software revenue mix comes from products
that have embedded third-party applications
and/or
require payment of higher royalty fee obligations, in particular
the applications we acquired from Manugistics.
37
Amortization of Acquired Software
Technology. The decrease in amortization of
acquired software technology in 2009 compared to 2008 is due
primarily to the cessation of amortization on certain acquired
technology that is now fully amortized.
Cost of Maintenance Services. Cost of
maintenance services decreased $2.5 million, or 6%, to $43.2
million in 2009 compared to $45.7 million in 2008. The decrease
in cost of maintenance services in 2009 compared to 2008 is due
primarily to a decrease in salaries and related benefits and a
$416,000 decrease in maintenance royalties and fees paid to
third parties who provide first level support to certain of our
customers. Although the average customer support headcount
increased 4% in 2009 compared to 2008, salaries and related
benefits decreased approximately $2.1 million as new and
replacement positions were filled with lower cost resources at
the CoE.
Cost of
Service Revenues
Cost of service revenues increased $2.8 million, or 3%, to
$95.3 million in 2009 compared to $92.5 million in 2008. The
increase in cost of service revenues in 2009 compared to 2008 is
due primarily to a $1.8 million increase in incentive
compensation and a $1.6 million increase in outside
contractor costs. These additional costs were offset in part by
cost savings associated with the movement of service functions
to the CoE and a $607,000 decrease in travel costs.
Although the average services headcount was flat in 2009
compared to 2008, salaries and related benefits decreased as we
continue to successfully implement our lower cost delivery model
through the expansion of the CoE.
Operating
Expenses
Operating expenses, excluding amortization of intangibles,
restructuring charges and acquisition-related costs were
$165.0 million in 2009, which is flat compared to 2008.
During 2009, operating expenses were impacted by a
$2.0 million decrease in sales commissions resulting from
the decrease in software license revenues, and a decrease in
salaries and related benefits due to new and replacement
positions being filled with lower cost resources at the CoE.
These decreases were substantially offset by a
$2.7 million increase in share-based compensation due
primarily to an increase in the value of equity awards issued
under the 2009 Performance Plan compared to the 2008 Performance
Plan and the costs associated with certain equity inducement
awards granted to new executive officers, a $1.2 million
increase in the provision for doubtful accounts and a $360,000
increase in marketing-related costs.
Product Development. Product development
expense decreased $2.5 million, or 5%, to
$51.3 million in 2009 compared to $53.9 million in
2008. The decrease is due primarily to a decrease in salaries
and related benefits. Although the average product development
headcount increased over 13% in 2009 compared to 2008, salaries
and related benefits decreased as new and replacement positions
were filled with lower cost resources at the CoE.
Sales and Marketing. Sales and marketing
expense decreased $467,000, or less than 1%, to
$66.0 million in 2009 compared to $66.5 million in
2008. The decrease is due primarily to a $2.0 million
decrease in sales commissions resulting from the decrease in
software license revenues and a $454,000 decrease in travel
costs, substantially offset by a $1.1 million increase in
share-based compensation, a $360,000 increase in
marketing-related costs and an increase in outside contractor
costs.
General and Administrative. General and
administrative expense increased $2.7 million, or 6%, to
$47.7 million in 2009 compared to $45.0 million in
2008. The increase is due primarily to a $1.4 million
increase in share-based compensation resulting from an increase
in the value of equity awards issued under the 2009 Performance
Plan compared to the 2008 Performance Plan and the costs
associated with certain equity inducement awards granted to new
executive officers. The increase in general and administrative
expense in 2009 compared to 2008 also includes a
$1.2 million increase in the provision for doubtful
accounts associated primarily with two specific accounts and a
$327,000 increase in legal and accounting fees, offset in part
by a decrease in salaries and benefits. Although the average
general and administrative headcount increased approximately 1%
in 2009 compared to 2008, salaries and related benefits
decreased $579,000 as new and replacement positions were filled
with lower cost resources at the CoE.
38
Amortization of Intangibles. The decrease in
amortization of intangibles in 2009 compared to 2008 is due
primarily to the cessation of amortization on certain trademark
and customer list intangibles that are now fully amortized.
Restructuring Charges. Restructuring charges
in 2009 include (i) a $6.5 million charge for 2009
restructuring activities, (ii) a $376,000 adjustment to
reduce estimated restructuring reserves established in prior
years, (iii) an adjustment of $1.4 million to increase
certain Manugistics acquisition reserves based on our revised
estimate of sublease rentals and market adjustments on an
unfavorable office facility in the United Kingdom, (iv) the
reversal of $758,000 in contingency reserves established in the
initial purchase accounting on the Manugistics acquisition and
(v) $111,000 in adjustments to other acquisition-related
reserves. The charge for 2009 restructuring activities is
primarily associated with the transition of additional on-shore
activities to the CoE and certain restructuring
activities in the EMEA sales organization. The charges include
termination benefits related to a workforce reduction of
86 full-time employees (FTE) in product
development, service, support, sales and marketing, information
technology and other administrative positions, primarily in the
Americas region. In addition, the restructuring charges include
approximately $2.0 million in severance and other
termination benefits under separation agreements with our former
Executive Vice President and Chief Financial Officer and our
former Chief Operating Officer.
Restructuring charges in 2008 include (i) an
$8.0 million charge for 2008 restructuring activities,
(ii) $426,000 in net adjustments to increase certain
Manugistics acquisition reserves based on our revised estimates
of the restructuring costs to exit certain activities of
Manugistics primarily related to facility closures and employee
severance and termination benefits and (iii) and $38,000 of
net adjustments to reduce estimated restructuring reserves
established in prior years and to reverse certain contingency
reserves established in the initial purchase accounting of
Manugistics acquisition. The charge for 2008 restructuring
activities was primarily associated with our transition of
certain on-shore activities to the CoE and included
$7.9 million for termination benefits, primarily related to
a workforce reduction of 100 FTE in product development,
consulting and sales-related positions across all of our
geographic regions and $119,000 for office closure and
integration costs of redundant office facilities.
Acquisition-Related Costs. During 2009 we
expensed approximately $4.8 million of costs related to the
acquisition of i2 on January 28, 2010. These costs consist
primarily of investment banking fees, commitment fees on unused
bank financing, legal and accounting fees.
Operating
Income
Operating income increased $19.6 million to
$39.9 million in 2009 compared to $20.3 million in
2008. Operating income in 2008 was reduced by $25.1 million
in costs associated with the abandoned acquisition of
i2 Technologies, which are included in operating expenses
under the caption Costs of abandoned acquisition.
Excluding the impact of these non-recurring costs, operating
income decreased $5.5 million in 2009 compared to 2008, due
primarily to the $4.5 million decrease in total revenues.
The combined operating income reported in the reportable
business segments excludes $82.9 million and
$102.7 million of general and administrative expenses and
other charges in 2009 and 2008, respectively, that are not
directly identified with a particular reportable business
segment and which management does not consider in evaluating the
operating income (loss) of the reportable business segments.
Other
Income (Expense)
Interest Expense and Amortization of Loan
Fees. The decrease in interest expense and
amortization of loan fees in 2009 compared to 2008 is due
primarily to the repayment in full during 2008 of all remaining
borrowings on term loans used to finance the acquisition of
Manugistics, the accelerated amortization of related loan
origination fees and an $899,000 payment in consideration for
early termination of a related interest rate swap. We issued
$275 million of Senior Notes on December 10, 2009 at
an initial offering price of 98.988%. The net proceeds from the
sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($6.5 million) were placed in escrow and, together with
cash on hand at JDA and i2, were used to fund the cash portion
of the merger consideration in the acquisition of i2. Through
December 31, 2009, we have amortized
39
approximately $110,000 of the original issue discount and
related loan origination fees and accrued $1.3 million of
interest in on the Senior Notes.
Finance Costs on Abandoned Acquisition. During
2008, we accrued $5.3 million in finance costs related to
loan origination ($3.4 million) and ticking
fees ($1.9 million) on the debt financing commitments from
Credit Suisse, Credit Suisse Securities (USA) LLC, Wachovia
Bank, National Association and Wachovia Capital Markets, LLC
related to the abandoned acquisition of i2. During 2009,
approximately $767,000 of the ticking fees were
waived pursuant to a mutual release agreement and the related
expense was reversed.
Interest Income and Other, Net. The decrease
in interest income and other, net in 2009 compared to 2008 is
due primarily to a $1.5 million decrease in interest on
invested funds as the excess cash balances that were held in
interest bearing accounts during 2008 were used to repay the
remaining balance of the term loans used to finance the
acquisition of Manugistics.
Income
Tax Provision
A summary of the income tax provision recorded in 2009 and 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Income before income taxes
|
|
$
|
39,188
|
|
|
$
|
7,458
|
|
|
|
|
|
|
|
|
|
|
Income tax provision at federal statutory rate
|
|
$
|
(13,716
|
)
|
|
$
|
(2,610
|
)
|
Research and development credit
|
|
|
773
|
|
|
|
930
|
|
Meals, entertainment and other non-deductible expenses
|
|
|
(425
|
)
|
|
|
(332
|
)
|
State income taxes
|
|
|
(1,294
|
)
|
|
|
(59
|
)
|
Section 199 deduction
|
|
|
554
|
|
|
|
|
|
Foreign tax rate differential
|
|
|
451
|
|
|
|
804
|
|
Other, net
|
|
|
(255
|
)
|
|
|
(120
|
)
|
Changes in estimate and foreign statutory rates
|
|
|
677
|
|
|
|
(2,582
|
)
|
Interest and penalties on uncertain tax positions
|
|
|
386
|
|
|
|
(365
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
(12,849
|
)
|
|
$
|
(4,334
|
)
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
32.8
|
%
|
|
|
58.1
|
%
|
The effective tax rate used to record the income tax provision
in 2009 and 2008 takes into account the source of taxable
income, domestically by state and internationally by country,
and available income tax credits. The effective tax rates do not
include excess tax benefits from the employee stock options
exercised during 2009 and 2008 of $2.7 million and
$1.4 million, respectively. These excess tax benefits will
reduce our income tax liabilities in future periods and result
in an increase to additional paid-in capital as we are able to
utilize them. During 2008 we recorded an immaterial adjustment
to reverse the total excess tax benefit previously recognized in
2007 and 2006 of approximately $1.6 million which reduced
additional paid-in capital and non-current deferred tax assets.
The effective tax rate in 2009 is lower than the United States
federal statutory rate of 35% due primarily to utilization of
research and development (R&D) credits,
Section 199 deduction and the benefit of previously
unrecorded net operating losses. The effective tax rate in 2008
is higher than the federal statutory rate of 35% due primarily
to increases in the liability for unrecognized tax benefits
related to prior year tax positions related to uncertainty
regarding our ability to utilize certain foreign net operating
loss carryforwards acquired in the acquisition of Manugistics
and uncertainties regarding the validity of the income tax
holiday in India.
Consideration
Paid in Excess of Carrying Value on the Repurchase of Redeemable
Preferred Stock
We entered into a Purchase Agreement with Thoma Bravo on
September 8, 2009 to acquire the remaining shares of
Series B preferred stock for $28.1 million in cash (or
$20 per share for each of the 1,403,603 shares of JDA
common stock into which the Series B Preferred Stock is
convertible). The agreed purchase price included
$19.5 million, which represents the conversion of
1,403,603 shares of common stock at the conversion price of
$13.875, and $8.6 million, which represents consideration
paid in excess of the conversion price of $13.875 ($6.125
40
per share). The consideration paid in excess of the conversion
price was charged to retained earnings in the same manner as a
dividend on preferred stock, and reduced the income applicable
to common shareholders in the calculation of earnings per share
for 2009.
Year
Ended December 31, 2008 Compared to Year Ended
December 31, 2007
Software
Revenues
Software License Results by Region.
The following table summarizes software license revenues by
region for 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Region
|
|
2008
|
|
|
2007
|
|
|
$Change
|
|
|
%Change
|
|
|
Americas
|
|
$
|
67,046
|
|
|
$
|
42,268
|
|
|
$
|
24,778
|
|
|
|
59
|
%
|
EMEA
|
|
|
18,646
|
|
|
|
21,911
|
|
|
|
(3,265
|
)
|
|
|
(15
|
)%
|
Asia/Pacific
|
|
|
7,206
|
|
|
|
9,420
|
|
|
|
(2,214
|
)
|
|
|
(24
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
92,898
|
|
|
$
|
73,599
|
|
|
$
|
19,299
|
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in software license revenues in the Americas region
in 2008 compared to 2007 was due primarily to an increase in the
number of large transactions to both new and install-base
customers. There were 14 large transactions in the Americas
region in 2008, which included an $11.5 million license
software license that represents the largest transaction in our
history, compared to five in 2007.
The decrease in software license revenues in the European region
in 2008 compared to 2007 was due primarily to a decrease in the
volume of small to mid-size software license sales with new
customers, offset in part by an increase in follow-on sales to
existing customers for new products or to expand the scope of an
existing license. There were four large transactions in the
European region in 2008 compared to three in 2007.
The decrease in software license revenues in the Asia/Pacific
region in 2008 compared to 2007 was due primarily to a decrease
in the number of large transactions and follow-on sales to
existing customers for new products or to expand the scope of an
existing license, offset in part by an increase in the volume of
small to mid-size software license sales to new customers. There
was one large transaction in the Asia/Pacific region in 2008
compared to two in 2007.
Software License Results by Reportable Business Segment.
Retail. Software license revenues in this
reportable business segment increased 40% in 2008 compared to
2007, due primarily to an increase in the number of large
transactions to both new and existing customers. There were 12
large transactions in this reportable business segment in 2008
compared to six in 2007.
Manufacturing &
Distribution. Software license revenues in this
reportable business segment increased 6% in 2008 compared to
2007, due primarily to an increase in the number and average
sales price of large transactions. There were four large
transactions in this reportable business segment in 2008
compared to three in 2007.
Services Industries. Software license revenues
in this reportable business segment increased 23% in 2008
compared to 2007, due primarily to an increase in the number and
average sales price of large transactions. There were three
large transactions in this reportable business segment in 2008
compared to one in 2007.
Maintenance
Services
Maintenance services revenues increased 3% to
$182.8 million in 2008 compared to 2007 and represented 47%
and 48% of total revenues, respectively in these periods.
Unfavorable foreign exchange rate variances decreased 2008
maintenance services revenues by $2.0 million compared to
2007 primarily due to the strengthening of the US Dollar
against European currencies. Excluding the impact of the
favorable foreign exchange rate variance, maintenance services
revenues increased 4% in 2008 compared to 2007 as maintenance
revenues related to new software sales, rate increases on annual
renewals and reinstatements of previously cancelled maintenance
agreements exceeded decreases in recurring maintenance revenues
due to attrition.
41
Service
Revenues
Service revenues, which include consulting services, hosting
services and training revenues, net revenues from our hardware
reseller business and reimbursed expenses, decreased
$7.2 million or 6% to $114.6 million in 2008 compared
to $121.8 million in 2007. The decrease in 2008 compared to
2007 reflects a decrease in utilization and billable hours in
the Europe and Asia/Pacific regions and lower average billing
rates per hour in the Americas and Asia/Pacific regions as well
as a $737,000 decrease in hosting services and our hardware
reseller business, offset in part by a $518,000 increase in
training services. Service revenues in 2007 also included the
non-recurring favorable impact from the release of
$3.4 million of previously deferred consulting revenue upon
completion and final acceptance of a fixed bid project inherited
from Manugistics. Fixed bid consulting services work represented
15% of total consulting services revenue in 2008 compared to 20%
in 2007.
Cost of
Product Revenues
Cost of Software Licenses. The increase in
cost of software licenses in 2008 compared to 2007 was due
primarily to royalties on embedded 3rd party applications.
A large portion of our software revenue mix comes from products
that have embedded
3rd party
applications
and/or
require payments of higher royalty fee obligations, particularly
the infrastructure and other products we acquired from
Manugistics.
Amortization of Acquired Software
Technology. The decrease in amortization of
acquired software technology in 2008 compared to 2007 was due to
the cessation of amortization on certain acquired software
technology that is now fully amortized.
Cost of Maintenance Services. Cost of
maintenance services increased $492,000, or 1%, to
$45.7 million in 2008 compared to $45.2 million in
2007. The increase in cost of maintenance services in 2008
compared to 2007 was due primarily to the costs associated with
an 8% increase in average headcount and a higher bonus payout
due to the Companys improved operating performance.
Cost of
Service Revenues
Cost of service revenues decreased $1.5 million, or 2%, to
$92.5 million in 2008 compared to $94.0 million in
2007. The decrease in cost of service revenues in 2008 compared
to 2007 was due primarily to a decrease in costs resulting from
a 5% decrease in average headcount, offset in part by a higher
bonus payout due to the Companys improved operating
performance and a $521,000 increase in outside contractor costs.
Cost of service revenues in 2007 also included the release of
$1.4 million in deferred costs upon completion and
acceptance of a fixed bid project inherited from Manugistics.
Operating
Expenses
Product Development. Product development
expense increased $2.7 million, or 5%, to
$53.9 million in 2008 compared to $51.2 million in
2007. The increase in product development expense in 2008
compared to 2007 was due primarily to a $2.5 million
reduction in deferred costs resulting from the completion of
certain on-going customer funded product development efforts and
a higher bonus payout due to the Companys improved
operating performance, offset in part by an $884,000 decrease in
outside contractor costs. Additionally, although the average
product development headcount increased 15% in 2008 compared to
2007, salaries and related benefits only increased 1% as new and
replacement positions were filled with lower cost resources,
including those added at the CoE.
Sales and Marketing. Sales and marketing
expense increased $3.3 million, or 5%, to
$66.5 million in 2008 compared to $63.2 million in
2007. The increase in sales and marketing expense in 2008
compared to 2007 was due primarily to a $3.4 million
increase in commissions due to the 26% increase in software
sales and an $851,000 increase in marketing-related costs,
offset in part by a $790,000 decrease in share-based
compensation.
General and Administrative. General and
administrative expense increased $558,000, or 1%, to
$45.0 million in 2008 compared to $44.4 million in
2007. The increase in general and administrative expense in 2008
42
compared to 2007 was due primarily to a 14% increase in average
headcount that was substantially offset by a $482,000 decrease
in outside contractor costs for assistance with internal system
initiatives, a higher bonus payout due to the Companys
improved operating performance and a $267,000 increase in legal
and accounting fees, offset in part by a $2.2 million
decrease in the provision for doubtful accounts and a $647,000
decrease in share-based compensation. The provision for doubtful
accounts in 2007 related primarily to certain foreign
receivables for which collection was doubtful.
Amortization of Intangibles. The increase in
amortization of intangibles in 2008 compared to 2007 was due
primarily to a change in the estimated useful life of certain
customer lists to reflect current trends in attrition. With this
change, the quarterly amortization expense on customer lists
increased approximately $2.1 million per quarter, beginning
first quarter 2008 and continuing over the remaining useful life
of the related customer lists which extend through June 2014.
This change had a $0.16 per share impact (reduction) on basic
and diluted earnings per share calculations for 2008.
Restructuring Charges. Restructuring charges
in 2008 included (i) an $8.0 million charge for 2008
restructuring activities, (ii) $426,000 in net adjustments
to increase certain Manugistics acquisition reserves based on
our revised estimates of the restructuring costs to exit certain
activities of Manugistics primarily related to facility closures
and employee severance and termination benefits and
(iii) and $38,000 of net adjustments to reduce estimated
restructuring reserves established in prior years and to reverse
certain contingency reserves established in the initial purchase
accounting of Manugistics acquisition. The charge for 2008
restructuring activities was primarily associated with our
transition of certain on-shore activities to the CoE and
included $7.9 million for termination benefits, primarily
related to a workforce reduction of 100 FTE in product
development, consulting and sales-related positions across all
of our geographic regions and $119,000 for office closure and
integration costs of redundant office facilities.
Restructuring charges in 2007 included a $6.2 million
charge for 2007 restructuring activities that included
$5.9 million for termination benefits and $292,000 for
office closures. The termination benefits were primarily related
to a workforce reduction of approximately 120 full-time
employees (FTE) in our Scottsdale, Arizona product
development group as a direct result of our decision to
standardize future product offerings on the JDA Enterprise
Architecture platform and a reduction of approximately 40
FTE in our worldwide consulting services group. The office
closure charge was for the closure and integration costs of
redundant office facilities.
Costs of Abandoned Acquisition. We expensed
$30.4 million in costs associated with the abandoned
acquisition of i2 Technologies in fourth quarter 2008,
including a $20 million non-refundable reverse termination
fee, $5.1 million of legal, accounting and other
acquisition-related fees that are included in operating expenses
under the caption Costs of abandoned acquisition and
$5.3 million in finance costs related to loan origination
and ticking fees on certain debt financing
commitments that are included in other income (expense) under
the caption Finance costs on abandoned acquisition.
Gain on Sale of Office Facility. During 2007
we sold a 15,000 square foot facility in the United Kingdom
for approximately $6.3 million and recognized a gain of
$4.1 million.
Operating
Income
Operating income decreased $28.5 million to
$20.3 million in 2008 compared to $48.8 million in
2007. The decrease in operating income resulted primarily from
$25.1 million in costs associated with the abandoned
acquisition of i2 Technologies that are included in
operating expenses under the caption Costs of abandoned
acquisition, an $8.4 million increase in amortization
due to a change in the estimated useful life of certain customer
list intangibles and a $2.2 million higher restructuring
charge, together with increases in product development, sales
and marketing and general and administrative expenses, offset in
part by the 4% increase in total revenues and a
$2.1 million lower bad debt provision. In addition,
operating income in 2007 included a $4.1 million gain on
the sale of an office facility in the United Kingdom that did
not recur in 2008.
The combined operating income reported in the reportable
business segments excludes $102.7 million and
$62.3 million of general and administrative expenses and
other charges in 2008 and 2007, respectively, that are not
43
directly identified with a particular reportable business
segment and which management does not consider in evaluating the
operating income (loss) of the reportable business segments.
Other
Income (Expense)
Interest Expense and Amortization of Loan
Fees. We incurred interest expense of
$6.8 million and recorded $3.5 million in amortization
of loan origination fees in 2008 compared to $10.0 million
and $1.8 million, respectively in 2007. The decrease in
interest expense is due primarily to lower outstanding
borrowings on the term loans used to finance the acquisition of
Manugistics in 2008 compared to 2007. During 2008 we repaid the
remaining $99.6 million balance on the term loans,
including $80.5 million on October 1, 2008. In
addition, we made an $899,000 payment on October 5, 2008 in
consideration for early termination of a related interest rate
swap which is also included in interest expense. The increase in
amortization of loan origination fees was due to the accelerated
repayment of the term loans in 2008. All loan origination fees
related to the term loans have been fully amortized.
Interest Income and Other, Net. We recorded
interest income and other, net of $2.8 million in 2008
compared to $3.5 million in 2007. The decrease in interest
income was due primarily to lower interest rates.
Income
Tax Provision
A summary of the income tax provision recorded in 2008 and 2007
is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Income before income taxes
|
|
$
|
7,458
|
|
|
$
|
40,417
|
|
|
|
|
|
|
|
|
|
|
Income tax provision at federal statutory rate
|
|
$
|
(2,610
|
)
|
|
$
|
(14,146
|
)
|
Research and development credit
|
|
|
930
|
|
|
|
432
|
|
Meals, entertainment and other non-deductible expenses
|
|
|
(332
|
)
|
|
|
(322
|
)
|
State income taxes
|
|
|
(59
|
)
|
|
|
(983
|
)
|
Foreign tax rate differential
|
|
|
804
|
|
|
|
796
|
|
Other, net
|
|
|
(120
|
)
|
|
|
161
|
|
Changes in estimate and foreign statutory rates
|
|
|
(2,582
|
)
|
|
|
556
|
|
Interest and penalties on uncertain tax positions
|
|
|
(365
|
)
|
|
|
(389
|
)
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
(4,334
|
)
|
|
$
|
(13,895
|
)
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
58.1
|
%
|
|
|
34.4
|
%
|
The effective tax rate used to record the income tax provision
in 2008 and 2007 takes into account the source of taxable
income, domestically by state and internationally by country,
and available income tax credits. The effective tax rates do not
include excess tax benefits from the employee stock options
exercised during 2008 and 2007 of $1.4 million and
$1.3 million, respectively. These excess tax benefits will
reduce our income tax liabilities in future periods and result
in an increase to additional paid-in capital as we are able to
utilize them. During 2008 we recorded an immaterial adjustment
to reverse the total excess tax benefit previously recognized in
2007 and 2006 of approximately $1.6 million which reduced
additional paid-in capital and non-current deferred tax assets.
The effective tax rate in 2008 is higher than the federal
statutory rate of 35% due primarily to increases in the
liability for unrecognized tax benefits related to prior year
tax positions related to uncertainty regarding our ability to
utilize certain foreign net operating loss carryforwards
acquired in the acquisition of Manugistics and uncertainties
regarding the validity of the income tax holiday in India. The
effective tax rate in 2007 is lower than the federal statutory
rate of 35% due to the impact of foreign tax rate differentials.
Liquidity
and Capital Resources
We had working capital of $345.7 million at
December 31, 2009 compared to $32.1 million at
December 31, 2008. The working capital balance at
December 31, 2009 and 2008 includes $76.0 million and
$32.7 million, respectively, in cash and cash equivalents.
In addition, working capital at December 31, 2009 includes
44
$287.9 million of restricted cash, consisting primarily of
net proceeds from the issuance of the Senior Notes (see
Contractual Obligations), which together with cash on
hand at JDA and i2, was used to fund the cash portion of the
merger consideration in the acquisition of i2 on
January 28, 2010 . During 2009, we generated
$96.5 million in cash flow from operating activities and
utilized $30.1 million to repurchase redeemable preferred
stock ($28.1 million) and common stock ($2.0 million)
held by Thoma Bravo.
Net accounts receivable were $68.9 million, or 58 days
sales outstanding (DSO), at December 31, 2009
compared to $79.4 million, or 67 DSO, at December 31,
2008. Our quarterly DSO results historically increase during the
first quarter of each year due to the heavy annual maintenance
renewal billings that occur during this time frame and then
typically decrease slowly over the remainder of the year. DSO
results can fluctuate significantly on a quarterly basis due to
a number of factors including the percentage of total revenues
that comes from software license sales, which typically have
installment payment terms, seasonality, shifts in customer
buying patterns, the timing of customer payments and annual
maintenance renewals, lengthened contractual payment terms in
response to competitive pressures, the underlying mix of
products and services, and the geographic concentration of
revenues.
The following table compares
year-to-year
changes in the key components of our Statements of Cash Flows
for the years ended December 31, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
% Change
|
|
|
|
|
2009
|
|
2009 to 2008
|
|
2008
|
|
2008 vs 2007
|
|
2007
|
|
Net cash provided from operating activities
|
|
$
|
96,481
|
|
|
|
105
|
%
|
|
$
|
47,092
|
|
|
|
(41
|
)%
|
|
$
|
79,707
|
|
Net cash used in investing activities
|
|
|
(300,037
|
)
|
|
|
NM
|
%
|
|
|
(12,704
|
)
|
|
|
(56
|
)%
|
|
|
(8,158
|
)
|
Net cash provided by (used in) financing activities
|
|
|
245,968
|
|
|
|
358
|
%
|
|
|
(95,481
|
)
|
|
|
(212
|
)%
|
|
|
(30,590
|
)
|
Cash and cash equivalents (end of period)
|
|
|
75,974
|
|
|
|
132
|
%
|
|
|
32,696
|
|
|
|
(66
|
)%
|
|
|
95,288
|
|
Operating activities provided cash of $96.5 million,
$47.1 million and $79.7 million in 2009, 2008 and
2007, respectively. The principle sources of our cash flow from
operations are typically net income adjusted for depreciation
and amortization and bad debt provisions, collections on
accounts receivable and increases in deferred maintenance
revenue. The increase in cash flow from operations in 2009
compared to 2008 is due primarily to a $23.2 million
increase in net income, a $9.9 million net decrease in
accounts receivable resulting from the higher volume of software
sales over the second half of 2008 that were collected in 2009
(compared to an increase of $6.6 million in 2008), and a
$4.2 million increase in deferred revenue (compared to
decrease of $6.7 million in 2008) due primarily to
favorable foreign exchange rate variances, offset in part by a
$4.6 million decrease in accrued expenses (compared to a
$3.9 million increase in 2008) due to primarily to the
payment of the higher commissions and bonuses resulting from the
Companys improved operating performance in 2008.
Cash flow from operating activities in 2008 was impacted by
$30.4 million in costs paid
and/or
accrued in connection with the abandoned acquisition of i2,
including a $20 million non-refundable reverse termination
fee, $5.3 million in finance costs and $5.1 million of
legal, accounting and other acquisition-related costs. Excluding
the impact of the $30.4 million in costs related to the
terminated acquisition, less approximately $3.6 million of
which were accrued but not paid as of December 31, 2008,
cash flow from operating activities decreased $5.8 million
to $73.9 million in 2008 compared to 2007. The decrease in
cash flow from operating activities in 2008 compared to 2007
resulted primarily from an $8.2 million smaller decrease in
deferred taxes, a $6.7 million decrease in deferred revenue
balances due primarily to unfavorable foreign exchange rate
variances (compared to an increase of $2.2 million in
2007), a $6.6 million net increase in accounts receivable
due to the higher volume of software sales in 2008 (compared to
a $5.6 million decrease in 2007) and a
$2.1 million smaller bad debt provision, offset in part a
$7.6 million increase in depreciation and amortization
resulting primarily from a change in the estimated useful life
of certain customer lists to reflect current trends in
attrition, a $3.8 million larger increase in accrued
expenses due to higher commissions and bonuses resulting from
the Companys improved operating performance in 2008, a
$2.1 million decrease in prepaid expenses (compared to
$212,000 increase in 2007) and a $1.9 million increase
in amortization of loan origination fees due to the repayment of
the remaining long-term debt borrowings in 2008. In
45
addition, cash flow from operating activities in 2007 was
reduced by a $4.1 million gain on the sale of an office
facility in the United Kingdom that did not recur in 2008.
Investing activities utilized cash of
$300.0 million, $12.7 million and $8.2 million in
2009, 2008 and 2007, respectively. Investing activities in 2009
include a $287.9 million increase in restricted cash
balances, the majority of which represents the net proceeds from
the issuance of the Senior Notes. The net proceeds from the sale
of the Senior Notes, which exclude the original issue discount
($2.8 million) and other debt issuance costs
($6.5 million) were placed in escrow and together with cash
on hand at JDA and i2, were used to fund the cash portion of the
merger consideration in the acquisition of i2 on
January 28, 2010. The restricted cash balances also include
the transfer of an additional $17.1 million in funds from
our available cash balances into escrow in order to effect the
transaction and $4.1 million in cash balances that are
being used to collateralize a standby letter of credit.
Investing activities in 2009, 2008 and 2007 include capital
expenditures of $7.1 million, $8.6 million and
$7.4 million, respectively, and payment of direct costs
related to acquisitions of $5.1 million, $4.2 million
and $7.6 million, respectively. Direct costs related to
acquisitions in 2009 include the purchase of a 49.1% equity
interest in the registered share capital of Strategix. Investing
activities in 2007 include $6.9 million in proceeds from
the disposal of property and equipment, including
$6.3 million from the sale of the office facility in the
United Kingdom.
Financing activities provided cash of $246.0 million
in 2009 and utilized cash of $95.5 million and
$30.6 million in 2008 and 2007, respectively. Financing
activities in 2009 include proceeds from the issuance of the
Senior Notes, net of $2.8 million of original issue
discount, and $14.8 million in proceeds from the issuance
of stock ($12.6 million from the exercise of stock options
and $2.3 million from the purchase of common shares under
the Employee Stock Purchase Plan), offset in part by the
$28.1 million redemption of the remaining Series B
Convertible Preferred Stock owned by Thoma Bravo,
$6.5 million in purchases of treasury stock
($2.9 million for 265,715 shares of common stock
repurchased pursuant to our approved stock repurchase program,
$1.6 million for the repurchase of shares tendered by
employees for payment of applicable statutory withholding taxes
on the issuance of restricted stock, and $2.0 million for
the purchase of 100,000 shares of converted common stock
held by Thoma Bravo), and $6.5 million of debt issuance
costs related to the issuance of the Senior Notes. Financing
activities in 2008 and 2007 included the repayment of
$99.6 million and $41.5 million of term loans and
other long-term debt assumed in the acquisition of Manugistics
and proceeds from the issuance of common stock under our stock
plans and the repurchase of shares tendered by employees for
payment of applicable statutory withholding taxes on the
issuance of restricted stock.
Changes in foreign currency exchange rates had the effect
of increasing cash by $866,000 in 2009, reducing cash by
$1.5 million in 2008 and increasing cash by $770,000 in
2007. The increases in 2009 and 2007 are due primarily to the
weakening of the US Dollar against European currencies and
the Japanese Yen, and conversely the decrease in 2008 was due
primarily to the strengthening of the US Dollar against
European currencies, particularly during the last three months
of the year. We use derivative financial instruments, primarily
forward exchange contracts, to manage a majority of the
short-term foreign currency exchange exposure associated with
foreign currency denominated assets and liabilities which exist
as part of our ongoing business operations. We do not hedge the
potential impact of foreign currency exposure on our ongoing
revenues and expenses from foreign operations. The exposures
relate primarily to the gain or loss recognized in earnings from
the settlement of current foreign denominated assets and
liabilities. We do not enter into derivative financial
instruments for trading or speculative purposes. The forward
exchange contracts generally have maturities of 90 days or
less, and are not designated as hedging instruments. Forward
exchange contracts are
marked-to-market
at the end of each reporting period, with gains and losses
recognized in other income, net, offset by the gains or losses
resulting from the settlement of the underlying foreign currency
denominated assets and liabilities.
Treasury Stock Repurchases. On March 5,
2009, the Board adopted a program to repurchase up to
$30 million of our common stock in the open market or in
private transactions at prevailing market prices during the
12-month
period ended March 10, 2010. During 2009, we repurchased
265,715 shares of our common stock under this program for
$2.9 million at prices ranging from $10.34 to $11.00 per
share. There were no shares of common stock repurchased under
this program in 2010.
During 2009 and 2008, we also repurchased 108,765 and 118,048
common shares, respectively, tendered by employees for the
payment of applicable statutory withholding taxes on the
issuance of restricted shares under the
46
2005 Performance Incentive Plan. These shares were repurchased
in 2009 for $1.6 million at prices ranging from $9.75 to
$26.05 and in 2008 for $2.1 million at prices ranging from
$11.50 to $20.40 per share.
As part of the Purchase Agreement with Thoma Bravo, we
repurchased 100,000 shares of our common stock held by
Thoma Bravo for $2.0 million, or $20 per share.
Separation Agreements with Former Executive
Officers. We entered into separation agreements
with Kristen L. Magnuson, our former Executive Vice President
and Chief Financial Officer in second quarter 2009 and
Christopher J. Koziol, our former Chief Operating Officer, in
third quarter 2009. Pursuant to these agreements,
Ms. Magnuson and Mr. Koziol received lump sum
severance payments of approximately $825,000 and $898,000,
respectively, and all unvested equity awards granted under the
2005 Incentive Plan vested immediately as of their date of
resignation. We recorded additional share-based compensation
expense related to this accelerated vesting of $175,000 for
Ms. Magnuson and $140,000 for Mr. Koziol, which has
been included in the 2009 restructuring charges.
Contractual Obligations. The following
summarizes scheduled principal maturities and interest on
long-term debt and our operating lease obligations as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period (In thousands)
|
Contractual Obligations
|
|
Total
|
|
< 1 year
|
|
1 to 3 years
|
|
3 to 5 years
|
|
> 5 years
|
|
Scheduled principal maturities and interest on long-term debt
|
|
$
|
385,000
|
|
|
$
|
22,000
|
|
|
$
|
44,000
|
|
|
$
|
319,000
|
|
|
$
|
|
|
Operating lease obligations
|
|
$
|
44,321
|
|
|
$
|
13,673
|
|
|
$
|
20,185
|
|
|
$
|
3,876
|
|
|
$
|
6,587
|
|
Contracted sublease rentals
|
|
$
|
(12,730
|
)
|
|
$
|
(4,631
|
)
|
|
$
|
(7,118
|
)
|
|
$
|
(981
|
)
|
|
$
|
|
|
Long-term debt consists of the Senior Notes issued on
December 10, 2009 at an initial offering price of 98.988%.
The net proceeds from the sale of the Senior Notes, which
exclude the original issue discount ($2.8 million) and
other debt issuance costs ($6.5 million) were placed in
escrow and subsequently used, together with cash on hand at JDA
and i2, to fund the cash portion of the merger consideration in
the acquisition of i2 (see Note 2 to consolidated financial
statements).
The Senior Notes have a five-year term and mature on
December 15, 2014. Interest is computed on the basis of a
360-day year
composed of twelve
30-day
months, and is payable semi-annually on June 15 and December 15
of each year, beginning on June 15, 2010. The obligations
under the Senior Notes are fully and unconditionally guaranteed
on a senior basis by substantially all of our existing and
future domestic subsidiaries (including, following the Merger,
i2 and its domestic subsidiaries).
Operating lease obligations represent future minimum lease
payments under non-cancelable operating leases at
December 31, 2009. We currently lease office space in the
Americas for 12 regional sales and support offices across the
United States and Latin America, and for 15 other international
sales and support offices located in major cities throughout
Europe, Asia, Australia, Japan and the CoE facility in
Hyderabad, India. The leases are primarily non-cancelable
operating leases with initial terms ranging from one to
20 years that expire at various dates through the year
2018. None of the leases contain contingent rental payments;
however, certain of the leases contain scheduled rent increases
and renewal options. We expect that in the normal course of
business most of these leases will be renewed or that suitable
additional or alternative space will be available on
commercially reasonable terms as needed. In addition, we lease
various computers, telephone systems, automobiles, and office
equipment under non-cancelable operating leases with initial
terms ranging from 12 to 48 months. Certain of the
equipment leases contain renewal options and we expect that in
the normal course of business some or all of these leases will
be renewed or replaced by other leases.
The contractual obligations shown in the table above exclude
$8.8 million in non-current liabilities for uncertain tax
positions as we are unable to make reasonably reliable estimates
of the period of expected cash settlement with the respective
taxing authorities.
We also assumed certain operating lease obligations in
connection with our acquisition of i2 on January 28, 2010.
These leases include office space in the Americas for 5 regional
sales and support offices across the United States, Canada and
Latin America, and for 14 other international sales and support
office located in major cities
47
through Europe, Asia, Australia, Japan and Center of Excellence
facilities in Bangalore and Mumbai, India. The leases are
primarily non-cancelable operating leases with initial terms
generally ranging from one to seven years that expire at various
dates through the year 2014. None of the leases contain
contingent rental payments; however, certain of the leases
contain scheduled rent increases and renewal options. We expect
that in the normal course of business a portion of these leases
will be renewed or that suitable additional or alternative space
will be available on commercially reasonable terms as needed,
and others will be cancelled as we consolidate JDA and i2
offices. In addition, we lease various computers, automobiles,
and office equipment under non-cancelable operating leases with
initial terms ranging from 12 to 48 months. Certain of the
equipment leases contain renewal options and we expect that in
the normal course of business some or all of these leases will
be renewed or replaced by other leases.
The following summarizes future minimum lease payments under
non-cancelable operating leases assumed in the acquisition of i2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period (In thousands)
|
Contractual Obligations
|
|
Total
|
|
< 1 year
|
|
1 to 3 years
|
|
3 to 5 years
|
|
> 5 years
|
|
Operating lease obligations
|
|
$
|
20,800
|
|
|
$
|
7,257
|
|
|
$
|
9,799
|
|
|
$
|
3,744
|
|
|
$
|
|
|
Contracted sublease rentals
|
|
$
|
(917
|
)
|
|
$
|
(432
|
)
|
|
$
|
(485
|
)
|
|
$
|
|
|
|
$
|
|
|
We believe our existing facilities and those assumed in the
acquisition of i2 are adequate for our current needs and for the
foreseeable future.
We believe our cash and cash equivalents and net cash provided
from operations will provide adequate liquidity to meet our
normal operating requirements for the foreseeable future. A
major component of our positive cash flow is the collection of
accounts receivable and the generation of cash earnings.
Critical
Accounting Policies
We have identified the policies below as critical to our
business operations and the understanding of our results of
operations. The impact and any associated risks related to these
policies on our business operations is discussed throughout
Managements Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our
reported and expected financial results. The preparation of this
Annual Report on
Form 10-K
requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from
those estimates.
|
|
|
|
|
Revenue recognition. Our revenue recognition
policy is significant because our revenue is a key component of
our results of operations. In addition, our revenue recognition
determines the timing of certain expenses such as commissions
and royalties. We follow specific and detailed guidelines in
measuring revenue; however, certain judgments affect the
application of our revenue policy.
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We license software primarily under non-cancelable agreements
and provide related services, including consulting, training and
customer support. Software license revenue is generally
recognized using the residual method when:
Ø
Persuasive evidence of an arrangement exists and a license
agreement has been signed;
Ø
Delivery, which is typically FOB shipping point, is complete;
Ø
Fees are fixed and determinable and there are no uncertainties
surrounding product acceptance;
Ø
Collection is considered probable; and
Ø
Vendor-specific evidence of fair value (VSOE) exists
for all undelivered elements.
Our customer arrangements typically contain multiple elements
that include software, options for future purchases of software
products not previously licensed to the customer, maintenance,
consulting and training services. The fees from these
arrangements are allocated to the various elements based on
VSOE. Under the residual method, if an arrangement contains an
undelivered element, the VSOE of the undelivered element is
deferred and the revenue recognized once the element is
delivered. If we are unable to determine
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VSOE for any undelivered element included in an arrangement, we
will defer revenue recognition until all elements have been
delivered. In addition, if a software license contains
milestones, customer acceptance criteria or a cancellation
right, the software revenue is recognized upon the achievement
of the milestone or upon the earlier of customer acceptance or
the expiration of the acceptance period or cancellation right.
For arrangements that provide for significant services or custom
development that are essential to the softwares
functionality, the software license revenue and contracted
services are recognized under the percentage of completion
method. We measure
progress-to-completion
on arrangements involving significant services or custom
development that are essential to the softwares
functionality using input measures, primarily labor hours, which
relate hours incurred to date to total estimated hours at
completion. We continually update and revise our estimates of
input measures. If our estimates indicate that a loss will be
incurred, the entire loss is recognized in that period.
Maintenance services are separately priced and stated in our
arrangements. Maintenance services typically include on-line
support, access to our Solution Centers via telephone and web
interfaces, comprehensive error diagnosis and correction, and
the right to receive unspecified upgrades and enhancements, when
and if we make them generally available. Maintenance services
are generally billed on a monthly basis and recorded as revenue
in the applicable month, or billed on an annual basis with the
revenue initially deferred and recognized ratably over the
maintenance period. VSOE for maintenance services is the price
customers will be required to pay when it is sold separately,
which is typically the renewal rate.
Consulting and training services are separately priced and
stated in our arrangements, are generally available from a
number of suppliers, and are generally not essential to the
functionality of our software products. Consulting services
include project management, system planning, design and
implementation, customer configurations, and training. These
services are generally billed bi-weekly on an hourly basis or
pursuant to the terms of a fixed price contract. Consulting
services revenue billed on an hourly basis is recognized as the
work is performed. Under fixed price service contracts and
milestone-based arrangements that include services that are not
essential to the functionality of our software products,
consulting services revenue is recognized using the proportional
performance method. We measure
progress-to-completion
under the proportional performance method by using input
measures, primarily labor hours, which relate hours incurred to
date to total estimated hours at completion. We continually
update and revise our estimates of input measures. If our
estimates indicate that a loss will be incurred, the entire loss
is recognized in that period. Training revenues are included in
consulting revenues in the Companys consolidated
statements of income and are recognized once the training
services are provided. VSOE for consulting and training services
is based upon the hourly or per class rates charged when those
services are sold separately. We offer hosting and other managed
services on certain of our software products under arrangements
in which the end users do not take possession of the software.
Revenues from hosting services are included in consulting
revenues, billed monthly and recognized as the services are
provided. Revenues from our hardware reseller business are also
included in consulting revenues, reported net (i.e., the amount
billed to a customer less the amount paid to the supplier) and
recognized upon shipment of the hardware.
Customers are reviewed for creditworthiness before we enter into
a new arrangement that provides for software
and/or a
service element. We do not sell or ship our software, nor
recognize any license revenue, unless we believe that collection
is probable. Payments for our software licenses are typically
due within twelve months from the date of delivery. Although
infrequent, where software license agreements call for payment
terms of twelve months or more from the date of delivery,
revenue is recognized as payments become due and all other
conditions for revenue recognition have been satisfied.
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Accounts Receivable. Consistent with industry
practice and to be competitive in the software marketplace, we
typically provide payment terms on most software license sales.
Software licenses are generally due within twelve months from
the date of delivery. Customers are reviewed for
creditworthiness before we enter into a new arrangement that
provides for software
and/or a
service element. We do not sell or ship our software, nor
recognize any revenue unless we believe that collection is
probable. For those customers who are not credit worthy, we
require prepayment of the software license fee or a letter of
credit before we will ship our software. We have a history of
collecting software payments when they come due without
providing refunds or concessions. Consulting services are
generally billed bi-weekly and maintenance services are
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billed annually or monthly. For those customers who are
significantly delinquent or whose credit deteriorates, we
typically put the account on hold and do not recognize any
further services revenue, and may as appropriate withdraw
support
and/or our
implementation staff until the situation has been resolved.
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We do not have significant billing or collection problems. We
review each past due account and provide specific reserves based
upon the information we gather from various sources including
our customers, subsequent cash receipts, consulting services
project teams, members of each regions management, and
credit rating services such as Dun and Bradstreet. Although
infrequent and unpredictable, from time to time certain of our
customers have filed bankruptcy, and we have been required to
refund the pre-petition amounts collected and settle for less
than the face value of their remaining receivable pursuant to a
bankruptcy court order. In these situations, as soon as it
becomes probable that the net realizable value of the receivable
is impaired, we provide reserves on the receivable. In addition,
we monitor economic conditions in the various geographic regions
in which we operate to determine if general reserves or
adjustments to our credit policy in a region are appropriate for
deteriorating conditions that may impact the net realizable
value of our receivables.
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Business Combinations. All business
combinations through December 31, 2008 were accounted for
using the purchase method of accounting. Under the purchase
method of accounting, the purchase price of each acquired
company was allocated to the acquired assets and liabilities
based on their fair values. There was no in-process research and
development (IPR&D) recorded on any of our
business combinations during the three years ended
December 31, 2008. IPR&D consists of products or
technologies in the development stage for which technological
feasibility has not been established and which we believe have
no alternative use.
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Effective January 1, 2009, all future business combinations
will be accounted for at fair value under the acquisition method
of accounting. Under the acquisition method of accounting,
(i) acquisition-related costs, except for those costs
incurred to issue debt or equity securities, will be expensed in
the period incurred; (ii) non-controlling interests will be
valued at fair value at the acquisition date;
(iii) IPR&D will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
(iv) restructuring costs associated with a business
combination will be expensed subsequent to the acquisition date;
and (v) changes in deferred tax asset valuation allowances
and income tax uncertainties after the acquisition date will be
recognized through income tax expense or directly in contributed
capital, including any adjustments made to valuation allowances
on deferred taxes and acquired tax contingencies associated with
acquisitions that closed prior January 1, 2009. There were
no business combinations in 2009. We did however acquire
i2 Technologies, Inc. on January 28, 2010 in a
business combination that will be accounted for under the
acquisition method of accounting.
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Goodwill and Intangible Assets. Our business
combinations have typically resulted in goodwill and other
intangible assets. These intangible assets affect the amount of
future period amortization expense and potential impairment
charges we may incur. The determination of the value of such
intangible assets and the annual impairment tests that we
perform require management to make estimates of future revenues,
customer retention rates and other assumptions that affect our
consolidated financial statements.
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Goodwill is tested annually for impairment, or more frequently
if events or changes in business circumstances indicate the
asset might be impaired, by comparing a weighted average of the
fair value of future cash flows under the Discounted Cash
Flow Method of the Income Approach and the Guideline
Company Method to the carrying value of the goodwill
allocated to our reporting units. We found no indication of
impairment of our goodwill balances during 2009, 2008 or 2007
with respect to the goodwill allocated to our Retail,
Manufacturing and Distribution and Services Industries
reportable business segments. Absent future indications of
impairment, the next annual impairment test will be performed in
fourth quarter 2010.
Customer lists are amortized on a straight-line basis over
estimated useful lives ranging from 8 years to
13 years. The values allocated to customer list intangibles
are based on the projected economic life of each acquired
customer base, using historical turnover rates and discussions
with the management of the acquired companies. We estimate the
economic lives of these assets using the historical life
experiences of the acquired companies as well as our historical
experience with similar customer accounts for products that we
50
have developed internally. We review customer attrition rates
for each significant acquired customer group on annual basis, or
more frequently if events or circumstances change, to ensure the
rate of attrition is not increasing and if revisions to the
estimated economic lives are required. In first quarter 2008, we
changed the estimated useful life of certain customer lists to
reflect current trends in attrition. With this change, the
quarterly amortization expense on customer lists increased
approximately $2.1 million per quarter, beginning first
quarter 2008 and continuing over the remaining useful life of
the related customer lists which extend through June 2014.
Acquired software technology is capitalized if the related
software product under development has reached technological
feasibility or if there are alternative future uses for the
purchased software. Amortization of software technology is
reported in the consolidated statements of income in cost of
revenues under the caption Amortization of acquired
software technology. Software technology is amortized on a
product-by-product
basis with the amortization recorded for each product being the
greater of the amount computed using (a) the ratio that
current gross revenues for a product bear to the total of
current and anticipated future revenue for that product, or
(b) the straight-line method over the remaining estimated
economic life of the product including the period being reported
on. The estimated economic lives of our acquired software
technology range from 8 years to 15 years.
Trademarks are being amortized on a straight-line basis over
estimated remaining useful life of five years.
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Product Development. The costs to develop new
software products and enhancements to existing software products
are expensed as incurred until technological feasibility has
been established. We consider technological feasibility to have
occurred when all planning, designing, coding and testing have
been completed according to design specifications. Once
technological feasibility is established, any additional costs
would be capitalized. We believe our current process for
developing software is essentially completed concurrent with the
establishment of technological feasibility, and accordingly, no
costs have been capitalized.
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Income Taxes. Deferred tax assets and
liabilities are recorded for the estimated future tax effects of
temporary differences between the tax basis of assets and
liabilities and amounts reported in the consolidated balance
sheets, as well as operating loss and tax credit carry-forwards.
We follow specific and detailed guidelines regarding the
recoverability of any tax assets recorded on the balance sheet
and provide valuation allowances when recovery of deferred tax
assets is not considered likely.
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We exercise significant judgment in determining our income tax
provision due to transactions, credits and calculations where
the ultimate tax determination is uncertain. Uncertainties arise
as a consequence of the actual source of taxable income between
domestic and foreign locations, the outcome of tax audits and
the ultimate utilization of tax credits. Although we believe our
estimates are reasonable, the final tax determination could
differ from our recorded income tax provision and accruals. In
such case, we would adjust the income tax provision in the
period in which the facts that give rise to the revision become
known. These adjustments could have a material impact on our
income tax provision and our net income for that period.
As of December 31, 2009 we have approximately
$10.8 million of unrecognized tax benefits, substantially
all of which relates to uncertain tax positions associated with
the acquisition of Manugistics that would impact our effective
tax rate if recognized. Recognition of these uncertain tax
positions will be treated as a component of income tax expense
rather than as a reduction of goodwill. During 2009, there were
no significant changes in our unrecognized tax benefits. It is
reasonably possible that approximately $8.8 million of
unrecognized tax benefits will be recognized within the next
twelve months, primarily related to lapses in the statute of
limitations. At December 31, 2009, we have approximately
$5.5 million and $7.8 million of federal and state
research and development tax credit carryforwards, respectively,
that expire at various dates through 2024. We have placed a
valuation allowance against the Arizona research and development
credit as we do not expect to be able to utilize it prior to its
expiration.
We treat the accrual of interest and penalties related to
uncertain tax positions as a component of income tax expense,
including accruals (benefits) made during 2009, 2008 and 2007 of
$(515,000), $600,000 and
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$630,000, respectively. As of December 31, 2009, 2008 and
2007, there are approximately $2.3 million,
$2.6 million and $1.9 million, respectively of
interest and penalty accruals related to uncertain tax positions
which are reflected in the Consolidated Balance Sheet under the
caption Liability for uncertain tax positions. To
the extent interest and penalties are not assessed with respect
to the uncertain tax positions, the accrued amounts for interest
and penalties will be reduced and reflected as a reduction of
the overall tax provision.
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Share-Based Compensation. Our 2005 Performance
Incentive Plan, as amended (2005 Incentive Plan)
provides for the issuance of up to 3,847,000 shares of
common stock to employees, consultants and directors under stock
purchase rights, stock bonuses, restricted stock, restricted
stock units, performance awards, performance units and deferred
compensation awards. The 2005 Incentive Plan contains certain
restrictions that limit the number of shares that may be issued
and the amount of cash awarded under each type of award,
including a limitation that awards granted in any given year can
represent no more than two percent (2%) of the total number of
shares of common stock outstanding as of the last day of the
preceding fiscal year. Awards granted under the 2005 Incentive
Plan are in such form as the Compensation Committee shall from
time to time establish and the awards may or may not be subject
to vesting conditions based on the satisfaction of service
requirements or other conditions, restrictions or performance
criteria including the Companys achievement of annual
operating goals. Restricted stock and restricted stock units may
also be granted under the 2005 Incentive Plan as a component of
an incentive package offered to new employees or to existing
employees based on performance or in connection with a
promotion, and will generally vest over a three-year period,
commencing at the date of grant. We measure the fair value of
awards under the 2005 Incentive Plan based on the market price
of the underlying common stock as of the date of grant. The fair
value of each award is amortized over the applicable vesting
period of the awards using graded vesting and reflected in the
consolidated statements of income under the captions Cost
of maintenance services, Cost of consulting
services, Product development, Sales and
marketing, and General and administrative.
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Annual stock-based incentive programs have been approved for
executive officers and certain other members of our management
team for years 2007 through 2010 that provide for contingently
issuable performance share awards or restricted stock units upon
achievement of defined performance threshold goals. The defined
performance threshold goal for each year has been an adjusted
EBITDA (earnings before interest, taxes, depreciation and
amortization) targets, which excludes certain non-routine items.
The awards vest 50% upon the date the Board approves the
achievement of the annual performance threshold goal with the
remaining 50% vesting ratably over the subsequent
24-month
period.
Equity Inducement Awards. During third quarter
2009, we announced the appointment of Peter S. Hathaway to the
position of Executive Vice President and Chief Financial Officer
and Jason Zintak to the newly-created position of Executive Vice
President, Sales and Marketing. In order to induce
Mr. Hathaway and Mr. Zintak to accept employment, the
Compensation Committee granted certain equity awards outside of
the terms of the 2005 Incentive Plan and pursuant to NASDAQ
Marketplace Rule 5635(c)(4).
Stock Option Plans. We maintained various
stock option plans through May 2005 (Prior Plans).
The Prior Plans provided for the issuance of shares of common
stock to employees, consultants and directors under incentive
and non-statutory stock option grants. Stock option grants under
the Prior Plans were made at a price not less than the fair
market value of the common stock at the date of grant, generally
vested over a three to four-year period commencing at the date
of grant and expire in ten years. Stock options are no longer
used for share-based compensation and no grants have been made
under the Prior Plans since 2004. With the adoption of the 2005
Incentive Plan, we terminated all Prior Plans except for those
provisions necessary to administer the outstanding options, all
of which are fully vested. As of December 31, 2009, we had
approximately 1.3 million vested stock options outstanding
with exercise prices ranging from $10.33 to $27.50 per share.
Employee Stock Purchase Plan. Our employee
stock purchase plan (2008 Purchase Plan) has an
initial reserve of 1,500,000 shares and provides eligible
employees with the ability to defer up to 10% of their earnings
for the purchase of our common stock on a semi-annual basis at
85% of the fair market value on the
52
last day of each six-month offering period that begin on
February 1st and August 1st of each year.
The 2008 Purchase Plan is considered compensatory and, as a
result, stock-based compensation is recognized on the last day
of each six-month offering period in an amount equal to the
difference between the fair value of the stock on the date of
purchase and the discounted purchase price. A total of
155,888 shares of common stock were purchased under the
2008 Purchase Plan in 2009 at prices ranging from $9.52 to
$17.52. We have recognized $342,000 of share-based compensation
expense in connection with these purchases, which is reflected
in the consolidated statements of income under the captions
Cost of maintenance services, Cost of
consulting services, Product development,
Sales and marketing, and General and
administrative.
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Derivative Instruments and Hedging
Activities. We use derivative financial
instruments, primarily forward exchange contracts, to manage a
majority of the foreign currency exchange exposure associated
with net short-term foreign currency denominated assets and
liabilities that exist as part of our ongoing business
operations that are denominated in a currency other than the
functional currency of the subsidiary. The exposures relate
primarily to the gain or loss recognized in earnings from the
settlement of current foreign denominated assets and
liabilities. We do not enter into derivative financial
instruments for trading or speculative purposes. The forward
exchange contracts generally have maturities of 90 days or
less and are not designated as hedging instruments. Forward
exchange contracts are
marked-to-market
at the end of each reporting period, using quoted prices for
similar assets or liabilities in active markets, with gains and
losses recognized in other income offset by the gains or losses
resulting from the settlement of the underlying foreign currency
denominated assets and liabilities.
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At December 31, 2009, we had forward exchange contracts
with a notional value of $37.9 million and an associated
net forward contract payable of $354,000. At December 31,
2008, we had forward exchange contracts with a notional value of
$33.5 million and an associated net forward contract
liability of $14,000. These derivatives are not designated as
hedging instruments. The forward contract liabilities are
included in the consolidated balance sheets under the caption
Accrued expenses and other liabilities. The notional
value represents the amount of foreign currencies to be
purchased or sold at maturity and does not represent our
exposure on these contracts. We recorded net foreign currency
exchange contract gains of $677,000, $483,000 and $147,000 in
2009, 2008 and 2007, respectively, which are included in the
condensed consolidated statements of income under the caption
Interest Income and other, net.
Other
Recent Accounting Pronouncements
In September 2009, FASB issued an amendment to its accounting
guidance on certain revenue arrangements with multiple
deliverables that enables a vendor to account for products and
services (deliverables) separately rather than as a combined
unit. The revised guidance establishes a selling price hierarchy
for determining the selling price of a deliverable, which is
based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) managements
best estimate of selling price. This guidance also eliminates
the residual method of allocation and requires that the
arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price
method. In addition, this guidance significantly expands
required disclosures related to a such revenue arrangements that
have multiple deliverables. The revised guidance is effective
for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010 with early
adoption permitted. We are currently assessing the impact the
new guidance will have on certain of our revenue arrangements,
specifically those involving the delivery of
software-as-a-service and certain other managed service
offerings as i2 derived a significant portion of their revenues
from these form of contracts. The ultimate impact on our
consolidated financial statements will depend on the nature and
terms of the revenue arrangements entered into or materially
modified after the adoption date. The new guidance does not
significantly change the accounting for the majority of our
existing and future revenue arrangements that are subject to
specific guidance in sections 605 and 985 of the
Codification (see Revenue Recognition discussion above).
In December 2009, FASB issued a new guidance for improvements to
financial reporting by enterprises involved with variable
interest entities. The new guidance provides an amendment to its
consolidation guidance for variable interest entities and the
definition of a variable interest entity and requires enhanced
disclosures to provide more information about an
enterprises involvement in a variable interest entity.
This amendment also requires ongoing assessments of whether an
enterprise is the primary beneficiary of a variable interest
entity and is effective
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for reporting periods beginning after December 15, 2009. We
do not currently anticipate any significant impact from adoption
of this guidance on our consolidated financial position or
results of operations.
In January 2010, FASB issued an amendment to its accounting
guidance for fair value measurements which adds new requirements
for disclosures about transfers into and out of Levels 1
and 2 and separate disclosures about purchases, sales,
issuances, and settlements related to Level 3 measurements.
The revised guidance also clarifies existing fair value
disclosures about the level of disaggregation and about inputs
and valuation techniques used to measure fair value. The
amendment is effective for the first reporting period beginning
after December 15, 2009, except for the requirements to
provide the Level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which will be
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. Early
adoption is permitted. We are currently assessing what impact
this guidance will have on our consolidated financial statements.
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Item 7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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We are exposed to certain market risks in the ordinary course of
our business. These risks result primarily from changes in
foreign currency exchange rates and interest rates. In addition,
our international operations are subject to risks related to
differing economic conditions, changes in political climate,
differing tax structures, and other regulations and restrictions.
Foreign currency exchange rates. Our
international operations expose us to foreign currency exchange
rate changes that could impact translations of foreign
denominated assets and liabilities into U.S. dollars and
future earnings and cash flows from transactions denominated in
different currencies. International revenues represented
approximately 40% of our total revenues in 2009, 2008 and 2007.
In addition, the identifiable net assets of our foreign
operations represented 19% and 28% of consolidated net assets at
December 31, 2009 and 2008, respectively. The decrease in
the percentage of identifiable net assets of our foreign
operations in 2009 compared to 2008 is due primarily to the
issuance of $275 million of Senior Notes, all of which are
recorded in a domestic subsidiary. Our exposure to currency
exchange rate changes is diversified due to the number of
different countries in which we conduct business. We operate
outside the United States primarily through wholly owned
subsidiaries in Europe, Asia/Pacific, Canada and Latin America.
We have determined that the functional currency of each of our
foreign subsidiaries is the local currency and as such, foreign
currency translation adjustments are recorded as a separate
component of stockholders equity. Changes in the currency
exchange rates of our foreign subsidiaries resulted in our
reporting an unrealized foreign currency exchange gain of
$5.3 million in 2009 compared to an unrealized foreign
currency loss of $6.1 million in 2008 and an unrealized
foreign currency gain of $3.3 million in 2007.
The foreign currency exchange gain in 2009 resulted primarily
from the weakening of the U.S. Dollar, particularly against
the British Pound and the Euro. Foreign currency gains and
losses will continue to result from fluctuations in the value of
the currencies in which we conduct operations as compared to the
U.S. Dollar, and future operating results will be affected
to some extent by gains and losses from foreign currency
exposure. We prepared sensitivity analyses of our exposures from
foreign net working capital as of December 31, 2009 to
assess the impact of hypothetical changes in foreign currency
rates. Based upon the results of these analyses, a 10% adverse
change in all foreign currency rates from the December 31,
2009 rates would result in a currency translation loss of
approximately $1.0 million before tax.
We use derivative financial instruments, primarily forward
exchange contracts, to manage a majority of the foreign currency
exchange exposure associated with net short-term foreign
currency denominated assets and liabilities that exist as part
of our ongoing business operations that are denominated in a
currency other than the functional currency of the subsidiary.
The exposures relate primarily to the gain or loss recognized in
earnings from the settlement of current foreign denominated
assets and liabilities. We do not enter into derivative
financial instruments for trading or speculative purposes. The
forward exchange contracts generally have maturities of
90 days or less and are not designated as hedging
instruments. Forward exchange contracts are
marked-to-market
at the end of each reporting period, using quoted prices for
similar assets or liabilities in active markets, with gains and
losses recognized in other income offset by the gains or losses
resulting from the settlement of the underlying foreign currency
denominated assets and liabilities.
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At December 31, 2009, we had forward exchange contracts
with a notional value of $37.9 million and an associated
net forward contract payable of $354,000. At December 31,
2008, we had forward exchange contracts with a notional value of
$33.5 million and an associated net forward contract
liability of $14,000. These derivatives are not designated as
hedging instruments. The forward contract liabilities are
included in the consolidated balance sheets under the caption
Accrued expenses and other liabilities. The notional
value represents the amount of foreign currencies to be
purchased or sold at maturity and does not represent our
exposure on these contracts. We prepared sensitivity analyses of
the impact of changes in foreign currency exchange rates on our
forward exchange contracts at December 31, 2009. Based on
the results of these analyses, a 10% adverse change in all
foreign currency rates from the December 31, 2009 rates
would result in a net forward contract liability of
$3.5 million that would increase the underlying currency
translation loss on our net foreign assets. We recorded net
foreign currency exchange contract gains of $677,000, $483,000
and $147,000 in 2009, 2008 and 2007, respectively, which are
included in the condensed consolidated statements of income
under the caption Interest Income and other, net.
Interest rates. At December 31, 2009 and
2008, our excess cash balances are included in our operating
account. Cash balances in foreign currencies overseas are
operating balances and are invested in short-term deposits of
the local operating bank. Interest income earned on investments
is reflected in our financial statements under the caption
Interest income and other, net. Investments in both
fixed rate and floating rate interest earning instruments carry
a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less
income than expected if interest rates fall.
We issued $275 million of Senior Notes in December 200 at
an initial offering price of 98.988%. The net proceeds from the
sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($6.5 million) were placed in escrow and subsequently used,
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2 on
January 28, 2010. The Senior Notes mature in 2014. Interest
accrues on the Senior Notes at a fixed rate of 8% per annum,
payable semi-annually in cash on June 15 and December 15 of each
year, commencing on June 15, 2010. The interest is computed
on the basis of a
360-day year
comprised of twelve
30-day
months.
We were exposed to interest rate risk on the term loans used to
finance the acquisition of Manugistics, which provided for
quarterly interest payments at LIBOR + 2.25%. To manage this
risk, we entered into an interest rate swap agreement to fix
LIBOR at 5.365% on $140 million, or 80% of the aggregate
term loans. The interest rate swap was structured with
decreasing notional amounts to match our expected pay down of
the debt. The interest rate swap agreement was designated a cash
flow hedge derivative. The effectiveness of the cash flow hedge
derivative was evaluated on a quarterly basis with changes in
the fair value of the interest rate swap deferred and recorded
as a component of Accumulated other comprehensive income
(loss). We repaid the remaining balance of the term loans
on October 1, 2008 and terminated the interest rate swap on
October 5, 2008. We made an $899,000 payment on
October 5, 2008 in consideration for early termination of
the interest rate swap. This payment is included in the
consolidated statements of operations under the caption
Interest expense and amortization of loan fees.
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Item 8.
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Financial
Statements and Supplementary Data
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Our consolidated financial statements as of December 31,
2009 and 2008, and for each of the three years in the period
ended December 31, 2009, together with the report of the
independent registered public accounting firm of
Deloitte & Touche LLP, are included in this
Form 10-K
as required by
Rule 14a-3(b).
|
|
Item 9.
|
Changes
In and Disagreements with Accountants on Accounting and
Financial Disclosure -
|
None
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure Controls and Procedures. During and
subsequent to the reporting period, and under the supervision
and with the participation of our management, including our
principal executive officer and principal financial and
accounting officer, we conducted an evaluation of our disclosure
controls and procedures that were in effect at the end of the
period covered by this report. Disclosure controls and
procedures is defined under
Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the Act)
as those controls and other procedures of an
55
issuer that are designed to ensure that the information required
to be disclosed by the issuer in the reports it files or submits
under the Act is recorded, processed, summarized and reported,
within the time periods specified in the Commissions rules
and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and
communicated to the issuers management, including its
principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. Based on their
evaluation, our principal executive officer and principal
financial and accounting officer have concluded that our
disclosure controls and procedures that were in effect on
December 31, 2009 were effective to ensure that information
required to be disclosed in our reports to be filed under the
Act is accumulated and communicated to management, including the
chief executive officer and chief financial officer, to allow
timely decisions regarding disclosures and is recorded,
processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules
and forms.
Managements Report on Internal Control Over Financial
Reporting. Our management is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in
Rule 13a-15(f)
under the Act. Management conducted an evaluation of the
effectiveness of our internal control over financial reporting
based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its
evaluation under the Internal Control Integrated
Framework, management concluded that our internal control
over financial reporting was effective as of December 31,
2009. The effectiveness of our internal control over financial
reporting as of December 31, 2009 has been audited by
Deloitte & Touche LLP, an independent registered
accounting firm, as stated in their attestation report, which is
included herein.
Changes in Internal Control Over Financial
Reporting. The term internal control over
financial reporting is defined under
Rule 13a-15(f)
under the Act and refers to the process of a company that is
designed by, or under the supervision of, the issuers
principal executive and principal financial officers, or persons
performing similar functions, and effected by the issuers
board of directors, management and other personnel, 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 and includes those policies and procedures
that: (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made only in accordance
with authorizations of management and directors of the issuer;
and (iii) provide reasonable assurance regarding the
prevention or timely detection of unauthorized acquisition, use
or disposition of the issuers assets that could have a
material effect on the financial statements.
There were no changes in our internal controls over financial
reporting during the three months ended December 31, 2009
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
None
|
56
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
JDA Software Group, Inc.
Scottsdale, Arizona
We have audited the internal control over financial reporting of
JDA Software Group, Inc. and subsidiaries (the
Company) as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel 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. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2009 of the Company and our report dated
March 16, 2010 expressed an unqualified opinion on those
financial statements.
/s/ DELOITTE &
TOUCHE LLP
Phoenix, Arizona
March 16, 2010
57
PART III
Certain information required by Part III is omitted from
this
Form 10-K,
as we intend to file our Proxy Statement pursuant to
Regulation 14A not later than 120 days after the end
of the fiscal year covered by this
Form 10-K,
and certain information included therein is incorporated herein
by reference.
|
|
Item 10.
|
Board
of Directors, Executive Officers and Corporate
Governance
|
The information relating to our board of directors and executive
officers is incorporated by reference to the Proxy Statement
under the captions Proposal 1 Election of
Directors, Corporate Governance, and
Executive Officers of the Company. Information
relating to our Audit Committee Members and the designation of
our Audit Committee Financial Expert, beneficial ownership
reporting compliance under Section 16(a) of the Exchange
Act, and the adoption of a Code of Ethics, is incorporated by
reference to the proxy statement under the captions
Corporate Governance Committees of our Board
of Directors, Section 16(a) Beneficial
Ownership Reporting Compliance, Report of the Audit
Committee, and Corporate Governance Code
of Business Conduct and Ethics.
|
|
Item 11.
|
Executive
Compensation
|
The information relating to executive compensation is
incorporated by reference to the Proxy Statement under the
captions Executive Compensation, Potential
Payments upon Termination or Change in Control,
Compensation of Directors, and Compensation
Committee Interlocks and Insider Participation.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information relating to security ownership of certain
beneficial owners and management and related stockholder matters
is incorporated by reference to the Proxy Statement under the
captions Security Ownership of Certain Beneficial Owners
and Management, and Securities Authorized for
Issuance under Equity Compensation Plans.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information relating to certain relationships and related
transactions is incorporated by reference to the Proxy Statement
under the caption Transactions with Related Persons.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information relating to principal accountant fees and
services is incorporated by reference to the Proxy Statement
under the captions Report of the Audit
Committee Principal Accounting Firm Fees and
Report of the Audit Committee Policy for
Approving Audit and Permitted Non-Audit Services of the
Independent Auditor.
Certain information required by Part III is omitted from
this
Form 10-K,
as we intend to file our Proxy Statement pursuant to
Regulation 14A not later than 120 days after the end
of the fiscal year covered by this
Form 10-K,
and certain information included therein is incorporated herein
by reference.
58
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
a. The following documents are filed as part of this Report:
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets December 31, 2009
and 2008
Consolidated Statements of Income Three Years Ended
December 31, 2009
Consolidated Statements of Stockholders Equity and
Comprehensive Income (Loss) Three Years Ended
December 31, 2009
Consolidated Statements of Cash Flows Three Years
Ended December 31, 2009
Notes to Consolidated Financial Statements Three
Years Ended December 31, 2009
2. Financial Statement Schedules None
3. Exhibits See Exhibit Index.
59
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
JDA Software Group, Inc.
Scottsdale, Arizona
We have audited the accompanying consolidated balance sheets of
JDA Software Group, Inc. and subsidiaries (the
Company) as of December 31, 2009 and 2008, and
the related consolidated statements of income,
stockholders equity and comprehensive income (loss), and
cash flows for each of the three years in the period ended
December 31, 2009. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of JDA
Software Group, Inc. and subsidiaries as of December 31,
2009 and 2008, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2009, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 16, 2010 expressed an
unqualified opinion on the Companys internal control over
financial reporting.
/s/ DELOITTE &
TOUCHE LLP
Phoenix, Arizona
March 16, 2010
60
JDA
SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except share amounts)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
75,974
|
|
|
$
|
32,696
|
|
Restricted cash
|
|
|
287,875
|
|
|
|
|
|
Accounts receivable, net
|
|
|
68,883
|
|
|
|
79,353
|
|
Income tax receivable
|
|
|
|
|
|
|
316
|
|
Deferred tax asset
|
|
|
19,142
|
|
|
|
22,919
|
|
Prepaid expenses and other current assets
|
|
|
15,667
|
|
|
|
14,223
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
467,541
|
|
|
|
149,507
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
40,842
|
|
|
|
43,093
|
|
Goodwill
|
|
|
135,275
|
|
|
|
135,275
|
|
Other Intangibles, net:
|
|
|
|
|
|
|
|
|
Customer lists
|
|
|
99,264
|
|
|
|
121,719
|
|
Acquired software technology
|
|
|
20,240
|
|
|
|
24,160
|
|
Trademarks
|
|
|
157
|
|
|
|
1,335
|
|
Deferred tax asset
|
|
|
44,350
|
|
|
|
44,815
|
|
Other non-current assets
|
|
|
13,997
|
|
|
|
4,872
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
354,125
|
|
|
|
375,269
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
821,666
|
|
|
$
|
524,776
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
7,192
|
|
|
$
|
3,273
|
|
Accrued expenses and other liabilities
|
|
|
45,523
|
|
|
|
52,090
|
|
Income taxes payable
|
|
|
3,489
|
|
|
|
|
|
Deferred revenue
|
|
|
65,665
|
|
|
|
62,005
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
121,869
|
|
|
|
117,368
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
272,250
|
|
|
|
|
|
Accrued exit and disposal obligations
|
|
|
7,341
|
|
|
|
8,820
|
|
Liability for uncertain tax positions
|
|
|
8,770
|
|
|
|
7,093
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
288,361
|
|
|
|
15,913
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
410,230
|
|
|
|
133,281
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Notes 11 and 12)
|
|
|
|
|
|
|
|
|
Redeemable Preferred Stock
|
|
|
|
|
|
|
50,000
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; authorized
2,000,000 shares; none issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; authorized,
50,000,000 shares; issued 36,323,245 and
32,458,397 shares, respectively
|
|
|
363
|
|
|
|
325
|
|
Additional paid-in capital
|
|
|
361,362
|
|
|
|
305,564
|
|
Deferred compensation
|
|
|
(5,297
|
)
|
|
|
(2,915
|
)
|
Retained earnings
|
|
|
74,014
|
|
|
|
56,268
|
|
Accumulated other comprehensive income (loss)
|
|
|
3,267
|
|
|
|
(2,017
|
)
|
Less treasury stock, at cost, 1,785,715 and
1,307,317 shares, respectively
|
|
|
(22,273
|
)
|
|
|
(15,730
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
411,436
|
|
|
|
341,495
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
821,666
|
|
|
$
|
524,776
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
61
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
88,786
|
|
|
$
|
92,898
|
|
|
$
|
73,599
|
|
Maintenance services
|
|
|
179,336
|
|
|
|
182,844
|
|
|
|
178,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
268,122
|
|
|
|
275,742
|
|
|
|
251,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
107,618
|
|
|
|
104,072
|
|
|
|
110,893
|
|
Reimbursed expenses
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
10,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
117,678
|
|
|
|
114,590
|
|
|
|
121,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
385,800
|
|
|
|
390,332
|
|
|
|
373,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
3,241
|
|
|
|
3,499
|
|
|
|
2,499
|
|
Amortization of acquired software technology
|
|
|
3,920
|
|
|
|
5,277
|
|
|
|
6,377
|
|
Cost of maintenance services
|
|
|
43,165
|
|
|
|
45,734
|
|
|
|
45,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
50,326
|
|
|
|
54,510
|
|
|
|
54,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
85,285
|
|
|
|
81,954
|
|
|
|
83,131
|
|
Reimbursed expenses
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
10,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
95,345
|
|
|
|
92,472
|
|
|
|
94,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
145,671
|
|
|
|
146,982
|
|
|
|
148,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
240,129
|
|
|
|
243,350
|
|
|
|
225,441
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
51,318
|
|
|
|
53,866
|
|
|
|
51,173
|
|
Sales and marketing
|
|
|
66,001
|
|
|
|
66,468
|
|
|
|
63,154
|
|
General and administrative
|
|
|
47,664
|
|
|
|
44,963
|
|
|
|
44,405
|
|
Amortization of intangibles
|
|
|
23,633
|
|
|
|
24,303
|
|
|
|
15,852
|
|
Restructuring charges
|
|
|
6,865
|
|
|
|
8,382
|
|
|
|
6,208
|
|
Acquisition-related costs
|
|
|
4,768
|
|
|
|
|
|
|
|
|
|
Costs of abandoned acquisition
|
|
|
|
|
|
|
25,060
|
|
|
|
|
|
Gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
(4,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
200,249
|
|
|
|
223,042
|
|
|
|
176,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
39,880
|
|
|
|
20,308
|
|
|
|
48,777
|
|
Interest expense and amortization of loan fees
|
|
|
(2,712
|
)
|
|
|
(10,349
|
)
|
|
|
(11,836
|
)
|
Finance costs on abandoned acquisition
|
|
|
767
|
|
|
|
(5,292
|
)
|
|
|
|
|
Interest income and other, net
|
|
|
1,253
|
|
|
|
2,791
|
|
|
|
3,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
39,188
|
|
|
|
7,458
|
|
|
|
40,417
|
|
Income tax provision
|
|
|
(12,849
|
)
|
|
|
(4,334
|
)
|
|
|
(13,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
26,339
|
|
|
|
3,124
|
|
|
|
26,522
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Applicable to Common Shareholders
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share Applicable to Common Shareholders
|
|
$
|
.51
|
|
|
$
|
.09
|
|
|
$
|
.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share Applicable to Common
Shareholders
|
|
$
|
.50
|
|
|
$
|
.09
|
|
|
$
|
.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Used To Compute:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share applicable to common shareholders
|
|
|
34,936
|
|
|
|
34,339
|
|
|
|
33,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share applicable to common shareholders
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
34,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
62
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Deferred
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Gain (Loss)
|
|
|
Stock
|
|
|
Total
|
|
|
|
(In thousands, except share amounts)
|
|
|
Balance, January 1, 2007
|
|
|
30,569,447
|
|
|
$
|
305
|
|
|
$
|
275,705
|
|
|
$
|
(904
|
)
|
|
$
|
27,628
|
|
|
$
|
1,018
|
|
|
$
|
(13,400
|
)
|
|
$
|
290,352
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock Options
|
|
|
757,513
|
|
|
|
8
|
|
|
|
9,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,877
|
|
Issuance of restricted stock
|
|
|
30,981
|
|
|
|
1
|
|
|
|
628
|
|
|
|
(412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217
|
|
Vesting of restricted stock units
|
|
|
24,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of unvested equity awards
|
|
|
|
|
|
|
|
|
|
|
8,242
|
|
|
|
(8,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of unvested equity awards
|
|
|
(3,359
|
)
|
|
|
|
|
|
|
(58
|
)
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,974
|
|
Tax benefit stock compensation
|
|
|
|
|
|
|
|
|
|
|
1,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,308
|
|
Accrual for uncertain tax positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,006
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,006
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(244
|
)
|
|
|
(244
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,522
|
|
|
|
|
|
|
|
|
|
|
|
26,522
|
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(525
|
)
|
|
|
|
|
|
|
(525
|
)
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,321
|
|
|
|
|
|
|
|
3,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
31,378,768
|
|
|
|
314
|
|
|
|
295,694
|
|
|
|
(3,526
|
)
|
|
|
53,144
|
|
|
|
3,814
|
|
|
|
(13,644
|
)
|
|
|
335,796
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock Options
|
|
|
697,072
|
|
|
|
7
|
|
|
|
7,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,806
|
|
Issuance of restricted stock
|
|
|
10,000
|
|
|
|
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199
|
|
Vesting of restricted stock units
|
|
|
372,561
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of unvested equity awards
|
|
|
|
|
|
|
|
|
|
|
3,971
|
|
|
|
(3,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of unvested equity awards
|
|
|
(4
|
)
|
|
|
|
|
|
|
(457
|
)
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,125
|
|
Tax benefit stock compensation
|
|
|
|
|
|
|
|
|
|
|
(1,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,638
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,086
|
)
|
|
|
(2,086
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
3,124
|
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
|
|
|
|
|
|
289
|
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,120
|
)
|
|
|
|
|
|
|
(6,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
32,458,397
|
|
|
|
325
|
|
|
|
305,564
|
|
|
|
(2,915
|
)
|
|
|
56,268
|
|
|
|
(2,017
|
)
|
|
|
(15,730
|
)
|
|
|
341,495
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock Options
|
|
|
1,053,251
|
|
|
|
10
|
|
|
|
12,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,580
|
|
Issuance of common stock ESPP
|
|
|
155,888
|
|
|
|
1
|
|
|
|
2,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,269
|
|
Issuance of restricted stock
|
|
|
180,000
|
|
|
|
2
|
|
|
|
3,011
|
|
|
|
(2,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
|
|
Vesting of restricted stock units
|
|
|
285,301
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of unvested equity awards
|
|
|
|
|
|
|
|
|
|
|
7,845
|
|
|
|
(7,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of unvested equity awards
|
|
|
(9,592
|
)
|
|
|
|
|
|
|
(396
|
)
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,934
|
|
Conversion of redeemable preferred stock
|
|
|
2,200,000
|
|
|
|
22
|
|
|
|
30,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,525
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,543
|
)
|
|
|
(6,543
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,339
|
|
|
|
|
|
|
|
|
|
|
|
26,339
|
|
Cash consideration paid for Series B preferred stock in
excess of carrying value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,284
|
|
|
|
|
|
|
|
5,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
36,323,245
|
|
|
$
|
363
|
|
|
$
|
361,362
|
|
|
$
|
(5,297
|
)
|
|
$
|
74,014
|
|
|
$
|
3,267
|
|
|
$
|
(22,273
|
)
|
|
$
|
411,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
63
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
26,339
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
37,239
|
|
|
|
39,280
|
|
|
|
31,646
|
|
Provision for doubtful accounts
|
|
|
1,900
|
|
|
|
750
|
|
|
|
2,890
|
|
Amortization of loan origination fees, debt issuance costs and
original issue discount
|
|
|
110
|
|
|
|
3,672
|
|
|
|
1,808
|
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
1,638
|
|
|
|
(1,308
|
)
|
Net gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
(4,128
|
)
|
Net (gain) loss on disposal of property and equipment
|
|
|
(42
|
)
|
|
|
9
|
|
|
|
(20
|
)
|
Stock-based compensation expense
|
|
|
8,095
|
|
|
|
4,324
|
|
|
|
6,191
|
|
Deferred income taxes
|
|
|
4,242
|
|
|
|
1,784
|
|
|
|
9,991
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
9,894
|
|
|
|
(6,590
|
)
|
|
|
5,597
|
|
Income tax receivable
|
|
|
365
|
|
|
|
116
|
|
|
|
(284
|
)
|
Prepaid expenses and other assets
|
|
|
(1,768
|
)
|
|
|
2,055
|
|
|
|
(212
|
)
|
Accounts payable
|
|
|
4,525
|
|
|
|
(346
|
)
|
|
|
(1,256
|
)
|
Accrued expenses and other liabilities
|
|
|
(4,608
|
)
|
|
|
3,938
|
|
|
|
110
|
|
Income tax payable
|
|
|
5,964
|
|
|
|
27
|
|
|
|
|
|
Deferred revenue
|
|
|
4,226
|
|
|
|
(6,689
|
)
|
|
|
2,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
96,481
|
|
|
|
47,092
|
|
|
|
79,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
(287,875
|
)
|
|
|
|
|
|
|
|
|
Payment of direct costs related to acquisitions
|
|
|
(5,110
|
)
|
|
|
(4,242
|
)
|
|
|
(7,606
|
)
|
Purchase of property and equipment
|
|
|
(7,136
|
)
|
|
|
(8,594
|
)
|
|
|
(7,408
|
)
|
Proceeds from disposal of property and equipment
|
|
|
84
|
|
|
|
132
|
|
|
|
6,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(300,037
|
)
|
|
|
(12,704
|
)
|
|
|
(8,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity plans
|
|
|
14,849
|
|
|
|
7,806
|
|
|
|
9,877
|
|
Excess tax benefits from share-based compensation
|
|
|
|
|
|
|
(1,638
|
)
|
|
|
1,308
|
|
Purchase of treasury stock
|
|
|
(6,543
|
)
|
|
|
(2,086
|
)
|
|
|
(244
|
)
|
Redemption of redeemable preferred stock
|
|
|
(28,068
|
)
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term, debt, net of discount
|
|
|
272,217
|
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
|
|
(6,487
|
)
|
|
|
|
|
|
|
|
|
Principal payments on term loan agreement
|
|
|
|
|
|
|
(99,563
|
)
|
|
|
(40,000
|
)
|
Repayment of 5% convertible subordinated notes
|
|
|
|
|
|
|
|
|
|
|
(1,531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
245,968
|
|
|
|
(95,481
|
)
|
|
|
(30,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
866
|
|
|
|
(1,499
|
)
|
|
|
770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
43,278
|
|
|
|
(65,592
|
)
|
|
|
41,729
|
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
32,696
|
|
|
|
95,288
|
|
|
|
53,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
75,974
|
|
|
$
|
32,696
|
|
|
$
|
95,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
64
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
3,854
|
|
|
$
|
3,378
|
|
|
$
|
5,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,149
|
|
|
$
|
7,312
|
|
|
$
|
11,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received for income tax refunds
|
|
$
|
856
|
|
|
$
|
852
|
|
|
$
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in retained earnings from an accrual for uncertain tax
positions
|
|
|
|
|
|
|
|
|
|
$
|
1,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Non-cash Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (reduction) of goodwill recorded in acquisitions
|
|
|
|
|
|
$
|
714
|
|
|
$
|
(11,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Non-cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of redeemable preferred stock to common stock
|
|
$
|
30,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
65
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended December 31, 2009
(in thousands, except percentages, shares, per share amounts or
as otherwise stated)
|
|
1.
|
Summary
of Significant Accounting Policies
|
Nature of Business. We are a leading provider
of sophisticated enterprise software solutions designed
specifically to address the supply chain requirements of global
consumer products companies, manufacturers,
wholesale/distributors and retailers, as well as government and
aerospace defense contractors and travel, transportation,
hospitality and media organizations, and with the acquisition of
i2 Technologies (see Note 2) we have licensed our
software to over 6,000 customers worldwide. Our solutions enable
customers to plan, manage and optimize the coordination of
supply, demand and flows of inventory throughout the supply
chain to the consumer. We conduct business in three geographic
regions that have separate management teams and reporting
structures: the Americas (United States, Canada, and Latin
America), Europe (Europe, Middle East and Africa), and
Asia/Pacific. Our corporate offices are located in Scottsdale,
Arizona.
Principles of Consolidation and Basis of
Presentation. The consolidated financial
statements are stated in U.S. dollars and include the
accounts of JDA Software Group, Inc. and our subsidiaries, all
of which are wholly owned. All intercompany balances and
transactions have been eliminated in consolidation. The
consolidated financial statements have been prepared in
accordance with the FASB Standard Accounting Codification
(Codification), which is the authoritative source of
authoritative generally accepted accounting principles
(GAAP) for nongovernmental entities in the United
States. The Codification, which is effective for all reporting
periods that end after September 15, 2009, superseded and
replaced all existing non-SEC accounting and reporting
standards. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. Adoption of the
Codification did not have a material impact on our consolidated
financial statement note disclosures.
Certain reclassifications have been made to the Consolidated
Statements of Income for the years ended December 31, 2008
and 2007 to conform to the current presentation. In the
Consolidated Statements of Income we have combined the provision
for doubtful accounts in operating expenses under the caption
General and administrative. The provision for
doubtful accounts was previously reported under a separate
caption, Provision for doubtful accounts.
Use of Estimates. 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 reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Significant estimates include the allowance for doubtful
accounts, which is based upon an evaluation of our
customers ability to pay and general economic conditions;
the useful lives of intangible assets and the recoverability or
impairment of tangible and intangible asset values; deferred
revenues; purchase accounting allocations and related reserves;
and our effective income tax rate and the valuation allowance
applied against deferred tax assets which are based upon our
expectations of future taxable income, allowable deductions, and
projected tax credits. Actual results may differ from these
estimates.
Foreign Currency Translation. The financial
statements of our international subsidiaries are translated into
U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities and at an average exchange rate
for the revenues and expenses reported in each fiscal period. We
have determined that the functional currency of each foreign
subsidiary is the local currency and as such, foreign currency
translation adjustments are recorded as a separate component of
stockholders equity. Transaction gains and losses, and
unrealized gains and losses on short-term intercompany
receivables and payables and foreign denominated receivables,
are included in results of operations as incurred.
Cash and Cash Equivalents. Cash and cash
equivalents consist of cash held in bank demand deposits. The
restricted cash balance at December 31, 2009 consists
primarily of proceeds from the issuance of long-term debt
66
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(see Note 9), which were subsequently used to fund a
portion of the cash merger consideration in the acquisition of
i2 Technologies, Inc. (see Note 2).
Accounts Receivable. Consistent with industry
practice and to be competitive in the software marketplace, we
typically provide payment terms on most software license sales.
Software licenses are generally due within twelve months from
the date of delivery. Customers are reviewed for
creditworthiness before we enter into a new arrangement that
provides for software
and/or a
service element. We do not sell or ship our software, nor
recognize any revenue unless we believe that collection is
probable. For those customers who are not credit worthy, we
require prepayment of the software license fee or a letter of
credit before we will ship our software. We have a history of
collecting software payments when they come due without
providing refunds or concessions. Consulting services are
generally billed bi-weekly and maintenance services are billed
annually or monthly. For those customers who are significantly
delinquent or whose credit deteriorates, we typically put the
account on hold and do not recognize any further services
revenue, and may as appropriate withdraw support
and/or our
implementation staff until the situation has been resolved.
We do not have significant billing or collection problems. We
review each past due account and provide specific reserves based
upon the information we gather from various sources including
our customers, subsequent cash receipts, consulting services
project teams, members of each regions management, and
credit rating services such as Dun and Bradstreet. Although
infrequent and unpredictable, from time to time certain of our
customers have filed bankruptcy, and we have been required to
refund the pre-petition amounts collected and settle for less
than the face value of their remaining receivable pursuant to a
bankruptcy court order. In these situations, as soon as it
becomes probable that the net realizable value of the receivable
is impaired, we provide reserves on the receivable. In addition,
we monitor economic conditions in the various geographic regions
in which we operate to determine if general reserves or
adjustments to our credit policy in a region are appropriate for
deteriorating conditions that may impact the net realizable
value of our receivables.
Property and Equipment and Long-Lived
Assets. Property and equipment are stated at cost
less accumulated depreciation and amortization. Property and
equipment are depreciated on a straight-line basis over the
following estimated useful lives: computers, internal use
software, furniture and fixtures two to seven years;
buildings and improvements fifteen to forty years;
automobiles three years; leasehold
improvements the shorter of the initial lease term
or the estimated useful life of the asset.
Business Combinations. All business
combinations through December 31, 2008 were accounted for
using the purchase method of accounting. Under the purchase
method of accounting, the purchase price of each acquired
company was allocated to the acquired assets and liabilities
based on their fair values. There was no in-process research and
development (IPR&D) recorded on any of our
business combinations during the three years ended
December 31, 2008. IPR&D consists of products or
technologies in the development stage for which technological
feasibility has not been established and which we believe have
no alternative use.
Effective January 1, 2009, all future business combinations
will be accounted for at fair value under the acquisition method
of accounting. Under the acquisition method of accounting,
(i) acquisition-related costs, except for those costs
incurred to issue debt or equity securities, will be expensed in
the period incurred; (ii) non-controlling interests will be
valued at fair value at the acquisition date;
(iii) IPR&D will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
(iv) restructuring costs associated with a business
combination will be expensed subsequent to the acquisition date;
and (v) changes in deferred tax asset valuation allowances
and income tax uncertainties after the acquisition date will be
recognized through income tax expense or directly in contributed
capital, including any adjustments made to valuation allowances
on deferred taxes and acquired tax contingencies associated with
acquisitions that closed prior January 1, 2009. There were
no business combinations in 2009. We did however acquire
i2 Technologies, Inc. on January 28, 2010 in a
business combination that will be accounted for under the
acquisition method of accounting (see Note 2).
67
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill and Intangible Assets. Goodwill
represents the excess of the purchase price over the net assets
acquired in our business combinations. Goodwill is tested
annually for impairment, or more frequently if events or changes
in business circumstances indicate the asset might be impaired,
by comparing a weighted average of the fair value of future cash
flows under the Discounted Cash Flow Method of the Income
Approach and the Guideline Company Method to
the carrying value of the goodwill allocated to our reporting
units. We found no indication of impairment of our goodwill
balances during 2009, 2008 or 2007 with respect to the goodwill
allocated to our Retail, Manufacturing and Distribution
and Services Industries reportable business segments
(see Note 5). Absent future indications of impairment, the
next annual impairment test will be performed in fourth quarter
2010.
Customer lists are amortized on a straight-line basis over
estimated useful lives ranging from 8 years to
13 years. The values allocated to customer list intangibles
are based on the projected economic life of each acquired
customer base, using historical turnover rates and discussions
with the management of the acquired companies. We estimate the
economic lives of these assets using the historical life
experiences of the acquired companies as well as our historical
experience with similar customer accounts for products that we
have developed internally. We review customer attrition rates
for each significant acquired customer group on annual basis, or
more frequently if events or circumstances change, to ensure the
rate of attrition is not increasing and if revisions to the
estimated economic lives are required. In first quarter 2008, we
changed the estimated useful life of certain customer lists to
reflect current trends in attrition. With this change, the
quarterly amortization expense on customer lists increased
approximately $2.1 million per quarter, beginning first
quarter 2008 and continuing over the remaining useful life of
the related customer lists which extend through June 2014.
Acquired software technology is capitalized if the related
software product under development has reached technological
feasibility or if there are alternative future uses for the
purchased software. Amortization of software technology is
reported in the consolidated statements of income in cost of
revenues under the caption Amortization of acquired
software technology. Software technology is amortized on a
product-by-product
basis with the amortization recorded for each product being the
greater of the amount computed using (a) the ratio that
current gross revenues for a product bear to the total of
current and anticipated future revenue for that product, or
(b) the straight-line method over the remaining estimated
economic life of the product including the period being reported
on. The estimated economic lives of our acquired software
technology range from 8 years to 15 years.
Trademarks are being amortized on a straight-line basis over
estimated remaining useful life of five years.
Revenue recognition. Our revenue recognition
policy is significant because our revenue is a key component of
our results of operations. In addition, our revenue recognition
determines the timing of certain expenses such as commissions
and royalties. We follow specific and detailed guidelines in
measuring revenue; however, certain judgments affect the
application of our revenue policy.
We license software primarily under non-cancelable agreements
and provide related services, including consulting, training and
customer support. Software license revenue is generally
recognized using the residual method when:
|
|
|
|
Ø
|
Persuasive evidence of an arrangement exists and a license
agreement has been signed;
|
|
|
Ø
|
Delivery, which is typically FOB shipping point, is complete;
|
|
|
Ø
|
Fees are fixed and determinable and there are no uncertainties
surrounding product acceptance;
|
|
|
Ø
|
Collection is considered probable; and
|
|
|
Ø
|
Vendor-specific evidence of fair value (VSOE) exists
for all undelivered elements.
|
Our customer arrangements typically contain multiple elements
that include software, options for future purchases of software
products not previously licensed to the customer, maintenance,
consulting and training services. The fees from these
arrangements are allocated to the various elements based on
VSOE. Under the residual method, if an arrangement contains an
undelivered element, the VSOE of the undelivered element is
deferred and
68
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the revenue recognized once the element is delivered. If we are
unable to determine VSOE for any undelivered element included in
an arrangement, we will defer revenue recognition until all
elements have been delivered. In addition, if a software license
contains milestones, customer acceptance criteria or a
cancellation right, the software revenue is recognized upon the
achievement of the milestone or upon the earlier of customer
acceptance or the expiration of the acceptance period or
cancellation right. For arrangements that provide for
significant services or custom development that are essential to
the softwares functionality, the software license revenue
and contracted services are recognized under the percentage of
completion method. We measure
progress-to-completion
on arrangements involving significant services or custom
development that are essential to the softwares
functionality using input measures, primarily labor hours, which
relate hours incurred to date to total estimated hours at
completion. We continually update and revise our estimates of
input measures. If our estimates indicate that a loss will be
incurred, the entire loss is recognized in that period.
Maintenance services are separately priced and stated in our
arrangements. Maintenance services typically include on-line
support, access to our Solution Centers via telephone and web
interfaces, comprehensive error diagnosis and correction, and
the right to receive unspecified upgrades and enhancements, when
and if we make them generally available. Maintenance services
are generally billed on a monthly basis and recorded as revenue
in the applicable month, or billed on an annual basis with the
revenue initially deferred and recognized ratably over the
maintenance period. VSOE for maintenance services is the price
customers will be required to pay when it is sold separately,
which is typically the renewal rate.
Consulting and training services are separately priced and
stated in our arrangements, are generally available from a
number of suppliers, and are generally not essential to the
functionality of our software products. Consulting services
include project management, system planning, design and
implementation, customer configurations, and training. These
services are generally billed bi-weekly on an hourly basis or
pursuant to the terms of a fixed price contract. Consulting
services revenue billed on an hourly basis is recognized as the
work is performed. Under fixed price service contracts and
milestone-based arrangements that include services that are not
essential to the functionality of our software products,
consulting services revenue is recognized using the proportional
performance method. We measure
progress-to-completion
under the proportional performance method by using input
measures, primarily labor hours, which relate hours incurred to
date to total estimated hours at completion. We continually
update and revise our estimates of input measures. If our
estimates indicate that a loss will be incurred, the entire loss
is recognized in that period. Training revenues are included in
consulting revenues in the Companys consolidated
statements of income and are recognized once the training
services are provided. VSOE for consulting and training services
is based upon the hourly or per class rates charged when those
services are sold separately. We offer hosting and other managed
services on certain of our software products under arrangements
in which the end users do not take possession of the software.
Revenues from hosting services are included in consulting
revenues, billed monthly and recognized as the services are
provided. Revenues from our hardware reseller business are also
included in consulting revenues, reported net (i.e., the amount
billed to a customer less the amount paid to the supplier) and
recognized upon shipment of the hardware.
Customers are reviewed for creditworthiness before we enter into
a new arrangement that provides for software
and/or a
service element. We do not sell or ship our software, nor
recognize any license revenue, unless we believe that collection
is probable. Payments for our software licenses are typically
due within twelve months from the date of delivery. Although
infrequent, where software license agreements call for payment
terms of twelve months or more from the date of delivery,
revenue is recognized as payments become due and all other
conditions for revenue recognition have been satisfied.
Software License Indemnification. Our standard
software license agreements contain an infringement indemnity
clause under which we agree to indemnify and hold harmless our
customers and business partners against liability and damages
arising from claims of various copyright or other intellectual
property infringement by our products. We have never lost an
infringement claim and our costs to defend such lawsuits have
been insignificant. Although it is possible that in the future
third parties may claim that our current or potential future
69
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
software solutions infringe on their intellectual property, we
do not currently expect a significant impact on our business,
operating results, or financial condition.
Reimbursed Expenses. We classify reimbursed
expenses in both service revenues and cost of service revenues
in our consolidated statements of income.
Product Development. The costs to develop new
software products and enhancements to existing software products
are expensed as incurred until technological feasibility has
been established. We consider technological feasibility to have
occurred when all planning, designing, coding and testing have
been completed according to design specifications. Once
technological feasibility is established, any additional costs
would be capitalized. We believe our current process for
developing software is essentially completed concurrent with the
establishment of technological feasibility, and accordingly, no
costs have been capitalized.
Restructuring Charges. Restructuring charges
include charges for the costs of exit or disposal activities and
adjustments to acquisition-related reserves and other
liabilities recorded in connection with business combinations.
The liability for costs associated with exit or disposal
activities is measured initially at fair value and only
recognized when the liability is incurred, rather than at the
date the Company committed to the exit plan. Restructuring
charges are not directly identified with a particular business
segment and as a result, management does not consider these
charges in the evaluation of the operating income (loss) from
the business segments. We recorded restructuring charges of
$6.9 million, $8.4 million and $6.2 million in
2009, 2008 and 2007, respectively. These charges include net
adjustments to acquisition-related reserves and other
liabilities of $755,000, $426,000 and $8,000, respectively (see
Notes 6, 7 and 8).
Derivative Instruments and Hedging
Activities. We use derivative financial
instruments, primarily forward exchange contracts, to manage a
majority of the foreign currency exchange exposure associated
with net short-term foreign currency denominated assets and
liabilities that exist as part of our ongoing business
operations that are denominated in a currency other than the
functional currency of the subsidiary. The exposures relate
primarily to the gain or loss recognized in earnings from the
settlement of current foreign denominated assets and
liabilities. We do not enter into derivative financial
instruments for trading or speculative purposes. The forward
exchange contracts generally have maturities of 90 days or
less and are not designated as hedging instruments. Forward
exchange contracts are
marked-to-market
at the end of each reporting period, using quoted prices for
similar assets or liabilities in active markets, with gains and
losses recognized in other income offset by the gains or losses
resulting from the settlement of the underlying foreign currency
denominated assets and liabilities.
At December 31, 2009, we had forward exchange contracts
with a notional value of $37.9 million and an associated
net forward contract payable of $354,000. At December 31,
2008, we had forward exchange contracts with a notional value of
$33.5 million and an associated net forward contract
liability of $14,000. These derivatives are not designated as
hedging instruments. The forward contract liabilities are
included in the consolidated balance sheets under the caption
Accrued expenses and other liabilities. The notional
value represents the amount of foreign currencies to be
purchased or sold at maturity and does not represent our
exposure on these contracts. We recorded net foreign currency
exchange contract gains of $677,000, $483,000 and $147,000 in
2009, 2008 and 2007, respectively, which are included in the
condensed consolidated statements of income under the caption
Interest Income and other, net.
We were exposed to interest rate risk on term loans used to
finance the acquisition of Manugistics, which provided for
quarterly interest payments at LIBOR + 2.25%. To manage this
risk, we entered into an interest rate swap agreement to fix
LIBOR at 5.365% on $140 million, or 80% of the aggregate
term loans. The interest rate swap was structured with
decreasing notional amounts to match our expected pay down of
the debt. The interest rate swap agreement was designated a cash
flow hedge derivative. The effectiveness of the cash flow hedge
derivative was evaluated on a quarterly basis with changes in
the fair value of the interest rate swap deferred and recorded
as a component of Accumulated other comprehensive income
(loss). We repaid the remaining balance on the term loans
on October 1, 2008 (see Note 9) and terminated
the interest rate swap on October 5, 2008. We made an
70
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$899,000 payment on October 5, 2008 in consideration for
early termination of the interest rate swap. This payment is
included in the consolidated statements of operations under the
caption Interest expense and amortization of loan
fees.
Stock-Based Compensation. Compensation expense
for awards of restricted stock, restricted stock units,
performance share awards and other forms of equity based
compensation are based on the market price of the underlying
common stock as of the date of grant, amortized over the
applicable vesting period of the awards (generally 3 years)
using graded vesting (see Note 14).
As of December 31, 2009, we had approximately
1.3 million stock options outstanding with exercise prices
ranging from $10.33 to $27.50 per share. Stock options are no
longer used for share-based compensation (see Note 14).
Income Taxes. Deferred tax assets and
liabilities are recorded for the estimated future tax effects of
temporary differences between the tax basis of assets and
liabilities and amounts reported in the consolidated balance
sheets, as well as operating loss and tax credit carry-forwards.
We follow specific and detailed guidelines regarding the
recoverability of any tax assets recorded on the balance sheet
and provide valuation allowances when recovery of deferred tax
assets is not considered likely.
We exercise significant judgment in determining our income tax
provision due to transactions, credits and calculations where
the ultimate tax determination is uncertain. Uncertainties arise
as a consequence of the actual source of taxable income between
domestic and foreign locations, the outcome of tax audits and
the ultimate utilization of tax credits. Although we believe our
estimates are reasonable, the final tax determination could
differ from our recorded income tax provision and accruals. In
such case, we would adjust the income tax provision in the
period in which the facts that give rise to the revision become
known. These adjustments could have a material impact on our
income tax provision and our net income for that period.
As of December 31, 2009 we have approximately
$10.8 million of unrecognized tax benefits, substantially
all of which relates to uncertain tax positions associated with
the acquisition of Manugistics that would impact our effective
tax rate if recognized. Recognition of these uncertain tax
positions will be treated as a component of income tax expense
rather than as a reduction of goodwill. During 2009 there were
no significant changes in our unrecognized tax benefits. It is
reasonably possible that approximately $8.8 million of
unrecognized tax benefits will be recognized within the next
twelve months, primarily related to lapses in the statute of
limitations. At December 31, 2009, we have approximately
$5.5 million and $7.8 million of federal and state
research and development tax credit carryforwards, respectively,
that expire at various dates through 2024. We have placed a
valuation allowance against the Arizona research and development
credit as we do not expect to be able to utilize it prior to its
expiration.
We treat the accrual of interest and penalties related to
uncertain tax positions as a component of income tax expense,
including accruals (benefits) made during 2009, 2008 and 2007 of
$(515,000), $600,000 and $630,000, respectively. As of
December 31, 2009, 2008 and 2007, there are approximately
$2.3 million, $2.6 million and $1.9 million,
respectively of interest and penalty accruals related to
uncertain tax positions which are reflected in the Consolidated
Balance Sheet under the caption Liability for uncertain
tax positions. To the extent interest and penalties are
not assessed with respect to the uncertain tax positions, the
accrued amounts for interest and penalties will be reduced and
reflected as a reduction of the overall tax provision.
Earnings per Share. From July 2006 through
September 8, 2009, the Company had two classes of
outstanding capital stock, common stock and Series B
preferred stock. The Series B preferred stock, which was
issued in connection with acquisition of Manugistics (see
Note 13), was a participating security such that in the
event a dividend was declared or paid on the common stock, the
Company would have been required to simultaneously declare and
pay a dividend on the Series B preferred stock as if the
Series B preferred stock had been converted into common
stock. Companies that have participating securities are required
to apply the two-class method to compute basic earnings per
share. Under the two-class computation method, basic earnings
per
71
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
share is calculated for each class of stock and participating
security considering both dividends declared and participation
rights in undistributed earnings as if all such earnings had
been distributed during the period.
During third quarter 2009, all shares of the Series B
preferred stock were either converted into shares of common
stock or repurchased for cash, including $8.6 million paid
in excess of the conversion price (see Note 13). The excess
consideration was charged to retained earnings in the same
manner as a dividend on preferred stock and reduced the income
applicable to common shareholders in the calculation of earnings
per share for 2009. The calculation of diluted earnings per
share applicable to common shareholders for 2009 includes the
assumed conversion of the Series B preferred stock into
common stock as of the beginning of the period, weighted for the
actual days and number of shares outstanding during the period.
The calculation of diluted earnings per share applicable to
common shareholders for 2008 and 2007 includes the assumed
conversion of the Series B preferred stock into common
stock as of the beginning of the period.
The dilutive effect of outstanding stock options and unvested
restricted stock units and performance share awards is included
in the diluted earnings per share calculations for 2009, 2008
and 2007 using the treasury stock method (see Note 18).
Other
Recent Accounting Pronouncements
In September 2009, FASB issued an amendment to its accounting
guidance on certain revenue arrangements with multiple
deliverables that enables a vendor to account for products and
services (deliverables) separately rather than as a combined
unit. The revised guidance establishes a selling price hierarchy
for determining the selling price of a deliverable, which is
based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) managements
best estimate of selling price. This guidance also eliminates
the residual method of allocation and requires that the
arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price
method. In addition, this guidance significantly expands
required disclosures related to such revenue arrangements that
have multiple deliverables. The revised guidance is effective
for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010 with early
adoption permitted. We are currently assessing the impact the
new guidance will have on certain of our revenue arrangements,
specifically those involving the delivery of
software-as-a-service and certain other managed service
offerings as i2 derived a significant portion of their revenues
from these form of contracts. The ultimate impact on our
consolidated financial statements will depend on the nature and
terms of the revenue arrangements entered into or materially
modified after the adoption date. The new guidance does not
significantly change the accounting for the majority of our
existing and future revenue arrangements that are subject to
specific guidance in sections 605 and 985 of the
Codification (see Revenue Recognition discussion above).
In December 2009, FASB issued a new guidance for improvements to
financial reporting by enterprises involved with variable
interest entities. The new guidance provides an amendment to its
consolidation guidance for variable interest entities and the
definition of a variable interest entity and requires enhanced
disclosures to provide more information about an
enterprises involvement in a variable interest entity.
This amendment also requires ongoing assessments of whether an
enterprise is the primary beneficiary of a variable interest
entity and is effective for reporting periods beginning after
December 15, 2009. We do not currently anticipate any
significant impact from adoption of this guidance on our
consolidated financial position or results of operations.
In January 2010, FASB issued an amendment to its accounting
guidance for fair value measurements which adds new requirements
for disclosures about transfers into and out of Levels 1
and 2 and separate disclosures about purchases, sales,
issuances, and settlements related to Level 3 measurements.
The revised guidance also clarifies existing fair value
disclosures about the level of disaggregation and about inputs
and valuation techniques used to measure fair value. The
amendment is effective for the first reporting period beginning
after December 15, 2009, except for the requirements to
provide the Level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which will be
effective for fiscal years beginning after December 15,
2010, and for interim periods within
72
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
those fiscal years. Early adoption is permitted. We are
currently assessing what impact this guidance will have on our
consolidated financial statements.
Acquisition
of i2 Technologies, Inc. (2010)
On January 28, 2010, we completed the acquisition of
i2 Technologies, Inc. (i2) for approximately
$600.0 million, which includes cash consideration of
approximately $432.0 million and the issuance of
approximately 6.2 million shares of our common stock with
an acquisition date fair value of approximately
$168.0 million, or $26.88 per share, determined on the
basis of the closing market price of our common stock on the
date of acquisition (the Merger). The combination of
JDA and i2 creates a market leader in the supply chain
management market. We believe this combination provides JDA with
(i) a strong, complementary presence in new markets such as
discrete manufacturing and transportation; (ii) enhanced
scale; (iii) a more diversified, global customer base of
over 6,000 customers; (iv) a comprehensive product suite
that provides
end-to-end
supply chain management (SCM) solutions;
(v) incremental revenue opportunities associated with
cross-selling of products and services among our existing
customer base; and (vi) an ability to increase
profitability through net cost synergies in the first six to
nine months after the Merger.
Under the terms of the Merger Agreement, each issued and
outstanding share of i2 common stock was converted into the
right to receive $12.70 in cash and 0.2562 of a share of JDA
common stock (the Merger Consideration). Holders of
i2 common stock did not receive any fractional JDA shares in the
Merger. Instead, the total number of shares that each holder of
i2 common stock received in the Merger was rounded down to the
nearest whole number, and JDA paid cash for any resulting
fractional share determined by multiplying the fraction by
$26.65, which represents the average closing price of JDA common
stock on Nasdaq for the five consecutive trading days ending
three days prior to the effective date of the Merger.
Each outstanding option to acquire i2 common stock was canceled
and terminated at the effective time of the Merger and converted
into the right to receive the Merger Consideration with respect
to the number of shares of i2 common stock that would have been
issuable upon a net exercise of such option, assuming the market
value of the i2 common stock at the time of such exercise was
equal to the value of the Merger Consideration as of the close
of trading on the day immediately prior to the effective date of
the Merger. Any outstanding option with a per share exercise
price that was greater than or equal to such amount was
cancelled and terminated and no payment was made with respect
thereto. In addition, each i2 restricted stock unit award
outstanding immediately prior to the effective time of the
Merger was fully vested and cancelled, and each holder of such
awards became entitled to receive the Merger Consideration for
each share of i2 common stock into which the vested portion of
the awards would otherwise have been convertible. Each i2
restricted stock award was vested immediately prior to the
effective time of the Merger and was entitled to receive the
Merger Consideration.
Each outstanding share of i2s Series B Preferred
Stock was converted into the right to receive $1,100 per share
in cash, which is equal to the stated change of control
liquidation value of each such share plus all accrued and unpaid
dividends thereon through the effective date of the Merger.
At the effective time of the Merger, each outstanding warrant to
purchase shares of i2s common stock ceased to represent a
right to acquire i2s common stock and was assumed by JDA
and converted into a warrant with the right to receive upon
exercise, the Merger Consideration that would have been received
as a holder of i2 common stock if such i2 warrant had been
exercised prior to the. In total, 420,237 warrants to purchase
i2 common stock at an exercise price of $15.4675 were assumed
and converted into the right to receive the Merger Consideration
upon exercise, including 107,663 shares of JDA common stock.
The Merger will be accounted for using the acquisition method of
accounting with JDA identified as the acquirer. Under the
acquisition method of accounting, we will record all assets
acquired and liabilities assumed at their respective
acquisition-date fair values. We have not completed the
valuation analysis and calculations
73
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
necessary to finalize the required purchase price allocations.
In addition to goodwill, the final purchase price allocation may
include allocations to intangible assets such as trademarks and
trade names, in-process research and development, developed
technology and customer-related assets.
On December 10, 2009, we issued $275 million of
five-year, 8.0% Senior Notes (the Senior Notes)
at an initial offering price of 98.988%. The net proceeds from
the sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($6.5 million) were placed in escrow and subsequently used,
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2
(see Note 9).
Through December 31, 2009, we expensed approximately
$4.8 million of costs related to the acquisition of i2.
These costs, which consist primarily of investment banking fees,
commitment fees on unused bank financing, legal and accounting
fees, are included in the consolidated statements of income
under the caption Acquisition-related costs.
Acquisition
of Equity Interest in European-based Strategix Enterprise
Technology (2009)
In July 2009, we purchased 49.1% of the registered share capital
of Strategix Enterprise Technology GMBH and Strategix Enterprise
Technology sp.z.o.o. (collectively, Strategix) for
cash. The initial investment, which is not material to our
financial statements, is reflected in the consolidated balance
sheet under the caption Other non-current assets,
and in the consolidated statement of cash flows as an investing
activity under the caption Payment of direct costs related
to acquisitions. The adjustments to record our equity
share of Strategixs earnings from the date of purchase
through December 31, 2009 are reflected in the consolidated
statements of income, net of tax, under the caption
Interest income and other, net, The transaction
provides for additional annual purchase price earn-outs in each
of 2009, 2010 and 2011 if defined performance milestones are
achieved. No additional purchase price earn-out was earned in
2009. We have an option to purchase the remaining registered
share capital of Strategix beginning on the third anniversary
date of the transaction based on defined operating metrics.
Strategix has been a distributor of our supply and category
management applications in Central and Eastern Europe and Russia
since 2004. As part of this transaction, Strategix now has
access to our entire suite of products, and we believe such
access can expand our presence with retail, manufacturing and
wholesale-distribution customers in these markets. We have also
acquired the rights to various applications developed by
Strategix that are designed to enhance certain of our space and
category management solutions, plus a suite of SAP integration
tools.
Abandoned
Acquisition of i2 Technologies, Inc (2008)
In August 2008, we entered into an agreement and plan of merger
to acquire all of the outstanding common and preferred equity of
i2. This transaction was subsequently abandoned in December 2008
and we paid i2 a $20 million non-refundable reverse
termination fee. The acquisition was abandoned due primarily to
the adverse effect of the continuing credit crisis and the
credit terms available under proposed credit facilities that
would have resulted in unacceptable risks and costs to the
combined company.
We expensed $30.4 million in costs associated with the
termination acquisition of i2 in fourth quarter 2008, including
the $20 million non-refundable reverse termination fee and
$5.1 million of legal, accounting and other
acquisition-related fees that are included in operating expenses
under the caption Costs of abandoned acquisition and
$5.3 million in finance costs related to loan origination
and ticking fees on certain debt financing
commitments that are included in other income (expense) under
the caption Finance costs on abandoned acquisition.
During 2009, approximately $767,000 of the ticking
fees were waived pursuant to a mutual release agreement and the
related expense was reversed. As of December 31, 2009 and
2008, $1.2 million and $3.6 million of these costs,
respectively, had not been paid and are included in the
consolidated balance sheet under the caption Accrued
Expenses and other current liabilities.
74
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
3.
|
Accounts
Receivable, Net
|
At December 31, 2009 and 2008 accounts receivable consist
of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Trade receivables
|
|
$
|
75,661
|
|
|
$
|
84,492
|
|
Less allowance for doubtful accounts
|
|
|
(6,778
|
)
|
|
|
(5,139
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
68,883
|
|
|
$
|
79,353
|
|
|
|
|
|
|
|
|
|
|
A summary of changes in the allowance for doubtful accounts for
the three-year period ended December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance at beginning of period
|
|
$
|
5,139
|
|
|
$
|
7,030
|
|
|
$
|
9,596
|
|
Reserves recorded in the Manugistics acquisition
|
|
|
|
|
|
|
|
|
|
|
(4,195
|
)
|
Provision for doubtful accounts
|
|
|
1,900
|
|
|
|
750
|
|
|
|
2,890
|
|
Deductions, net
|
|
|
(261
|
)
|
|
|
(2,641
|
)
|
|
|
(1,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
6,778
|
|
|
$
|
5,139
|
|
|
$
|
7,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Property
and Equipment, Net
|
At December 31, 2009 and 2008 property and equipment
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Computers, internal use software, furniture & fixtures
and automobiles
|
|
$
|
83,520
|
|
|
$
|
78,610
|
|
Land and buildings
|
|
|
26,652
|
|
|
|
25,883
|
|
Leasehold improvements
|
|
|
7,400
|
|
|
|
5,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,572
|
|
|
|
110,367
|
|
Less accumulated depreciation
|
|
|
(76,730
|
)
|
|
|
(67,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,842
|
|
|
$
|
43,093
|
|
|
|
|
|
|
|
|
|
|
During 2007, we sold a 15,000 square foot office facility
in the United Kingdom for approximately $6.3 million and
recognized a gain of approximately $4.1 million.
Depreciation expense for 2009, 2008 and 2007 was
$9.7 million, $9.7 million and $9.4 million,
respectively.
75
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Goodwill
and Other Intangibles, Net
|
At December 31, 2009 and 2008 goodwill and other intangible
assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
|
$
|
144,988
|
|
|
$
|
|
|
|
$
|
144,988
|
|
|
$
|
|
|
Accumulated impairment losses
|
|
|
(9,713
|
)
|
|
|
|
|
|
|
(9,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net of impairment losses
|
|
$
|
135,275
|
|
|
$
|
|
|
|
$
|
135,275
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Lists
|
|
|
183,383
|
|
|
|
(84,119
|
)
|
|
|
183,383
|
|
|
|
(61,664
|
)
|
Acquired software technology
|
|
|
65,847
|
|
|
|
(45,607
|
)
|
|
|
65,847
|
|
|
|
(41,687
|
)
|
Trademarks
|
|
|
5,191
|
|
|
|
(5,034
|
)
|
|
|
5,191
|
|
|
|
(3,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,421
|
|
|
|
(134,760
|
)
|
|
|
254,421
|
|
|
|
(107,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
389,696
|
|
|
$
|
(134,760
|
)
|
|
$
|
389,696
|
|
|
$
|
(107,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded a $714,000 net increase to goodwill in 2008 due
to adjustments of tax NOLs, accruals for uncertain tax positions
and certain temporary timing differences recorded in the
acquisition of Manugistics (see Note 17). We found no
indication of impairment of our goodwill balances during 2009,
2008 or 2007 with respect to the goodwill allocated to our
Retail, Manufacturing and Distribution and Services
Industries reportable business segments. As of
December 31, 2009 and 2008, goodwill has been allocated to
our reporting units as follows: $87.1 million to
Retail, $44.5 million to Manufacturing and
Distribution, and $3.7 million to Services
Industries.
Amortization expense for 2009, 2008 and 2007 was
$27.6 million, $29.6 million and $22.2 million,
respectively, and is shown as separate line items in the
consolidated statements of operations within cost of revenues
and operating expenses. We expect amortization expense for the
next five years, excluding the impact of amortization that will
result from the final purchase price allocation on the
acquisition of i2 (see Note 2), to be as follows:
|
|
|
|
|
Year
|
|
Expected Amortization
|
|
|
2010
|
|
$
|
26,277
|
|
2011
|
|
$
|
25,962
|
|
2012
|
|
$
|
25,500
|
|
2013
|
|
$
|
24,810
|
|
2014
|
|
$
|
13,607
|
|
76
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
6.
|
Accrued
Expenses and Other Liabilities
|
At December 31, 2009 and 2008, accrued expenses and other
liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Accrued compensation and benefits
|
|
$
|
28,292
|
|
|
$
|
27,787
|
|
Acquisition reserves (Note 7)
|
|
|
4,585
|
|
|
|
4,407
|
|
Accrued costs on terminated acquisition of i2 Technologies
(Note 2)
|
|
|
1,150
|
|
|
|
3,413
|
|
Accrued royalties
|
|
|
2,982
|
|
|
|
3,446
|
|
Accrued interest
|
|
|
1,344
|
|
|
|
84
|
|
Disputes and other customer liabilities
|
|
|
577
|
|
|
|
1,331
|
|
Accrued hardware purchases for the hardware reseller business
|
|
|
1,450
|
|
|
|
997
|
|
Customer deposits
|
|
|
1,104
|
|
|
|
1,508
|
|
Restructuring charges (Note 8)
|
|
|
378
|
|
|
|
2,518
|
|
Other accrued expenses and liabilities
|
|
|
3,661
|
|
|
|
6,599
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
45,523
|
|
|
$
|
52,090
|
|
|
|
|
|
|
|
|
|
|
During 2009 we successfully settled a customer dispute assumed
in the acquisition of Manugistics and reversed $758,000 of
related contingency reserves that had been established in the
initial purchase accounting. This adjustment is included in the
consolidated statement of income under the caption
Restructuring charges.
77
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We recorded initial acquisition reserves of $47.4 million
for restructuring charges and other direct costs associated with
the acquisition of Manugistics in 2006. The restructuring
charges were primarily related to facility closures, employee
severance and termination benefits and other direct costs
associated with the acquisition, including investment banker
fees,
change-in-control
payments, and legal and accounting costs. Subsequent adjustments
of $2.9 million were made to reduce the reserves in 2007
and 2008 based on our revised estimates of the restructuring
costs to exit certain of the activities of Manugistics. The
majority these adjustments were made by June 30, 2007 and
included in the final purchase price allocation. All adjustments
made subsequent to June 30, 2007, including the
$1.4 million increase recorded in 2009, have been included
in the consolidated statements of income under the caption
Restructuring charges. Adjustments made in 2009
resulted primarily from our revised estimate of sublease rentals
and market adjustments on an unfavorable office facility lease
in the United Kingdom. The unused portion of the acquisition
reserves at December 31, 2009 includes $4.6 million of
current liabilities under the caption Accrued expenses and
other liabilities and $7.3 million of non-current
liabilities under the caption Accrued exit and disposal
obligations. A summary of the charges and adjustments
recorded against the reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Adjustments to
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2008
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
Restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office closures, lease terminations and sublease costs
|
|
$
|
29,212
|
|
|
$
|
(2,351
|
)
|
|
$
|
(13,109
|
)
|
|
$
|
(1,034
|
)
|
|
$
|
12,718
|
|
|
$
|
1,402
|
|
|
$
|
(3,001
|
)
|
|
$
|
310
|
|
|
$
|
11,429
|
|
Employee severance and termination benefits
|
|
|
3,607
|
|
|
|
(767
|
)
|
|
|
(2,465
|
)
|
|
|
107
|
|
|
|
482
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
18
|
|
|
|
497
|
|
IT projects, contract termination penalties, capital lease
buyouts and other costs to exit activities of Manugistics
|
|
|
1,450
|
|
|
|
222
|
|
|
|
(1,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,269
|
|
|
|
(2,896
|
)
|
|
|
(17,246
|
)
|
|
|
(927
|
)
|
|
|
13,200
|
|
|
$
|
1,402
|
|
|
|
(3,004
|
)
|
|
|
328
|
|
|
|
11,926
|
|
Direct costs
|
|
|
13,125
|
|
|
|
6
|
|
|
|
(13,104
|
)
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47,394
|
|
|
$
|
(2,890
|
)
|
|
$
|
(30,350
|
)
|
|
$
|
(927
|
)
|
|
$
|
13,227
|
|
|
$
|
1,402
|
|
|
$
|
(3,031
|
)
|
|
$
|
328
|
|
|
$
|
11,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The balance in the reserve for office closures, lease
termination and sublease costs is primarily related to office
facility leases in Rockville, Maryland and the United Kingdom
and is being amortized over the related lease terms that extend
through 2018. The balance in the reserve for employee severance
and termination benefits is related to certain foreign employees
that we expect to pay in 2010.
2009
Restructuring Charges
We recorded restructuring charges of $6.5 million in 2009
primarily associated with the transition of additional on-shore
activities to the Center of Excellence (CoE)
in India and certain restructuring activities in the EMEA sales
organization. The charges include termination benefits related
to a workforce reduction of 86 full-time employees
(FTE) in product development, service, support,
sales and marketing, information technology and other
administrative positions, primarily in the Americas region. In
addition, the restructuring charges include approximately
$2.0 million in severance and other termination benefits
under separation agreements with our former Executive Vice
President and Chief Financial Officer and our former Chief
Operating Officer. As of December 31, 2009, approximately
$6.2 million of the costs associated with these
restructuring charges have been paid and the remaining balance
of $291,000 is included in the condensed consolidated balance
sheet under the
78
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
caption Accrued expenses and other current
liabilities. We expect substantially all of the remaining
costs to be paid in 2010.
2008
Restructuring Charges
We recorded restructuring charges of $8.0 million in 2008
primarily associated with our transition of certain on-shore
activities to the CoE. The 2008 restructuring charges
included $7.9 million for termination benefits, primarily
related to a workforce reduction of 100 FTE in product
development, consulting and sales-related positions across all
of our geographic regions and $119,000 for office closure and
integration costs of redundant office facilities. Subsequent
adjustments were made to these reserves in 2009 based on our
revised estimates to complete the restructuring activities and
are included in the consolidated statements of income under the
caption Restructuring charges. As of
December 31, 2009 all costs associated with these
restructuring charges have been paid. A summary of the 2008
restructuring charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
Charges
|
|
|
Rates
|
|
|
2008
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
Termination benefits
|
|
$
|
7,891
|
|
|
$
|
(5,576
|
)
|
|
$
|
(164
|
)
|
|
$
|
2,151
|
|
|
$
|
(281
|
)
|
|
$
|
(1,866
|
)
|
|
$
|
(4
|
)
|
|
$
|
|
|
Office closures
|
|
|
119
|
|
|
|
(77
|
)
|
|
|
(6
|
)
|
|
|
36
|
|
|
|
(18
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,010
|
|
|
$
|
(5,653
|
)
|
|
$
|
(170
|
)
|
|
$
|
2,187
|
|
|
$
|
(299
|
)
|
|
$
|
(1,884
|
)
|
|
$
|
(4
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Restructuring Charges
We recorded restructuring charges of $6.2 million in 2007
that included $5.9 million for termination benefits and
$292,000 for office closures. The termination benefits are
primarily related to a workforce reduction of approximately
120 full-time employees (FTE) in our
Scottsdale, Arizona product development group as a direct result
of our decision to standardize future product offerings on the
JDA Enterprise Architecture platform and reduction of
approximately 40 FTE in our worldwide consulting services group.
The office closure charge is for the closure and integration
costs of redundant office facilities. As of December 31,
2009, all costs associated with the 2007 restructuring charges
have been paid with the exception of a $34,000 reserve for
office closures which is included in the caption Accrued
expenses and other current liabilities. We expect the
remaining office closure costs to be paid in 2010. A summary of
the 2007 restructuring and office closure charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
Charges
|
|
|
Rates
|
|
|
2008
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
Termination benefits
|
|
$
|
5,908
|
|
|
$
|
(5,775
|
)
|
|
$
|
5
|
|
|
$
|
138
|
|
|
$
|
(61
|
)
|
|
$
|
(74
|
)
|
|
$
|
(3
|
)
|
|
$
|
|
|
Office closures
|
|
|
292
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,200
|
|
|
$
|
(6,028
|
)
|
|
$
|
5
|
|
|
$
|
177
|
|
|
$
|
(61
|
)
|
|
$
|
(76
|
)
|
|
$
|
(6
|
)
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Long-term
Debt and Revolving Credit Facilities:
|
Senior
Notes
On December 10, 2009, we issued $275 million of
8.0% Senior Notes at an initial offering price of 98.988%.
The net proceeds from the sale of the Senior Notes, which
exclude the original issue discount ($2.8 million) and
other debt issuance costs ($6.5 million) were placed in
escrow and subsequently used, together with cash on hand at JDA
and i2, to fund the cash portion of the merger consideration in
the acquisition of i2 (see Note 2).
The Senior Notes have a five-year term and mature on
December 15, 2014. Interest is computed on the basis of a
360-day year
composed of twelve
30-day
months, and is payable semi-annually on June 15 and December 15
of each year, beginning on June 15, 2010. The obligations
under the Senior Notes are fully and unconditionally
79
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
guaranteed on a senior basis by our substantially all of
existing and future domestic subsidiaries (including, following
the Merger, i2 and its domestic subsidiaries).
At any time prior to December 15, 2012, we may redeem up to
35% of the aggregate principal amount of the Senior Notes at a
redemption price equal to 108%, plus accrued and unpaid
interest, with the cash proceeds of an equity offering of our
common stock. At any time prior to December 15, 2012, we
may also redeem all or a part of the Senior Notes at a
redemption price equal to 100%, plus accrued and unpaid interest
and a make whole premium calculated as the greater
of (i) 1% of the principal amount of the Senior Notes
redeemed or (ii) the excess of the present value of the
redemption price of the Senior Notes redeemed at
December 15, 2012 over the principal amount the Senior
Notes redeemed. In addition, we may redeem the Senior Notes on
or after December 15, 2012 at a redemption price of 104%,
and on or after December 15, 2013 at a redemption price of
100%, plus accrued and unpaid interest. The Senior Notes rank
equally in right of payment with all existing and future senior
debt and is senior in right of payment to all subordinated debt.
The Senior Notes contain certain restrictive covenants including
(i) a requirement to repurchase the Senior Notes at price
equal to 101% of the principal in the event of a change in
control and (ii) restrictions that limit our ability to pay
dividends, make investments, incur additional indebtedness,
create liens, issue preferred stock or consolidate, merge, sell
or otherwise dispose of all or substantially all of our or their
assets. The Senior Notes also provide for customary events of
default and in the case of an event of default arising from
specified events of bankruptcy or insolvency, all outstanding
Senior Notes will become due and payable immediately without
further action or notice. If any other event of default occurs
or is continuing, the trustee or holders of at least 25% in
aggregate principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable
immediately.
The Senior Notes and the related guarantees have not been
registered under the Securities Act of 1933, as amended, or any
state securities laws, and may not be offered or sold in the
United States without registration or an applicable exemption
from registration requirements. In connection with the issuance
of the Senior Notes, we entered into an exchange and
registration rights agreement. Under the terms of the exchange
and registration rights agreement, we are required to file an
exchange offer registration statement within 180 days
following the issuance of the Senior Notes enabling holders to
exchange the Senior Notes for registered notes with terms
substantially identical to the terms of the Senior Notes; to use
commercially reasonable efforts to have the exchange offer
registration statement declared effective by the Securities and
Exchange Commission (the SEC) on or prior to
270 days after the closing of the note offering (the
Registration Deadline); and, unless the exchange
offer would not be permitted by applicable law or SEC policy, to
complete the exchange offer within 30 business days after the
Registration Deadline. Under specified circumstances, including
if the exchange offer would not be permitted by applicable law
or SEC policy, the registration rights agreement provides that
we shall file a shelf registration statement for the resale of
the Senior Notes. If we default on these registration
obligations, additional interest (referred to as special
interest), up to a maximum amount of 1.0% per annum, will be
payable on the Senior Notes until all such registration defaults
are cured.
The $2.8 million original issue discount on the Senior
Notes and other debt issuance costs of approximately
$6.5 million are being amortized on a straight-line basis
over the five-year term and are reflected in the consolidated
statements of income under the caption, Interest expense
and amortization of loan fees. Through December 31,
2009, we have amortized approximately $110,000 of the original
issue discount and related loan origination fees and accrued
$1.3 million of interest on the Senior Notes.
Bank
Borrowings
To finance the acquisition of Manugistics and the repayment of
their debt obligations, we entered into a credit agreement (the
Credit Agreement) with a consortium of lenders that
provided $175 million in aggregate term loans,
$50 million in revolving credit facilities and up to
$75 million of incremental term or revolving credit
facilities as requested, subject to certain terms and
conditions. Proceeds from the term loans of approximately
80
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$168.4 million, which is net of nearly $6.6 million of
loan origination and other administrative fees, together with
the JDA and Manugistics combined cash balances at acquisition
closing of approximately $281 million and the
$50 million investment from Thoma Bravo, LLC in the form of
Series B Preferred Stock (see Note 13), were used to
fund the cash obligations under the merger agreement and related
transaction expenses, and to retire approximately
$174 million of Manugistics existing debt consisting
of Convertible Subordinated Notes that were scheduled to mature
in 2007. The remaining $1.5 million of assumed Convertible
Subordinated Notes were retired in 2007. Additionally, we
utilized the revolving credit facilities to replace
approximately $9.6 million of Manugistics standby
letters of credit.
Term Loans. The term loans were scheduled to
be repaid in 27 quarterly installments of $437,500 beginning in
September 2006, with the remaining balance due at maturity in
July 2013. In addition to the scheduled maturities, the Credit
Agreement also required additional mandatory repayments on the
term loans based on a percentage of our annual excess cash flow,
as defined, beginning with the fiscal year that commenced
January 1, 2007. As of December 31, 2008, all term
loans had been repaid including payments of $99.6 million
in 2008 and $40.0 million in 2007.
Interest on the term loans was paid quarterly during 2008 and
2007 at the London Interbank Offered Rate (LIBOR) +
2.25%. We entered into an interest rate swap agreement on
July 28, 2006 to fix LIBOR at 5.365% on $140 million,
or 80% of the aggregate term loans. We structured the interest
rate swap with decreasing notional amounts to match the expected
pay down of the debt. The interest rate swap, which was
designated a cash flow hedge derivative (see Note 1), was
terminated on October 5, 2008 in connection with the
repayment of the remaining balance of the term loans.
Loan origination and other administrative fees were amortized on
a 3-year
straight-line schedule based upon an accelerated repayment of
the term loan obligations with the remaining balance fully
amortized in fourth quarter 2008 in connection with the
repayment of the remaining term loans. Amortization expense
related to the loan origination and other administrative fees
was $3.7 million and $1.8 million in 2008 and 2007,
respectively and is included under the caption Interest
expense and amortization of loan fees.
Revolving Credit Facilities. The revolving
credit facilities were scheduled to mature on July 5, 2012
with interest payable quarterly at LIBOR + 2.25%. The facilities
were terminated in December 2009 prior to issuance of the Senior
Notes.
At December 31, 2009 and 2008, deferred revenue consists of
deferrals for software license fees, maintenance, consulting and
training and other services as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Software
|
|
$
|
1,185
|
|
|
$
|
977
|
|
Maintenance
|
|
|
61,046
|
|
|
|
57,955
|
|
Consulting
|
|
|
2,165
|
|
|
|
1,869
|
|
Training and other
|
|
|
1,269
|
|
|
|
1,204
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,665
|
|
|
$
|
62,005
|
|
|
|
|
|
|
|
|
|
|
We currently lease office space in the Americas for 12 regional
sales and support offices across the United States and Latin
America, and for 15 other international sales and support
offices located in major cities throughout Europe, Asia,
Australia, Japan and the CoE facility in Hyderabad,
India. The leases are primarily non-cancelable operating leases
with initial terms ranging from one to 20 years that expire
at various dates through the year 2018.
81
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
None of the leases contain contingent rental payments; however,
certain of the leases contain scheduled rent increases and
renewal options. We expect that in the normal course of business
most of these leases will be renewed or that suitable additional
or alternative space will be available on commercially
reasonable terms as needed. We believe our existing facilities
are adequate for our current needs and for the foreseeable
future. As of December 31, 2009, we have sublet
approximately 191,000 square feet of excess office space
through 2012, and have identified an additional
24,000 square feet that we are trying to sublet. In
addition, we lease various computers, telephone systems,
automobiles, and office equipment under non-cancelable operating
leases with initial terms generally ranging from 12 to
48 months. Certain of the equipment leases contain renewal
options and we expect that in the normal course of business some
or all of these leases will be renewed or replaced by other
leases.
Net rental expense under operating leases in 2009, 2008 and 2007
was $10.7 million, $11.0 million and
$13.1 million, respectively. The following summarizes
future minimum lease obligations under non-cancelable operating
leases at December 31, 2009.
|
|
|
|
|
2010
|
|
$
|
13,673
|
|
2011
|
|
|
12,662
|
|
2012
|
|
|
7,523
|
|
2013
|
|
|
2,004
|
|
2014
|
|
|
1,872
|
|
Thereafter
|
|
|
6,587
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
44,321
|
|
|
|
|
|
|
We have entered into sublease agreements on excess space in
certain of our leased facilities that will provide sublease
rentals of approximately $4.6 million, $4.8 million,
$2.3 million, $485,000 and $496,000 in 2010 through 2014,
respectively. We currently have no sublease agreements in place
that provide for sublease rentals beyond 2014.
We are involved in other legal proceedings and claims arising in
the ordinary course of business. Although there can be no
assurance, management does not currently believe the disposition
of these matters will have a material adverse effect on our
business, financial position, results of operations or cash
flows.
On April 29, 2009, i2 filed a lawsuit for patent
infringement against Oracle Corporation (NASDAQ: ORCL). The
lawsuit, filed in the United States District Court for the
Eastern District of Texas, alleges infringement of 11 patents
related to supply chain management, available to promise
software and other enterprise software applications. As a result
of our acquisition of i2 on January 28, 2010, i2 is now a
wholly-owned subsidiary of the Company. i2 incurred expenses
related to this matter of approximately $1.0 million for
the twelve months ended December 31, 2009.
|
|
13.
|
Redeemable
Preferred Stock
|
In connection with the Manugistics Group, Inc.
(Manugistics) acquisition in 2006, we issued
50,000 shares of Series B preferred stock to funds
affiliated with Thoma Bravo, LLC (Thoma Bravo), a
private equity investment firm, for $50 million in cash.
The Series B preferred stock was convertible, at any time
in whole or in part, into a maximum of 3,603,603 shares of
common stock based on an agreed conversion rate of $13.875.
During third quarter 2009, Thoma Bravo exercised conversion
rights on 30,525 shares of the Series B preferred
stock, which resulted in the issuance of 2,200,000 shares
of common stock. We recorded a $30.5 million adjustment to
reduce the carrying value of the redeemable preferred stock
($13.875 per share for each of the 2,200,000 shares of
common stock), and increased common stock for the par value of
converted shares ($22,000) and additional paid-in capital
($30.5 million).
82
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We entered into stock purchase agreement (the Purchase
Agreement) with Thoma Bravo on September 8, 2009 to
acquire the remaining shares of Series B preferred stock
for $28.1 million in cash ($20 per share for each of the
1,403,603 shares of JDA common stock into which the
Series B Preferred Stock was convertible). The agreed
purchase price included $19.5 million, which represents the
conversion of 1,403,603 shares of common stock at the
conversion price of $13.875, and $8.6 million, which
represents consideration paid in excess of the conversion price
of $13.875 ($6.125 per share). The consideration paid in excess
of the conversion price was charged to retained earnings in the
same manner as a dividend on preferred stock and reduced the
income applicable to common shareholders in the calculation of
earnings per share for 2009 (see Note 18). As part of the
Purchase Agreement, we also repurchased 100,000 shares of
our common stock held by Thoma Bravo for $2.0 million, or
$20 per share (see Note 15).
Holders of the Series B preferred stock were entitled as a
class to elect a director to our Board. Mr. Orlando Bravo,
a Managing Partner with Thoma Bravo, was appointed to our Board
in 2006. Mr. Bravo resigned from the Board upon closing of
the Purchase Agreement.
|
|
14.
|
Share-Based
Compensation
|
Our 2005 Performance Incentive Plan, as amended (2005
Incentive Plan), provides for the issuance of up to
3,847,000 shares of common stock to employees, consultants
and directors under stock purchase rights, stock bonuses,
restricted stock, restricted stock units, performance awards,
performance units and deferred compensation awards. The 2005
Incentive Plan contains certain restrictions that limit the
number of shares that may be issued and the amount of cash
awarded under each type of award, including a limitation that
awards granted in any given year can represent no more than two
percent (2%) of the total number of shares of common stock
outstanding as of the last day of the preceding fiscal year.
Awards granted under the 2005 Incentive Plan are in such form as
the Compensation Committee shall from time to time establish and
the awards may or may not be subject to vesting conditions based
on the satisfaction of service requirements or other conditions,
restrictions or performance criteria including the
Companys achievement of annual operating goals. Restricted
stock and restricted stock units may also be granted under the
2005 Incentive Plan as a component of an incentive package
offered to new employees or to existing employees based on
performance or in connection with a promotion, and will
generally vest over a three-year period, commencing at the date
of grant. We measure the fair value of awards under the 2005
Incentive Plan based on the market price of the underlying
common stock as of the date of grant. The fair value of each
award is amortized over the applicable vesting period of the
awards using graded vesting and reflected in the consolidated
statements of income under the captions Cost of
maintenance services, Cost of consulting
services, Product development, Sales and
marketing, and General and administrative.
Annual stock-based incentive programs (Performance
Programs) have been approved for executive officers and
certain other members of our management team for years 2007
through 2010 that provide for contingently issuable performance
share awards or restricted stock units upon achievement of
defined performance threshold goals. A summary of the annual
Performance Programs is as follows:
2010 Performance Program. In February 2010,
the Board approved a stock-based incentive program for 2010
(2010 Performance Program). The 2010 Performance
Program provides for the issuance of contingently issuable
performance share awards under the 2005 Incentive Plan to
executive officers and certain other members of our management
team if we are able to achieve a defined adjusted EBITDA
performance threshold goal in 2010. A partial pro-rata issuance
of performance share awards will be made if we achieve a minimum
adjusted EBITDA performance threshold. The 2010 Performance
Program initially provides for approximately 555,000 of targeted
contingently issuable performance share awards with a fair value
of approximately $15.1 million. The performance share
awards, if any, will be issued after the approval of our 2010
financial results in January 2011 and will vest 50% upon the
date of issuance with the remaining 50% vesting ratably over a
24-month
period. Our performance against the defined performance
threshold goal will be evaluated on a quarterly basis throughout
2010 and share-based compensation will be recognized over the
requisite service period that runs from February 3, 2010
(the date of board
83
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approval) through January 2013. If we achieve the defined
performance threshold goal we would expect to recognize
approximately $10.1 million of the award as share-based
compensation in 2010.
2009 Performance Program. The 2009 Performance
Program provided for the issuance of contingently issuable
performance share awards if we were able to achieve
$91.5 million of adjusted EBITDA. The Companys actual
2009 adjusted EBITDA performance qualified participants to
receive 100% of their target awards. In total, 506,450
contingently issuable performance share awards were issued in
January 2010 with a grant date fair value of $6.8 million
that is being recognized as share-based compensation over
requisite service periods that run from the date of Board
approval of the 2009 Performance Program through January 2012.
The performance share awards vested 50% upon the date of
issuance with the remaining 50% vesting ratably over the
subsequent
24-month
period. A deferred compensation charge of $6.8 million was
recorded in the equity section of our balance sheet during 2009,
with a related increase to additional paid-in capital, for the
total grant date fair value of the awards. We recognized
$4.5 million in share-based compensation expense related to
these performance share awards in 2009, which is reflected in
the consolidated statements of income under the captions
Cost of maintenance services, Cost of
consulting services, Product development,
Sales and marketing, and General and
administrative.
2008 Performance Program. The 2008 Performance
Program provided for the issuance of contingently issuable
performance share awards if we were able to achieve
$95 million of adjusted EBITDA. The Companys actual
2008 adjusted EBITDA performance, which exceeded the defined
performance threshold goal of $95 million, qualified
participants to receive approximately 106% of their target
awards. In total, 222,838 performance share awards were issued
in January 2009 with a grant date fair value of
$3.9 million that is being recognized as stock-based
compensation over requisite service periods that run from the
date of Board approval of the 2008 Performance Program through
January 2011. Through December 31, 2009, approximately
4,300 of performance share awards granted under the 2008
Performance Program have been subsequently forfeited. A deferred
compensation charge of $3.9 million was recorded in the
equity section of our balance sheet during 2008, with a related
increase to additional paid-in capital, for the total grant date
fair value of the awards. We recognized $522,000 and
$2.6 million in share-based compensation expense related to
these performance share awards in 2009 and 2008, respectively.
2007 Performance Program. The 2007 Performance
Program provided for the issuance of contingently issuable
restricted stock units if we were able to successfully integrate
the Manugistics acquisition and achieve $85 million of
adjusted EBITDA. The Companys actual 2007 adjusted EBITDA
performance qualified participants for a pro-rata issuance equal
to 99.25% of their target awards. In total, 502,935 restricted
stock units were issued in January 2008 with a grant date fair
value of $8.1 million. Through December 31, 2009,
approximately 35,000 of the restricted stock units granted under
the 2007 Integration Program have been subsequently forfeited.
We recognized $883,000, $1.1 million and $5.4 million
in share-based compensation expense related to these performance
share awards in 2009, 2008 and 2007, respectively.
During 2009, 2008 and 2007, we recorded share-based compensation
expense of $648,000, $644,000 and $820,000, respectively related
to other 2005 Incentive Plan awards.
We recorded total share-based compensation expense of
$6.6 million, $4.3 million and $6.2 million
related to 2005 Incentive Plan awards in 2009, 2008 and 2007,
respectively and as of December 31, 2009 we have included
$3.7 million of deferred compensation in stockholders
equity related to 2005 Incentive Plan awards. This compensation
is expected to be recognized over a weighted average period of
1.8 years. The total fair value of restricted shares and
restricted share units vested during 2009, 2008, and 2007 was
$5.0 million, $6.4 million and $783,000, respectively.
84
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes activity under the 2005 Incentive
Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units &
|
|
|
|
|
|
|
Performance Share Awards
|
|
|
Restricted Stock Awards
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Non-vested Balance, January 1, 2007
|
|
|
29,069
|
|
|
$
|
12.26
|
|
|
|
39,140
|
|
|
$
|
15.43
|
|
Granted
|
|
|
9,000
|
|
|
|
20.59
|
|
|
|
30,981
|
|
|
|
20.30
|
|
Vested
|
|
|
(24,186
|
)
|
|
|
13.79
|
|
|
|
(26,154
|
)
|
|
|
17.18
|
|
Forfeited
|
|
|
(363
|
)
|
|
|
11.19
|
|
|
|
(3,417
|
)
|
|
|
15.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2007
|
|
|
13,520
|
|
|
$
|
15.08
|
|
|
|
40,550
|
|
|
$
|
17.98
|
|
Granted
|
|
|
510,935
|
|
|
|
15.92
|
|
|
|
10,000
|
|
|
|
19.86
|
|
Vested
|
|
|
(372,561
|
)
|
|
|
15.92
|
|
|
|
(25,751
|
)
|
|
|
18.56
|
|
Forfeited
|
|
|
(27,749
|
)
|
|
|
16.97
|
|
|
|
(4
|
)
|
|
|
14.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Balance, December 31, 2008
|
|
|
124,145
|
|
|
$
|
15.60
|
|
|
|
24,795
|
|
|
$
|
18.14
|
|
Granted
|
|
|
226,786
|
|
|
|
17.23
|
|
|
|
80,000
|
|
|
|
15.13
|
|
Vested
|
|
|
(285,070
|
)
|
|
|
16.59
|
|
|
|
(20,828
|
)
|
|
|
16.75
|
|
Forfeited
|
|
|
(12,332
|
)
|
|
|
16.51
|
|
|
|
(9,592
|
)
|
|
|
20.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Balance, December 31, 2009
|
|
|
53,529
|
|
|
$
|
17.01
|
|
|
|
74,375
|
|
|
$
|
15.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Inducement Awards. During third quarter
2009, we announced the appointment of Peter S. Hathaway to the
position of Executive Vice President and Chief Financial Officer
and Jason B. Zintak to the newly-created position of Executive
Vice President, Sales and Marketing. In order to induce
Mr. Hathaway and Mr. Zintak to accept employment, the
Compensation Committee granted certain equity awards outside of
the terms of the 2005 Incentive Plan and pursuant to NASDAQ
Marketplace Rule 5635(c)(4).
(i) 100,000 shares of restricted stock with a grant
date fair value of $1.8 million were granted to
Mr. Hathaway (50,000 shares) and Mr. Zintak
(50,000 shares). The restricted stock awards vest over a
three-year period, with one-third vesting on the first
anniversary of their employment with the remainder vesting
ratably over the subsequent
24-month
period. A deferred compensation charge of $1.8 million has
been recorded in the equity section of our balance sheet for the
total grant date fair value of the restricted stock. Stock-based
compensation is being recorded on a graded vesting basis over
requisite service periods that run from their effective dates of
employment through June 2012. We recognized $497,000 in
share-based compensation related to these awards in 2009 which
is reflected in the consolidated statements of income under the
caption General and administrative.
(ii) 55,000 contingently issuable performance share awards
were granted to Mr. Hathaway (25,000 shares) and
Mr. Zintak (30,000 shares) if the Company was able to
achieve the $91.5 million adjusted EBITDA performance
threshold goal defined under the 2009 Performance Program. The
Companys actual 2009 adjusted EBITDA performance qualified
Mr. Hathaway and Mr. Zintak to receive 100% of their
target awards. A total of 55,000 performance share awards were
issued in January 2010 with a grant date fair value of $996,000
that is being recognized as share-based compensation over
requisite service periods that run from their effective dates of
employment through January 2012. The performance share awards
vested 50% upon the date of issuance with the remaining 50%
vesting ratably over the subsequent
24-month
period. A deferred compensation charge of $996,000 has been
recorded in the equity section of our balance sheet, with a
related increase to additional paid-in capital, for the total
grant date fair value of the awards. We recognized $664,000 in
share-based compensation related to these awards in 2009 which
is reflected in the consolidated statements of income under the
caption General and administrative.
(iii) 100,000 contingently issuable restricted stock units
were granted to Mr. Hathaway (50,000 shares) and
Mr. Zintak (50,000 shares) that will vest in defined
tranches if and when we achieve certain pre-defined performance
milestones. As of December 31, 2009, none of these awards
had been issued, no deferred
85
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compensation charge has been recorded in the equity section of
our balance sheet, nor has any share-based compensation expense
been recognized related to these grants as management is unable
to determine if it is probable the pre-defined performance
milestones will be attained.
We recorded total share-based compensation expense of
$1.2 million related to the Equity Inducement Awards and as
of December 31, 2009 we have included $1.6 million of
deferred compensation in stockholders equity. This
compensation is expected to be recognized over a weighted
average period of 2.4 years. None of the Equity Inducement
Awards vested during 2009.
The following table summarizes Equity Inducement Awards activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units &
|
|
|
|
|
|
|
Performance Share Awards
|
|
|
Restricted Stock Awards
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Non-vested Balance, January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
17.98
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Balance, December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
17.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Plans
We maintained various stock option plans through May 2005
(Prior Plans). The Prior Plans provided for the
issuance of shares of common stock to employees, consultants and
directors under incentive and non-statutory stock option grants.
Stock option grants under the Prior Plans were made at a price
not less than the fair market value of the common stock at the
date of grant, generally vested over a three to four-year period
commencing at the date of grant and expire in ten years. Stock
options are no longer used for share-based compensation and no
grants have been made under the Prior Plans since 2004. With the
adoption of the 2005 Incentive Plan, we terminated all Prior
Plans except for those provisions necessary to administer the
outstanding options, all of which are fully vested.
The following summarizes the combined stock option activity
during the three-year period ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
Options available
|
|
|
|
|
|
Exercise price
|
|
|
|
for grant
|
|
|
Shares
|
|
|
per share
|
|
|
Balance, January 1, 2007
|
|
|
|
|
|
|
4,157,084
|
|
|
$
|
6.44 to $27.50
|
|
Plan shares expired
|
|
|
(168,680
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
168,680
|
|
|
|
(168,680
|
)
|
|
$
|
8.56 to $26.23
|
|
Exercised
|
|
|
|
|
|
|
(757,513
|
)
|
|
$
|
6.43 to $21.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
3,230,891
|
|
|
$
|
6.44 to $27.50
|
|
Plan shares expired
|
|
|
(159,233
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
159,233
|
|
|
|
(159,233
|
)
|
|
$
|
8.56 to $26.96
|
|
Exercised
|
|
|
|
|
|
|
(697,072
|
)
|
|
$
|
6.44 to $16.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
|
|
|
|
2,374,586
|
|
|
$
|
6.44 to $27.50
|
|
Plan shares expired
|
|
|
(25,555
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
25,555
|
|
|
|
(25,555
|
)
|
|
$
|
6.44 to $16.80
|
|
Exercised
|
|
|
|
|
|
|
(1,053,251
|
)
|
|
$
|
6.44 to $21.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
|
|
|
|
1,295,780
|
|
|
$
|
10.33 to $27.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average exercise price of outstanding options at
December 31, 2008, options cancelled during 2009, options
exercised during 2009 and outstanding options at
December 31, 2009 were $14.29, $13.77, $11.94 and $16.20,
respectively.
The following summarizes certain weighted average information on
options outstanding at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$10.33 to $14.88
|
|
|
576,555
|
|
|
|
1.80
|
|
|
$
|
12.14
|
|
|
|
576,555
|
|
|
$
|
12.14
|
|
$15.15 to $21.17
|
|
|
691,225
|
|
|
|
2.10
|
|
|
$
|
19.15
|
|
|
|
691,225
|
|
|
$
|
19.15
|
|
$25.33 to $27.50
|
|
|
28,000
|
|
|
|
2.40
|
|
|
$
|
26.98
|
|
|
|
28,000
|
|
|
$
|
26.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,295,780
|
|
|
|
1.97
|
|
|
$
|
16.20
|
|
|
|
1,295,780
|
|
|
$
|
16.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during 2009, 2008
and 2007 was $7.1 million, $4.3 million and
$5.4 million, respectively and as of December 31,
2009, the aggregate intrinsic value of outstanding and
exercisable options was $12.1 million.
Employee Stock Purchase Plan. Our employee
stock purchase plan (2008 Purchase Plan) has an
initial reserve of 1,500,000 shares and provides eligible
employees with the ability to defer up to 10% of their earnings
for the purchase of our common stock on a semi-annual basis at
85% of the fair market value on the last day of each six-month
offering period that begin on February 1st and
August 1st of each year. The 2008 Purchase Plan is
considered compensatory and, as a result, stock-based
compensation is recognized on the last day of each six-month
offering period in an amount equal to the difference between the
fair value of the stock on the date of purchase and the
discounted purchase price. A total of 155,888 shares of
common stock were purchased under the 2008 Purchase Plan in 2009
at prices ranging from $9.52 to $17.52. We have recognized
$342,000 of share-based compensation expense in connection with
these purchases, which is reflected in the consolidated
statements of income under the captions Cost of
maintenance services, Cost of consulting
services, Product development, Sales and
marketing, and General and administrative. A
total of 44,393 shares of common stock were subsequently
purchased on January 31, 2010 at a price of $22.28 and we
recorded $175,000 of related share-based compensation expense.
87
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following provides tabular disclosure as of
December 31, 2009 of the number of securities to be issued
upon the exercise of outstanding options or vesting of
restricted stock units, the weighted average exercise price of
outstanding options, and the number of securities remaining
available for future issuance under equity compensation plans,
aggregated into two categories plans that have been
approved by stockholders and plans that have not:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
to be Issued
|
|
|
|
|
|
Number of
|
|
|
|
Upon Exercise of
|
|
|
|
|
|
Securities
|
|
|
|
Outstanding Options
|
|
|
|
|
|
Remaining Available
|
|
|
|
or Vesting of
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Restricted Stock
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
Equity Compensation Plans
|
|
Units
|
|
|
Outstanding Options
|
|
|
Compensation Plans
|
|
|
Approved by stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1996 Option Plan
|
|
|
1,101,530
|
|
|
$
|
16.72
|
|
|
|
|
|
1996 Directors Plan
|
|
|
90,750
|
|
|
$
|
16.18
|
|
|
|
|
|
2005 Performance Incentive Plan
|
|
|
127,904
|
|
|
$
|
|
|
|
|
2,957,778
|
|
Employee Stock Purchase Plan
|
|
|
1,344,112
|
|
|
$
|
|
|
|
|
1,344,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,664,296
|
|
|
$
|
16.68
|
|
|
|
4,301,890
|
|
Not approved by stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1998 Option Plan
|
|
|
103,500
|
|
|
$
|
10.64
|
|
|
|
|
|
Non-Plan Equity Inducement Awards
|
|
|
255,000
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,022,796
|
|
|
$
|
16.20
|
|
|
|
4,301,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
Treasury
Stock Purchases
|
On March 5, 2009, the Board adopted a program to repurchase
up to $30 million of our common stock in the open market or
in private transactions at prevailing market prices during the
12-month
period ended March 10, 2010. During 2009, we repurchased
265,715 shares of our common stock under this program for
$2.9 million at prices ranging from $10.34 to $11.00 per
share. There were no shares of common stock repurchased under
this program in 2010.
During 2009 and 2008, we also repurchased 108,765 and 118,048
common shares, respectively, tendered by employees for the
payment of applicable statutory withholding taxes on the
issuance of restricted shares under the 2005 Performance
Incentive Plan. These shares were repurchased in 2009 for
$1.6 million at prices ranging from $9.75 to $26.05 and in
2008 for $2.1 million at prices ranging from $11.50 to
$20.40 per share.
As part of the Purchase Agreement with Thoma Bravo (see
Note 13), we repurchased 100,000 shares of our common
stock held by Thoma Bravo for $2.0 million, or $20 per
share.
|
|
16.
|
Employee
Benefit Plans
|
We maintain a defined 401(k) contribution plan (401(k)
Plan) for the benefit of our employees. Participant
contributions vest immediately and are subject to the limits
established from
time-to-time
by the Internal Revenue Service. We provide discretionary
matching contributions to the 401(k) Plan on an annual basis.
Our matching contributions were 25% in 2009, 2008 and 2007 and
vest 100% after 2 years of service. Our matching
contributions to the 401(k) Plan were $2.1 million,
$2.1 million and $1.9 million in 2009, 2008 and 2007,
respectively.
88
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We exercise significant judgment in determining our income tax
provision due to transactions, credits and calculations where
the ultimate tax determination is uncertain. Uncertainties arise
as a consequence of the actual source of taxable income between
domestic and foreign locations, the outcome of tax audits and
the ultimate utilization of tax credits. Although we believe our
estimates are reasonable, the final tax determination could
differ from our recorded income tax provision and accruals. In
such case, we would adjust the income tax provision in the
period in which the facts that give rise to the revision become
known. These adjustments could have a material impact on our
income tax provision and our net income for that period.
The income tax provision includes income taxes currently payable
and those deferred due to temporary differences between the
financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future. The
components of the income tax provision for the three years ended
December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and state
|
|
$
|
(2,252
|
)
|
|
$
|
(4,099
|
)
|
|
$
|
(356
|
)
|
Foreign
|
|
|
(4,746
|
)
|
|
|
268
|
|
|
|
(3,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current taxes
|
|
|
(6,998
|
)
|
|
|
(3,831
|
)
|
|
|
(3,904
|
)
|
Deferred taxes
|
|
|
(5,851
|
)
|
|
|
(503
|
)
|
|
|
(9,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
(12,849
|
)
|
|
$
|
(4,334
|
)
|
|
$
|
(13,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate used to record the income tax provision
in 2009, 2008 and 2007 takes into account the source of taxable
income, domestically by state and internationally by country,
and available income tax credits.
The income tax provision recorded in the three years ended
December 31, 2009 differed from the amounts computed by
applying the federal statutory income tax rate of 35% to income
before income taxes as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income before income taxes
|
|
$
|
39,188
|
|
|
$
|
7,458
|
|
|
$
|
40,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision at federal statutory rate
|
|
$
|
(13,716
|
)
|
|
$
|
(2,610
|
)
|
|
$
|
(14,146
|
)
|
Research and development credit
|
|
|
773
|
|
|
|
930
|
|
|
|
432
|
|
Meals, entertainment and other non-deductible expenses
|
|
|
(425
|
)
|
|
|
(332
|
)
|
|
|
(322
|
)
|
State income taxes
|
|
|
(1,294
|
)
|
|
|
(59
|
)
|
|
|
(983
|
)
|
Section 199 deduction
|
|
|
554
|
|
|
|
|
|
|
|
|
|
Foreign tax rate differential
|
|
|
451
|
|
|
|
804
|
|
|
|
796
|
|
Other, net
|
|
|
(255
|
)
|
|
|
(120
|
)
|
|
|
161
|
|
Changes in estimate and foreign statutory rates
|
|
|
677
|
|
|
|
(2,582
|
)
|
|
|
556
|
|
Interest and penalties on uncertain tax positions
|
|
|
386
|
|
|
|
(365
|
)
|
|
|
(389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
(12,849
|
)
|
|
$
|
(4,334
|
)
|
|
$
|
(13,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
32.8
|
%
|
|
|
58.1
|
%
|
|
|
34.4
|
%
|
Income before income taxes for 2009, 2008 and 2007 includes
$7.6 million, $6.3 million, and $8.2 million of
foreign pretax income, respectively. The increase in the changes
in estimate and foreign statutory rates from 2007 to 2008 is due
primarily to additional liabilities related to uncertain tax
positions, settlement of IRS examinations and the
true-up of
previously estimated deferred tax assets.
89
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The income tax effects of temporary differences that give rise
to our deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
Current
|
|
|
Non-Current
|
|
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and reserves
|
|
$
|
7,266
|
|
|
$
|
3,895
|
|
|
$
|
3,381
|
|
|
$
|
4,116
|
|
Deferred revenue
|
|
|
271
|
|
|
|
|
|
|
|
712
|
|
|
|
|
|
Excess Space Reserve
|
|
|
76
|
|
|
|
2,803
|
|
|
|
110
|
|
|
|
3,643
|
|
Net Operating Loss
|
|
|
9,479
|
|
|
|
50,301
|
|
|
|
9,420
|
|
|
|
58,964
|
|
Foreign deferred and NOL
|
|
|
1,322
|
|
|
|
|
|
|
|
1,491
|
|
|
|
|
|
Tax credit carryforwards
|
|
|
|
|
|
|
11,484
|
|
|
|
7,141
|
|
|
|
10,101
|
|
R&D Expenses Capitalized
|
|
|
1,679
|
|
|
|
3,417
|
|
|
|
1,672
|
|
|
|
5,074
|
|
AMT Credit carryforward
|
|
|
|
|
|
|
341
|
|
|
|
|
|
|
|
341
|
|
Property and equipment
|
|
|
|
|
|
|
3,946
|
|
|
|
|
|
|
|
2,831
|
|
Foreign deferred
|
|
|
|
|
|
|
3,054
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
20,093
|
|
|
|
79,241
|
|
|
|
23,927
|
|
|
|
85,070
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangibles
|
|
|
|
|
|
|
(30,746
|
)
|
|
|
|
|
|
|
(35,307
|
)
|
Foreign deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
|
|
|
|
(30,746
|
)
|
|
|
|
|
|
|
(36,192
|
)
|
Valuation Allowance
|
|
|
(951
|
)
|
|
|
(4,145
|
)
|
|
|
(1,008
|
)
|
|
|
( 4,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,142
|
|
|
$
|
44,350
|
|
|
$
|
22,919
|
|
|
$
|
44,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The valuation allowances at December 31, 2009 and 2008 are
for state research and development tax credit carryforwards that
we may not be able to fully utilize before they expire.
Residual United States income taxes have not been provided on
undistributed earnings of our foreign subsidiaries. These
earnings are considered to be indefinitely reinvested and,
accordingly, no provision for United States federal and state
income taxes has been provided thereon. Upon distribution of
those earnings in the form of dividends or otherwise, the
Company would be subject to both United States income taxes and
withholding taxes payable to various foreign countries less an
adjustment for foreign tax credits. It is not practicable to
estimate the amount of additional tax that might be payable on
the foreign earnings. The Company has incurred net operating
losses in certain foreign jurisdictions that will be carried
forward to future years.
A reconciliation of the liability for unrecognized income tax
benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Unrecognized tax benefits, beginning of year
|
|
$
|
11,721
|
|
|
$
|
9,436
|
|
|
$
|
3,487
|
|
Increase (decrease) related to prior year tax positions
|
|
|
471
|
|
|
|
5,006
|
|
|
|
5,949
|
|
Increase related to current year tax positions
|
|
|
317
|
|
|
|
539
|
|
|
|
|
|
Expirations
|
|
|
(722
|
)
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(393
|
)
|
|
|
(3,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits, end of year
|
|
$
|
11,394
|
|
|
$
|
11,721
|
|
|
$
|
9,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2009 approximately $10.8 million of
unrecognized tax benefits would impact our effective tax rate if
recognized, substantially all of which relates to uncertain tax
positions associated with the acquisition of Manugistics.
Deferred tax assets have been reduced by $4.4 million
related to liabilities for uncertain tax positions. Future
recognition of uncertain tax positions resulting from the
acquisition of Manugistics will be treated as a component of
income tax expense rather than as a reduction of goodwill. It is
reasonably possible that approximately $8.8 million of
unrecognized tax benefits will be recognized within the next
12 months, primarily related to lapses in the statute of
limitations.
We treat the accrual of interest and penalties related to
uncertain tax positions as a component of income tax expense,
including accruals (benefits) made during 2009, 2008 and 2007 of
$(515,000), $600,000 and $630,000, respectively. As of
December 31, 2009, 2008 and 2007, there are approximately
$2.3 million, $2.6 million and $1.9 million,
respectively of interest and penalty accruals related to
uncertain tax positions which are reflected in the Consolidated
Balance Sheet under the caption Liability for uncertain
tax positions. To the extent interest and penalties are
not assessed with respect to the uncertain tax positions, the
accrued amounts for interest and penalties will be reduced and
reflected as a reduction of the overall tax provision.
We conduct business globally and, as a result, JDA Software
Group, Inc. or one or more of our subsidiaries files income tax
returns in the U.S. federal jurisdiction and various state
and foreign jurisdictions. In the normal course of business we
are subjected to examination by taxing authorities throughout
the world, including significant jurisdictions in the United
States, the United Kingdom, Australia and France. The change in
the liability for unrecognized tax benefits related to prior
year tax positions during 2009 and 2008 relate to uncertainty
regarding our ability to utilize certain foreign net operating
loss carryforwards acquired in the acquisition of Manugistics
and uncertainties regarding the validity of the income tax
holiday in India. Our business operations in India have been
granted a tax holiday from income taxes through the tax year
ending March 31, 2011. This tax holiday did not have a
significant impact on our 2009 or 2008 operating results;
however, our overall effective tax rate will be negatively
impacted as the tax holiday period expires. The decrease in
liability for unrecognized tax benefits in 2009 results
primarily from the expiration of a statute of limitations and
the settlement of a Taiwan income tax examination. The decrease
in liability for unrecognized tax benefits in 2008 results
primarily from the settlement of an Internal Revenue Service
audit of our 2006 tax year and the settlement of a tax audit in
Germany in the amount of approximately $800,000. We are
currently under audit by the Internal Revenue Service for the
2009 tax year. The examination phase of these audits has not yet
been completed; however, we do not anticipate any material
adjustments. The following table sets forth significant
jurisdictions that have open tax years that are subject to
examination:
|
|
|
Country
|
|
Open Tax Years Subject to Examination
|
|
United States
|
|
2008, 2009
|
United Kingdom
|
|
2005, 2006, 2007, 2008, 2009
|
Australia
|
|
2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009
|
France
|
|
2005, 2006, 2007, 2008, 2009
|
JDA Software Group, Inc. accepted an invitation to participate
in the Compliance Assurance Program (CAP) beginning
in 2007. The CAP program was developed by the Internal Revenue
Service to allow for transparency and to remove uncertainties in
tax compliance. The CAP program is offered by invitation only to
those companies with both a history of immaterial audit
adjustments and a high level of tax complexity and will involve
a review of each quarterly tax provision. The Internal Revenue
Service has completed their review of our 2007 and 2008 tax
returns and no material adjustments have been made as a result
of these examinations.
At December 31, 2009, we have approximately
$5.5 million and $7.8 million of federal and state
research and development tax credit carryforwards, respectively,
that expire at various dates through 2024. We also have
approximately $8.4 million of foreign tax credit
carryforwards that expire between 2016 and 2018. We have
approximately $163.0 million of federal net operating loss
carryforwards, which are subject to annual limitations
91
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
prescribed in section 382 of the Internal Revenue Code,
that expire beginning in 2019. We also have $58.6 million
and $22.5 million of state and foreign net operating loss
carryforwards that expire beginning in 2014.
As a result of certain realization requirements of ASC Topic
718, the table of deferred tax assets and liabilities shown
above does not include certain deferred tax assets at
December 31, 2009 and 2009 that arose directly from (or the
use of which was postponed by) tax deductions related to equity
compensation in excess of compensation recognized for financial
reporting. Equity will be increased by $6.3 million and if
and when such deferred tax assets are ultimately realized. The
Company uses ASC 740 ordering for purposes of determining when
excess tax benefits have been realized.
From July 2006 through September 2008, the Company had two
classes of outstanding capital stock, common stock and
Series B preferred stock. The Series B preferred
stock, which was issued in connection with the acquisition of
Manugistics (see Note 13), was a participating security
such that in the event a dividend was declared or paid on the
common stock, the Company would be required to simultaneously
declare and pay a dividend on the Series B preferred stock
as if the Series B preferred stock had been converted into
common stock. Companies that have participating securities are
required to apply the two-class method to compute basic earnings
per share. Under the two-class computation method, basic
earnings per share is calculated for each class of stock and
participating security considering both dividends declared and
participation rights in undistributed earnings as if all such
earnings had been distributed during the period.
During third quarter 2009, all shares of the Series B
preferred stock were either converted into shares of common
stock or repurchased for cash, including $8.6 million paid
in excess of the conversion price (see Note 13). The excess
consideration was charged to retained earnings in the same
manner as a dividend on preferred stock and reduced the income
applicable to common shareholders in the calculation of earnings
per share for 2009. The calculation of diluted earnings per
share applicable to common shareholders for 2009 includes the
assumed conversion of the Series B preferred stock into
common stock as of the beginning of the period, weighted for the
actual days and number of shares outstanding during the period.
The calculation of diluted earnings per share applicable to
common shareholders for 2008 and 2007 includes the assumed
conversion of the Series B preferred stock into common
stock as of the beginning of the period.
The dilutive effect of outstanding stock options and unvested
restricted stock units and performance share awards is included
in the diluted earnings per share calculations for 2009, 2008
and 2007 using the treasury stock method. Diluted earnings per
share applicable to common shareholders for 2009, 2008 and 2007
exclude approximately 795,000, 775,000 and 762,000, respectively
of vested options for the purchase of common stock that have
grant prices in excess of the average market price, or which are
otherwise anti-dilutive. In addition, diluted earnings per share
calculations for 2009, 2008 and 2007 exclude approximately
561,000, 223,000 and 503,000 contingently issuable restricted
stock units or performance share awards, respectively for which
all necessary conditions had not been met (see Note 14).
92
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings per share for the three years ended December 31,
2009 is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net income
|
|
$
|
26,339
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
. (8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income applicable to common shareholders
|
|
|
17,746
|
|
|
|
3,124
|
|
|
|
26,522
|
|
Undistributed earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
16,613
|
|
|
|
2,796
|
|
|
|
23,664
|
|
Series B Preferred Stock
|
|
|
1,133
|
|
|
|
328
|
|
|
|
2,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
32,706
|
|
|
|
30,735
|
|
|
|
29,789
|
|
Series B Preferred Stock
|
|
|
2,230
|
|
|
|
3,604
|
|
|
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Basic earnings per share
|
|
|
34,936
|
|
|
|
34,339
|
|
|
|
33,393
|
|
Dilutive common stock equivalents
|
|
|
322
|
|
|
|
846
|
|
|
|
1,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Diluted earnings per share
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
34,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
.51
|
|
|
$
|
.09
|
|
|
$
|
.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Preferred Stock
|
|
$
|
.51
|
|
|
$
|
.09
|
|
|
$
|
.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share applicable to common shareholders
|
|
$
|
.50
|
|
|
$
|
.09
|
|
|
$
|
.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We are a leading provider of sophisticated enterprise software
solutions designed specifically to address the supply chain
requirements of global consumer products companies,
manufacturers, wholesale/distributors and retailers, as well as
government and aerospace defense contractors and travel,
transportation, hospitality and media organizations, and have
licensed our software to nearly 6,000 customers worldwide. Our
solutions enable customers to plan, manage and optimize the
coordination of supply, demand and flows of inventory throughout
the supply chain to the consumer. We conduct business in three
geographic regions that have separate management teams and
reporting structures: the Americas (United States, Canada, and
Latin America), Europe (Europe, Middle East and Africa), and
Asia/Pacific. Similar products and services are offered in each
geographic region. Identifiable assets are also managed by
geographical region. The accounting policies of each region are
the same as those described in Note 1 of the Notes to
Consolidated Financial Statements.
93
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The geographic distribution of our revenues and identifiable
assets as of, or for the three-year period ended
December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
264,681
|
|
|
$
|
269,269
|
|
|
$
|
247,907
|
|
Europe
|
|
|
82,011
|
|
|
|
87,656
|
|
|
|
89,486
|
|
Asia/Pacific
|
|
|
39,108
|
|
|
|
33,407
|
|
|
|
36,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
$
|
373,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
695,539
|
|
|
$
|
402,350
|
|
|
$
|
470,205
|
|
Europe
|
|
|
85,817
|
|
|
|
86,780
|
|
|
|
108,390
|
|
Asia/Pacific
|
|
|
40,310
|
|
|
|
35,646
|
|
|
|
43,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets
|
|
$
|
821,666
|
|
|
$
|
524,776
|
|
|
$
|
622,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues for the Americas include $231.3 million,
$236.7 million and $224.5 million from the United
States in 2009, 2008 and 2007, respectively. Identifiable assets
for the Americas include $666.0 million,
$379.7 million and $446.3 million in the United States
as of December 31, 2009, 2008 and 2007, respectively. The
increase in identifiable assets at December 31, 2009
compared to December 31, 2008 resulted primarily from the
issuance of the Senior Notes, the net proceeds of which were
used to fund a portion of the cash merger consideration for the
acquisition of i2 Technologies on January 28, 2010
(see Notes 2 and 9). The decrease in identifiable assets at
December 31, 2008 compared to December 31, 2007
resulted primarily from the utilization of cash to repay
$99.6 million of term loans used to finance the acquisition
of Manugistics and the costs associated with the abandoned
acquisition of i2 Technologies in fourth quarter 2008 (see
Notes 2 and 9).
No customer accounted for more than 10% of our revenues during
any of the three years ended December 31, 2009.
We organize and manage our operations by type of customer across
the following reportable business segments:
|
|
|
|
|
Retail. This reportable business segment
includes all revenues related to applications and services sold
to retail customers.
|
|
|
|
Manufacturing and Distribution. This
reportable business segment includes all revenues related to
applications and services sold to manufacturing and distribution
companies, including process manufacturers, consumer goods
manufacturers, life sciences companies, high tech organizations,
oil and gas companies, automotive producers and other discrete
manufacturers involved with government, aerospace and defense
contracts.
|
|
|
|
Services Industries. This reportable business
segment includes all revenues related to applications and
services sold to customers in service industries such as travel,
transportation, hospitality, media and telecommunications. The
Services Industries segment is centrally managed by a
team that has global responsibilities for this market.
|
94
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the revenues, operating income and depreciation
attributable to each of these reportable business segments for
the three years ended December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
209,717
|
|
|
$
|
210,624
|
|
|
$
|
195,940
|
|
Manufacturing and Distribution
|
|
|
144,685
|
|
|
|
159,323
|
|
|
|
161,117
|
|
Services Industries
|
|
|
31,398
|
|
|
|
20,385
|
|
|
|
16,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
$
|
373,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
55,668
|
|
|
$
|
59,256
|
|
|
$
|
48,596
|
|
Manufacturing and Distribution
|
|
|
58,506
|
|
|
|
61,759
|
|
|
|
62,154
|
|
Services Industries
|
|
|
8,636
|
|
|
|
2,001
|
|
|
|
364
|
|
Other (see below)
|
|
|
(82,930
|
)
|
|
|
(102,708
|
)
|
|
|
(62,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,880
|
|
|
$
|
20,308
|
|
|
$
|
48,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$
|
4,559
|
|
|
$
|
4,479
|
|
|
$
|
4,280
|
|
Manufacturing and Distribution
|
|
|
2,777
|
|
|
|
3,131
|
|
|
|
3,517
|
|
Services Industries
|
|
|
1,049
|
|
|
|
699
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,385
|
|
|
$
|
8,309
|
|
|
$
|
8,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
47,664
|
|
|
$
|
44,963
|
|
|
$
|
44,405
|
|
Amortization of intangible assets
|
|
|
23,633
|
|
|
|
24,303
|
|
|
|
15,852
|
|
Restructuring charge and adjustments to acquisition-related
reserves
|
|
|
6,865
|
|
|
|
8,382
|
|
|
|
6,208
|
|
Acquisition-related costs
|
|
|
4,768
|
|
|
|
|
|
|
|
|
|
Costs of abandoned acquisition
|
|
|
|
|
|
|
25,060
|
|
|
|
|
|
Gain on sale of office facility
|
|
|
|
|
|
|
|
|
|
|
(4,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
82,930
|
|
|
$
|
102,708
|
|
|
$
|
62,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income in the Retail, Manufacturing and
Distribution and Services Industry reportable
business segments includes direct expenses for software
licenses, maintenance services, service revenues, and product
development expenses, as well as allocations for sales and
marketing expenses, occupancy costs, depreciation expense and
amortization of acquired software technology. The
Other caption includes general and administrative
expenses and other charges that are not directly identified with
a particular reportable business segment and which management
does not consider in evaluating the operating income (loss) of
the reportable business segment.
95
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
20.
|
Quarterly
Data (Unaudited)
|
The following table presents selected unaudited quarterly
operating results for the two-year period ended
December 31, 2009. We believe that all necessary
adjustments have been included in the amounts shown below to
present fairly the related quarterly results.
Consolidated
Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Total
|
|
Revenues
|
|
$
|
83,333
|
|
|
$
|
99,485
|
|
|
$
|
95,859
|
|
|
$
|
107,123
|
|
|
$
|
385,800
|
|
Gross profit
|
|
|
49,815
|
|
|
|
63,705
|
|
|
|
58,464
|
|
|
|
68,145
|
|
|
|
240,129
|
|
Amortization of intangibles (see Note 1)
|
|
|
6,076
|
|
|
|
6,051
|
|
|
|
5,753
|
|
|
|
5,753
|
|
|
|
23,633
|
|
Restructuring charges (see Note 8)
|
|
|
1,430
|
|
|
|
2,732
|
|
|
|
2,543
|
|
|
|
160
|
|
|
|
6,865
|
|
Acquisition-related costs (see Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,768
|
|
|
|
4,768
|
|
Operating income
|
|
|
4,458
|
|
|
|
14,418
|
|
|
|
9,480
|
|
|
|
11,524
|
|
|
|
39,880
|
|
Finance costs on abandoned acquisition (see Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
767
|
|
|
|
767
|
|
Net income
|
|
|
2,644
|
|
|
|
8,935
|
|
|
|
6,263
|
|
|
|
8,497
|
|
|
|
26,339
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
(8,593
|
)
|
Income (loss) applicable to common shareholders
|
|
|
2,644
|
|
|
|
8,935
|
|
|
|
(2,330
|
)
|
|
|
8,497
|
|
|
|
17,746
|
|
Basic earnings (loss) per share applicable to common shareholders
|
|
$
|
.08
|
|
|
$
|
.26
|
|
|
$
|
(.07
|
)
|
|
$
|
.25
|
|
|
$
|
.51
|
|
Diluted earnings (loss) per share applicable to common
shareholders
|
|
$
|
.08
|
|
|
$
|
.25
|
|
|
$
|
(.07
|
)
|
|
$
|
.24
|
|
|
$
|
.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total
|
|
|
Revenues
|
|
$
|
93,875
|
|
|
$
|
91,796
|
|
|
$
|
98,446
|
|
|
$
|
106,215
|
|
|
$
|
390,332
|
|
Gross profit
|
|
|
58,062
|
|
|
|
54,681
|
|
|
|
62,086
|
|
|
|
68,521
|
|
|
|
243,350
|
|
Amortization of intangibles (see Note 1)
|
|
|
6,076
|
|
|
|
6,076
|
|
|
|
6,075
|
|
|
|
6,076
|
|
|
|
24,303
|
|
Restructuring charges (see Note 8)
|
|
|
756
|
|
|
|
2,799
|
|
|
|
399
|
|
|
|
4,428
|
|
|
|
8,382
|
|
Costs of abandoned acquisition (see Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,060
|
|
|
|
25,060
|
|
Operating income (loss)
|
|
|
9,857
|
|
|
|
6,466
|
|
|
|
15,985
|
|
|
|
(12,000
|
)
|
|
|
20,308
|
|
Finance costs on abandoned (see Note 2)
|
|
|
|
|
|
|
|
|
|
|
637
|
|
|
|
4,655
|
|
|
|
5,292
|
|
Net income (loss)
|
|
|
5,356
|
|
|
|
3,073
|
|
|
|
8,242
|
|
|
|
(13,547
|
)
|
|
|
3,124
|
|
Income (loss) applicable to common shareholders
|
|
|
5,356
|
|
|
|
3,073
|
|
|
|
8,242
|
|
|
|
(13,547
|
)
|
|
|
3,124
|
|
Basic earnings (loss) per share applicable to common shareholders
|
|
$
|
.16
|
|
|
$
|
.09
|
|
|
$
|
.24
|
|
|
$
|
(.44
|
)
|
|
$
|
.09
|
|
Diluted earnings (loss) per share applicable to common
shareholders
|
|
$
|
.15
|
|
|
$
|
.09
|
|
|
$
|
.23
|
|
|
$
|
(.44
|
)
|
|
$
|
.09
|
|
96
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JDA SOFTWARE GROUP, INC.
|
|
|
|
By:
|
/s/ Hamish
N. J. Brewer
|
Hamish N. J. Brewer
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 16, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
March 16, 2010:
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
/s/ James
D. Armstrong
James
D. Armstrong
|
|
Chairman of the Board
|
|
|
|
/s/ Hamish
N. J. Brewer
Hamish
N. J. Brewer
|
|
President, Chief Executive Officer
and Director (Principal Executive Officer)
|
|
|
|
/s/ Peter
S. Hathaway
Peter
S. Hathaway
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ J.
Michael Gullard
J.
Michael Gullard
|
|
Director
|
|
|
|
/s/ Douglas
G. Marlin
Douglas
G. Marlin
|
|
Director
|
|
|
|
/s/ Jock
Patton
Jock
Patton
|
|
Director
|
97
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
2
|
.1
|
|
|
|
Agreement and Plan of Merger by and between JDA Software Group,
Inc., Iceberg Acquisition Corp and i2 Technologies, Inc.
dated August 10, 2008. (Incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K dated
August 10, 2008, as filed on August 11, 2008).
|
|
2
|
.2
|
|
|
|
Agreement and Plan of Merger by and between JDA Software Group,
Inc., Alpha Acquisition Corp and i2 Technologies, Inc.
dated November 4, 2009. (Incorporated by reference to Exhibit
2.1 to the Companys Current Report on Form 8-K dated
November 4, 2009, as filed on November 5, 2009).
|
|
3
|
.1
|
|
|
|
Third Restated Certificate of Incorporation of the Company
together with Certificate of Amendment dated July 23, 2002.
(Incorporated by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2002, as filed on November 12, 2002).
|
|
3
|
.2
|
|
|
|
First Amended and Restated Bylaws of JDA Software Group, Inc.
(Incorporated by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998, as filed on August 14, 1998).
|
|
3
|
.3
|
|
|
|
Certificate of Designation of rights, preferences, privileges
and restrictions of Series B Convertible Preferred Stock of JDA
Software Group, Inc filed with the Secretary of State of the
State of Delaware on July 5, 2006. (Incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K
dated July 5, 2006, as filed on July 6, 2006).
|
|
3
|
.4
|
|
|
|
Certificate of Correction filed to correct a certain error in
the Certificate of Designation of rights, preferences,
privileges and restrictions of Series B Convertible Preferred
Stock of JDA Software Group, Inc. filed with the Secretary of
State of the State of Delaware on July 5, 2006. (Incorporated by
reference to Exhibit 3.4 to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2006,
as filed on November 9, 2006).
|
|
4
|
.1
|
|
|
|
Specimen Common Stock Certificate of JDA Software Group, Inc.
(Incorporated by reference the Companys Registration
Statement on Form S-1 (File No. 333-748), declared effective on
March 14, 1996).
|
|
4
|
.2
|
|
|
|
8.0% Senior Notes Due 2014 Indenture dated as of December
10, 2009 among JDA Software Group, Inc., the Guarantors, and
U.S. Bank National Association, as trustee. (Incorporated by
reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K dated December 10, 2009, as filed on December 11, 2009).
|
|
10
|
.1(1)
|
|
|
|
Form of Indemnification Agreement. (Filed herewith).
|
|
10
|
.2(1)
|
|
|
|
1996 Stock Option Plan, as amended on March 28, 2003.
(Incorporated by reference to Exhibit 10.3 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2003,
as filed on March 12, 2004).
|
|
10
|
.3(1)
|
|
|
|
1996 Outside Directors Stock Option Plan and forms of agreement
thereunder. (Incorporated by reference to the Companys
Registration Statement on Form S-1 (File No. 333-748), declared
effective on March 14, 1996).
|
|
10
|
.4(1)
|
|
|
|
Executive Employment Agreement between James D. Armstrong and
JDA Software Group, Inc. dated July 23, 2002, together with
Amendment No. 1 effective August 1, 2003. (Incorporated by
reference to Exhibit 10.5 to the Companys Annual Report on
Form 10-K for the year ended December 21, 2003, as filed on
March 12, 2004).
|
|
10
|
.5(1)
|
|
|
|
Amended and Restated Executive Employment Agreement between
Hamish N. Brewer and JDA Software Group, Inc. dated September 8,
2009. (Filed herewith).
|
|
10
|
.6(1)
|
|
|
|
Executive Employment Agreement between Kristen L. Magnuson and
JDA Software Group, Inc. dated July 23, 2002. (Incorporated by
reference to Exhibit 10.7 to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2002,
as filed on November 12, 2002).
|
|
10
|
.7(1)
|
|
|
|
1998 Nonstatutory Stock Option Plan, as amended on March 28,
2003. (Incorporated by Reference to Exhibit 10.8 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2003, as filed on March 12, 2004).
|
98
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
10
|
.8
|
|
|
|
2008 Employee Stock Purchase Plan. (Incorporated by reference to
Exhibit 10.8 to the Companys Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2008, as filed on August
11, 2008).
|
|
10
|
.9
|
|
|
|
Credit Agreement dated as of July 5, 2006, among JDA Software
Group, Inc., Manugistics Group, Inc., Citicorp North America,
Inc., Citibank, N.A., Citigroup Global Markets Inc., UBS
Securities LLC and Wells Fargo Foothill, LLC and the Lenders
named therein. (Incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K dated July 5, 2006, as
filed on July 6, 2006).
|
|
10
|
.9.1
|
|
|
|
Amendment No. 1 to Credit Agreement dated July 26, 2007, among
JDA Software Group, Inc., Manugistics Group, Inc., Citicorp
North America, Inc., Citibank, N.A., Citigroup Global Markets
Inc., UBS Securities LLC and Wells Fargo Foothill, LLC and the
Lenders named therein. (Incorporated by reference to Exhibit
10.9.1 to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2007, as filed on August 9,
2007).
|
|
10
|
.10(2)
|
|
|
|
Value-Added Reseller License Agreement for Uniface Software
between Compuware Corporation and JDA Software Group, Inc. dated
April 1, 2000, together with Product Schedule No. One dated June
23, 2000, Product Schedule No. Two dated September 28, 2001, and
Amendment to Product Schedule No. Two dated December 23, 2003.
(Incorporated by reference to Exhibit 10.14 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2003, as filed on March 12, 2004).
|
|
10
|
.11(1)
|
|
|
|
JDA Software, Inc. 401(k) Profit Sharing Plan, adopted as
amended effective January 1, 2004. (Incorporated by reference to
Exhibit 10.15 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2003, as filed on March 12,
2004).
|
|
10
|
.12(1)
|
|
|
|
Form of Amendment of Stock Option Agreement between JDA Software
Group, Inc and Kristen L. Magnuson, amending certain stock
options granted to Ms. Magnuson pursuant to the JDA Software
Group, Inc. 1996 Stock Option Plan on September 11, 1997 and
January 27, 1998. (Incorporated by reference to Exhibit 10.35 to
the Companys Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1998, as filed on August 14,
1998).
|
|
10
|
.13(1)
|
|
|
|
Form of Rights Agreement between the Company and ChaseMellon
Shareholder Services, as Rights Agent (including as Exhibit A
the Form of Certificate of Designation, Preferences and Rights
of the Terms of the Series A Preferred Stock, as Exhibit B the
Form of Right Certificate, and as Exhibit C the Summary of Terms
and Rights Agreement). (Incorporated by reference to Exhibit 1
to the Companys Current Report on Form 8-K dated October
2, 1998, as filed on October 28, 1998).
|
|
10
|
.14(1)
|
|
|
|
Form of Incentive Stock Option Agreement between JDA Software
Group, Inc. and Kristen L. Magnuson to be used in connection
with stock option grants to Ms. Magnuson pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.39 to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1998, as filed on November 16, 1998).
|
|
10
|
.15 (1)(3)
|
|
|
|
Form of Incentive Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.20 to the Companys Annual Report
on Form 10-K for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.16 (1)(3)
|
|
|
|
Form of Nonstatutory Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.21 to the Companys Annual Report
on Form 10-K for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.17 (1)(4)
|
|
|
|
Form of Amendment of Stock Option Agreement between JDA Software
Group, Inc and certain Senior Executive Officers, amending
certain stock options granted pursuant to the JDA Software
Group, Inc. 1996 Stock Option Plan. (Incorporated by reference
to Exhibit 10.22 to the Companys Annual Report on Form
10-K for the year ended December 31, 1999, as filed on March 16,
2000).
|
99
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
10
|
.18 (1)(5)
|
|
|
|
Form of Incentive Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.24 to the Companys Annual Report
on Form 10-K for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.19(1)
|
|
|
|
Executive Employment Agreement between Christopher Koziol and
JDA Software Group, Inc. dated June 13, 2005. (Incorporated by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K dated May 16, 2005, as filed on June 20, 2005).
|
|
10
|
.20(1)
|
|
|
|
Restricted Stock Units Agreement between Christopher Koziol and
JDA Software Group, Inc. dated November 3, 2005. (Incorporated
by reference to Exhibit 99.1 to the Companys Current Repot
on Form 8-K dated October 28, 2005, as filed on November 3,
2005).
|
|
10
|
.21(1)
|
|
|
|
Form of Restricted Stock Unit Agreement to be used in connection
with restricted stock units granted pursuant to the JDA Software
Group, Inc. 2005 Performance Incentive Plan. (Incorporated by
reference to Exhibit 99.2 to the Companys Current Repot on
Form 8-K dated October 28, 2005, as filed on November 3, 2005).
|
|
10
|
.22(1)
|
|
|
|
Standard Form of Restricted Stock Agreement to be used in
connection with restricted stock granted pursuant to the JDA
Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.31 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2005, as filed on March 16, 2006).
|
|
10
|
.23(1)
|
|
|
|
Form of Restricted Stock Agreement to be used in connection with
restricted stock granted to Hamish N. Brewer pursuant to the JDA
Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.32 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2005, as filed on March 16, 2006).
|
|
10
|
.24(1)
|
|
|
|
Form of Restricted Stock Agreement to be used in connection with
restricted stock granted to Kristen L. Magnuson pursuant to the
JDA Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.33 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2005, as filed on March 16, 2006).
|
|
10
|
.25(1)
|
|
|
|
Form of Restricted Stock Agreement to be used in connection with
restricted stock granted to Christopher J. Koziol pursuant to
the JDA Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.34 to the
Companys Annual Report on Form 10-K for the year ended
December 31, 2005, as filed on March 16, 2006).
|
|
10
|
.26
|
|
|
|
Preferred Stock Purchase Agreement by and among JDA Software
Group, Inc. and Funds Affiliated with Thoma Cressey Equity
Partners Inc. dated as of April 23, 2006. (Incorporated by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8- K/A (Amendment No. 1) dated April 24, 2006, as filed
on April 27, 2006).
|
|
10
|
.27
|
|
|
|
Registration Rights Agreement Between JDA Software Group, Inc.
and Funds Affiliated With Thoma Cressey Equity Partners Inc.
dated as of April 23, 2006. (Incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K/A
(Amendment No. 1) dated April 24, 2006, as filed on April 27,
2006).
|
|
10
|
.28
|
|
|
|
Commitment Letter by and among JDA Software Group, Inc., Credit
Suisse, Credit Suisse Securities (USA) LLC, Wachovia Bank,
National Association and Wachovia Capital Markets, LLC dated
August 10, 2008. (Incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K dated August 10,
2008, as filed on August 11, 2008).
|
|
10
|
.29
|
|
|
|
Amendment to Commitment Letter by and among JDA Software Group,
Inc., Credit Suisse, Credit Suisse Securities (USA) LLC,
Wachovia Bank, National Association and Wachovia Capital
Markets, LLC dated September 29, 2008. (Incorporated by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K dated September 29, 2008, as filed on September 30,
2008).
|
|
10
|
.30 (1)(2)
|
|
|
|
Executive Employment Agreement between Pete Hathaway and JDA
Software Group, Inc. dated July 20, 2009. (Incorporated by
reference to Exhibit 10.1 to the Companys Quarterly Report
on Form 10-Q/A (Amendment No. 1) for the quarterly period ended
September 30, 2009, as filed on December 18, 2009).
|
100
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
10
|
.31 (1)(2)
|
|
|
|
Executive Employment Agreement between Jason Zintak and JDA
Software Group, Inc. dated August 18, 2009. (Incorporated by
reference to Exhibit 10.2 to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2009,
as filed on November 3, 2009).
|
|
10
|
.32(1)
|
|
|
|
Separation Agreement between JDA Software Group, Inc. and
Kristen L. Magnuson dated April 6, 2009. (Incorporated by
reference to Exhibit 10.4 to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2009,
as filed on November 3, 2009).
|
|
10
|
.33(1)
|
|
|
|
Separation Agreement between JDA Software Group, Inc. and
Christopher J. Koziol dated August 3, 2009. (Incorporated by
reference to Exhibit 10.5 to the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2009,
as filed on November 3, 2009).
|
|
10
|
.34
|
|
|
|
Voting Agreement by and among JDA Software Group, Inc.,
i2 Technologies, Inc. and R2 Top Hat, Ltd. dated November
4, 2009. (Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated November 4,
2009, as filed on November 5, 2009).
|
|
10
|
.35
|
|
|
|
Voting Agreement by and among JDA Software Group, Inc.,
i2 Technologies, Inc. and directors and officers of
i2 Technologies, Inc. signatory thereto dated November 4,
2009. (Incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K dated November 4,
2009, as filed on November 5, 2009).
|
|
10
|
.36
|
|
|
|
Voting Agreement by and among JDA Software Group, Inc.,
i2 Technologies, Inc. and directors and officers of JDA
Software Group, Inc. signatory thereto dated November 4, 2009.
(Incorporated by reference to Exhibit 10.3 to the Companys
Current Report on Form 8-K dated November 4, 2009, as filed on
November 5, 2009).
|
|
10
|
.37
|
|
|
|
Commitment Letter by and among JDA Software Group, Inc., Wells
Fargo Foothill, LLC and Wells Fargo Securities, LLC dated
November 4, 2009. (Incorporated by reference to Exhibit 10.4 to
the Companys Current Report on Form 8-K dated November 4,
2009, as filed on November 5, 2009).
|
|
10
|
.38
|
|
|
|
Exchange and Registration Rights Agreement Between JDA Software
Group, Inc. and certain Purchasers represented by Goldman, Sachs
& Co. and Wells Fargo Securities, LLC, dated December 10,
2009. (Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated December 10,
2009, as filed on December 11, 2009).
|
|
10
|
.39
|
|
|
|
Escrow and Security Agreement Between JDA Software Group, Inc.
and U.S. Bank National Association dated December 10, 2009.
(Incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K dated December 10, 2009, as filed on
December 11, 2009).
|
|
10
|
.40
|
|
|
|
Stock Purchase Agreement among JDA Software Group, Inc., Thoma
Cressey Fund VII, LP and Thoma Cressey Friends Fund VII, LP,
dated September 8, 2009. (Incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K dated
September 9, 2009, as filed on September 9, 2009).
|
|
14
|
.1
|
|
|
|
Code of Business Conduct and Ethics. (Incorporated by reference
to Exhibit 14.1 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2003, as filed on March 12,
2004).
|
|
21
|
.1
|
|
|
|
Subsidiaries of Registrant. (Filed herewith).
|
|
23
|
.1
|
|
|
|
Consent of Independent Registered Public Accounting Firm. (Filed
herewith).
|
|
31
|
.1
|
|
|
|
Rule 13a-14(a) Certification of Chief Executive Officer. (Filed
herewith).
|
|
31
|
.2
|
|
|
|
Rule 13a-14(a) Certification of Chief Financial Officer. (Filed
herewith).
|
|
32
|
.1
|
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(Filed herewith).
|
|
|
|
(1) |
|
Management contracts or compensatory plans or arrangements
covering executive officers or directors of the Company. |
|
(2) |
|
Confidential treatment has been granted as to part of this
exhibit. |
|
(3) |
|
Applies to James D. Armstrong. |
|
(4) |
|
Applies to Hamish N. Brewer. |
|
(5) |
|
Applies to Senior Executive Officers with the exception of James
D. Armstrong and Kristen L. Magnuson |
101