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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
OR
     
o   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: 0-27876
JDA SOFTWARE GROUP, INC.
(Exact name of registrant as specified in its charter)
     
Delaware   86-0787377
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
14400 North 87th Street
Scottsdale, Arizona 85260
(480) 308-3000
(Address and telephone number of principal executive offices)
Indicate by check mark whether 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) had been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No 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 Acts. (Check one):
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The number of shares outstanding of the Registrant’s Common Stock, $0.01 par value, was 34,514,874 as of October 30, 2009.
 
 

 


 

FORM 10-Q
TABLE OF CONTENTS
             
        Page No.
PART I: INTERIM FINANCIAL INFORMATION        
   
 
       
Item 1.          
   
 
       
        3  
   
 
       
        4  
   
 
       
        5  
   
 
       
        6  
   
 
       
        8  
   
 
       
Item 2.       17  
   
 
       
Item 3.       39  
   
 
       
Item 4.       40  
   
 
       
PART II: OTHER INFORMATION        
   
 
       
Item 1.       41  
   
 
       
Item 1A.       41  
   
 
       
Item 2.       48  
   
 
       
Item 3.       49  
   
 
       
Item 4.       49  
   
 
       
Item 5.       49  
   
 
       
Item 6.       49  
   
 
       
Signatures     50  
 EX-10.1
 EX-10.2
 EX-10.4
 EX-10.5
 EX-31.1
 EX-31.2
 EX-32.1

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Part I: FINANCIAL INFORMATION
Item 1.   Financial Statements
JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)
                 
    September 30,     December 31,  
    2009     2008  
ASSETS
               
Current Assets:
               
Cash and cash equivalents
  $ 85,477     $ 32,696  
Accounts receivable, net
    60,236       79,353  
Income tax receivable
    2,298       316  
Deferred tax asset
    23,221       22,919  
Prepaid expenses and other current assets
    18,292       14,223  
 
           
Total current assets
    189,524       149,507  
 
           
 
               
Non-Current Assets:
               
Property and equipment, net
    41,608       43,093  
Goodwill
    135,275       135,275  
Other intangibles, net:
               
Customer lists
    104,848       121,719  
Acquired software technology
    21,206       24,160  
Trademarks
    326       1,335  
Deferred tax asset
    35,996       44,815  
Other non-current assets
    7,272       4,872  
 
           
Total non-current assets
    346,531       375,269  
 
           
 
               
Total Assets
  $ 536,055     $ 524,776  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts payable
  $ 8,574     $ 3,273  
Accrued expenses and other liabilities
    39,381       52,090  
Deferred revenue
    71,852       62,005  
 
           
Total current liabilities
    119,807       117,368  
 
           
 
               
Non-Current Liabilities:
               
Accrued exit and disposal obligations
    7,269       8,820  
Liability for uncertain tax positions
    7,447       7,093  
 
           
Total non-current liabilities
    14,716       15,913  
 
           
 
               
Total Liabilities
    134,523       133,281  
 
           
 
               
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 36,269,083 and 32,458,396 shares, respectively
    363       325  
Additional paid-in capital
    361,740       305,564  
Deferred compensation
    (7,681 )     (2,915 )
Retained earnings
    65,517       56,268  
Accumulated other comprehensive income (loss)
    3,589       (2,017 )
Less treasury stock, at cost, 1,774,006 and 1,307,317 shares, respectively
    (21,996 )     (15,730 )
 
           
Total stockholders’ equity
    401,532       341,495  
 
           
Total liabilities and stockholders’ equity
  $ 536,055     $ 524,776  
 
           
See notes to condensed consolidated financial statements.

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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except earnings per share data, unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
REVENUES:
                               
Software licenses
  $ 17,250     $ 23,011     $ 60,160     $ 58,593  
Maintenance services
    45,010       46,388       132,378       138,843  
 
                       
Product revenues
    62,260       69,399       192,538       197,436  
 
                               
Consulting services
    30,852       26,437       78,965       78,901  
Reimbursed expenses
    2,747       2,610       7,174       7,780  
 
                       
Service revenues
    33,599       29,047       86,139       86,681  
 
                               
Total revenues
    95,859       98,446       278,677       284,117  
 
                       
 
                               
COST OF REVENUES:
                               
Cost of software licenses
    580       613       2,417       2,009  
Amortization of acquired software technology
    966       1,309       2,954       4,270  
Cost of maintenance services
    10,883       11,513       32,416       34,145  
 
                       
Cost of product revenues
    12,429       13,435       37,787       40,424  
 
                               
Cost of consulting services
    22,219       20,315       61,732       61,084  
Reimbursed expenses
    2,747       2,610       7,174       7,780  
 
                       
Cost of service revenues
    24,966       22,925       68,906       68,864  
 
                               
Total cost of revenues
    37,395       36,360       106,693       109,288  
 
                       
 
                               
GROSS PROFIT
    58,464       62,086       171,984       174,829  
 
                               
OPERATING EXPENSES:
                               
Product development
    12,495       13,288       37,732       40,196  
Sales and marketing
    15,888       15,899       46,310       47,738  
General and administrative
    12,305       10,440       35,001       32,406  
Amortization of intangibles
    5,753       6,075       17,880       18,227  
Restructuring charges and adjustments to acquisition-related reserves
    2,543       399       6,705       3,954  
 
                       
Total operating expenses
    48,984       46,101       143,628       142,521  
 
                       
 
                               
OPERATING INCOME
    9,480       15,985       28,356       32,308  
 
                               
Interest expense and amortization of loan fees
    (346 )     (2,353 )     (971 )     (7,313 )
Interest income and other, net
    1,006       51       886       2,127  
 
                       
 
INCOME BEFORE INCOME TAXES
    10,140       13,683       28,271       27,122  
 
                               
Income tax provision
    3,877       5,441       10,429       10,451  
 
                       
 
                               
NET INCOME
  $ 6,263     $ 8,242     $ 17,842     $ 16,671  
 
                               
Consideration paid in excess of carrying value on the repurchase of redeemable preferred stock
    (8,593 )           (8,593 )      
 
                       
 
                               
INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS
  $ (2,330 )   $ 8,242     $ 9,249     $ 16,671  
 
                       
 
                               
EARNINGS (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS:
                               
Basic earnings (loss) per share
  $ (.07 )   $ .24     $ .26     $ .49  
 
                       
Diluted earnings (loss) per share
  $ (.07 )   $ .23     $ .26     $ .47  
 
                       
 
                               
SHARES USED TO COMPUTE EARNINGS (LOSS) PER SHARE:
                               
Basic earnings (loss) per share
    33,505       34,528       35,076       34,223  
 
                       
Diluted earnings (loss) per share
    33,505       35,432       35,329       35,261  
 
                       
See notes to condensed consolidated financial statements.

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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
NET INCOME
  $ 6,263     $ 8,242     $ 17,842     $ 16,671  
 
                               
OTHER COMPREHENSIVE INCOME (LOSS):
                               
 
                               
Foreign currency translation adjustment
    2,032       (3,797 )     5,606       (2,901 )
Change in fair value of interest rate swap
          329             159  
 
                       
Total other comprehensive income (loss)
    2,032       (3,468 )     5,606       (2,742 )
 
                       
 
                               
COMPREHENSIVE INCOME
  $ 8,295     $ 4,774     $ 23,448     $ 13,929  
 
                       
See notes to condensed consolidated financial statements.

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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
                 
    Nine Months  
    Ended September 30,  
    2009     2008  
OPERATING ACTIVITIES:
               
Net income
  $ 17,842     $ 16,671  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    28,043       29,909  
Provision for doubtful accounts
    900        
Amortization of loan origination fees
          713  
Excess tax benefits from stock-based compensation
          1,638  
Share-based compensation expense
    6,412       3,135  
Net gain on disposal of property and equipment
    (55 )      
Deferred income taxes
    8,517       8,888  
 
               
Changes in assets and liabilities:
               
Accounts receivable
    19,536       11,611  
Income tax receivable
    (1,838 )     482  
Prepaid expenses and other assets
    (3,976 )     (424 )
Accounts payable
    5,685       1,877  
Accrued expenses and other liabilities
    (11,478 )     (4,698 )
Income tax payable
    380       (628 )
Deferred revenue
    10,560       1,498  
 
           
Net cash provided by operating activities
    80,528       70,672  
 
           
 
               
INVESTING ACTIVITIES:
               
Payment of direct costs related to acquisitions
    (4,431 )     (5,434 )
Purchase of other property and equipment
    (5,541 )     (6,065 )
Proceeds from disposal of property and equipment
    62       115  
 
           
Net cash used in investing activities
    (9,910 )     (11,384 )
 
           
 
               
FINANCING ACTIVITIES:
               
Issuance of common stock — equity plans
    14,524       6,014  
Excess tax benefits from stock-based compensation
          (1,638 )
Purchase of treasury stock
    (6,266 )     (1,902 )
Redemption of redeemable preferred stock
    (28,068 )      
Principal payments on term loan agreement
          (19,086 )
Loan origination fees
          (3,375 )
 
           
Net cash used in financing activities
    (19,810 )     (19,987 )
 
           
 
               
Effect of exchange rates on cash
    1,973       (3,786 )
 
           
Net increase in cash and cash equivalents
    52,781       35,515  
 
           
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    32,696       95,288  
 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 85,477     $ 130,803  
 
           
See notes to consolidated financial statements.

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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
                 
    Nine Months  
    Ended September 30,  
    2009     2008  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
 
               
Cash paid for income taxes
  $ 3,262     $ 3,141  
 
           
Cash paid for interest
  $ 304     $ 6,803  
 
           
Cash received for income tax refunds
  $ 723     $ 502  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
               
 
               
Conversion of redeemable preferred stock to common stock
  $ 30,525     $  
See notes to consolidated financial statements.

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JDA SOFTWARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except percentages, shares, per share amounts, or as otherwise stated)
(unaudited)
1. Basis of Presentation
     The accompanying unaudited condensed consolidated financial statements of JDA Software Group, Inc. (“we” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
     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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
     The Financial Accounting Standards Board (“FASB”) has established the FASB Standard Accounting Codification (“Codification”) as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) for nongovernmental entities. The Codification, which is effective for all reporting periods that end after September 15, 2009, supersedes and replaces 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.
2. Subsequent Events
     Subsequent events have been evaluated through November 3, 2009, which is the date these financial statements were filed with the Securities and Exchange Commission. On this date, the financial statements are considered issued and widely distributed to shareholders and other financial statement users for general use and reliance in a form and format that complies with generally accepted accounted principles. Based on our evaluation, there are no subsequent events that need to be reported in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2009.
3. 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 currency 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 less than 90 days 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 September 30, 2009, we had forward exchange contracts with a notional value of $40.7 million and an associated net forward contract receivable of $577,000. 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 receivables or liabilities are included in the condensed consolidated balance sheet under the captions, “Prepaid expenses and other current assets” or “Accrued expenses and other liabilities” as appropriate. 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 $609,000 and $78,000 in the nine months ended September 30, 2009 and 2008, respectively, which are included in the condensed consolidated statements of income under the caption “Interest Income and other, net.”

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4. Goodwill and Other Intangibles, Net
     Goodwill and other intangible assets consist of the following:
                                         
            September 30, 2009        
            Gross             December 31, 2008  
    Estimated     Carrying     Accumulated     Gross Carrying     Accumulated  
    Useful Lives     Amount     Amortization     Amount     Amortization  
Goodwill
          $ 135,275     $     $ 135,275     $  
 
                               
 
                                       
Other amortized intangible assets:
                                       
 
                                       
Customer lists
    8 to 13 years       183,383       (78,535 )     183,383       (61,664 )
Acquired software technology
    8 to 15 years       65,847       (44,641 )     65,847       (41,687 )
Trademarks
    3 to 5 years       5,191       (4,865 )     5,191       (3,856 )
 
                               
 
            254,421       (128,041 )     254,421       (107,207 )
 
                               
 
                                       
 
          $ 389,696     $ (128,041 )   $ 389,696     $ (107,207 )
 
                               
     We found no indication of impairment of our goodwill balances in the nine months ended September 30, 2009 and, absent future indicators of impairment, the next annual impairment test will be performed in fourth quarter 2009. As of September 30, 2009, the goodwill balance 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 the three and nine months ended September 30, 2009 was $6.7 million and $20.8 million, respectively, compared to $7.4 million and $22.5 million, respectively in the three and nine months ended September 30, 2008. The decrease in amortization in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to certain software technology acquired from E3 Corporation in 2001 that has now been fully amortized.
     Amortization expense is reported in the condensed consolidated statements of income within cost of revenues under the caption “Amortization of acquired software technology” and in operating expenses under the caption “Amortization of intangibles.” As of September 30, 2009, we expect amortization expense for the remainder of 2009 and the next four years to be as follows:
         
Year   Amortization
2009
  $ 6,719  
2010
  $ 26,277  
2011
  $ 25,962  
2012
  $ 25,500  
2013
  $ 24,810  
5. Acquisition of Equity Interest in European-based Strategix Enterprise Technology
     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 condensed consolidated balance sheet under the caption “Other non-current assets” and in the condensed consolidated statement of cash flows as an investing activity under the caption “Payment of direct costs related to acquisitions.” We will adjust the initial investment and record our equity share of earnings or losses on a one-quarter lag beginning in fourth quarter 2009. The transaction provides for additional annual purchase price earn-outs in each of 2009, 2010 and 2011 if defined performance milestones are achieved. The Company also has 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 will now have access to our entire suite of products, and we believe such access will expand our presence with retail, manufacturing and

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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.
6. Acquisition Reserves
     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 $539,000 increase recorded in the nine months ended September 30, 2009, have been included in the consolidated statements of operations under the caption “Restructuring charges and adjustments to acquisition-related reserves.” Adjustments made in the nine months ended September 30, 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 was $11.8 million at September 30, 2009, of which $4.5 million is included in the condensed consolidated balance sheet in current liabilities under the caption “Accrued expenses and other liabilities” and $7.3 million is included in 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   Cash   Exchange   December 31,   Adjustments   Cash   Exchange   Sept 30,
Description of charge   Reserve   to 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     $ 539     $ (2,220 )   $ 293     $ 11,330  
Employee severance and termination benefits
    3,607       (767 )     (2,465 )     107       482             (3 )     26       505  
 
                                                                       
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       539       (2,223 )     319       11,835  
 
                                                                       
Direct costs
    13,125       6       (13,104 )           27             (26 )           1  
     
Total
  $ 47,394     $ (2,890 )   $ (30,350 )   $ (927 )   $ 13,227     $ 539     $ (2,249 )   $ 319     $ 11,836  
     
     As of September 30, 2009, the remaining 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 the remaining balance in the reserve for employee severance and termination benefits is related to certain foreign employees.
7. Restructuring Charges
2009 Restructuring Charges
     We recorded restructuring charges of $6.4 million in the nine months ended September 30, 2009, including $1.5 million in first quarter 2009, $2.3 million in second quarter 2009 and $2.6 million in third quarter 2009. These charges are 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 83 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 $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 September 30, 2009, approximately $5.7 million of the costs associated with these restructuring charges

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have been paid and the remaining balance of $728,000 is included in the condensed consolidated balance sheet under the caption “Accrued expenses and other current liabilities.” We expect substantially all of the remaining costs to be paid in 2009.
2008 Restructuring Charges
     We recorded restructuring charges of $8.0 million in 2008, including $794,000 in first quarter 2008, $3.3 million in second quarter 2008 and $435,000 in third quarter 2008. These charges are primarily associated with our transition of certain on-shore activities to our 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 the nine months ended September 30, 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 and adjustments to acquisition-related reserves.” As of September 30, 2009, approximately $7.5 million of the costs associated with these restructuring charges have been paid and the remaining balance of $96,000 is included in the condensed consolidated balance sheet under the caption “Accrued expenses and other current liabilities.” We expect substantially all of the remaining termination benefits and office closure costs to be paid in 2009. 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   Sept 30,
Description of charge   Reserve   Charges   Rates   2008   to Reserves   Charges   Rates   2009
 
Termination benefits
  $ 7,891     $ (5,576 )   $ (164 )   $ 2,151     $ (212 )   $ (1,839 )   $ (6 )   $ 94  
Office closures
    119       (77 )     (6 )     36       (16 )     (18 )           2  
     
Total
  $ 8,010     $ (5,653 )   $ (170 )   $ 2,187     $ (228 )   $ (1,857 )   $ (6 )   $ 96  
     
8. 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).
     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 (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 includes $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 has been 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 the three and nine months ended September 30, 2009 (see Note 12). 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.
     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 and has served as a member of our Board since 2006. Mr. Bravo resigned from our Board upon the closing of the Purchase Agreement.
9. 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

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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 Company’s 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 its applicable vesting period 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 have been approved for 2007, 2008 and 2009 (“Performance Programs”). The Performance Programs provide for contingently issuable performance share awards or restricted stock units under the 2005 Incentive Plan to executive officers and certain other members of our management team 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. A summary of the annual Performance Programs is as follows:
     2009 Performance Program. The 2009 Performance Program provides for a target award of up to 604,000 contingently issuable performance share awards if we are able to achieve a defined adjusted EBITDA performance threshold goal. Under the terms of the 2009 Performance Program, a partial pro-rata issuance of performance share awards will be made if we achieve a minimum adjusted EBITDA performance threshold. The performance share awards, if any, will be issued after the confirmation of our 2009 financial results in January 2010. The Company’s performance against the defined performance threshold goal is being evaluated on a quarterly basis throughout 2009 and share-based compensation recognized over the requisite service periods that generally run from January 13, 2009 (the date of Board approval of the 2009 Performance Program) through January 2012. A deferred compensation charge of $7.4 million 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 current estimated awards to be issued under the 2009 Performance Program. Although all necessary service and performance conditions have not been met through September 30, 2009, based on our results for the nine months ended September 30, 2009 and the outlook for the remainder of the year, we have recorded $3.7 million in stock-based compensation related to these awards in the nine months ended September 30, 2009, including $1.4 million in third quarter 2009. We currently expect to recognize approximately $4.9 million of this award as stock-based compensation in 2009.
     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 Company’s 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 September 30, 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 $2.6 million in share-based compensation expense related to these performance share awards in 2008, including $1.7 million in the nine months ended September 30, 2008, plus an additional $400,000 in the nine months ended September 30, 2009.
     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 a $85 million of adjusted EBITDA. The Company’s 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 September 30, 2009, approximately 35,000 of the restricted stock units granted under the 2007 Integration Program have been subsequently forfeited. We recognized $1.1 million in share-based compensation expense related to these performance share awards in 2008, including $858,000 in the nine months ended September 30, 2008, and an additional $683,000 in the nine months ended September 30, 2009.
     During the nine months ended September 30, 2009 and 2008, we recorded share-based compensation expense of $487,000 and $538,000, respectively related to other 2005 Incentive Plan awards.

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     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. During third quarter 2009, we recorded $249,000 in stock-based compensation related to these awards.
 
  (ii)   55,000 performance share awards will be issued to Mr. Hathaway (25,000 shares up to a maximum of 31,250 shares) and Mr. Zintak (30,000 shares up to a maximum of 37,500 shares) if we are able to achieve the adjusted EBITDA performance threshold goal defined under the 2009 Performance Program. Under the terms of the grants, a partial pro-rata issuance of performance share awards will be made if we achieve a minimum adjusted EBITDA performance threshold. The performance share awards, if any, will be issued after the confirmation of our 2009 financial results in January 2010 and will vest 50% upon the date of issuance with the remaining 50% vesting ratably over the subsequent 24-month period. The Company’s performance against the defined performance threshold goal is being evaluated on a quarterly basis throughout 2009 and share-based compensation recognized over the requisite service periods that run from their effective dates of employment through January 2012. A deferred compensation charge of $1.1 million 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 current estimated awards to be issued. Although all necessary service and performance conditions have not been met through September 30, 2009, based on our results for the nine months ended September 30, 2009 and the outlook for the remainder of the year, we have recorded $543,000 in stock-based compensation related to these awards in third quarter 2009. We currently expect to recognize approximately $724,000 of this award as stock-based compensation in 2009.
 
  (iii)   100,000 restricted stock units with a grant date fair value of $1.8 million were granted to Mr. Hathaway (50,000 shares) and Mr. Zintak (50,000 shares) that will vest in defined tranches if and when the Company achieves certain pre-defined performance milestones. No deferred 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.
     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 will be 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 the nine months ended September 30, 2009 at prices ranging from $9.52 to $17.52. We have recognized $342,000 in 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.”
10. 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 ending March 10, 2010. During the nine months ended September 30, 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.
     During the nine months ended September 30, 2009 and 2008, we also repurchased 97,056 and 107,472 common shares, respectively, tendered by employees for the payment of applicable statutory withholding taxes on the issuance of restricted shares

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under the 2005 Performance Incentive Plan. These shares were repurchased for $1.4 million at prices ranging from $9.75 to $22.37 in the nine months ended September 30, 2009 and for $1.9 million at prices ranging from $14.97 to $20.40 per share in the nine months ended September 30, 2008.
     As part of the Purchase Agreement with Thoma Bravo (see Note 8), we repurchased 100,000 shares of our common stock held by Thoma Bravo for $2.0 million, or $20 per share.
11. Income Taxes
     We calculate our tax provision on an interim basis using the year-to-date effective tax rate and record discrete tax adjustments in the reporting period in which they occur. Because the Company is subject to income taxes in numerous jurisdictions and the timing of software and consulting income by jurisdiction can vary significantly, we are unable to reliably estimate an overall annual effective tax rate. A summary of the income tax provision recorded in the three and nine months ended September 30, 2009 and 2008 is as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Income before income tax provision
  $ 10,140     $ 13,683     $ 28,271     $ 27,122  
 
                       
 
                               
Income tax provision at federal statutory rate
  $ 3,549     $ 4,789     $ 9,895     $ 9,493  
State income taxes
    306       446       831       789  
Research and development credit
    (420 )           (809 )      
Foreign tax rate differential
    (32 )     (6 )     (333 )     (291 )
Interest and penalties on uncertain tax positions
    118       108       354       323  
Other, net
    356       104       491       137  
 
                       
Income tax provision
  $ 3,877     $ 5,441     $ 10,429     $ 10,451  
 
                       
Effective tax rate
    38 %     40 %     37 %     39 %
     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 recorded in the three and nine months ended September 30, 2009 and 2008 takes into account the source of taxable income, domestically by state and internationally by country, and available income tax credits, and does not include the tax benefits realized from the employee stock options exercised during third quarter 2009 and 2008 of $1.7 million and $30,000, respectively, and during the nine months ended September 30, 2009 and 2008 of $2.4 million and $1.4 million, respectively. These 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 the nine months ended September 30, 2008, we recorded an immaterial adjustment to reverse the total windfall 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.
     As of September 30, 2009 approximately $11 million of unrecognized tax benefits, substantially all of which relates to uncertain tax positions associated with the acquisition of Manugistics, 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 the nine months ended September 30, 2009, there were no significant changes in our unrecognized tax benefits. It is reasonably possible that approximately $800,000 of unrecognized tax benefits will be recognized within the next twelve months. As of December 31, 2008, we had 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 2028. We have placed a full valuation allowance against the Arizona research and development credit carryforward as we do not expect to be able to utilize it prior to its expiration.
     We treat interest and penalties related to uncertain tax positions as a component of income tax expense. We have accrued interest and penalties related to uncertain tax positions of $354,000 and $323,000, net of taxes, in the nine months ended September

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30, 2009 and 2008, respectively. As of September 30, 2009 and December 31, 2008 there are approximately $3.1 million and $2.6 million, respectively of interest and penalties accruals related to uncertain tax positions that are reflected in the consolidated balance sheets 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. 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. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2003. The Internal Revenue Service has completed their examination of our 2007 tax year with no material adjustments. We also completed a tax examination in France during third quarter 2009 with no material adjustments. We currently have on-going tax examinations in Australia, Canada, Hong Kong, India, Malaysia and Singapore. We do not believe there will be any material adjustments from these audits.
     We have participated in the Internal Revenue Service’s Compliance Assurance Program (“CAP”) since 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 involves a review of each quarterly tax provision.
12. Earnings per Share
     During the three and nine months ended September 30, 2009 and 2008, the Company had two classes of outstanding capital stock, common stock and Series B preferred stock. The Series B preferred stock 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, Thoma Bravo exercised conversion rights on 30,250 shares of the Series B preferred stock, which resulted in the issuance of 2,200,000 shares of common 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 includes $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 has been 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 the three and nine months ended September 30, 2009 (see Note 8). The calculation of diluted earnings (loss) per share applicable to common shareholders for the three months ended September 30, 2009 excludes the assumed conversion of the Series B preferred stock into common stock as the effect would be anti-dilutive. The calculation of diluted earnings (loss) per share applicable to common shareholders for the nine months ended September 30, 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 nine-month period. The calculation of diluted earnings per share applicable to common shareholders for the three and nine months ended September 30, 2008 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 is included in the diluted earnings per share calculations for 2009 and 2008 using the treasury stock method. Diluted earnings per share applicable to common shareholders for the three months ended September 30, 2009 and 2008 exclude approximately 453,000 and 575,000, 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. Diluted earnings per share applicable to common shareholders for the nine months ended September 30, 2009 and 2008 exclude approximately 1.1 million and 629,000, 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 and 2008 exclude approximately 759,000 and 200,000 contingently issuable performance share awards or restricted stock units, respectively for which all necessary conditions have not been met (see Note 9). Earnings per share for the three and nine months ended September 30, 2009 and 2008 are calculated as follows:

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    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2009     2008     2009     2008  
Net income
  $ 6,263     $ 8,242     $ 17,842     $ 16,671  
Consideration paid in excess of carrying value of Series B
preferred stock
    (8,593 )           (8,593 )      
 
                       
Income (loss) applicable to common shareholders
  $ (2,330 )   $ 8,242     $ 9,249     $ 16,671  
 
                       
 
                               
Allocation of undistributed earnings:
                               
Common stock
  $ (2,330 )   $ 7,382     $ 8,463     $ 14,918  
Series B preferred stock
          860       786       1,753  
 
                       
 
  $ (2,330 )   $ 8,242     $ 9,249     $ 16,671  
 
                       
Weighted average shares:
                               
Common stock
    33,505       30,924       32,095       30,619  
Series B preferred stock
          3,604       2,981       3,604  
 
                       
Shares – Basic earnings per share
    33,505       34,528       35,076       34,223  
Dilutive common stock equivalents
          904       253       1,038  
 
                       
Shares – Diluted earnings per share
    33,505       35,432       35,329       35,261  
 
                       
Basic earnings (loss) per share applicable to:
                               
Common stock
  $ (.07 )   $ .24     $ .26     $ .49  
 
                       
Series B preferred stock
  $     $ .24     $ .26     $ .49  
 
                       
Diluted earnings (loss) per share applicable to common shareholders
  $ (.07 )   $ .23     $ .26     $ .47  
 
                       
13. Business Segments and Geographic Data
     We are a leading provider of sophisticated 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 more than 5,900 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: the Americas (United States, Canada and Latin America), EMEA (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 geographic distribution of our revenues and identifiable assets is as follows:
                                 
    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2009     2008     2009     2008  
Revenues:
                               
 
                               
Americas
  $ 67,059     $ 68,616     $ 193,440     $ 191,421  
Europe
    20,601       21,168       57,440       66,553  
Asia/Pacific
    8,199       8,662       27,797       26,143  
 
                       
Total revenues
  $ 95,859     $ 98,446     $ 278,677     $ 284,117  
 
                       
                 
    September 30,     December 31,  
    2009     2008  
Identifiable assets:
               
 
               
Americas
  $ 410,284     $ 402,350  
EMEA
    83,671       86,780  
Asia/Pacific
    42,100       35,646  
 
           
Total identifiable assets
  $ 536,055     $ 524,776  
 
           
     Revenues for the Americas include $58.2 million and $56.7 million from the United States in third quarter 2009 and 2008, respectively and $169.0 million and $167.4 million in the nine months ended September 30, 2009 and 2008, respectively. Identifiable assets for the Americas include $387.8 million and $379.7 million in the United States as of September 30, 2009 and December 31, 2008, respectively.
     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.
 
  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.
     A summary of the revenues, operating income and depreciation attributable to each of these reportable business segments for three and nine months ended September 30, 2009 and 2008 is as follows:
                                 
    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2009     2008     2009     2008  
Revenues:
                               
Retail
  $ 54,863     $ 53,378     $ 151,562     $ 150,398  
Manufacturing and Distribution
    33,745       39,890       103,430       118,324  
Services Industries
    7,251       5,178       23,685       15,395  
 
                       
 
  $ 95,859     $ 98,446     $ 278,677     $ 284,117  
 
                       
Operating income (loss):
                               
Retail
  $ 15,213     $ 16,114     $ 39,507     $ 40,361  
Manufacturing and Distribution
    13,841       16,317       40,785       44,984  
Services Industries
    1,027       468       7,650       1,550  
Other (see below)
    (20,601 )     (16,914 )     (59,586 )     (54,587 )
 
                       
 
  $ 9,480     $ 15,985     $ 28,356     $ 32,308  
 
                       
Depreciation:
                               
Retail
  $ 1,233     $ 1,096     $ 3,394     $ 3,363  
Manufacturing and Distribution
    665       727       2,034       2,454  
Services Industries
    256       184       809       524  
 
                       
 
  $ 2,154     $ 2,007     $ 6,237     $ 6,341  
 
                       
Other:
                               
General and administrative expenses
  $ 12,305     $ 10,440     $ 35,001     $ 32,406  
Amortization of intangible assets
    5,753       6,075       17,880       18,227  
Restructuring charge
    2,543       399       6,705       3,954  
 
                       
 
  $ 20,601     $ 16,914     $ 59,586     $ 54,587  
 
                       
     Operating income in the Retail, Manufacturing and Distribution and Services Industries 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.
Item 2:   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Significant Trends and Developments in Our Business
     Management’s Discussion and Analysis of Financial Condition and Results of Operations contains 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-Q are based upon information available to us as of the filing date of this Form 10-Q. 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

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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-Q. You should carefully consider the risks and uncertainties described under this section.
     Outlook and Guidance for Second Half 2009. The following summarizes our guidance for second half 2009 and includes our estimated ranges for software revenues and total revenues. This guidance is consistent with the guidance previously provided at the end of second quarter 2009.
                         
    Guidance for Second Half 2009   Third Quarter
    Low End   High End   2009 Results
Software revenues
  $43 million   $47 million   $17 million
Total revenues
  $195 million   $202 million   $96 million
     Quarter-to-quarter software sales continue to fluctuate, and as expected, software sales in third quarter 2009 were sequentially lower compared to second quarter 2009 due to the volume and timing of deals in our sales pipeline. We believe the current trend in software sales is positive, and as we enter fourth quarter 2009, our sales pipeline includes a strong representation of both large transactions greater than $1.0 million (“large transactions”) and mid-size software sales opportunities ranging from $300,000 to $1.0 million (“mid-size sales opportunities”), the majority of which are in the Americas region. We believe the current sales pipeline supports our ability to achieve the previously announced guidance for second half 2009, and, if software deals close as expected, our fourth quarter 2009 software sales should be sequentially higher compared to third quarter 2009 and range between $26 and $30 million.
     We believe the weak economy is driving some businesses in our target markets to focus on achieving more process and efficiency improvements in their operations and invest in solutions that improve operating margins, rather than make large infrastructure-type technology purchases. We believe this trend may continue for some time and that this scenario favors our solution offerings, in particular our planning and optimization applications, which are designed to provide a quick return on investment and focus on some of the largest profit drivers in our customer’s business. 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. While it is true that the economic crisis has stressed the weaker companies in our target market, we believe a much larger percentage will make proactive investments to strengthen their operations, and some will even take advantage of this situation to gain market share. We believe these trends have helped us achieve solid performance in a very difficult market, including record quarterly software sales in three of the past five quarters. We continue to believe our value proposition, business model and financial health are all in excellent condition.
     Maintenance services revenues were in line with our expectations in third quarter 2009, and it appears our maintenance renewals have stabilized. However, as a result of the current economic environment, we expect our average annualized maintenance retention rate to range from 91% to 92% for the full year 2009 assuming a constant currency. This range is consistent with the guidance previously provided at the end of second quarter 2009. Volatility in foreign currency exchange rates significantly impacts our maintenance services revenue. For example, unfavorable foreign exchange rate variances reduced maintenance services revenues in third quarter 2009 by $2.0 million compared to third quarter 2008, and increased maintenance services revenue by $989,000 compared to second quarter 2009. Excluding any further impacts from currency rate fluctuations, we expect maintenance services revenues for second half 2009 to be flat or slightly higher compared to first half 2009. We believe maintenance services revenues from new software sales will continue to offset the impact of attrition in our existing customer base.
     Our consulting services business has begun to show signs of recovery and we believe this part of our business has started to move in a positive direction. Consulting services is a lagging indicator for the Company, and for the first time in over a year, quarterly results from our consulting services business have improved in year-over-year comparisons. We believe our successful software sales performance in recent quarters has started to drive improvements in consulting services revenues and our service margins. Service revenues increased $4.6 million, or 16%, to $33.6 million in third quarter 2009 compared to $29.0 million in third quarter 2008, and service margins improved to 26% from 21%, respectively. Third quarter 2009 service revenues include $1.1 million of consulting work performed during second quarter 2009 that could not be recognized until third quarter 2009. Excluding the non-recurring impact of this consulting work, service revenues in third quarter 2009 increased $3.5 million or 12% compared to third

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quarter 2008 and service margins improved to 23% from 21%, respectively. The improvement in service margins is consistent with our expectation that service margins would gradually increase throughout 2009. We have realized a sharp improvement over the past two quarters in the volume of work and implementation projects executed through our Center of Excellence (“CoE”). In third quarter 2009, approximately 8% of all billable hours were delivered through the CoE compared to 7% in second quarter 2009 and less than 1% in third quarter 2008. We expect the normal decrease in billable hours during the fourth quarter holiday season and a modest sequential drop in service margins compared to the adjusted third quarter 2009 service margin that excludes the non-recurring impact of the $1.1 million in consulting services.
     We Have Announced a New Growth and Investment Strategy in China. We announced a two-year plan in second quarter 2009 to significantly increase the number of Chinese nationals available to serve existing and future customers in China. The new Chinese associates will primarily fill support, consulting and sales roles. As part of this strategy, we are opening a new services and support center in Shanghai. The center will be staffed with solution experts in both retail and supply chain management that can offer workshops on global best practices and address the growing demand from local manufacturers, wholesalers and retailers for best-of-breed integrated supply chain and merchandising solutions. We do not expect this strategy to provide immediate results in 2009; however we do believe it will drive growth in our Asia/Pacific region in 2010.
     We Have Acquired an Equity Interest in Our Leading European Reseller. 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 condensed consolidated balance sheet under the caption “Other non-current assets” and in the condensed consolidated statement of cash flows as an investing activity under the caption “Payment of direct costs related to acquisitions.” We will adjust the initial investment and record our equity share of earnings or losses on a one-quarter lag beginning in fourth quarter 2009. The transaction provides for additional annual purchase price earn-outs in each of 2009, 2010 and 2011 if defined performance milestones are achieved. The Company also has 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 will now have access to our entire suite of products, and we believe such access will 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.
     We Will Continue to Focus on Fully Leveraging Our Investment in the Center of Excellence. The CoE has significantly expanded our overall capacity and provides us with the potential to substantially reduce our operating costs without compromising the quality of our services. Although we have not yet fully utilized certain of the service capabilities of the CoE, we believe significant progress has been made in the nine months ended September 30, 2009. We are 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 in fourth quarter 2009. We also believe there are additional opportunities to further leverage the CoE in our customer support organization. The CoE is 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, most of which are in the Americas and Europe.
     We Have Repurchased All Remaining Shares of Redeemable Preferred Stock. In connection with the Manugistics acquisition in 2006, we issued 50,000 shares of Series B preferred stock to funds affiliated with 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).
     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 (or $20 per share for each of the 1,403,603 shares of common stock into which the Series B preferred stock is convertible). The agreed purchase price includes $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 has been 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 the three and nine months ended September 30, 2009 (see Note 12).

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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.
     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 and has served as a member of our Board since 2006. Mr. Bravo resigned from our Board upon the closing of the Purchase Agreement.
     We Will Continue to Actively Look for Strategic Acquisition Opportunities. Acquisitions are an integral part of our overall growth plan, and we believe the current environment is likely to create acquisition opportunities. We also believe the changes that have been implemented in our executive leadership structure (see Appointment of New Executive Officers) better position the Company to execute its growth initiatives.
     Appointment of New Executive Officers. 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. Mr. Hathaway is responsible for our finance, accounting, investor relations and information technology groups and replaces Kristen L. Magnuson who resigned effective July 5, 2009. Mr. Zintak is responsible for our worldwide sales and marketing operations, our partner and alliances programs, and industry operations, including the Company’s Services Industries business segment. We have entered into employment agreements with Mr. Hathaway and Mr. Zintak under which they receive a base salary and both are eligible to participate in our executive cash incentive plan. 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. During third quarter 2009, we recorded $249,000 in stock-based compensation related to these awards.
 
  (ii)   55,000 performance share awards will be issued to Mr. Hathaway (25,000 shares up to a maximum of 31,250 shares) and Mr. Zintak (30,000 shares up to a maximum of 37,500 shares) if we are able to achieve the adjusted EBITDA performance threshold goal defined under the 2009 Performance Program. Under the terms of the grants, a partial pro-rata issuance of performance share awards will be made if we achieve a minimum adjusted EBITDA performance threshold. The performance share awards, if any, will be issued after the confirmation of our 2009 financial results in January 2010 and will vest 50% upon the date of issuance with the remaining 50% vesting ratably over the subsequent 24-month period. The Company’s performance against the defined performance threshold goal is being evaluated on a quarterly basis throughout 2009 and share-based compensation recognized over the requisite service periods that run from their effective dates of employment through January 2012. A deferred compensation charge of $1.1 million 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 current estimated awards to be issued. Although all necessary service and performance conditions have not been met through September 30, 2009, based on our results for the nine months ended September 30, 2009 and the outlook for the remainder of the year, we have recorded $543,000 in stock-based compensation related to these awards in third quarter 2009. We currently expect to recognize approximately $724,000 of this award as stock-based compensation in 2009.
 
  (iii)   100,000 restricted stock units with a grant date fair value of $1.8 million were granted to Mr. Hathaway (50,000 shares) and Mr. Zintak (50,000 shares) that will vest in defined tranches if and when the Company achieves certain pre-defined performance milestones. No deferred 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.
     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

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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 second and third quarter 2009 restructuring charges, respectively. The following summarizes the unvested restricted stock units and performance awards granted to Ms. Magnuson and Mr. Koziol that vested immediately as of their date of resignation:
                                 
Type of Award
  Original Grant Date   Kristen L. Magnuson   Christopher J. Koziol
        (Resigned July 5, 2009)   (Resigned August 3, 2009)
Restricted Stock Units
  March 13, 2007     6,805       5,722  
Restricted Stock Units
  May 14, 2007     903       761  
Performance Shares
  February 7, 2008     9,600       7,856  
     Share-Based Compensation Expense. We recorded share-based compensation expense of $6.4 million and $3.1 million in nine months ended September 30, 2009 and 2008, respectively and as of September 30, 2009, we have included $7.7 million of deferred compensation in stockholders’ equity. A summary of total stock-based compensation by expense category for the three and nine months ended September 30, 2009 and 2008 is as follows:
                                 
    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2009     2008     2009     2008  
Cost of maintenance services
  $ 206     $ 49     $ 474     $ 205  
Cost of consulting services
    411       48       882       303  
Product development
    234       115       594       354  
Sales and marketing
    667       307       1,736       810  
General and administrative
    1,327       392       2,726       1,463  
 
                       
Total stock-based compensation
  $ 2,845     $ 911     $ 6,412     $ 3,135  
 
                       

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Results of Operations
     The following table sets forth certain selected financial information expressed as a percentage of total revenues and certain gross margin data expressed as a percentage of software license revenue, maintenance services revenue, product revenues or services revenues, as appropriate, for the three and nine months ended September 30, 2009 and 2008:
                                 
    Three Months   Nine Months
    Ended Sept. 30,   Ended Sept. 30,
    2009   2008   2009   2008
REVENUES:
                               
Software licenses
    18 %     23 %     22 %     20 %
Maintenance services
    47 %     47 %     47 %     49 %
 
                               
Product revenues
    65 %     70 %     69 %     69 %
 
                               
Consulting services
    32 %     27 %     28 %     28 %
Reimbursed expenses
    3 %     3 %     3 %     3 %
 
                               
Service revenues
    35 %     30 %     31 %     31 %
 
                               
Total revenues
    100 %     100 %     100 %     100 %
 
                               
 
                               
COST OF REVENUES:
                               
 
                               
Cost of software licenses
    1 %     1 %     1 %     1 %
Amortization of acquired software technology
    1 %     1 %     1 %     1 %
Cost of maintenance services
    11 %     12 %     11 %     12 %
 
                               
Cost of product revenues
    13 %     14 %     13 %     14 %
 
                               
Cost of consulting services
    23 %     20 %     22 %     21 %
Reimbursed expenses
    3 %     3 %     3 %     3 %
 
                               
Cost of service revenues
    26 %     23 %     25 %     24 %
 
                               
Total cost of revenues
    39 %     37 %     38 %     38 %
 
                               
 
                               
GROSS PROFIT
    61 %     63 %     62 %     62 %
 
                               
OPERATING EXPENSES:
                               
 
                               
Product development
    13 %     14 %     14 %     14 %
Sales and marketing
    16 %     16 %     17 %     17 %
General and administrative
    13 %     11 %     13 %     12 %
Amortization of intangibles
    6 %     6 %     6 %     6 %
Restructuring charges and adjustments to acquisition-related reserves
    3 %     %     2 %     1 %
 
                               
Total operating expenses
    51 %     47 %     52 %     50 %
 
                               
 
                               
OPERATING INCOME
    10 %     16 %     10 %     12 %
 
                               
Interest expense and amortization of loan fees
    %     (2 %)     %     (3 %)
Interest income and other, net
    1 %     %     %     1 %
 
                               
 
                               
INCOME BEFORE INCOME TAX PROVISION
    11 %     14 %     10 %     10 %
 
                               
Income tax provision
    4 %     6 %     4 %     4 %
 
                               
 
                               
NET INCOME
    7 %     8 %     6 %     6 %
 
                               
 
                               
Gross margin on software licenses
    97 %     97 %     96 %     97 %
Gross margin on maintenance services
    76 %     75 %     76 %     75 %
Gross margin on product revenues
    80 %     81 %     80 %     80 %
Gross margin on service revenues
    26 %     21 %     20 %     21 %

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     The following table sets forth a comparison of selected financial information, expressed as a percentage change between quarters for the three and nine months ended September 30, 2009 and 2008. In addition, the table sets forth cost of revenues and product development expenses expressed as a percentage of the related revenues:
                                                 
            % Change                     % Change          
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2009     2009 to 2008     2008     2009     2009 to 2008     2008  
Revenues:
                                               
 
                                               
Software licenses
  $ 17,250       (25 %)   $ 23,011     $ 60,160       3 %   $ 58,593  
Maintenance
    45,010       (3 %)     46,388       132,378       (5 %)     138,843  
 
                                       
Product revenues
    62,260       (10 %)     69,399       192,538       2 %     197,436  
Service revenues
    33,599       16 %     29,047       86,139       (1 %)     86,681  
 
                                       
Total revenues
    95,859       (3 %)     98,446       278,677       (2 %)     284,117  
 
                                       
 
                                               
Cost of Revenues:
                                               
 
                                               
Software licenses
    580       (5 %)     613       2,417       20 %     2,009  
Amortization of acquired software technology
    966       (26 %)     1,309       2,954       (31 %)     4,270  
Maintenance services
    10,883       (5 %)     11,513       32,416       (5 %)     34,145  
 
                                       
Product revenues
    12,429       (7 %)     13,435       37,787       (6 %)     40,424  
Service revenues
    24,966       9 %     22,925       68,906       %     68,864  
 
                                       
Total cost of revenues
    37,395       3 %     36,360       106,693       (2 %)     109,288  
 
                                       
 
                                               
Gross Profit
    58,464       (6 %)     62,086       171,984       (2 %)     174,829  
 
                                               
Operating Expenses:
                                               
 
                                               
Product development
    12,495       (6 %)     13,288       37,732       (6 %)     40,196  
Sales and marketing
    15,888       %     15,899       46,310       (3 %)     47,738  
General and administrative
    12,305       18 %     10,440       35,001       8 %     32,406  
 
                                       
 
    40,688       3 %     39,627       119,043       (1 %)     120,340  
 
                                               
Amortization of intangibles
    5,753       (5 %)     6,075       17,880       (2 %)     18,227  
Restructuring charge and adjustments to acquisition-related reserves
    2,543       537 %     399       6,705       70 %     3,954  
 
                                               
Operating Income
  $ 9,480       (41 %)   $ 15,985     $ 28,356       (12 %)   $ 32,308  
 
                                               
Cost of Revenues as a % of related revenues:
                                               
Software licenses
    3 %             3 %     4 %             3 %
Maintenance services
    24 %             25 %     24 %             25 %
Product revenues
    20 %             19 %     20 %             20 %
Service revenues
    74 %             79 %     80 %             79 %
 
                                               
Product Development as a % of product revenues
    20 %             19 %     20 %             20 %

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     The following tables set forth selected comparative financial information on revenues in our business segments and geographical regions, expressed as a percentage change between the three and nine months ended September 30, 2009 and 2008. In addition, the tables set forth the contribution of each business segment and geographical region to total revenues in the three and nine months ended September 30, 2009 and 2008, expressed as a percentage of total revenues:
                                                 
                    Manufacturing &    
    Retail   Distribution   Services Industries
    Sept. 30, 2009 vs. 2008   Sept. 30, 2009 vs. 2008   Sept. 30, 2009 vs. 2008
    Quarter   Nine Months   Quarter   Nine Months   Quarter   Nine Months
Software licenses
    (22 %)     (7 %)     (34 %)     (10 %)     (15 %)     123 %
 
Maintenance services
    1 %     (1 %)     (9 %)     (9 %)     40 %     13 %
 
                                               
Product revenues
    (8 %)     (3 %)     (14 %)     (9 %)     12 %     76 %
Service revenues
    26 %     8 %     (19 %)     (22 %)     62 %     28 %
 
                                               
Total revenues
    3 %     1 %     (15 %)     (13 %)     40 %     54 %
 
                                               
Product development
    (3 %)     2 %     (5 %)     (9 %)     (30 %)     (36 %)
Sales and marketing
    8 %     (1 %)     (27 %)     (17 %)     53 %     48 %
Operating income
    (6 %)     (2 %)     (15 %)     (9 %)     119 %     394 %
                                                                                                 
    Contribution to Total Revenues
    Retail   Manufacturing & Distribution   Services Industries
    Quarter   Nine Months   Quarter   Nine Months   Quarter   Nine Months
    2009   2008   2009   2008   2009   2008   2009   2008   2009   2008   2009   2008
 
    57 %     54 %     54 %     53 %     35 %     41 %     37 %     42 %     8 %     5 %     9 %     5 %
                                                 
    The Americas   EMEA   Asia/Pacific
    Sept. 30, 2009 vs. 2008   Sept. 30, 2009 vs. 2008   Sept. 30, 2009 vs. 2008
    Quarter   Nine Months   Quarter   Nine Months   Quarter   Nine Months
Software licenses
    (28 %)     (4 %)     16 %     (6 %)     (73 %)     67 %
Maintenance services
    (3 %)     (2 %)     (4 %)     (11 %)     (2 %)     (6 %)
 
                                               
Product revenues
    (12 %)     (3 %)     1 %     (10 %)     (27 %)     19 %
Service revenues
    20 %     9 %     (12 %)     (25 %)     37 %     (17 %)
 
                                               
Total revenues
    (2 %)     1 %     (3 %)     (14 %)     (5 %)     6 %
                                                                                                 
    Contribution to Total Revenues
    The Americas   EMEA   Asia/Pacific
    Quarter   Nine Months   Quarter   Nine Months   Quarter   Nine Months
    2009   2008   2009   2008   2009   2008   2009   2008   2009   2008   2009   2008
 
    70 %     70 %     69 %     67 %     21 %     21 %     21 %     24 %     9 %     9 %     10 %     9 %
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Software License Revenues
     Software license sales decreased 25% to $17.3 million in third quarter 2009 compared to $23.0 million in third quarter 2008, and includes decreases in software license sales of 28% and 73% in the Americas and Asia/Pacific regions, respectively, offset in part by a 16% increase in the EMEA region. The decrease in software license sales is due primarily to the volume and timing of deals in our sales pipeline. We closed one large transaction greater than $1.0 million (“large transactions”) in third quarter 2009 compared to four in third quarter 2008. We believe our competitive position remains strong, and we have maintained consistently high competitive win rates in our markets. We continue to have significant back-selling opportunities as 81% and 72% of our software license sales in third quarter 2009 and 2008, respectively, came from install-base customers. Our average sale price (“ASP”) remains strong compared to historical benchmarks and was $733,000 for the 12-month period ended September 30, 2009, compared to

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$520,000 in the 12-month period ended September 30, 2008 and to our all-time high of $819,000 in the 12-month period ended June 30, 2009, which was largely driven by one large transaction.
     Software License Results by Region. The following table summarizes software license revenues by region for third quarter 2009 and 2008:
                                 
    Three Months Ended September 30,  
Region
  2009     2008     $ Change     % Change  
Americas
  $ 12,624     $ 17,503     $ (4,879 )     (28 %)
EMEA
    4,084       3,516       568       16 %
Asia/Pacific
    542       1,992       (1,450 )     (73 %)
 
                         
Total
  $ 17,250     $ 23,011     $ (5,761 )     (25 %)
 
                         
     The decrease in software sales performance in the Americas region in third quarter 2009 compared to third quarter 2008 is due primarily to a decrease in the number of large transactions. There was one large transaction in the Americas region in third quarter 2009 compared to four in third quarter 2008. The Americas region, and in particular North America, has performed consistently in a difficult economic environment over the past four quarters and, as we enter fourth quarter, the Americas sales pipeline includes a strong representation of both large transactions and mid-size sales opportunities. The Americas region is our largest region and, as a result, we believe the software sales performance in this region will continue to be a key driver of our overall success.
     The increase in software sales in the EMEA region in third quarter 2009 compared to third quarter 2008 is due primarily to an increase in contractual revenues from a new customer that are being recognized on a percentage of completion basis. Software sales in the EMEA region appear to be improving under the direction of the new regional management team that was hired in first half 2009, and as a result of other fundamental changes to the organizational structure that have improved the performance and business development activities in the region. While there are still challenges, we believe the prospects and sales pipeline in the EMEA region have improved as we enter fourth quarter 2009.
     The Asia/Pacific region continues to perform below our expectations, and we expect the underlying trend in software sales to remain relatively soft in the region in fourth quarter 2009. The region has operated under new sales management and with a substantially new sales team during all of 2009. We believe the changes that have been made in the sales function during 2009 can ultimately improve the sales execution and performance in the Asia/Pacific region over the course of 2010.
Software License Results by Reportable Business Segment.
     Retail. Software license revenues in this reportable business segment decreased 22% in third quarter 2009 compared to third quarter 2008, due primarily to a decrease in the number of large transactions. There was one large transaction in this reportable business segment in third quarter 2009 compared to three in third quarter 2008.
     Manufacturing & Distribution. Software license revenues in this reportable business segment decreased 34% in third quarter 2009 compared to third quarter 2008, due primarily to a decrease in the number of large transactions and mid-size sales opportunities. There were no large transactions in this reportable business segment in third quarter 2009 compared to one in third quarter 2008.
     Services Industries. Software license revenues in this reportable business segment decreased 15% in third quarter 2009 compared to third quarter 2008, due primarily to a decrease in the amount of contractual revenues being recognized on a percentage of completion basis. There were no large transactions in this reportable business segment in either third quarter 2009 or 2008.
Maintenance Services
     Maintenance services revenues decreased $1.4 million, or 3%, to $45.0 million in third quarter 2009 compared to $46.4 million in third quarter 2008, and represented 47% of total revenues in both of these periods. Unfavorable foreign exchange rate variances reduced maintenance services revenues in third quarter 2009 by $2.0 million compared to third quarter 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 $600,000 in third quarter 2009 compared to third quarter 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.

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Service Revenues
     Service revenues, which include consulting services, hosting services and training revenues, net revenues from our hardware reseller business and reimbursed expenses, increased $4.6 million, or 16%, to $33.6 million in third quarter 2009 compared to $29.0 million in third quarter 2008. Third quarter 2009 service revenues include $1.1 million of consulting work performed during second quarter 2009 that could not be recognized until third quarter 2009. Excluding the non-recurring impact of this consulting work, service revenues in third quarter 2009 increased $3.5 million or 12% compared to third quarter 2008. The increase in service revenues is due to a 22% increase in billable hours, primarily from large projects in the Americas region and the Services Industries reportable business segment, offset in part by a decrease in our realized average hourly billing rates. Our global utilization rate was 61% in third quarter 2009 compared to 52% in third quarter 2008, and our realized average hourly billing rates were $193 and $198 per hour, respectively, in these periods. The decrease in realized average hourly billing rates reflects the increased utilization of service resources at the CoE. Since billing rates for CoE associates are lower than the rates typically charged for on-shore service resources, as the number of hours of work performed at the CoE increases, it will have the effect of reducing our overall realized average hourly billing rates. The overall service gross profit percentage for services provided through the CoE is typically higher, however, than the service gross profit percentage for services provided by our higher cost on-shore operations.
     Fixed bid consulting services work represented 18% of total consulting services revenue in third quarter 2009 compared to 14% in third quarter 2008.
Cost of Product Revenues
     Cost of Software Licenses. Cost of software licenses decreased $33,000 in third quarter 2009 compared to third quarter 2008. The decrease is due primarily to a decrease in certain third-party applications that we resell and royalties on embedded third-party software applications.
     Amortization of Acquired Software Technology. Amortization of acquired software technology decreased $343,000 in third quarter 2009 compared to third quarter 2008. The decrease is due primarily to a decrease in amortization on certain software technology acquired from E3 Corporation in 2001 that has now been fully amortized.
     Cost of Maintenance Services. Cost of maintenance services decreased $630,000 in third quarter 2009 compared to third quarter 2008. The decrease is due primarily to a decrease in salaries and related benefits, offset in part by an increase in stock-based incentive compensation. Although the average customer support headcount increased 2% in third quarter 2009 compared to third quarter 2008, salaries and related benefits decreased approximately $581,000 as new and replacement positions were filled with lower cost resources at the CoE. As of September 30, 2009, we had 302 employees in customer support functions compared to 304 at June 30, 2009 and 294 at September 30, 2008. The headcount totals include 55 FTE, 52 FTE and 34 FTE in customer support functions at the CoE, respectively.
Cost of Service Revenues
     Cost of service revenues increased $2.0 million in third quarter 2009 compared to third quarter 2008. The increase is due primarily to a $1.3 million increase in incentive compensation (bonuses and share-based compensation), a $605,000 increase in outside contractor costs and a $482,000 decrease in cost transfers for service personnel used to support the activities in other functional groups. In addition, although the average services headcount decreased 1% in third quarter 2009 compared to third quarter 2008, salaries and related benefits decreased $300,000 or approximately 2% as new and replacement positions were filled with lower cost resources at the CoE. As of September 30, 2009 we had 448 employees in service functions compared to 443 at June 30, 2009 and 453 at September 30, 2008. The headcount totals include 53 FTE, 50 FTE and 48 FTE in service functions at the CoE, respectively.
Gross Profit
     Gross profit dollars decreased $3.6 to $58.5 million in third quarter 2009 compared to $62.1 million in third quarter 2008. The decrease in gross profit dollars is due primarily to the $5.8 million decrease in software license sales and a $2.0 million increase in cost of service revenues, offset in part by the $4.6 million increase in service revenues. The gross margin percentage decreased to 61% in third quarter 2009 compared to 63% in third quarter 2008 due primarily to the decrease in software license revenues, which have a higher gross margin than maintenance and service revenues.
     Maintenance services gross profit dollars decreased $748,000 to $34.1 million in third quarter 2009 compared to $34.9 million in third quarter 2008, and represented 76% and 75% of maintenance services revenues in these periods, respectively. The decrease in

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maintenance services gross profit dollars is due primarily to the $1.4 million decrease in maintenance services revenues, offset in part by the $630,000 decrease in cost of maintenance services.
     Service gross profit dollars increased $2.5 million to $8.6 million in third quarter 2009 compared to $6.1 million in third quarter 2008, and represented 26% and 21% of service revenues in these periods, respectively. The increase in service gross profit dollars is due primarily to the $4.6 million increase in service revenues, offset in part by the $2.0 million increase in cost of service revenues.
Operating Expenses
     Operating expenses, excluding amortization of intangibles and restructuring charges, increased $1.1 million, or 3%, to $40.7 million in third quarter 2009 compared to $39.6 million in third quarter 2008. The increase is due primarily to a $1.4 million increase in share-based compensation, which is largely attributable to new senior executive leadership positions, a $631,000 increase in legal and accounting costs and a $600,000 increase in the provision for doubtful accounts, offset in part by a $762,000 decrease in commissions due to the Company’s lower operating performance and a decrease in salaries and related benefits as new and replacement positions were filled with lower cost resources at the CoE.
     Product Development. Product development expense decreased $793,000, or 6%, to $12.5 million in third quarter 2009 compared to $13.3 million in third quarter 2008. The decrease is due primarily to a $377,000 decrease in salaries and related benefits and a $474,000 decrease in cost transfers from other functional groups for personnel used to support product development activities. Although the average product development headcount increased nearly 10% in third quarter 2009 compared to third quarter 2008, salaries and related benefits decreased approximately 4% as new and replacement positions were filled with lower cost resources at the CoE. As of September 30, 2009 we had 581 employees in product development compared to 575 at June 30, 2009 and 535 at September 30, 2008. The headcount totals include 391 FTE, 377 FTE and 322 FTE in product development functions at the CoE, respectively.
     Sales and Marketing. Sales and marketing expense was $15.9 million in third quarter 2009, which is flat compared to third quarter 2008. Sales commissions decreased $762,000 in third quarter 2009 compared to third quarter 2008 due to the 25% decrease in software license revenues. This decrease was substantially offset by a $360,000 increase in stock-based compensation in third quarter 2009 compared to third quarter 2008, an increase in salaries and related benefits resulting from a 7% increase in average sales and marketing headcount, and a $211,000 increase in outside contractor costs. As of September 30, 2009 we had 229 employees in sales and marketing compared to 225 at June 30, 2009 and 212 at September 30, 2008, including quota carrying sales associates of 75, 72, and 63, respectively.
     General and Administrative. General and administrative expense increased $1.9 million, or 18%, to $12.3 million in third quarter 2009 compared to $10.4 million in third quarter 2008. The increase is due primarily to a $935,000 increase in share-based compensation. Our 2009 Performance Program provides for twice as many potential equity awards and related expense as the 2008 Performance Program. The increase in general and administrative expense in third quarter 2009 compared to third quarter 2008 also includes a $631,000 increase in legal and accounting fees and a $600,000 increase in the provision for doubtful accounts, offset in part by a decrease in salaries and benefits as certain new and replacement internal information technology positions were filled with lower cost resources at the CoE. As of September 30, 2009 we had 238 employees in general and administrative functions compared to 247 at June 30, 2009 and 245 at September 30, 2008. The headcount totals include 55 FTE, 51 FTE and 38 FTE in general and administrative functions at the CoE, respectively.
     Restructuring Charges and Adjustments to Acquisition-Related Reserves. We recorded a restructuring charge of $2.6 million in third quarter 2009. This charge includes termination benefits related to a workforce reduction of 14 FTE and is primarily associated with the transition of additional on-shore activities to the CoE and certain restructuring activities in the EMEA sales organization. In addition, the charge includes $1.0 million in severance and other termination benefits under a separation agreement with our former Chief Operating Officer.
     We recorded a restructuring charge of $435,000 in third quarter 2008 for termination benefits related to a workforce reduction of 7 FTE primarily in product development, consulting and sales-related positions in the United States. This charge is primarily associated with our transition of certain on-shore activities to the CoE. In addition, we reduced the Manugistics acquisition reserves by $36,000 in second quarter 2008 due to our revised estimate of the reserves for employee severance and termination benefits.

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Operating Income
     Operating income decreased $6.5 million to $9.5 million in third quarter 2009 compared to $16.0 million in third quarter 2008. The increase is due primarily to the $2.6 million decrease in revenues, a restructuring charge that was $2.1 million larger than one in the same period of 2008, and increases in total cost of revenues and total operating expenses of $1.0 million and $1.1 million, respectively.
     Operating income in our Retail reportable business segment decreased $901,000 to $15.2 million in third quarter 2009 compared to $16.1 million in third quarter 2008. The increase is due primarily to a $3.0 million decrease in product revenues and a $1.8 million increase in total cost of revenues, offset in part by $4.5 million increase in services revenues.
     Operating income in our Manufacturing and Distribution reportable business segment decreased $2.5 million to $13.8 million in third quarter 2009 compared to $16.3 million in third quarter 2008. The decrease is due primarily to decreases in product and services revenues of $4.4 million and $1.7 million, respectively, offset in part by decreases in total cost of revenues and total operating costs of $2.0 million and $1.6 million, respectively.
     Operating income in our Services Industries reportable business segment increased $559,000 to $1.0 million in third quarter 2009 compared to $468,000 in third quarter 2008. The increase is due primarily to a $1.8 million increase in services revenues, offset in part by an $1.3 million increase in total cost of revenues.
     The combined operating income reported in the reportable business segments excludes $20.6 million and $16.9 million of general and administrative expenses and other charges in third quarter 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 third quarter 2009 compared to third quarter 2008 is due primarily to the repayment in full of outstanding borrowings on our long-term debt in 2008. During 2008 we repaid the remaining $99.6 million balance of our long-term debt, including $80.5 million on October 1, 2008.
     Interest Income and Other, Net. The increase in interest income and other, net in third quarter 2009 compared to third quarter 2008 is due primarily to changes in foreign currency gains and losses and a $427,000 decrease in interest on invested funds. We recorded a net foreign currency exchange gain of $825,000 in third quarter 2009 compared to a net foreign currency exchange loss of $608,000 in third quarter 2008.
Income Tax Provision
     We calculate our tax provision on an interim basis using the year-to-date effective tax rate and record discrete tax adjustments in the reporting period in which they occur. Because the Company is subject to income taxes in numerous jurisdictions and the timing of software and consulting income by jurisdiction can vary significantly, we are unable to reliably estimate an overall annual effective tax rate. A summary of the income tax provision recorded in third quarter 2009 and 2008 is as follows:
                 
    Three Months Ended  
    September 30,  
    2009     2008  
Income before income tax provision
  $ 10,140     $ 13,683  
 
           
 
               
Income tax provision at federal statutory rate
  $ 3,549     $ 4,789  
State income taxes
    306       446  
Research and development credit
    (420 )      
Foreign tax rate differential
    (32 )     (6 )
Interest and penalties on uncertain tax positions
    118       108  
Other, net
    356       104  
 
           
Income tax provision
  $ 3,877     $ 5,441  
 
           
Effective tax rate
    38 %     40 %

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     The income tax provision recorded in the three months ended September 30, 2009 and 2008 takes into account the source of taxable income, domestically by state and internationally by country, and available income tax credits, and does not include the tax benefits realized from the employee stock options exercised during third quarter 2009 and 2008 of $1.7 million and $30,000, 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.
     The effective tax rate in third quarter 2009 is higher than the United States federal statutory rate of 35% due primarily to the mix of income by state jurisdiction, non-deductible permanent differences and interest and penalties on uncertain tax positions, offset in part by utilization of research and development credits (“R&D credits”). The effective tax rate in third quarter 2008 is higher than the United States federal statutory rate of 35% due primarily to our inability to utilize R&D credits as Congress had not yet approved an extension of the R&D credits for 2008.
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 includes $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 has been charged to retained earnings in the same manner as a dividend on preferred stock, and will reduce the income applicable to common shareholders in the calculation of earnings per share for the three months ended September 30, 2009
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Software Revenues
     Software License Results by Region. The following table summarizes software license revenues by region for the nine months ended September 30, 2009 and 2008:
                                 
    Nine Months Ended September 30,  
Region
  2009     2008     $Change     % Change  
Americas
  $ 38,086     $ 39,685     $ (1,599 )     (4 %)
EMEA
    12,266       13,025       (759 )     (6 %)
Asia/Pacific
    9,808       5,883       3,925       67 %
 
                         
Total
  $ 60,160     $ 58,593     $ 1,567       3 %
 
                         
     The decrease in software license revenues in the Americas region in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to a decrease in the number of large transactions, offset in part by an increase in mid-size software sales, particularly in North America. There were six large transactions in the Americas region in the nine months ended September 30, 2009 compared to eight in the nine months ended September 30, 2008.
     The decrease in software license revenues in the EMEA region in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to a decrease in the number of large transactions. There were two large transactions in the EMEA region in the nine months ended September 30, 2009 compared to three in the nine months ended September 30, 2008. One of the large transactions in the nine months ended September 30, 2009 is being recognized on a percentage of completion basis and to date we have recognized approximately 66% of the software license fee.
     The increase in software license revenues in the Asia/Pacific region in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to the size of one large transaction. There was one large transaction in the Asia/Pacific region in both the nine months ended September 30, 2009 and 2008.
Software License Results by Reportable Business Segment.
     Retail. Software license revenues in this reportable business segment decreased 7% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, due primarily to a decrease in the number of large transactions. There

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were six large transactions in this reportable business segment in the nine months ended September 30, 2009 compared to nine in the nine months ended September 30, 2008.
     Manufacturing & Distribution. Software license revenues in this reportable business segment decreased 10% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 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 was one large transaction in this reportable business segment in both the nine months ended September 30, 2009 and 2008.
     Services Industries. Software license revenues in this reportable business segment increased 123% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, due to an increase in the size of large transactions. There were two large transactions in this reportable business segment in both the nine months ended September 30, 2009 and 2008. One of the large transactions in the nine months ended September 30, 2009 is being recognized on a percentage of completion basis and to date we have recognized approximately 66% of the software license fee.
Maintenance Services
     Maintenance services revenues decreased $6.5 million, or 5%, to $132.4 million in the nine months ended September 30, 2009 compared to $138.8 million in the nine months ended September 30, 2008, and represented 47% and 49% of total revenues, respectively, in these periods. Unfavorable foreign exchange rate variances reduced maintenance services revenues in the nine months ended September 30, 2009 by $8.4 million compared to the nine months ended September 30, 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 $1.9 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 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, decreased $542,000, or 1%, to $86.1 million in the nine months ended September 30, 2009 compared to $86.7 million in the nine months ended September 30, 2008. The decrease is due primarily to a decrease in consulting services revenue and lower realized average hourly billing rates in the EMEA and Asia/Pacific regions and a $1.2 million decrease in non-consulting services (training and hosting services, hardware sales and reimbursed expenses), offset in part by an increase in consulting services revenue from large projects in the Americas region and the Services Industries reportable business segment.
     Fixed bid consulting services work represented 12% of total consulting services revenue in the nine months ended September 30, 2009 compared to 16% in the nine months ended September 30, 2008.
Cost of Product Revenues
     Cost of Software Licenses. Cost of software licenses increased $408,000 in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The increase is due primarily to an increase in certain third-party applications that we resell and royalties on embedded third-party software applications. A large portion of our software revenue growth is coming 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.
     Amortization of Acquired Software Technology. Amortization of acquired software technology decreased $1.3 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The decrease is due primarily to a decrease in amortization on certain software technology acquired from E3 Corporation in 2001 that has now been fully amortized.
     Cost of Maintenance Services. Cost of maintenance services decreased $1.7 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The decrease is due primarily to a decrease in salaries and related benefits and a $372,000 decrease in royalties paid to third parties who provide first level support to certain of our customers, offset in part by an increase in stock-based compensation. Although the average customer support headcount increased 5% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, salaries and related benefits decreased approximately $1.5 million as new and replacement positions were filled with lower cost resources at the CoE.

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Cost of Service Revenues
     Cost of service revenues was $68.9 million in the nine months ended September 30, 2009, which is flat compared to the nine months ended September 30, 2008. Cost of service revenues were increased in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 as a result of a $1.8 million increase in incentive compensation (bonuses and share-based compensation) and a $1.4 million increase in outside contractor costs. These additional costs were substantially offset by cost savings associated with the movement of service functions to the CoE, a $699,000 decrease in travel costs and a $619,000 decrease in reimbursed expenses. Although the average services headcount increased less than 1% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, salaries and related benefits decreased approximately $2.0 million as new and replacement positions were filled with lower cost resources at the CoE.
Gross Profit
     Gross profit dollars decreased $2.8 million to $172.0 million in the nine months ended September 30, 2009 compared to $174.8 million in the nine months ended September 30, 2008. The decrease in gross profit dollars is due primarily to the $6.5 million decrease in maintenance revenues, offset in part by $1.6 million increase in software sales and a $2.6 million decrease in total cost of revenues. The gross margin percentage was 62% in both the nine months ended September 30, 2009 and 2008.
     Maintenance services gross profit dollars decreased $4.7 million to $100.0 million in the nine months ended September 30, 2009 compared to $104.7 million in the nine months ended September 30, 2008, and represented 76% and 75% of maintenance services revenues in these periods, respectively. The decrease in maintenance services gross profit dollars is due primarily to the $6.5 million decrease in maintenance services revenues, offset in part by the $1.7 million decrease in cost of maintenance services.
     Service gross profit dollars decreased $584,000 to $17.2 million in the nine months ended September 30, 2009 compared to $17.8 million in the nine months ended September 30, 2008, and represented 20% and 21% of service revenues in these periods, respectively. The decrease in service gross profit dollars is due primarily to the $542,000 decrease in service revenues.
Operating Expenses
     Operating expenses, excluding amortization of intangibles and restructuring charges, decreased $1.3 million, or 1%, to $119.0 million in the nine months ended September 30, 2009 compared to $120.3 million in the nine months ended September 30, 2008. The decrease is due primarily to a decrease in salaries and related benefits due to new and replacement positions being filled with lower cost resources at the CoE, an $861,000 decrease in travel expenses, a decrease in cost transfers from other functional groups for personnel used to support product development activities and a $542,000 decrease in marketing-related costs, offset in part by a $2.4 million increase in share-based compensation and a $900,000 increase in the provision for doubtful accounts.
     Product Development. Product development expense decreased $2.5 million, or 6%, to $37.7 million in the nine months ended September 30, 2009 compared to $40.2 million in the nine months ended September 30, 2008. The decrease is due primarily to a decrease in salaries and related benefits, a decrease in cost transfers from other functional groups for personnel used to support product development activities and a $277,000 decrease in outside contractor costs. Although the average product development headcount increased nearly 14% in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, salaries and related benefits decreased $1.0 million, or 4%, as new and replacement positions were filled with lower cost resources at the CoE.
     Sales and Marketing. Sales and marketing expense decreased $1.4 million, or 3%, to $46.3 million in the nine months ended September 30, 2009 compared to $47.7 million in the nine months ended September 30, 2008. The decrease is due primarily to a $719,000 decrease in travel costs, a $549,000 decrease in salaries and benefits, a $542,000 decrease in marketing-related costs and a $396,000 decrease in commissions, offset in part by a $927,000 increase in share-based compensation.
     General and Administrative. General and administrative expense increased $2.6 million, or 8%, to $35.0 million in the nine months ended September 30, 2009 compared to $32.4 million in the nine months ended September 30, 2008. The increase is due primarily to a $1.3 million increase in share-based compensation. Our 2009 Performance Program provides for twice as many potential equity awards and related expense as the 2008 Performance Program. The increase in general and administrative expense in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 also includes a $900,000 increase in the provision for doubtful accounts and a $450,000 increase in legal and accounting fees, offset in part by a decrease in salaries and benefits related to a 2% decrease in average general and administrative headcount. No provision for doubtful accounts was recorded in the nine months ended September 30, 2008.

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     Restructuring Charges and Adjustments to Acquisition-Related Reserves. We recorded restructuring charges of $6.4 million in the nine months ended September 30, 2009, including $1.5 million in first quarter 2009, $2.3 million in second quarter 2009 and $2.6 million in third quarter 2009. These charges are 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 83 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 $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. We also recorded adjustments of $306,000 in the nine months ended September 30, 2009 to reduce estimated restructuring reserves established in prior years and an adjustment of $539,000 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.
     We recorded restructuring charges of $4.6 million in the nine months ended September 30, 2008, including $794,000 in first quarter 2008, $3.3 million in second quarter 2008 and $435,000 in third quarter 2008. These charges are primarily associated with our transition of certain on-shore activities to the CoE. The 2008 restructuring charges include $4.5 million for termination benefits related to a workforce reduction of 54 FTE, primarily in product development, consulting and sales-related positions across all of our geographic regions and $83,000 for office closure and integration costs of redundant office facilities. We reduced the Manugistics acquisition reserves by $604,000 in the nine months ended September 30, 2008 based on our revised estimate of the reserves for employee severance and termination benefits.
Operating Income
     Operating income decreased $4.0 million to $28.4 million in the nine months ended September 30, 2009 compared to $32.3 million in the nine months ended September 30, 2008. The decrease is due primarily to the $5.4 million decrease in revenues and a restructuring charge that was $2.8 million larger than one in the same period of 2008, offset in part by decreases of $2.6 million and $1.3 million in total cost of revenues and total operating expenses, respectively.
     Operating income in our Retail reportable business segment decreased $854,000 to $39.5 million in the nine months ended September 30, 2009 compared to $40.4 million in the nine months ended September 30, 2008. The decrease is due primarily to a $2.8 million decrease in product revenues and a $1.9 million increase in total cost of revenues, offset in part by a $4.0 million increase in service revenues.
     Operating income in our Manufacturing and Distribution reportable business segment decreased $4.2 million to $40.8 million in the nine months ended September 30, 2009 compared to $45.0 million in the nine months ended September 30, 2008. The decrease is due primarily to decreases in product revenues and services revenues of $8.3 million and $6.5 million, respectively, offset in part by a $6.5 million decrease in total cost of revenues and a 13% decrease in operating costs for product development and sales and marketing activities.
     Operating income in our Services Industries reportable business segment increased $6.1 million to $7.7 million in the nine months ended September 30, 2009 compared to $1.6 million in the nine months ended September 30, 2008. The increase is due primarily to increases in product revenues and services revenues of $6.2 million and $2.0 million, respectively, offset in part by a $2.0 million increase in total cost of revenues.
     The combined operating income reported in the reportable business segments excludes $59.6 million and $54.6 million of general and administrative expenses and other charges in the nine months ended September 30, 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 the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to the repayment in full of outstanding borrowings on our long-term debt in 2008. During 2008 we repaid the remaining $99.6 million balance of our long-term debt, including $80.5 million on October 1, 2008.
     Interest Income and Other, Net. The decrease in interest income and other, net in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to a $1.4 million decrease in interest on invested funds as we

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utilized excess cash balances held in interest bearing accounts during 2008 to repay the remaining balance of our long-term debt, and a $326,000 decrease in investment gains, offset in part by a $531,000 decrease in net foreign currency exchange gains.
Income Tax Provision
     We calculate our tax provision on an interim basis using the year-to-date effective tax rate and record discrete tax adjustments in the reporting period in which they occur. Because the Company is subject to income taxes in numerous jurisdictions and the timing of software and consulting income by jurisdiction can vary significantly, we are unable to reliably estimate an overall annual effective tax rate. A summary of the income tax provision recorded in the nine months ended September 30, 2009 and 2008 is as follows:
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Income before income tax provision
  $ 28,271     $ 27,122  
 
           
 
               
Income tax provision at federal statutory rate
  $ 9,895     $ 9,493  
State income taxes
    831       789  
Research and development credit
    (809 )      
Foreign tax rate differential
    (333 )     (291 )
Interest and penalties on uncertain tax positions
    354       323  
Other, net
    491       137  
 
           
Income tax provision
  $ 10,429     $ 10,451  
 
           
Effective tax rate
    37 %     39 %
     The income tax provision recorded in the nine months ended September 30, 2009 and 2008 takes into account the source of taxable income, domestically by state and internationally by country, and available income tax credits, and does not include the tax benefits realized from the employee stock options exercised during the nine months ended September 30, 2009 and 2008 of $2.4 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.
     The effective tax rate in the nine months ended September 30, 2009 is higher than the United States federal statutory rate of 35% due primarily to the mix of income by state jurisdiction, non-deductible permanent differences and interest and penalties on uncertain tax positions, offset in part by utilization of R&D credits. The effective tax rate in the nine months ended September 30, 2008 is higher than the United States federal statutory rate of 35% due primarily to the inability to utilize R&D credits as Congress had not yet approved an extension of the R&D credits for 2008.
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 includes $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 has been 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 the nine months ended September 30, 2009.
Liquidity and Capital Resources
     We had working capital of $69.7 million at September 30, 2009 compared to $32.1 million at December 31, 2008. The working capital balance at September 30, 2009 and December 31, 2008 includes $85.4 million and $32.7 million, respectively, in cash and cash equivalents. During the nine months ended September 30, 2009 we generated $80.5 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 received over $318 million in cash collections on accounts receivable in the nine months ended September 30, 2009 and have no outstanding debt.
     Net accounts receivable were $60.2 million, or 57 days sales outstanding (“DSO”), at September 30, 2009, which equals our historical low for the Company, compared to $79.4 million, or 67 DSO, at December 31, 2008. Our quarterly DSO results historically

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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.
     Operating activities provided cash of $80.5 million in the nine months ended September 30, 2009 compared to $70.7 million in the nine months ended September 30 2008. The principle sources of our cash flow from operations are typically net income adjusted for depreciation and amortization, collections on accounts receivable, and increases in deferred maintenance revenue. The increase in cash flow from operations in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to a $9.1 million larger increase in deferred revenue, a $7.9 million larger net decrease in accounts receivable resulting from the higher volume of software sales in 2008 and a $3.8 million larger increase in accounts payable, offset in part by a $6.8 million larger decrease in accrued expenses due to the payment of the higher commissions and bonuses resulting from the Company’s improved operating performance in 2008 and a $3.6 million increase in prepaid expenses and other current assets.
     Investing activities utilized cash of $9.9 million in the nine months ended September 30, 2009 and $11.4 million in the nine months ended September 30, 2008. The decrease in cash utilized in investing activities in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008 is due primarily to a $1.0 million decrease in payment of direct costs related to acquisitions. Cash utilized in investing activities also includes capital expenditures of $5.5 million in the nine months ended September 30, 2009 and $6.1 million in the nine months ended September 30, 2008.
     Financing activities utilized cash of $19.8 million in the nine months ended September 30, 2009 and $20.0 million in nine months ended September 30, 2008. Cash utilized by financing activities in the nine months ended September 30, 2009 includes $28.1 million for the purchase of the remaining Series B preferred stock owned by Thoma Bravo, $6.3 million in purchases of treasury stock ($2.9 million for shares of common stock repurchased pursuant to our approved stock repurchase program, $1.4 million for the repurchase of shares tendered by employees for payment of applicable statutory withholding taxes on the issuance of stock, and $2.0 million for the purchase of 100,000 shares of common stock held by Thoma Bravo), offset in part by $14.5 million in proceeds from the issuance of stock ($12.2 million from the exercise of stock options and $2.3 million from the purchase of common shares under the employee stock purchase plan). Cash utilized in financing activities in the nine months ended September 30, 2008 includes the repayment of $19.1 million of long-term debt incurred in connection with the Manugistics acquisition, $3.4 million of loan origination fees on a credit facility commitment for a previously terminated acquisition, and $1.9 million for the repurchase of shares tendered by employees for payment of applicable statutory withholding taxes on the issuance of stock, offset in part by $6.0 million in proceeds from the exercise of stock options.
     Changes in the currency exchange rates of our foreign operations had the effect of increasing cash by $2.0 million in the nine months ended September 30, 2009 and reducing cash by $3.8 million in the nine months ended September 30 2008. 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 revaluation or settlement of current foreign currency 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 less than 90 days 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 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 ending March 10, 2010. During the nine months ended September 30, 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.
     During the nine months ended September 30, 2009 and 2008, we also repurchased 97,056 and 107,472 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 for $1.4 million at prices ranging from $9.75 to $22.37 in the nine months ended September 30, 2009 and for $1.9 million at prices ranging from $14.97 to $20.40 per share in the nine months ended September 30, 2008.

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     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.
     Contractual Obligations. We currently lease office space in the Americas for 11 regional sales and support offices across the United States, Canada and Latin America, and for 12 other international sales and support offices located in major cities throughout Europe, Asia, Australia, Japan and our CoE 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.
     There have been no material changes in our contractual obligations and other commercial commitments other than in the ordinary course of business since the end of fiscal year 2008. Information regarding our contractual obligations and commercial commitments is provided in our Annual Report on Form 10-K for the year ended December 31, 2008.
     We believe our existing cash balances and net cash provided from operations will provide adequate liquidity to meet our normal operating requirements for at least the next twelve months. A major component of our positive cash flow is the collection of accounts receivable and the generation of cash earnings. In addition, there is a $50 million revolving credit facility and up to $75 million of incremental term or revolving credit facilities available to the Company. There were no amounts borrowed under these credit facilities at September 30, 2009.
Critical Accounting Policies
     There were no significant changes in our critical accounting policies during nine months ended September 30, 2009. We have identified the following policies 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. The preparation of this Quarterly Report on Form 10-Q 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.
 
      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 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

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      arrangements that provide for significant services or custom development that are essential to the software’s 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 software’s 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 Company’s 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 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.
 
    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 region’s 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

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      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.
 
    Business Combinations. All business combinations during the three years ended 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 the nine months ended September 30, 2009.
 
    Goodwill and Intangible Assets. Our business combinations have typically resulted in goodwill and other intangible assets, which 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.
 
      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 the nine months ended September 30, 2009 with respect to the goodwill allocated to our Retail, Manufacturing and Distribution and Services Industries reportable business segments and, absent future indicators of impairment, the next annual impairment test will be performed in fourth quarter 2009.
 
      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.
 
      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 lives ranging from three and five years.
 
    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

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      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.
 
    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 September 30, 2009 approximately $11 million of unrecognized tax benefits, substantially all of which relates to uncertain tax positions associated with the acquisition of Manugistics, 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 the nine months ended September 30, 2009, there were no significant changes in our unrecognized tax benefits. It is reasonably possible that approximately $800,000 of unrecognized tax benefits will be recognized within the next twelve months. As of December 31, 2008, we had 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 2028. 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 interest and penalties related to uncertain tax positions as a component of income tax expense. We have accrued interest and penalties related to uncertain tax positions of $354,000 and $323,000 in the nine months ended September 30, 2009, respectively. As of September 30, 2009 and December 31, 2008 there are approximately $3.1 million and $2.6 million, respectively of interest and penalties accruals related to uncertain tax positions that are reflected in the consolidated balance sheets 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.
 
    Stock-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 Company’s 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 its applicable vesting period 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 have been approved for 2007, 2008 and 2009 (“Performance Programs”). The Performance Programs provide for contingently issuable performance share awards or restricted stock units under the 2005 Incentive Plan to executive officers and certain other members of our management team 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%

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      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. A summary of the annual Performance Programs is as follows:
 
      Equity Inducement Awards. During third quarter 2009, we announced the appointment of Pete 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) (see Appointment of New Executive Officers under Significant Trends and Developments in Our Business).
 
      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 September 30, 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 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 will be 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 the nine months ended September 30, 2009 at prices ranging from $9.52 to $17.52. We have recognized $342,000 in 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.”
 
    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 less than 90 days 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 September 30, 2009, we had forward exchange contracts with a notional value of $40.7 million and an associated net forward contract receivable of $577,000. 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 receivables or liabilities are included in the condensed consolidated balance sheet under the captions, “Prepaid expenses and other current assets” or “Accrued expenses and other liabilities” as appropriate. 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 $609,000 and $78,000 in the nine months ended September 30, 2009 and 2008, respectively, which are included in the condensed consolidated statements of income under the caption “Interest Income and other, net.”
Item 3:   Quantitative and Qualitative Disclosures about Market Risk
     We are exposed to certain market risks in the ordinary course of our business, the most significant of which has been changes in foreign currency exchange rates. In addition, we are exposed to risk if interest rates change, and our international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures, and other regulations and restrictions.

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     Foreign currency exchange rates. Our international operations expose us to foreign currency exchange rate changes that could impact translations of foreign currency denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. International revenues represented 40% of our total revenues in 2008 and 39% in the nine months ended September 30, 2009. In addition, the identifiable net assets of our foreign operations totaled 28% of consolidated net assets at both September 30, 2009 and December 31, 2008. 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 $5.6 million in the nine months ended September 30, 2009 and a $2.9 million foreign currency exchange loss in the nine months ended September 30, 2008.
     The foreign currency exchange gain in the nine months ended September 30, 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 September 30, 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 September 30, 2009 rates would result in a currency translation loss of approximately $552,000 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 denominated assets and liabilities that exist as part of our ongoing business operations. The exposures relate primarily to the gain or loss recognized in earnings from the revaluation or 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 less than 90 days, 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 denominated assets and liabilities.
     At September 30, 2009, we had forward exchange contracts with a notional value of $40.7 million and an associated net forward contract receivable of $577,000. 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 receivables or liabilities are included in the condensed consolidated balance sheet under the captions, “Prepaid expenses and other current assets” or “Accrued expenses and other liabilities” as appropriate. 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 September 30, 2009. Based on the results of these analyses, a 10% adverse change in all foreign currency rates from the September 30, 2009 rates would result in a net forward contract liability of $3.8 million that would increase the underlying currency transaction loss on our net foreign assets. We recorded net foreign currency exchange contract gains of $609,000 and $78,000 in the nine months ended September 30, 2009 and 2008, respectively, which are included in the condensed consolidated statements of income under the caption “Interest Income and other, net.”
     Interest rates. Excess cash balances as of September 30, 2009 and December 31, 2008 are included in our operating account. Cash balances in foreign currencies overseas are also 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.”
Item 4:   Controls and Procedures
     Disclosure Controls and Procedures. 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. The phrase “disclosure controls and procedures” is defined under Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”) and refers to those controls and other procedures of an 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 Securities and Exchange Commission’s (the “Commission”) rules and forms. Disclosure controls and procedures include, without limitation, controls and

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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 issuer’s 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 September 30, 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 Commission’s rules and forms.
     Changes in Internal Control Over Financial Reporting. The term “internal control over financial reporting” is defined under Rule 13a-15(f) of the Act and refers to the process of a company that is designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s 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 issuer’s 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 September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.   Legal Proceedings
     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.
Item 1A.   Risk Factors
     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 unaudited Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations as of September 30, 2009 and for the three and nine months then ended contained elsewhere in this Form 10-Q.
Risks Related To Our Business
We may misjudge when software sales will be realized
     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 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 or executive management of our customers decide to withdraw funding from IT 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

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software sales. We believe that an increasing number of our prospects may 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. 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.
Economic, political and market conditions can adversely affect our revenue results 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 not receive significant revenues from our current research and development efforts
     Developing and localizing software is expensive and the investment in product development often involves a long payback cycle. We have and expect to continue making significant investments in software research and development and related product opportunities. Accelerated product introductions and short product life cycles require 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 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 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. 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, 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.
     We believe that significant investments in research and development are required to remain competitive, and that speed to market is critical to our success. Our future performance will depend in large part on our ability to enhance our existing products through internal development and strategic partnering, internally develop new products which leverage both our existing customers and sales force, and strategically acquire complementary solutions that add functionality for specific business processes to an enterprise-wide system. If clients experience significant problems with implementation of our products or are otherwise dissatisfied with their functionality or performance, or if they 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 solutions
     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 (i) involve more significant integration efforts in order to complete implementation, (ii) require the execution of implementation procedures in multiple layers of software, (iii) offer a customer more deployment options and other configuration choices, (iv) require more training and (v) may involve third party integrators to change business processes concurrent with the implementation of the software. Delays in the implementations of any of our software products, whether by our business partners or us, may result in client dissatisfaction, disputes with our customers, or damage to our reputation.
     In addition, 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 nine months ended September 30, 2009, approximately 18% of our consulting services revenues were derived under fixed price arrangements compared to 16% in the nine months ended September 30, 2008. If we are unable to meet our contractual obligations under fixed price contracts within our estimated cost structure, our operating results could suffer.
We may have difficulty developing our new Managed Services offering
     We have limited experience operating our applications for our customers, either on a hosted or remote basis. Although we have hired management personnel with significant expertise in operating a managed services 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.
We may not be able to protect our intellectual property
     We rely on a combination of copyright, trade secrets, patents, trademarks, confidentiality procedures, contractual restrictions and patents to protect our proprietary technology. Despite our efforts, these measures only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products, circumvent our security devices or otherwise obtain and use our intellectual property. In addition, the laws of some countries do not provide the same level of protection of our proprietary rights as do the laws of the United States or are not adequately enforced in a timely manner. If we cannot protect our proprietary technology against unauthorized copying or use, we may not remain competitive.
Third parties may claim we infringe their intellectual property rights
     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:
    be time-consuming, costly and/or result in litigation;
 
    divert management’s time and attention from developing our business;
 
    require us to pay monetary damages or involve settlement payments, either of which could be significant;
 
    require us to enter into royalty and licensing agreements that we would not normally find acceptable;
 
    require us to stop selling or to redesign certain of our products; or
 
    require us to satisfy indemnification obligations to our customers.
     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

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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. 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
     The supply chain software market continues to consolidate and this has resulted in larger, new competitors with significantly greater financial, marketing resources and more numerous technical resources than we 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 its 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, available deployment models, 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 begun to increase, utilization of CoE consulting services resources 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 are continuously faced with 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; however, we cannot guarantee these efforts will be successful or enhance our ability to compete.

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There are many risks associated with international operations
  International revenues represented 40% of our total revenues in 2008 and 39% in the nine months ended September 30, 2009. Our international business operations are subject to risks associated with international activities, including:
    Currency fluctuations, which could significantly increase with our continuing expansion of the CoE in India;
 
    Higher operating costs due to local laws or regulations;
 
    Lower consulting margins;
 
    Competing against low-cost service providers;
 
    Unexpected changes in employment and other regulatory requirements;
 
    Tariffs and other trade barriers;
 
    Costs and risks of localizing products for foreign countries;
 
    Longer accounts receivable payment cycles in certain countries;
 
    Potentially negative tax consequences;
 
    Difficulties in staffing and managing geographically disparate operations;
 
    Greater difficulty in safeguarding intellectual property, licensing and other trade restrictions;
 
    Ability to negotiate and have enforced favorable contract provisions;
 
    Repatriation of earnings;
 
    The burdens of complying with a wide variety of foreign laws;
 
    Anti-American sentiment due to military conflicts and other American policies that may be unpopular in certain regions;
 
    The challenges of finding qualified management for our international operations;
 
    General economic conditions in international markets; and
 
    Developing and deploying the skills required to service our broad set of product offerings across the markets we serve.
     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 the CoE in India. We cannot guarantee that any currency exchange strategy would be successful in avoiding exchange-related losses.
We may experience expansion delays or difficulties with our CoE in India
     We are continuing the expansion of our CoE in Hyderabad, India. In order to take advantage of cost efficiencies associated with India’s 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 significant progress has been made in the nine months ended September 30, 2009. 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 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:
    Unexpected increases in labor costs in India;
 
    Terrorist activities in the region;
 
    Inability to hire or retain sufficient personnel with the necessary skill sets to meet our needs;
 
    Economic, security and political conditions in India;
 
    Inadequate facilities or communications infrastructure; and
 
    Local law or regulatory issues.
We are dependent on key personnel
     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

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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. J. Brewer our Chief Executive Officer. 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 acquisitions
     We 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 ten acquisitions over the past eleven years, the most recent being Manugistics Group, Inc. in July 2006. The risks we commonly encounter in acquisitions include:
    If we incur significant debt to finance an acquisition and our combined business does not perform as expected, we may have difficulty complying with debt covenants;
 
    If we use our stock to make an acquisition, it will dilute existing shareholders;
 
    We may have difficulty assimilating the operations and personnel of the acquired company;
 
    The challenge to integrate new products and technologies into our sales and marketing process;
 
    We may have difficulty effectively integrating the acquired technologies or products with our current products and technologies, particularly where such products reside on different technology platforms, or overlap with our products;
 
    Our ongoing business may be disrupted by transition and integration issues;
 
    The costs and complexity of integrating the internal IT infrastructure may be greater than expected and require capital investments;
 
    We may not be able to retain key technical and managerial personnel from the acquired business;
 
    We may be unable to achieve the financial and strategic goals for the acquired and combined businesses;
 
    We may have difficulty in maintaining controls, procedures and policies during the transition and integration;
 
    Our relationships with partner companies or third-party providers of technology or products could be adversely affected;
 
    Our relationships with employees and customers could be impaired;
 
    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;
 
    As successor we may be subject to certain liabilities of our acquisition targets;
 
    We and the target company may be subject to litigation challenging the adequacy of the acquisition consideration, which may cause additional transaction delays and costs; and
 
    We may be required to sustain significant exit or impairment charges if products acquired in business combinations are unsuccessful.
We may have difficulty completing acquisitions due to adverse conditions in the credit markets
     Until the credit markets fully stabilize and approach and maintain historically normal conditions, it may be difficult for us to make acquisitions using debt. If we are unable to close financing necessary to complete an acquisition, we may incur significant termination fees and expenses similar or greater than those that occurred in our failed acquisition of i2 Technologies, Inc. in fourth quarter 2008 when we paid a $20 million termination fee and incurred approximately $10 million in expenses. If we are unable to use debt to make acquisitions, our ability to achieve significant growth may be adversely impacted.
Government contracts are subject to unique costs, terms, regulations, claims and penalties
     As a result of the Manugistics acquisition, we acquired a number of contracts with the government. Government contracts entail many unique risks, including, but not limited to, the following: (i) early termination of contracts by the government; (ii) costly and complex competitive bidding process; (iii) required extensive use of subcontractors, whose work may be deficient or not performed in a timely manner; (iv) significant penalties associated with employee misconduct in the highly regulated government marketplace; (v) changes or delays in government funding that could negatively impact contracts; and (vi) onerous contractual provisions unique to the government such as “most favored customer” provisions.

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Risks Related To Our Industry
It may be difficult to identify, adopt and develop product architecture that is compatible with emerging industry standards
     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 the consumer products supply chain
     We are dependent upon and derive most of our revenue from the 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 this market. 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. Although to date the negative effects of such declines on our business have largely been offset by customers purchasing our products to drive efficiencies in their supply chain, if economic conditions resume their earlier deterioration 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 Our Stock
Our quarterly operating results may fluctuate significantly, which could adversely affect the price of our stock
     Historically, the Company has provided annual guidance for software revenues, total revenues and GAAP earnings per share. The reason for doing this has always been that our business does not typically operate on a 90-day sales cycle, and if the period of time covered by a projection is shortened (i.e., quarterly vs. annual), we believe it increases the risk of error, particularly with respect to the estimated timing of software deals. However, in light of the global recession, we believed it was better at the outset of 2009 to give quarterly rather than annual guidance and assume the inherent risk of error, rather than speculate about the economy and how it might change over the course of the year. As a result, we limited our guidance for first and second quarter 2009 to quarterly software revenues and total revenues, using fairly wide ranges in an attempt to mitigate the risks associated with the shortened forecast window. Based on our results for first half 2009, we lengthened our forecast window and provided guidance for second half 2009 rather than quarterly guidance for third quarter 2009 or fourth quarter 2009. Our actual quarterly operating results have varied in the past and are expected to continue to vary in the future. Fluctuating quarterly results can affect our annual guidance. If our quarterly or annual operating results, particularly our software revenues, fail to meet management’s or analysts’ expectations, the price of our stock could decline. Many factors may cause these fluctuations, including:
    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;
 
    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;
 
    Competitive pricing pressures and competitive success or failure on significant transactions;
 
    Customer order deferrals resulting from the anticipation of new products, economic uncertainty, disappointing operating results by the customer, management changes, corporate reorganizations or otherwise;
 
    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;
 
    Lack of desired features and functionality in our individual products or our suite of products;
 
    Changes in the number, size or timing of new and renewal maintenance contracts or cancellations;
 
    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;
 
    Our ability to complete fixed price consulting contracts within budget;
 
    Foreign currency exchange rate fluctuations;
 
    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
 
    Our limited ability to reduce costs in the short term to compensate for any unanticipated shortfall in product or services revenue.
     Charges to earnings resulting from past or future acquisitions or internal reorganizations may also adversely affect our operating results. Under purchase accounting, we allocate the total purchase price to an acquired company’s 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. Management’s estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain. As a result, any of the following or other factors could result in material charges that would adversely affect our results:
    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;
 
    Changes in the useful lives or the amortization of identifiable intangible assets;
 
    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;
 
    Charges to income to eliminate certain JDA pre-merger activities that duplicate those of the acquired company or to reduce our cost structure; and
 
    Changes in deferred tax assets and valuation allowances.
     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 management’s 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.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities:
The following table summarizes our purchases of our own equity securities during the three months ended September 30, 2009:
                                 
                            Approximate Dollar
                    Total Number of   Value of Shares
                    Shares Purchased   That May Yet Be
                    as Part of Publicly   Purchased Under
    Total Number of   Average Price   Announced Plans   the Plans or
Period (1)   Shares Purchased   Paid per Share   or Programs   Programs
July 1-31, 2009
        $           $ 27,126,842  
August 1-31, 2009
        $           $ 27,126,842  
September 1-30, 2009
        $           $ 27,126,842  
 
                           
Total
        $                
 
                           
 
(1)   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 ending March 10, 2010.

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     As part of the Purchase Agreement with Thoma Bravo pursuant to which we repurchased all of the outstanding shares of our Series B preferred stock held by Thoma Bravo for $28.1 million in cash, we also repurchased 100,000 shares of our common stock held by Thoma Bravo for $2.0 million, or $20 per share. See Note 8 to the unaudited condensed consolidated financial statements for further information.
Item 3.   Defaults Upon Senior Securities – Not applicable
Item 4.   Submission of Matters to a Vote of Security Holders – Not applicable
Item 5.   Other Information – Not applicable
Item 6.   Exhibits – See Exhibits Index

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JDA SOFTWARE GROUP, INC.
SIGNATURES
     Pursuant to the requirements 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.
 
 
Dated: November 3, 2009  By:   /s/ Hamish N. Brewer    
  Hamish N. Brewer   
  President and Chief Executive Officer
(Principal Executive Officer) 
 
 
     
  By:   /s/ Peter S. Hathaway    
  Peter S. Hathaway   
  Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) 
 

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EXHIBIT INDEX
             
Exhibit #       Description of Document
           
 
 
3.1***
     
Third Restated Certificate of Incorporation of the Company together with Certificate of Amendment dated July 23, 2002.
           
 
 
3.2**
     
First Amended and Restated Bylaws of JDA Software Group, Inc.
           
 
 
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.
           
 
 
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.
           
 
 
10.1 (1)(2)
   
Executive Employment Agreement between Pete Hathaway and JDA Software Group, Inc. dated July 20, 2009.
           
 
 
10.2 (1)(2)
   
Executive Employment Agreement between Jason B. Zintak and JDA Software Group, Inc. dated August 18, 2009.
           
 
 
10.3******
     
Stock Purchase Agreement between JDA Software Group, Inc. and Thoma Bravo Inc. dated September 8, 2009.
           
 
 
10.4
     
Separation Agreement between JDA Software Group, Inc. and Kristen L. Magnuson dated April 6, 2009.
           
 
 
10.5
     
Separation Agreement between JDA Software Group, Inc. and Christopher J. Koziol dated August 3, 2009.
           
 
 
4.1*
     
Specimen Common Stock Certificate of JDA Software Group, Inc.
           
 
 
31.1
     
Rule 13a-14(a) Certification of Chief Executive Officer.
           
 
 
31.2
     
Rule 13a-14(a) Certification of Chief Financial Officer.
           
 
 
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.
 
(1)   Management contracts or compensatory plans or arrangements covering executive officers or directors of the Company.
 
(2)   Certain confidential information contained in this exhibit was omitted by means of redacting a portion of the text and replacing it with an asterisk. This exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the redaction pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934.
 
*   Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-748), declared effective on
March 14, 1996.
 
**   Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, as filed on August 14, 1998.
 
***   Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, as filed on November 12, 2002.
 
****   Incorporated by reference to the Company’s Current Report on Form 8-K dated July 5, 2006, as filed on July 7, 2006.
 
*****   Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006, as filed on November 9, 2006.
 
******   Incorporated by reference to the Company’s Current Report on Form 8-K dated and filed on September 9, 2009.

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