UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-28030
i2 Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 75-2294945 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| One i2 Place 11701 Luna Road Dallas, Texas |
75234 | |
| (Address of principal executive offices) | (Zip code) |
(469) 357-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of April 30, 2004 the Registrant had 436,591,785 shares of $0.00025 par value Common Stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2004
TABLE OF CONTENTS
| Page | ||||
| Item 1. |
||||
| 3 | ||||
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
4 | |||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | ||
| Item 3. |
36 | |||
| Item 4. |
36 | |||
| Item 1. |
38 | |||
| Item 2. |
40 | |||
| Item 3. |
41 | |||
| Item 4. |
41 | |||
| Item 5. |
41 | |||
| Item 6. |
41 | |||
| 43 | ||||
2
PART I – FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 259,076 | $ | 288,822 | ||||
| Restricted cash |
10,897 | 15,532 | ||||||
| Short-term investments, at fair value |
5,000 | 5,000 | ||||||
| Accounts receivable, net of allowance for doubtful accounts |
41,156 | 36,746 | ||||||
| Deferred contract costs |
6,889 | 6,995 | ||||||
| Other current assets |
24,762 | 27,529 | ||||||
| Total current assets |
347,780 | 380,624 | ||||||
| Long-term investments, at fair value |
14,719 | — | ||||||
| Premises and equipment, net |
25,000 | 28,483 | ||||||
| Intangible assets, net |
4,099 | 4,647 | ||||||
| Goodwill |
16,620 | 16,620 | ||||||
| Total assets |
$ | 408,218 | $ | 430,374 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 19,079 | $ | 20,853 | ||||
| Accrued liabilities |
114,093 | 109,499 | ||||||
| Accrued compensation and related expenses |
26,994 | 27,380 | ||||||
| Deferred tax liabilities |
9 | 9 | ||||||
| Deferred revenue |
216,888 | 212,753 | ||||||
| Total current liabilities |
377,063 | 370,494 | ||||||
| Other long-term liabilities |
15 | 18 | ||||||
| Long-term debt |
356,800 | 356,800 | ||||||
| Total liabilities |
733,878 | 727,312 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ deficit: |
||||||||
| Preferred stock, $0.001 par value, 5,000 shares authorized, none issued |
— | — | ||||||
| Series A junior participating preferred stock, $0.001 par value, 2,000 shares authorized, none issued |
— | — | ||||||
| Common stock, $0.00025 par value, 2,000,000 shares authorized, 434,615 and 434,133 shares issued and outstanding |
109 | 109 | ||||||
| Additional paid-in capital |
10,377,641 | 10,376,937 | ||||||
| Accumulated other comprehensive income |
762 | 217 | ||||||
| Accumulated deficit |
(10,704,172 | ) | (10,674,201 | ) | ||||
| Net stockholders’ deficit |
(325,660 | ) | (296,938 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 408,218 | $ | 430,374 | ||||
See accompanying notes to condensed consolidated financial statements
3
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues: |
||||||||
| Software licenses |
$ | 12,388 | $ | 19,149 | ||||
| Development services |
6,617 | 9,289 | ||||||
| Contract |
5,970 | 56,593 | ||||||
| Services |
24,973 | 35,377 | ||||||
| Reimbursable expenses |
2,670 | 3,196 | ||||||
| Maintenance |
31,004 | 34,345 | ||||||
| Total revenues |
83,622 | 157,949 | ||||||
| Costs and expenses: |
||||||||
| Cost of revenues: |
||||||||
| Software licenses |
3,177 | 283 | ||||||
| Development services |
6,606 | 6,221 | ||||||
| Contract |
106 | 7,197 | ||||||
| Services and maintenance |
29,307 | 33,578 | ||||||
| Reimbursable expenses |
2,670 | 3,196 | ||||||
| Amortization of acquired technology |
145 | 145 | ||||||
| Sales and marketing |
19,921 | 23,649 | ||||||
| Research and development |
19,691 | 20,777 | ||||||
| General and administrative |
25,461 | 14,379 | ||||||
| Amortization of intangibles |
39 | 423 | ||||||
| Restructuring charges and adjustments |
575 | 253 | ||||||
| Total costs and expenses |
107,698 | 110,101 | ||||||
| Operating income (loss) |
(24,076 | ) | 47,848 | |||||
| Non-operating expense, net |
(5,091 | ) | (5,018 | ) | ||||
| Income (loss) before income taxes |
(29,167 | ) | 42,830 | |||||
| Income tax expense |
809 | 1,498 | ||||||
| Net income (loss) |
$ | (29,976 | ) | $ | 41,332 | |||
| Net income (loss) per common share: |
||||||||
| Basic |
$ | (0.07 | ) | $ | 0.10 | |||
| Diluted |
$ | (0.07 | ) | $ | 0.09 | |||
| Weighted-average common shares outstanding: |
||||||||
| Basic |
434,439 | 432,850 | ||||||
| Diluted |
434,439 | 477,524 | ||||||
| Comprehensive income (loss): |
||||||||
| Net income (loss) |
$ | (29,976 | ) | $ | 41,332 | |||
| Other comprehensive income: |
||||||||
| Unrealized gain on available-for-sale securities arising during the period |
14 | 121 | ||||||
| Foreign currency translation adjustments |
531 | 279 | ||||||
| Tax effect of other comprehensive income loss |
— | (44 | ) | |||||
| Total other comprehensive income |
545 | 356 | ||||||
| Total comprehensive income (loss) |
$ | (29,431 | ) | $ | 41,688 | |||
See accompanying notes to condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (29,976 | ) | $ | 41,332 | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
4,036 | 7,394 | ||||||
| Write-down of equipment |
282 | 349 | ||||||
| Provision (credit) for bad debts charged to costs and expenses |
(784 | ) | (594 | ) | ||||
| Amortization of deferred compensation |
338 | 352 | ||||||
| Deferred income taxes |
(3 | ) | 30 | |||||
| Changes in operating assets and liabilities: |
||||||||
| Restricted cash |
4,635 | (34 | ) | |||||
| Accounts receivable, net |
(3,680 | ) | 7,855 | |||||
| Deferred contract costs |
106 | 1,941 | ||||||
| Other assets |
2,666 | (2,051 | ) | |||||
| Accounts payable |
(1,809 | ) | (405 | ) | ||||
| Accrued liabilities |
4,502 | (20,679 | ) | |||||
| Accrued compensation and related expenses |
(479 | ) | (11,542 | ) | ||||
| Deferred revenue |
3,995 | (39,729 | ) | |||||
| Net cash used in operating activities |
(16,171 | ) | (15,781 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of premises and equipment |
(544 | ) | (97 | ) | ||||
| Proceeds from sales of long-term investments |
— | 5,000 | ||||||
| Purchases of long-term investments |
(14,705 | ) | — | |||||
| Net cash used in investing activities |
(15,249 | ) | 4,903 | |||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from option exercises and stock issued under employee stock purchase plans |
365 | 1 | ||||||
| Net cash provided by financing activities |
365 | 1 | ||||||
| Effect of exchange rates on cash |
1,309 | 142 | ||||||
| Net change in cash and cash equivalents |
(29,746 | ) | (10,735 | ) | ||||
| Cash and cash equivalents at beginning of period |
288,822 | 402,177 | ||||||
| Cash and cash equivalents at end of period |
$ | 259,076 | $ | 391,442 | ||||
See accompanying notes to condensed consolidated financial statements
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table dollars in thousands, except per share data)
(Unaudited)
1. Summary of Significant Accounting Policies
Nature of Operations. We are a provider of enterprise supply chain management solutions, including various supply chain software and service offerings. We operate our business in one business segment. Supply chain management is the set of processes, technology and expertise involved in managing supply, demand and fulfillment throughout divisions within a company and with its customers, suppliers and partners. The goals of our solutions include increasing supply chain efficiency and enhancing customer and supplier relationships by managing variability, reducing complexity, improving operational visibility, increasing operating velocity and integrating planning and execution. Our offerings help customers maximize efficiency in relation to spend, production, revenue and profit, fulfillment and logistics performance. Our application software is often bundled with other offerings, including content and services we provide such as business optimization and technical consulting, training, solution maintenance, content management, software upgrades and development.
Basis of Presentation. Our unaudited condensed consolidated financial statements have been prepared by management and reflect all adjustments (all of which are normal and recurring in nature, with the exception of certain accruals discussed in Note 7, Commitments and Contingencies) that, in the opinion of management, are necessary for a fair presentation of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2004. Certain information and disclosures normally included in financial statements prepared in accor