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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-27876

JDA SOFTWARE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		86-0787377 (I.R.S. Employer Identification No.)

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 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 Rule12b-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 41,799,525 as of August 5, 2010.

 

 

JDA SOFTWARE GROUP, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I: INTERIM FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2010 and June 30, 2009			4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2010 and June 30, 2009			5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and June 30, 2009			6
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			51
Item 4. Controls and Procedures			52
PART II: OTHER INFORMATION
Item 1. Legal Proceedings			53
Item 1A. Risk Factors			54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			66
Item 3. Defaults Upon Senior Securities			66
Item 4. Reserved			66
Item 5. Other Information			66
Item 6. Exhibits			66
Signature			67
EX-3.1
EX-31.1
EX-31.2
EX-32.1

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

JDA SOFTWARE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts, unaudited)

		June 30,				December 31,
		2010				2009
ASSETS
Current Assets:
Cash and cash equivalents		$	146,179			$	75,974
Restricted cash			11,780				287,875
Accounts receivable, net			116,091				68,883
Deferred tax asset			57,630				19,142
Prepaid expenses and other current assets			33,251				15,667
Total current assets			364,931				467,541
Non-Current Assets:
Property and equipment, net			44,648				40,842
Goodwill			197,813				135,275
Other Intangibles, net:
Customer-based intangibles			156,614				99,264
Technology-based intangibles			41,161				20,240
Marketing-based intangibles			13,226				157
Deferred tax asset			269,421				44,350
Other non-current assets			17,381				13,997
Total non-current assets			740,264				354,125
Total Assets		$	1,105,195			$	821,666
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	14,423			$	7,192
Accrued expenses and other liabilities			68,840				45,523
Income taxes payable			3,152				3,489
Deferred revenue			121,818				65,665
Total current liabilities			208,233				121,869
Commitments and Contingencies (Note 8)
Non-Current Liabilities:
Long-term debt			272,451				272,250
Accrued exit and disposal obligations			6,626				7,341
Liability for uncertain tax positions			10,306				8,770
Deferred revenue			14,601				—
Total non-current liabilities			303,984				288,361
Total Liabilities			512,217				410,230
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 43,628,080 and 36,323,245 shares, respectively			436				363
Additional paid-in capital			554,579				361,362
Deferred compensation			(12,783	)			(5,297	)
Retained earnings			77,612				74,014
Accumulated other comprehensive income (loss)			(1,014	)			3,267
Less treasury stock, at cost, 1,920,105 and 1,785,715 shares, respectively			(25,852	)			(22,273	)
Total stockholders’ equity			592,978				411,436
Total liabilities and stockholders’ equity		$	1,105,195			$	821,666

See notes to condensed consolidated financial statements.

JDA SOFTWARE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except earnings per share data, unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
REVENUES:
Software licenses		$	32,152			$	26,589			$	56,589			$	40,946
Subscriptions and other recurring revenues			5,806				996				10,093				1,964
Maintenance services			60,594				44,371				117,654				87,368
Product revenues			98,552				71,956				184,336				130,278
Consulting services			55,255				25,079				98,257				48,113
Reimbursed expenses			4,566				2,450				7,411				4,427
Service revenues			59,821				27,529				105,668				52,540
Total revenues			158,373				99,485				290,004				182,818
COST OF REVENUES:
Cost of software licenses			909				1,235				1,917				1,837
Amortization of acquired software technology			1,803				980				3,379				1,988
Cost of maintenance services			14,227				10,984				26,260				21,533
Cost of product revenues			16,939				13,199				31,556				25,358
Cost of consulting services			40,742				20,131				76,011				39,513
Reimbursed expenses			4,566				2,450				7,411				4,427
Cost of service revenues			45,308				22,581				83,422				43,940
Total cost of revenues			62,247				35,780				114,978				69,298
GROSS PROFIT			96,126				63,705				175,026				113,520
OPERATING EXPENSES:
Product development			19,481				12,664				36,758				25,237
Sales and marketing			24,460				16,170				45,572				30,422
General and administrative			19,801				11,670				37,498				22,696
Amortization of intangibles			9,915				6,051				18,481				12,127
Restructuring charges			4,548				2,732				12,306				4,162
Acquisition-related costs			865				—				7,608				—
Total operating expenses			79,070				49,287				158,223				94,644
OPERATING INCOME			17,056				14,418				16,803				18,876
Interest expense and amortization of loan fees			(6,182	)			(386	)			(12,268	)			(625	)
Interest income and other, net			(642	)			123				481				(120	)
INCOME BEFORE INCOME TAXES			10,232				14,155				5,016				18,131
Income tax provision			2,366				5,220				1,418				6,552
NET INCOME		$	7,866			$	8,935			$	3,598			$	11,579
BASIC EARNINGS PER SHARE		$	.19			$	.26			$	.09			$	.33
DILUTED EARNINGS PER SHARE		$	.19			$	.25			$	.09			$	.33
SHARES USED TO COMPUTE:
Basic earnings per share			41,672				35,004				40,514				34,983
Diluted earnings per share			42,265				35,232				41,151				35,154

See notes to condensed consolidated financial statements.

JDA SOFTWARE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
NET INCOME		$	7,866			$	8,935			$	3,598			$	11,579
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment			(3,720	)			4,188				(4,281	)			3,574
Total other comprehensive income (loss)			(3,720	)			4,188				(4,281	)			3,574
COMPREHENSIVE INCOME (LOSS)		$	4,146			$	13,123			$	(683	)		$	15,153

See notes to condensed consolidated financial statements.

JDA SOFTWARE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

		Six Months Ended
		June 30,
		2010				2009
OPERATING ACTIVITIES:
Net Income		$	3,598			$	11,579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			28,010				18,842
Provision for doubtful accounts			500				300
Amortization of loan fees			922				—
Share-based compensation expense			6,569				3,567
Net gain on disposal of property and equipment			(9	)			(54	)
Deferred income taxes			(304	)			5,670
Changes in assets and liabilities, net of effects from business acquisitions:
Accounts receivable			(14,856	)			16,820
Income tax receivable			2,031				(1,434	)
Prepaid expenses and other current assets			(13,911	)			(6,882	)
Accounts payable			3,634				7,139
Accrued expenses and other liabilities			(14,075	)			(13,507	)
Income tax payable			(3,737	)			365
Deferred revenue			11,196				18,107
Net cash provided by operating activities		$	9,568			$	60,512
INVESTING ACTIVITIES:
Change in restricted cash		$	276,095			$	—
Purchase of i2 Technologies, Inc			(213,427	)			—
Payment of direct costs related to acquisitions			(1,639	)			(1,489	)
Purchase of other property and equipment			(6,397	)			(1,407	)
Proceeds from disposal of property and equipment			349				54
Net cash provided by (used in) investing activities		$	54,981			$	(2,842	)
FINANCING ACTIVITIES:
Issuance of common stock under equity plans		$	11,610			$	4,642
Purchase of treasury stock and other, net			(3,758	)			(3,899	)
Net cash provided by financing activities		$	7,852			$	743
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS			(2,196	)			1,566
Net increase in cash and cash equivalents			70,205				59,979
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			75,974				32,696
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	146,179			$	92,675

See notes to condensed consolidated financial statements.

JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

		Six Months Ended
		June 30,
		2010				2009
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes		$	6,244			$	2,260
Cash paid for interest		$	12,227			$	98
Cash received for income tax refunds		$	1,458			$	722
ACQUISITION OF i2 TECHNOLOGIES, INC.
Identifiable assets acquired:
Current assets acquired		$	300,456
Property and equipment acquired			3,115
Customer-based intangibles			74,600
Technology-based intangibles			24,300
Marketing-based intangibles			14,300
Long-term deferred tax assets acquired			221,060
Other non-current assets acquired			3,925
Total identifiable assets acquired			641,756
Goodwill			62,538
Total assets acquired			704,294
Liabilities assumed:
Deferred revenue assumed			(59,095	)
Other current liabilities assumed			(44,251	)
Non-current liabilities assumed			(1,194	)
Total liabilities assumed			(104,540	)
Net assets acquired from i2 Technologies, Inc.		$	599,754
MERGER CONSIDERATION TO ACQUIRE i2 TECHNOLOGIES, INC.
Fair value of JDA common stock issued as merger consideration		$	167,979
Cash merger consideration			431,775
Total merger consideration to acquire i2 Technologies, Inc.		$	599,754
Cash merger consideration		$	431,775
Less cash acquired from i2 Technologies			218,348
Cash expended to acquire i2 Technologies, Inc.		$	213,427

See notes to condensed consolidated financial statements.

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 the FASB Standard Accounting Codification (“Codification”), which is the authoritative source of generally accepted accounting principles (“GAAP”) for nongovernmental entities in the United States. The interim financial statements 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 six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. 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, 2009.

          The preparation of financial statements in conformity with the Codification 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.

          Certain reclassifications have been made to the consolidated statements of operations for the three and six months ended June 30, 2009 to conform to the current presentation. In the consolidated statement of income, we have reported subscription revenues under the caption “Subscriptions and other recurring revenues.” Subscription revenues were previously reported in revenues under the caption “Software licenses” and were not material.

2. Acquisition of i2 Technologies, Inc.

          On January 28, 2010, we completed the acquisition of i2 Technologies, Inc. (“i2”) for approximately $599.8 million, which includes cash consideration of approximately $431.8 million and the issuance of approximately 6.2 million shares of our common stock with an acquisition date fair value of approximately $168.0 million, or $26.88 per share, determined on the basis of the closing market price of our common stock on the date of acquisition (the “Merger”). The combination of JDA and i2 creates a market leader in the supply chain management market. We believe this combination provides JDA with (i) a strong, complementary presence in new markets such as discrete manufacturing; (ii) enhanced scale; (iii) a more diversified, global customer base of over 6,000 customers; (iv) a comprehensive product suite that provides end-to-end supply chain management (“SCM”) solutions; (v) incremental revenue opportunities associated with cross-selling of products and services among our existing customer base; and (vi) an ability to increase profitability through net cost synergies within twelve months after the Merger.

          Under the terms of the Merger Agreement, each issued and outstanding share of i2 common stock was converted into the right to receive $12.70 in cash and 0.2562 of a share of JDA common stock (the “Merger Consideration”). Holders of i2 common stock did not receive any fractional JDA shares in the Merger. Instead, the total number of shares that each holder of i2 common stock received in the Merger was rounded down to the nearest whole number, and JDA paid cash for any resulting fractional share determined by multiplying the fraction by $26.65, which represents the average closing price of JDA common stock on Nasdaq for the five consecutive trading days ending three days prior to the effective date of the Merger.

          Each outstanding option to acquire i2 common stock was canceled and terminated at the effective time of the Merger and converted into the right to receive the Merger Consideration with respect to the number of shares of i2 common stock that would have been issuable upon a net exercise of such option, assuming the market value of the i2 common stock at the time of such exercise was equal to the value of the Merger Consideration as of the close of trading on the day immediately prior to the effective date of the Merger. Any outstanding option with a per share exercise price that was greater than or equal to such amount was cancelled and terminated and no payment was made with respect thereto. In addition, each i2 restricted stock unit award outstanding immediately prior to the effective time of the Merger was fully vested and cancelled, and each holder of such awards became entitled to receive the Merger Consideration for each share of i2 common stock into which the vested portion of the awards would otherwise have been convertible. Each i2 restricted stock award was vested immediately prior to the effective time of the Merger and was entitled to receive the Merger Consideration.

          Each outstanding share of i2’s Series B Preferred Stock was converted into the right to receive $1,100 per share in cash, which is equal to the stated change of control liquidation value of each such share plus all accrued and unpaid dividends thereon through the effective date of the Merger.

          At the effective time of the Merger, each outstanding warrant to purchase shares of i2’s common stock ceased to represent a right to acquire i2’s common stock and was assumed by JDA and converted into a warrant with the right to receive upon exercise, the Merger Consideration that would have been received as a holder of i2 common stock if such i2 warrant had been exercised prior to the effective time of the Merger. In total, 420,237 warrants to purchase i2 common stock at an exercise price of $15.4675 were assumed and converted into the right to receive the Merger Consideration upon exercise, including 107,663 shares of JDA common stock.

          The Merger is being accounted for using the acquisition method of accounting, with JDA identified as the acquirer, and the operating results of i2 have been included in our consolidated financial statements from the date of acquisition. Under the acquisition method of accounting, all assets acquired and liabilities assumed will be recorded at their respective acquisition-date fair values. We initially recorded $66.0 million of goodwill during the three months ended March 31, 2010 and made subsequent adjustments of $3.5 million during the three months ended June 30, 2010 to reduce the goodwill balance to $62.5 million (see Note 4). None of the goodwill recorded in the i2 acquisition is deductible for tax purposes. In addition, through June 30, 2010 we have recorded $113.2 million in other intangible assets, including $74.6 million for customer-based intangibles (maintenance relationships and future technological enhancements, service relationships and a covenant not-to-compete), $24.3 million for technology-based intangibles consisting of developed technology and $14.3 million for marketing-based intangibles consisting of trademark and trade names. The estimated weighted average amortization period for all intangible assets acquired in this transaction that are subject to amortization is approximately six years.

          The purchase price allocation has not been finalized. The preliminary allocation of the purchase price as of June 30, 2010 is based on the best estimates of management and is subject to revision as the final fair values of, and allocated purchase price to, the acquired assets and assumed liabilities in the acquisition of i2 are completed over the remainder of 2010. We currently anticipate that additional adjustments may still be made to the fair value of acquired deferred revenue balances, tax-related accounts, amortization of intangible assets and the residual amount allocated to goodwill.

          The following table summarizes our preliminary estimate through June 30, 2010 of the fair values of the assets acquired and liabilities assumed at the date of acquisition.

								Weighted Average
						Useful Life		Amortization Period
Cash		$	218,348
Trade accounts receivable acquired			33,419
Other current assets acquired			48,689
Property and equipment acquired			3,115
Customer-based intangibles			74,600			1 to 7 years		6 years
Technology-based intangibles			24,300			7 years		7 years
Marketing-based intangibles			14,300			5 years		5 years
Long-term deferred tax assets acquired			221,060
Other non-current assets			3,925
Total assets acquired			641,756
Goodwill			62,538
Total assets acquired			704,294
Deferred revenue assumed			(59,095	)
Other current liabilities assumed			(44,251	)
Other non-current liabilities assumed			(1,194	)
Total liabilities assumed			(104,540	)
Net assets acquired from i2 Technologies, Inc		$	599,754

          As of the date of the acquisition, the gross contractual amount of trade accounts receivable acquired were $36.3 million, of which approximately $2.8 million is expected to be uncollectable.

          Contingent liabilities were recorded in purchase accounting for certain assumed customer and labor disputes in the amounts of $7.7 million and $268,000, respectively. The potential undiscounted amount of all future payments that we could be required to make to settle the customer and labor disputes is estimated to range between approximately $5.2 million and $242.0 million and $73,000 and $1.2 million, respectively. See Note 8 for a discussion of legal proceedings.

          The following unaudited pro-forma consolidated results of operations for the six months ended June 30, 2010 and 2009 assume the i2 acquisition occurred as of January 1 of each year. The pro-forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been completed as of the beginning of each of the periods presented, nor are they necessarily indicative of future consolidated results.

		Six Months Ended				Six Months Ended
		June 30, 2010				June 30, 2009
Total revenues		$	305,030			$	296,249
Net income (loss)		$	(10,848	)		$	26,980
Basic earnings (loss) per share		$	(0.26	)		$	0.58
Diluted earnings (loss) per share		$	(0.26	)		$	0.58

          The amounts of i2 revenues and earnings (loss) included in our consolidated statements of operations for the six months ended June 30, 2010, and the revenues and earnings (loss) of the combined entity had the acquisition date been January 1, 2009 or January 1, 2010 are as follows:

		Revenues				Earnings (Loss)
i2 operating results from January 28, 2010 to June 30, 2010		$	90,195			$	*
i2 operating results from January 1, 2010 to June 30, 2010		$	105,221			$	*
i2 operating results from January 1, 2009 to June 30, 2009		$	113,431			$	11,663

          Through June 30, 2010, we have expensed approximately $12.4 million of costs related to the acquisition of i2, including $865,000 and $7.6 million in the three and six months ended June 30, 2010, respectively. These costs, which consist primarily of investment banking fees, commitment fees on unused bank financing, legal and accounting fees, are included in the consolidated statements of income under the caption “Acquisition-related costs.”

          On December 10, 2009, we issued $275 million of five-year, 8.0% Senior Notes (the “Senior Notes”) at an initial offering price of 98.988% of the principal amount. The net proceeds from the sale of the Senior Notes, which exclude the original issue discount ($2.8 million) and other debt issuance costs ($7.1 million) were placed in escrow and subsequently used, together with cash on hand at JDA and i2, to fund the cash portion of the merger consideration in the acquisition of i2 (see Note 7).

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 June 30, 2010, we had forward exchange contracts with a notional value of $72.3 million and an associated net forward contract receivable of $545,000 determined on the basis of Level 2 inputs. At December 31, 2009, we had forward exchange contracts with a notional value of $37.9 million and an associated net forward contract liability of $354,000 determined on the basis of Level 2 inputs. 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 a net foreign currency exchange loss of $958,000 in the three months ended June 30, 2010 and a net foreign currency exchange gain of $102,000 in the three months ended June 30, 2009. In the six months ended June 30, 2010 we recorded a net foreign currency exchange contract gain of $3,000 compared to a net foreign

currency exchange contract loss of $216,000 in the six months ended June 30, 2009. Net foreign currency exchange gains (losses) are included in the condensed consolidated statements of operations under the caption “Interest Income and other, net.”

4. Goodwill and Other Intangibles, net

     Goodwill and other intangible assets consist of the following:

						June 30, 2010								December 31, 2009
		Estimated Useful				Gross Carrying				Accumulated				Gross Carrying				Accumulated
		Lives				Amount				Amortization				Amount				Amortization
Goodwill:
Gross goodwill						$	207,526			$	—			$	144,988			$	—
Accumulated impairment losses							(9,713	)							(9,713	)
Goodwill, net of impairment losses						$	197,813							$	135,275
Identifiable intangible assets:
Customer-based intangible assets			1 to 13 years				257,983				(101,369	)			183,383				(84,119	)
Technology-based intangible assets			7 to 15 years				90,147				(48,986	)			65,847				(45,607	)
Marketing-based intangible assets			5 years				19,491				(6,265	)			5,191				(5,034	)
							367,621				(156,620	)			254,421				(134,760	)
						$	565,434			$	(156,620	)		$	389,696			$	(134,760	)

          Goodwill. We initially recorded $66.0 million of goodwill during the three months ended March 31, 2010 in connection with our acquisition of i2 (see Note 2), all of which has been allocated to our Supply Chain reportable business segmenting unit (see Note 13). Subsequent adjustments of $3.5 million were recorded during the three months ended June 30, 2010 to reduce the goodwill balance to $62.5 million. These adjustments were primarily made to (i) increase the fair value of assumed accounts receivable, (ii) reduce the fair value of customer-based and technology-based intangible assets, (iii) decrease the fair value of deferred revenue, (iv) record long-term deferred tax assets and current income tax payable liabilities, and (v) reduce the liability for uncertain tax positions. The purchase price allocation has not been finalized. The preliminary allocation of the purchase price as of June 30, 2010 is based on the best estimates of management and is subject to revision as the final fair values of, and allocated purchase price to, the acquired assets and assumed liabilities in the acquisition of i2 are completed over the remainder of 2010. We currently anticipate that additional adjustments may still be made to the fair value of acquired deferred revenue balances, tax-related accounts, amortization of intangible assets and the residual amount allocated to goodwill. We found no indication of impairment of our goodwill balances during the three months ended June 30, 2010 and, absent future indicators of impairment, the next annual impairment test will be performed in fourth quarter 2010. As of June 30, 2010, the goodwill balance has been allocated to our reporting units as follows: $194.1 million to Supply Chain and $3.7 million to Services Industries.

          Customer-based intangible assets include customer lists, maintenance relationships and future technological enhancements, service relationships and covenants not-to-compete; Technology-based intangible assets include acquired software technology; and Marketing-based intangible assets include trademarks and trade names. Customer-based and Marketing-based intangible assets are being amortized on a straight-line basis. Technology-based intangible assets are being 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. Through June 30, 2010, we have recorded $74.6 million, $24.3 million and $14.3 million of customer-based, technology-based and marketing-based intangible assets, respectively, in connection with our acquisition of i2 (see Note 2).

          Amortization expense for the three and six months ended June 30, 2010 was $11.7 million and $21.9 million, respectively. Amortization expense for the three and six months ended June 30, 2009 was $7.0 million and $14.1 million, respectively. The increase in amortization in the 2010 periods compared to the 2009 periods is due to amortization on the identifiable intangible assets recorded in the acquisition of i2.

          Amortization expense is reported in the consolidated statements of operations within cost of revenues under the caption “Amortization of acquired software technology” and in operating expenses under the caption “Amortization of intangibles.” As of June 30, 2010, we expect amortization expense for the remainder of 2010 and the next four years to be as follows:

Year		Amortization
2010		$23,893
2011		$45,518
2012		$44,931
2013		$44,241
2014		$27,172

5. Restructuring Reserves

2010 Restructuring Charges

          We recorded restructuring charges of $12.4 million in the six months ended June 30, 2010, including $7.8 million in first quarter 2010 and $4.6 million in second quarter 2010. These charges are primarily for termination benefits, office closures and contract terminations associated with the acquisition of i2 and the continued transition of additional on-shore activities to our Center of Excellence (“CoE”) facilities. The charges include $8.4 million for termination benefits related to a workforce reduction of 127 associates primarily in product development, sales, information technology and other administrative positions in each of our geographic regions. In addition, the charges include $4.0 million for estimated costs to close and integrate redundant office facilities and for the integration of information technology and termination of certain i2 contracts that have no future economic benefit to the Company and are incremental to the other costs that will be incurred by the combined Company. As of June 30, 2010, approximately $7.0 million of the costs associated with these restructuring charges have been paid and the remaining balance of $5.3 million includes $4.4 million of current liabilities under the caption “Accrued expenses and other current liabilities” and $942,000 of non-current liabilities under the caption “Accrued exit and disposal obligations.” A summary of the restructuring charges in the six months ended June 30, 2010 is as follows:

										Impact of Changes				Balance
Description of charge		Initial Reserve				Cash Payments				in Exchange Rates				June 30, 2010
Termination benefits		$	8,426			$	(6,334	)		$	6			$	2,098
Office closures			3,946				(748	)			23				3,221
Total		$	12,372			$	(7,082	)		$	29			$	5,319

          The balance in the reserve for office closures is primarily related to redundant office facility leases in Dallas, Texas and the United Kingdom that are being utilized as payments are made over the related lease terms that extend through 2014. The balance in the reserve for termination benefits is related to certain foreign employees that we expect to pay in 2010.

2009 Restructuring Charges

          We recorded restructuring charges of $6.5 million in 2009, including $1.5 million in first quarter 2009 and $2.3 million in second quarter 2009, primarily associated with the transition of additional on-shore activities to the CoE facilities and certain restructuring activities in the EMEA sales organization. The charges include termination benefits related to a workforce reduction of 86 full-time employees (“FTE”) in product development, service, support, sales and marketing, information technology and other administrative positions, primarily in the Americas region. In addition, the restructuring charges include approximately $2.0 million in severance and other termination benefits under separation agreements with our former Executive Vice President and Chief Financial Officer and our former Chief Operating Officer. We recorded an adjustment of $78,000 during the six months ended June 30, 2010 to reduce previously established reserves related to the 2009 restructuring charge. As of June 30, 2010, approximately $6.4 million of the costs associated with these restructuring charges have been paid and the remaining balance of $114,000 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 will be paid in 2010.

6. Manugistics 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 a $1.4 million increase recorded in 2009, have been included in the consolidated statements of income under the caption “Restructuring charges.” Adjustments made in 2009 resulted primarily from our revised estimate of sublease rentals and market adjustments on an unfavorable office facility lease in the United Kingdom. The unused portion of the acquisition reserves at June 30, 2010 includes $4.2 million of current liabilities under the caption “Accrued expenses and other liabilities” and $5.7 million of non-current liabilities under the caption “Accrued exit and disposal obligations.” A summary of the charges and adjustments recorded against the reserves is as follows:

		Initial				Adjustments				Cash				Impact of Changes				Balance				Adjustments to				Cash				Impact of Changes				Balance
Description of charge		Reserve				to Reserves				Payments				in Exchange Rates				December 31, 2009				Reserves				Payments				in Exchange Rates				June 30, 2010
Restructuring charges:
Office closures, lease terminations and sublease costs		$	29,212			$	(949	)		$	(16,110	)		$	(724	)		$	11,429			$	—			$	(1,572	)		$	(262	)		$	9,595
Employee severance and termination benefits			3,607				(767	)			(2,468	)			125				497				(73	)			(67	)			(63	)			294
IT projects, contract termination penalties, capital lease buyouts and other costs to exit activities of Manugistics			1,450				222				(1,672	)			—				—				—				—				—				—
			34,269				(1,494	)			(20,250	)			(599	)			11,926			$	(73	)			(1,639	)			(325	)			9,889
Direct costs			13,125				6				(13,131	)			—				—				—				—				—				—
Total		$	47,394			$	(1,488	)		$	(33,381	)		$	(599	)		$	11,926			$	(73	)		$	(1,639	)		$	(325	)		$	9,889

          The balance in the reserve for office closures, lease termination and sublease costs is primarily related to office facility leases in Rockville, Maryland and the United Kingdom and is being utilized as payments are made over the related lease terms that extend through 2018. The balance in the reserve for employee severance and termination benefits is related to certain foreign employees that we expect to pay in 2010.

7. Long-term Debt

          On December 10, 2009, we issued $275 million of 8.0% Senior Notes at an initial offering price of 98.988% of the principal amount. The net proceeds from the sale of the Senior Notes, which exclude the original issue discount ($2.8 million) and other debt issuance costs ($7.1 million) were placed in escrow and subsequently used, together with cash on hand at JDA and i2, to fund the cash portion of the Merger Consideration in the acquisition of i2 (see Note 2).

          The Senior Notes have a five-year term and mature on December 15, 2014. Interest is computed on the basis of a 360-day year composed of twelve 30-day months, and is payable semi-annually on June 15 and December 15 of each year, beginning on June 15, 2010. The obligations under the Senior Notes are fully and unconditionally guaranteed on a senior basis by substantially all of our existing and future domestic subsidiaries (including, following the Merger, i2 and its domestic subsidiaries).

          At any time prior to December 15, 2012, we may redeem up to 35% of the aggregate principal amount of the Senior Notes at a redemption price equal to 108% of the principal amount, plus accrued and unpaid interest, with the cash proceeds of an equity offering of our common stock. At any time prior to December 15, 2012, we may also redeem all or a part of the Senior Notes at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest and a ‘make whole” premium calculated as the greater of (i) 1% of the principal amount of the Senior Notes redeemed or (ii) the excess of the present value of the redemption price of the Senior Notes redeemed at December 15, 2012 over the principal amount the Senior Notes redeemed. In addition, we may redeem the Senior Notes on or after December 15, 2012 at a redemption price of 104% of the principal amount, and on or after December 15, 2013 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest. The Senior Notes rank equally in right of payment with all existing and future senior debt and are senior in right of payment to all subordinated debt.

          The Senior Notes contain certain restrictive covenants including (i) a requirement to repurchase the Senior Notes at price equal to 101% of the principal amount, plus accrued and unpaid interest, in the event of a change in control and (ii) restrictions that limit our ability to pay dividends, make investments, incur additional indebtedness, create liens, issue preferred stock or consolidate, merge, sell or otherwise dispose of all or substantially all of our or their assets. The Senior Notes also provide for customary events of default and in the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Senior Notes will become due and payable immediately without further action or notice. If any other event of default occurs or is continuing, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately.

          The Senior Notes and the related guarantees have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements. In connection with the issuance of the Senior Notes, we entered into an exchange and registration rights agreement. Under the terms of the exchange and registration rights agreement, we were required to file, and did initially file on June 9, 2010, an exchange offer registration statement, as amended, enabling holders to exchange the Senior Notes for registered notes with terms substantially identical to the terms of the Senior Notes. We are also required to use commercially reasonable efforts to have the exchange offer registration statement declared effective by the Securities and Exchange Commission (the “SEC”) on or prior to 270 days after the closing of the note offering (the “Registration Deadline”) and, unless the exchange offer would not be permitted by applicable law or SEC policy, to complete the exchange offer within 30 business days after the Registration Deadline.

          The fair value and carrying amount of the Senior Notes were $276.4 million and $272.5 million, respectively at June 30, 2010 and $269.4 million and $272.3 million, respectively at December 31, 2009.

          The $2.8 million original issue discount on the Senior Notes and other debt issuance costs of approximately $7.1 million are being amortized using the effective interest and straight-line methods, respectively over the five-year term and are reflected in the consolidated statements of income under the caption, “Interest expense and amortization of loan fees.” We accrued $11.0 million of interest on the Senior Notes in the six months ended June 30, 2010 and have amortized approximately $922,000 of the original issue discount and related loan origination fees.

8. Legal Proceedings

     Dillard’s, Inc. vs. i2 Technologies, Inc.

          In September 2007, Dillard’s, Inc. filed a lawsuit against i2 Technologies, Inc. in the 191^st Judicial District Court of Dallas County, Texas, (the “trial court”) Cause No. 07-10924-J, which alleges that i2 committed fraud and failed to meet certain obligations to Dillard’s regarding the purchase of two i2 products in the year 2000 under a software license agreement and related services agreement. Dillard’s paid i2 approximately $8.1 million under these two agreements.

          On June 15, 2010, the jury in the trial court ruled in favor of the plaintiffs and rendered three alternative verdicts ranging from $8.1 million to $237 million. Dillard’s is pursuing the verdict in the amount of $237 million, which includes $150 million punitive damages, $76.2 million in lost profits and pre-judgment interest of approximately 10.8 million. Post-judgment interest will accrue on the total amount of the judgment at 5% compounded annually. The Company has requested that the trial court set aside or reduce the verdict before it is entered as a judgment. There is no statutory time limit within which the trial court judge is required to enter judgment on this matter. If the trial court enters a judgment based on the pending jury verdict, or if another judgment is returned that we believe is unacceptable, the Company intends to pursue all available remedies in the appeals process. We have the right under Texas law to suspend enforcement of the trial court judgment during the appeals process by posting a $25 million bond and we are prepared to do that, if necessary. There can be no assurance that the verdict will be set aside or reduced, that any appeal of the judgment will be successful, or that the lawsuit can be settled on terms acceptable to the Company.

          The Company will accrue an estimated loss from this matter if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In evaluating the probability of an unfavorable outcome in this litigation we have considered (a) the nature of the litigation and claim, (b) the progress in the case, (c) the opinions of legal counsel and other advisors, (d) the experience of the Company and others in similar cases, and (e) how management intends to respond in the event an unfavorable final judgment is returned by the trial court. We currently estimate the potential loss for this matter to range between zero and $237 million (representing a maximum award for lost profits, punitive damages and pre-judgment interest), plus post-judgment interest. The final trial court judgment or any revised result that may be achieved through an appeals process (which could take several years to complete), could result in multiple potential outcomes within this range. Management has determined that the best estimate of the potential outcome of this matter is $5 million which was recorded on the opening balance sheet of i2. We have not accrued any

additional estimated contingent losses in this lawsuit as a result of the jury verdict. Management’s best estimate is based on our evaluation of the case, which included input from i2’s in-house counsel and trial lawyers, and other outside litigation experts who assisted in our due diligence process. This amount is also supported by subsequent analyses and focus group assessments prepared by outside trial consultants prior to the actual trial.

     i2 Technologies, Inc. vs. Oracle Corporation

          On April 29, 2009, i2 filed a lawsuit for patent infringement against Oracle Corporation (NASDAQ: ORCL). The lawsuit, filed in the United States District Court for the Eastern District of Texas, Tyler Division (No. 6:09-cv-194-LED) alleges infringement of 11 patents related to supply chain management, available to promise software and other enterprise software applications. As a result of our acquisition of i2 on January 28, 2010, i2 is now a wholly-owned subsidiary of the Company. On April 22, 2010, Oracle filed counterclaims against i2 and JDA Software Group, Inc. alleging the infringement by i2 of four Oracle patents. In response to i2’s motion to sever the Oracle counterclaim, on June 11, 2010, the trial court split the initial case into two cases, staying the second case (No. 6:10-cv-00284-LED) pending the outcome of the first case. The trial court instructed i2 to select five patents for the first case and Oracle to select one patent for the first case.

     Shareholder Class Action Litigation

          In December, 2009, the Company was sued in a putative shareholder class action against i2 and its board of directors, in the County Court of Law No. 2 of Dallas County (No. CC-09-08476-B). The plaintiffs allege in this lawsuit that the directors of i2 breached their fiduciary duties to shareholders of i2 by selling i2 to the Company via an allegedly unfair process and at an unfair price, and that the Company aided and abetted this alleged breach. On January 26, 2010, the Court denied the plaintiffs’ request for a preliminary injunction that sought to enjoin the merger between JDA and i2. The plaintiffs subsequently filed an amended complaint, alleging unspecified monetary damages in addition to declaratory and injunctive relief and attorneys’ fees. The Company, i2 and i2’s directors have denied all allegations and discovery is ongoing.

          We are involved in other legal proceedings and claims arising in the ordinary course of business. Although there can be no assurance, management does not currently believe the disposition of these matters will have a material adverse effect on our business, financial position, results of operations or cash flows.

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 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 the applicable vesting period of the awards using graded vesting and reflected in the consolidated statements of operations under the captions “Cost of maintenance services,” “Cost of consulting services,” “Product development,” “Sales and marketing,” and “General and administrative.”

          Annual stock-based incentive programs (“Performance Programs”) have been approved for executive officers and certain other members of our management team for years 2007 through 2010 that provide for contingently issuable performance share awards or restricted stock units upon achievement of defined performance threshold goals. A summary of the annual Performance Programs is as follows:

          2010 Performance Program. In February 2010, the Board approved a stock-based incentive program for 2010 (“2010 Performance Program”). The 2010 Performance Program provides for the issuance of contingently issuable performance share awards under the 2005 Incentive Plan to executive officers and certain other members of our management team if we are able to achieve a defined adjusted EBITDA performance threshold goal in 2010. A partial pro-rata issuance of performance share awards will be made if

we achieve a minimum adjusted EBITDA performance threshold. The 2010 Performance Program initially provides for the issuance of up to approximately 555,000 of targeted contingently issuable performance share awards. The performance share awards, if any, will be issued after the approval of our 2010 financial results in January 2011 and will vest 50% upon the date of issuance with the remaining 50% vesting ratably over a 24-month period. Our performance against the defined performance threshold goal will be evaluated on a quarterly basis throughout 2010 and share-based compensation will be recognized over the requisite service period that runs from February 3, 2010 (the date of board approval) through January 2013. A deferred compensation charge of $13.8 million has been recorded in the equity section 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 2010 Performance Program. Although all necessary service and performance conditions have not been met through June 30, 2010, based on first half 2010 results and the outlook for the remainder of 2010, management has determined that it is probable the Company will achieve its minimum adjusted EBITDA performance threshold. As a result, we have recorded $4.6 million in stock-based compensation expense related to these awards in the six months ended June 30, 2010, including $2.3 million in second quarter 2010. If we achieve the defined performance threshold goal we would expect to recognize approximately $9.2 million of the award as share-based compensation in 2010.

          2009 Performance Program. The 2009 Performance Program provided for the issuance of contingently issuable performance share awards if we were able to achieve $91.5 million of adjusted EBITDA. The Company’s actual 2009 adjusted EBITDA performance qualified participants to receive 100% of their target awards. In total, 506,450 contingently issuable performance share awards were issued in January 2010 with a grant date fair value of $6.8 million that is being recognized as share-based compensation over requisite service periods that run from the date of Board approval of the 2009 Performance Program through January 2012. The performance share awards vested 50% upon the date of issuance with the remaining 50% vesting ratably over the subsequent 24-month period. Through June 30, 2010, approximately 10,100 of the performance share awards granted under the 2009 Performance Program have been subsequently forfeited. A deferred compensation charge of $6.8 million was recorded in the equity section of our balance sheet during 2009, with a related increase to additional paid-in capital, for the total grant date fair value of the awards. We recognized $4.5 million in share-based compensation expense related to these performance share awards in 2009, including $2.3 million in the six months ended June 30, 2009, plus an additional $502,000 in the six months ended June 30, 2010.

          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 June 30, 2010, approximately 5,700 of performance share awards granted under the 2008 Performance Program have been subsequently forfeited. A deferred compensation charge of $3.9 million was recorded in the equity section of our balance sheet during 2008, with a related increase to additional paid-in capital, for the total grant date fair value of the awards. We recognized $522,000 in share-based compensation expense related to these awards in 2009, including $294,000 in the six months ended June 30, 2009, plus an additional $231,000 in the six months ended June 30, 2010.

          2007 Performance Program. The 2007 Performance Program provided for the issuance of contingently issuable restricted stock units if we were able to successfully integrate the Manugistics acquisition and achieve $85 million of adjusted EBITDA. The 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. Approximately 35,000 of the restricted stock units granted under the 2007 Integration Program were subsequently forfeited. We recognized $883,000 in share-based compensation expense related to these performance share awards in 2009, including $484,000 in the six months ended June 30, 2009 and as of December 31, 2009 all share-based compensation expense had been recognized.

          During the six months ended June 30, 2010 and 2009, we recorded share-based compensation expense of $470,000 and $341,000, respectively related to other 2005 Incentive Plan awards.

          Equity Inducement Awards. During third quarter 2009, we announced the appointment of Peter S. Hathaway to the position of Executive Vice President and Chief Financial Officer and Jason B. Zintak to the newly-created position of Executive Vice President, Sales and Marketing. In order to induce Mr. Hathaway and Mr. Zintak to accept employment, the Compensation Committee granted certain equity awards outside of the terms of the 2005 Incentive Plan and pursuant to NASDAQ Marketplace Rule 5635(c)(4).

(i)

100,000 shares of restricted stock with a grant date fair value of $1.8 million were granted to Mr. Hathaway (50,000 shares) and Mr. Zintak (50,000 shares). The restricted stock awards vest over a three-year period, with one-third vesting on the first anniversary of their employment with the remainder vesting ratably over the subsequent 24-

			month period. A deferred compensation charge of $1.8 million has been recorded in the equity section of our balance sheet for the total grant date fair value of the restricted stock. Stock-based compensation is being recorded on a graded vesting basis over requisite service periods that run from their effective dates of employment through June 2012. We recognized $497,000 in share-based compensation related to these awards in 2009, plus an additional $497,000 in the six months ended June 30, 2010, which is reflected in the consolidated statements of income under the caption “General and administrative.”
	(ii)		55,000 contingently issuable performance share awards were granted to Mr. Hathaway (25,000 shares) and Mr. Zintak (30,000 shares) if the Company was able to achieve the $91.5 million adjusted EBITDA performance threshold goal defined under the 2009 Performance Program. The Company’s actual 2009 adjusted EBITDA performance qualified Mr. Hathaway and Mr. Zintak to receive 100% of their target awards. A total of 55,000 performance share awards were issued in January 2010 with a grant date fair value of $996,000 that is being recognized as share-based compensation over requisite service periods that run from their effective dates of employment through January 2012. The performance share awards vested 50% upon the date of issuance with the remaining 50% vesting ratably over the subsequent 24-month period. A deferred compensation charge of $996,000 has been recorded in the equity section of our balance sheet, with a related increase to additional paid-in capital, for the total grant date fair value of the awards. We recognized $664,000 in share-based compensation related to these awards in 2009, plus an additional $83,000 in the six months ended June 30, 2010, which is reflected in the consolidated statements of income under the caption “General and administrative.”
	(iii)		100,000 contingently issuable restricted stock units were granted to Mr. Hathaway (50,000 shares) and Mr. Zintak (50,000 shares) that will vest in defined tranches if and when we achieve certain pre-defined performance milestones. As of June 30, 2010, none of these awards had been issued, no deferred compensation charge has been recorded in the equity section of our balance sheet, and no share-based compensation expense has 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 1^st and August 1^st of each year. The 2008 Purchase Plan is considered compensatory and, as a result, stock-based compensation is recognized on the last day of each six-month offering period in an amount equal to the difference between the fair value of the stock on the date of purchase and the discounted purchase price. A total of 44,393 shares of common stock were purchased on January 31, 2010 at a price of $22.28 and we recognized $175,000 of related share-based compensation expense. A total of 100,290 shares of common stock were purchased on February 1, 2009 at a price of $9.52 and we recognized $169,000 in share-based compensation expense in connection with such purchases. The share-based compensation expense in connection with these purchases 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 ended March 10, 2010. During 2009, we repurchased 265,715 shares of our common stock under this program for $2.9 million at prices ranging from $10.34 to $11.00 per share. There were no shares of common stock repurchased under this program in 2010.

          During the six months ended June 30, 2010 and 2009, we also repurchased 134,390 and 79,259 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 $3.6 million at prices ranging from $22.47 to $30.06 in the six months ended June 30, 2010 and for $988,000 at prices ranging from $9.75 to $15.87 in the six months ended June 30, 2009.

11. Income Taxes

          The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events, which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on our estimated tax expense for the year. The method used to calculate the Company’s effective rate for the three months ended June 30,

2010 is different from the method used to calculate the effective rate for the three months ended June 30, 2009. The change in the method used is due to the Company’s ability to forecast income by jurisdiction and reliably estimate an overall annual effective tax rate.

          We recorded income tax provisions of $2.4 million and $5.2 million for the three months ended June 30, 2010 and 2009, respectively, representing effective income tax rates of 23% and 37%, respectively. We recorded income tax provisions of $1.4 million and $6.6 million for the six months ended June 30, 2010 and 2009, respectively, representing effective income tax rates of 28% and 36%, respectively. Our effective income tax rates during the three months and six month periods ended June 30, 2010 and 2009 differed from the 35% U.S. statutory rate primarily due to changes in our liability for uncertain tax positions, state income taxes (net of federal benefit), the effect of foreign operations and items not deductible for tax, including those related to certain costs the Company incurred in connection with the acquisition of i2 Technologies, Inc. during first quarter 2010.

          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 June 30, 2010 we had approximately $12.6 million of unrecognized tax benefits that would impact our effective tax rate if recognized, some of which relate to uncertain tax positions associated with the acquisition of Manugistics and i2. Future recognition of uncertain tax positions resulting from the acquisition of Manugistics will be treated as a component of income tax expense rather than as a reduction of goodwill. During second quarter 2010, the liability for uncertain tax positions decreased by approximately $2.1 million. The decrease was primarily related to the Company receiving communication that the Indian and U.S. authorities reached a settlement related to i2’s 2002 through 2006 tax years. It is reasonably possible that approximately $6.3 million of all items included in our unrecognized tax benefits will be recognized within the next twelve months. 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 including a $194,000 benefit in the six months ended June 30, 2010 and an accrual of $383,000 for the six months ended June 30, 2009. As of June 30, 2010 and December 31, 2009 there are approximately $2.8 million and $2.3 million, respectively of interest and penalty accruals related to uncertain tax positions which are reflected in the consolidated balance sheet under the caption “Liability for uncertain tax positions”. To the extent interest and penalties are not assessed with respect to the uncertain tax positions, the accrued amounts for interest and penalties will be reduced and reflected as a reduction of the overall tax provision.

          We conduct business globally and, as a result, JDA Software Group, Inc. or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subjected to examination by taxing authorities throughout the world, including significant jurisdictions in the United States, the United Kingdom, Australia, India and France. With a few minor exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2003. We are currently under audit by the Internal Revenue Service for the 2009 tax year. The examination phase of these audits has not yet been completed; however, we do not anticipate any material adjustments.

          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 will involve a review of each quarterly tax provision. The Internal Revenue Service has completed their review of our tax returns prior to 2009 and no material adjustments have been made as a result of these examinations.

12. Earnings per Share

          From July 2006 through September 2009, the Company had two classes of outstanding capital stock, common stock and Series B preferred stock. The Series B preferred stock, which was issued in connection with the acquisition of Manugistics, was a participating security such that in the event a dividend was declared or paid on the common stock, the Company would be required to simultaneously declare and pay a dividend on the Series B preferred stock as if the Series B preferred stock had been converted into common stock. Companies that have participating securities are required to apply the two-class method to compute basic earnings per share. Under the two-class computation method, basic earnings per share is calculated for each class of stock and participating security considering both dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period.

          During third quarter 2009, all shares of the Series B preferred stock were either converted into shares of common stock or repurchased for cash. The calculation of diluted earnings per share applicable to common shareholders for the three and six months ended June 30, 2009 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 2010 and 2009 using the treasury stock method. Diluted earnings per share for the three months ended June 30, 2010 and 2009 exclude approximately 12,000 and 1.2 million, 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 for the six months ended June 30, 2010 and 2009 exclude approximately 6,000 and 1.3 million, 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 also exclude approximately 555,000 and 596,000 of contingently issuable performance share awards, respectively for which all necessary conditions had not been met (see Note 8). Earnings per share for three and six months ended June 30, 2010 and 2009 are calculated as follows:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
Net income		$	7,866			$	8,935			$	3,598			$	11,579
Less dividends paid			—				—				—				—
Undistributed earnings		$	7,866			$	8,935			$	3,598			$	11,579
Allocation of undistributed earnings:
Common Stock		$	7,866			$	8,015			$	3,598			$	10,387
Series B Preferred Stock			—				920				—				1,192
		$	7,866			$	8,935			$	3,598			$	11,579
Weighted average shares:
Common Stock			41,672				31,400				40,514				31,379
Series B Preferred Stock			—				3,604				—				3,604
Shares — Basic earnings per share			41,672				35,004				40,514				34,983
Dilutive common stock equivalents			593				228				637				171
Shares — Diluted earnings per share			42,265				35,232				41,151				35,154
Basic earnings per share applicable to:
Common Stock		$	.19			$	.26			$	.09			$	.33
Series B Preferred Stock		$	—			$	.26			$	—			$	.33
Diluted earnings per share applicable to common shareholders		$	.19			$	.25			$	.09			$	.33

13. Business Segments and Geographic Data

          We are a leading global provider of sophisticated enterprise software solutions designed specifically to address the supply chain, merchandising and pricing requirements of manufacturers, wholesale/distributors and retailers, as well as government and aerospace defense contractors and travel, transportation, hospitality and media organizations. We have licensed our software to more than 6,000 customers worldwide. We generate sales in three geographic regions that have separate management teams and reporting structures: the Americas (United States, Canada, and Latin America), Europe (Europe, Middle East and Africa), and Asia/Pacific. Similar products and services are offered in each geographic region. Identifiable assets are also attributed to a geographical region. The geographic distribution of our revenues and identifiable assets is as follows:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
Revenues:
Americas		$	107,304			$	65,803			$	195,004			$	126,381
Europe			26,874				20,186				52,188				36,839
Asia/Pacific			24,195				13,496				42,812				19,598
Total revenues		$	158,373			$	99,485			$	290,004			$	182,818

		June 30,				December 31,
		2010				2009
Identifiable assets:
Americas		$	890,253			$	695,539
Europe			119,549				85,817
Asia/Pacific			95,393				40,310
Total identifiable assets		$	1,105,195			$	821,666

          Revenues in the Americas for three months ended June 30, 2010 and 2009 include $93.3 million and $57.2 million from the United States, respectively and $168.3 million and $110.7 million in the six months ended June 30, 2010 and 2009, respectively. Identifiable assets for the Americas include $853.7 million and $666.0 million in the United States as of June 30, 2010 and December 31, 2009, respectively. The increase in identifiable assets at June 30, 2010 compared to December 31, 2009 resulted primarily from net assets recorded in the acquisition of i2 (see Note 2).

          In connection with the acquisition of i2, management approved a realignment of our reportable business segments to better reflect the core business in which we operate, the supply chain management market, and how our chief operating decision maker views, evaluates and makes decisions about resource allocations within our business. As a result of this realignment, we eliminated Retail and Manufacturing and Distribution as reportable business segments and beginning with first quarter 2010 have reported our operations within the following segments:

•		Supply Chain. This reportable business segment includes all revenues related to applications and services sold to customers in the supply chain management market. The majority of our products are specifically designed to provide customers with one synchronized view of product demand while managing the flow and allocation of materials, information, finances and other resources across global supply chains, from manufacturers to distribution centers and transportation networks to the retail store and consumer (collectively, the “Supply Chain”). This segment combines all revenues previously reported by the Company under the Retail and Manufacturing and Distribution reportable business segments and includes all revenues related to i2 applications and services.
•		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 the three and six months ended June 30, 2010 and 2009 is as follows:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2010				2009				2010				2009
Revenues:
Supply Chain		$	152,931			$	88,161			$	278,164			$	166,384
Services Industries			5,442				11,324				11,840				16,434
		$	158,373			$	99,485			$	290,004			$	182,818
Operating income (loss):
Supply Chain		$	52,638			$	29,127			$	92,542			$	51,238
Services Industries			(453	)			5,744				154				6,623
Other (see below)			(35,129	)			(20,453	)			(75,893	)			(38,985	)
		$	17,056			$	14,418			$	16,803			$	18,876
Depreciation:
Supply Chain		$	2,634			$	1,743			$	5,063			$	3,530
Services Industries			148				327				364				553
		$	2,782			$	2,070			$	5,427			$	4,083
Other:
General and administrative expenses		$	19,801			$	11,670			$	37,498			$	22,696
Amortization of intangible assets			9,915				6,051				18,481				12,127
Restructuring charge			4,548				2,732				12,306				4,162
Acquisition-related costs			865				—				7,608				—
		$	35,129			$	20,453			$	75,893			$	38,985

          Operating income in the Supply Chain and Services Industry reportable business segments includes direct expenses for software licenses, maintenance services, service revenues, and product development expenses, as well as allocations for sales and

marketing expenses, occupancy costs, depreciation expense and amortization of acquired software technology. The “Other” caption includes general and administrative expenses and other charges that are not directly identified with a particular reportable business segment and which management does not consider in evaluating the operating income (loss) of the reportable business segment.

14. Condensed Consolidating Financial Information

          Pursuant to the indenture governing the Senior Notes (see Note 7) our obligations under the Senior Notes are fully and unconditionally guaranteed, joint and severally, on a senior basis by substantially all of our existing and future domestic subsidiaries (including, following the Merger, i2 and its domestic subsidiaries). Pursuant to Regulation S-X, Section 210.3-10(f), we are required to present condensed consolidating financial information for subsidiaries that have guaranteed the debt of a registrant issued in a public offering, where the guarantee is full and unconditional, joint and several, and where the voting interest of the subsidiary is 100% owned by the registrant.

          The following tables present condensed consolidating balance sheets as of June 30, 2010 and December 31, 2009, and condensed consolidating statements of income for the three and six months ended June 30, 2010 and 2009, and condensed consolidated statements of cash flow for the six months ended June 30 2010 and 2009 for (i) JDA Software Group, Inc. — the parent company and issuer of the Senior Notes, (ii) the guarantor subsidiaries on a combined basis, (iii) the non-guarantor subsidiaries on a combined basis, (iv) elimination adjustments, and (v) total consolidating amounts. The condensed consolidating financial information should be read in conjunction with the consolidated financial statements herein.

Unaudited Condensed Consolidating Balance Sheets
June 30, 2010
(in thousands)

		JDA Software				Guarantor				Non-Guarantor
		Group, Inc.				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Current Assets:
Cash and cash equivalents		$	—			$	111,909			$	34,270			$	—			$	146,179
Restricted cash			—				10,971				809				—				11,780
Accounts receivable			—				95,406				20,685				—				116,091
Income tax receivable			4,531				(3,499	)			(1,032	)			—				—
Deferred tax asset			—				55,682				1,948				—				57,630
Prepaid expenses and other current assets			—				21,424				11,827				—				33,251
Total current assets			4,531				291,893				68,507				—				364,931
Non-Current Assets:
Property and equipment, net			—				38,680				5,968				—				44,648
Goodwill			—				197,813				—				—				197,813
Other intangibles, net:
Customer-based intangibles			—				156,614				—				—				156,614
Technology-based intangibles			—				41,161				—				—				41,161
Marketing-based intangibles			—				13,226				—				—				13,226
Deferred tax asset			—				257,546				11,875				—				269,421
Other non-current assets			6,266				108				11,007				—				17,381
Investment in subsidiaries			161,334				74,331				—				(235,665	)			—
Intercompany accounts			694,337				(730,368	)			36,031				—				—
Total non-current assets			861,937				49,111				64,881				(235,665	)			740,264
Total Assets		$	866,468			$	341,004			$	133,388			$	(235,665	)		$	1,105,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable		$	—			$	12,688			$	1,735			$	—			$	14,423
Accrued expenses and other liabilities			1,039				43,150				24,651				—				68,840
Income taxes payable			—				(3,296	)			6,448				—				3,152
Deferred revenue			—				89,952				31,866				—				121,818
Total current liabilities			1,039				142,494				64,700				—				208,233
Non-Current Liabilities:
Long-term debt			272,451				—				—				—				272,451
Accrued exit and disposal obligations			—				4,292				2,334				—				6,626
Liability for uncertain tax positions			—				9,052				1,254				—				10,306
Deferred revenues			—				14,429				172				—				14,601
Total non-current liabilities			272,451				27,773				3,760				—				303,984
Total Liabilities			273,490				170,267				68,460				—				512,217
Stockholders’ Equity			592,978				170,737				64,928				(235,665	)			592,978
Total Liabilities and Stockholders’ Equity		$	866,468			$	341,004			$	133,388			$	(235,665	)		$	1,105,195