SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 0-27876
JDA SOFTWARE GROUP,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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86-0787377
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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14400
North 87th Street
Scottsdale, Arizona 85260
(Address
of principal executive offices, including zip code)
Registrants
telephone number, including area code:
(480) 308-3000
Securities registered pursuant to Section 12(b) of the
Act:
NONE
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.01 par value
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or
any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12-b-2
of the Exchange
Act Yes o No þ
The approximate aggregate market value of the registrants
common stock held by non-affiliates of the registrant (based on
the closing sales price of such stock as reported by the NASDAQ
Stock Market) on June 30, 2010 was approximately
$883 million. The number of shares of common stock,
$0.01 par value per share, outstanding as of
February 22, 2011 was 42,218,776.
DOCUMENTS
INCORPORATED BY REFERENCE
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Documents
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Form 10-K Reference
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Portions of the Proxy Statement for the registrants 2010
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Items 10, 11, 12, 13 and 14 of Part III
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Annual Meeting of Stockholders are incorporated by
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reference into Part III of this
Form 10-K
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PART I
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Item 1B.
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Unresolved Staff Comments None
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Removed and Reserved
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PART II
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Item 5.
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Market for Registrants Common Equity and
Related Stockholder Matters
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Item 6.
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Selected Financial Data
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Item 7.
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Managements Discussion and Analysis of
Financial Condition and Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosures About
Market Risk
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Item 8.
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Financial Statements and Supplementary Data
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42
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Item 9.
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Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure -
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42
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information None
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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PART III
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Item 10.
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Board of Directors, Executive Officers and
Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions,
and Director Independence
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Item 14.
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Principal Accountant Fees and Services
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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JDA SOFTWARE GROUP, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS
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JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
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JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
COMPREHENSIVE INCOME (LOSS)
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JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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JDA SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Years
Ended December 31, 2009 (in thousands, except percentages,
shares, per share amounts or as otherwise stated)
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EX-10.1 |
EX-10.8 |
EX-21.1 |
EX-23.1 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
2
This Annual Report on
Form 10-K
contains forward-looking statements reflecting managements
current forecast of certain aspects of our future. It is based
on current information that we have assessed but which by its
nature is dynamic and subject to rapid and even abrupt changes.
Forward looking statements include statements regarding future
operating results, liquidity, capital expenditures, product
development and enhancements, numbers of personnel, strategic
relationships with third parties, and strategy. The
forward-looking statements are generally accompanied by words
such as plan, estimate,
expect, intend, believe,
should, would, could,
anticipate or other words that convey uncertainty of
future events or outcomes. Our actual results could differ
materially from those stated or implied by our forward-looking
statements due to risks and uncertainties associated with our
business. These risks are described throughout this Annual
Report on
Form 10-K,
which you should read carefully. We would particularly refer you
to Item 1A. Risk Factors for an extended
discussion of the risks confronting our business. The
forward-looking statements in this Annual Report on
Form 10-K
should be considered in the context of these risk factors. We
disclaim any obligation to update information contained in any
forward-looking statement.
PART I
Recent
Developments
Legal Proceedings (see Note 12Legal
Proceedings to our Condensed Consolidated Financial
Statements elsewhere in this Annual Report on
Form 10-K,
and is incorporated by reference herein). On
December 2, 2010, we met with Dillards for a
mediation session. During that mediation session, settlement
offers were exchanged, but no agreement was reached. Therefore,
on December 23, 2010 i2 Technologies, Inc.
(i2), which was acquired by JDA Software Group, Inc.
(the Company) on January 28, 2010, filed a
Notice of Appeal to the Dallas Court of Appeals. We currently
estimate the potential loss for this matter to range between
$19 million (the highest settlement offer exchanged) and
$237 million (representing a maximum award for lost
profits, punitive damages and pre-judgment interest), plus
post-judgment interest. The appeals process is not expected to
be resolved prior to the end of 2011. There can be no assurance
that it will be successful or that the litigation will be
settled on terms acceptable to JDA. Management has determined
that the best estimate of the potential outcome of this matter
is $19.0 million, of which $5.0 million was recorded
on the opening balance sheet of i2 following JDAs
acquisition of i2 in January 2010 and $14.0 million was
recorded in December 2010 in the Consolidated Statements of
Income under the capital Litigation provision and in
Consolidated Balance Sheets under the caption Accrued
expenses and other liabilities.
As previously reported, on April 29, 2009, i2 filed a
lawsuit against Oracle Corporation in the United States District
Court for the Eastern District of Texas, alleging infringement
of i2 patents related to supply chain management, available to
promise software and other enterprise applications. On
April 22, 2010, Oracle Corporation filed counterclaims
against i2 and the Company (of which i2 is now a wholly-owned
subsidiary), alleging infringement of certain Oracle Corporation
patents. On February 25, 2011, the Company, i2 and Oracle
Corporation entered into a settlement agreement (the
Agreement). Under the Agreement, the parties entered
into a cross-license arrangement and dismissed their respective
litigation claims related to the patent infringement dispute
with prejudice. In addition, the Company is entitled to receive
a one-time cash payment of $35.0 million from Oracle
Corporation, payable within seven days of the Agreement date, as
well as a $2.5 million license and technical support credit
from Oracle Corporation that must be used by the Company within
two years. The Company intends to account for this settlement as
a reduction of operating expenses in the first quarter of 2011
under the caption Litigation Settlement in the
consolidated statement of income.
We May Make Additional Strategic
Acquisitions. Acquisitions have been, and we
expect they will continue to be, an integral part of our overall
growth plan. We believe strategic acquisition opportunities will
allow JDA to continue to strengthen its position as a leading
supply chain management software and services provider. Our
intent is to seek acquisition opportunities that complement our
current software and services offerings. We may make future
acquisitions that are significant in relation to the current
size of JDA or smaller acquisitions that add specific
functionality to enhance our existing product suite. If the
Dillards litigation continues for an extended period of
time it may delay us in making acquisitions, though we do not
currently expect any delay to be significant.
3
Overview
We are a leading provider of sophisticated enterprise software
solutions designed to enable planning, optimization and
execution of merchandising and supply chain processes for
manufacturers, wholesalers and distributors, and retailers, as
well as government and aerospace defense contractors.
Additionally, we provide pricing, yield management and demand
management software solutions for travel, transportation,
hospitality and media organizations. We believe we have the
broadest and deepest suite of software products and services for
supply chain management. Our software offerings are highly
tailored to industry-specific needs and are integrated to
provide a complete set of solutions for our customers. These
attributes, we believe, position us well against both broad
enterprise resource planning (ERP) competitors and
point solution providers, and promote customer loyalty.
Industry
Overview
Organizations rely on various types of enterprise software
solutions to optimize their business processes in order to
enhance revenue growth and control expenses. The enterprise
software market includes both vertically-specialized solutions
such as supply chain management (SCM) solutions, as
well as horizontal business applications such as ERP suites,
business intelligence applications, customer relationship
management (CRM) solutions, analytical applications
and other financial and operational software.
SCM solutions represent a distinct subset of the broader
enterprise software applications market. SCM software manages
the utilization of assets and labor, the flow and allocation of
materials and products and the management of information,
finances and other resources across global supply chains, from
manufacturers to distribution centers and transportation
networks to the retail store and consumer. SCM software is used
to reduce costs by improving the efficiency of supply chain
flows and increase revenue by matching the supply of goods with
actual customer demand more accurately. For example, SCM
software enables companies to offer differentiated products
targeted to specific end markets while, at the same time,
ensuring the availability of appropriate sales personnel and
programs to help consumers make their purchases.
The SCM market is expected to grow by approximately 7% annually,
from approximately $6.2 billion of revenues in 2009 to
approximately $8.8 billion in 2014, according to
Gartners December 2010 publication entitled
Forecast: Enterprise Software Markets, Worldwide,
2009-2014,
4Q10 Update. The SCM software market is segmented into the
following categories
(sub-segment
size in 2009 is noted in parentheses):
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Supply Chain Planning (Approximately $2.3
Billion): Provides planning, what-if analysis
capabilities and management of real-time demand commitments to
optimize the delivery of goods and services and relay
information from suppliers to customers;
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Supply Chain Execution (Approximately $1.8
Billion): Performs the efficient procurement and
supply of goods, service and information across enterprise
boundaries to meet customer-specific demand;
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Procurement (Approximately $2.0
Billion): Creates an optimal set of suppliers and
establishes the terms of trade to balance cost, quality and
risk; and
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Service Parts Planning (Approximately $0.1
Billion): Enables service organizations to help
manage the growing number of parts and part locations.
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Key growth drivers for the SCM market include:
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Increased Complexity in Global Supply Chain
Networks: The ongoing globalization of supply
chain networks has added significant complexity for
manufacturers, distributors and retailers. Increased complexity
comes from the multiple sources of supply that companies must
manage and the volatility in raw materials and labor costs, as
well as the transportation challenges associated with increased
imports from distant suppliers. All of these factors require
companies to improve the sophistication of their supply chain
processes if they are to avoid costly errors.
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Efficiency Gains in the Recent Recession Must Be
Maintained: The recent recession drove many
companies to cut costs and reduce working capital. As markets
start to recover, companies are looking for ways
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to maintain the efficiencies garnered and keep costs low. We
believe that continued expansion of sophisticated SCM software
will be necessary to keep costs low and enable growth.
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Continued Shift from Niche Vendor Offerings to SCM
Suite Vendors: We believe that companies are
increasing their demand for integrated planning and execution
software suites which connect previously disconnected decision
making processes, rather than specialized, narrow applications.
JDAs SCM solutions are a leading example of an integrated
planning and execution suite in the field of SCM.
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Trend Towards Enterprise Software Solutions Focused on
Industry Verticals: Many of the worlds
leading companies have already implemented ERP systems to manage
their infrastructure. However, having completed this process,
they now realize that the limited SCM capabilities of the ERP
suites available today create an unacceptable risk to the
performance of the business. The combination of a best of breed
suite of SCM solutions combined with an ERP backbone is becoming
recognized as the most common IT strategy being deployed by
leading companies globally.
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Shift Towards Enterprise Software Delivered as a
Service: We believe that companies are
increasingly interested in purchasing SCM capabilities as a
service rather than as a traditional behind the
firewall implementation. JDAs Managed Services has
been developed to enable delivery of JDA solutions as a service.
We expect the revenues from this line of business to complement
existing lines of business and create growth for JDA.
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Product
Overview
We market our software products as modular yet integrated suites
that are designed to give our customers one synchronized view of
product demand across their enterprise and extended supply
chain. Our integrated suites of software products combine the
functionality of planning, optimization, execution and analysis
applications to enable our customers to develop an integrated
enterprise plan to track and optimize the flow of inventory
through the supply chain while optimizing their resources,
operating efficiencies and financial results. Our customers can
select individual products from our suites and implement them on
a stand-alone basis or they can implement various combinations
of our products to create an integrated solution. This
flexibility provides speed to value which is highly desirable in
the current economic environment.
Our product suites include the following:
Planning
and Optimization Solutions
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Demand Management solutions to establish the
demand plan leveraged by most of our planning suite. The
establishment of an accurate demand plan at every level of the
supply chain is the basis of improved balancing of supply with
demand and the foundation for optimized profits. Our demand
planning solutions enable companies to plan demand for products
and other resources such as labor. Improved demand planning
reduces inventory working capital costs and increases revenues
by reducing lost sales;
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Allocation, Replenishment and
Fulfillment solutions optimize the planning and
execution of orders and inventory strategies to meet the
requirements of the demand plan;
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Merchandise Planning solutions enable
businesses to establish strategic plans and expand those
strategies into detailed buying and resourcing plans that
support the requirements of the demand plan. Our merchandise
planning solutions also help businesses develop metrics,
including sales, margins or turns across functional
organizations, to optimize strategic financial and operating
planning activities;
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Assortment Management solutions enable
businesses to plan, manage and optimize localized assortment
offerings matched to specific consumer demand. Our assortment
management solutions support the definition of assortment
strategies, assortment optimization and
end-to-end
assortment execution through the supply chain;
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Space and Category Management solutions that
enable the planning and execution of category and merchandise
plans, which determine the physical allocation of shelf space
and the presentation of
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merchandise in stores designed to achieve demand-driven
precision merchandising and assortment management;
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Price Optimization and Revenue
Management solutions that enable a variety of
industries to optimize their profits by managing the pricing and
availability of finite time sensitive capacity, such as hotel
rooms, as well as physical inventory;
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Transportation Planning solutions that enable
companies to plan the sourcing of transportation capacity to
optimize the movement of goods through the supply chain in the
most cost effective manner to meet the requirements of the
demand plan;
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Supply and Manufacturing solutions that enable
companies to optimize the utilization of manufacturing resources
and materials to the creation of products to satisfy the needs
of the demand plan across the supply chain network;
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Network and Inventory Optimization solutions
that enable organizations to plan the flow of goods
end-to-end
through the various nodes in their supply chain to achieve
maximum profitability, optimize service levels, respond to
unexpected changes in demand and maximize profits;
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Supplier Relationship Management solutions
that enable companies to manage how they source products for
their manufacturing processes to ensure optimal pricing, terms
and the most efficient use of raw material or
sub-assemblies; and
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Workforce Planning solutions designed to
optimize the allocation of labor to support the execution of the
sales, distribution or production plan.
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Transaction
Systems
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Merchandise Operations Systems that enable
retailers to manage their inventory, product mix, pricing and
promotional execution at the corporate level and enhance the
productivity and accuracy of warehouse processes;
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Transportation and Logistics
Management solutions that are designed to enable
manufacturers, distributors, retailers, shippers, consignees,
carriers, trading partners and logistics service providers to
effectively manage the complexities of transportation and
logistics, including multiple modes of transport such as by air,
rail, sea and road;
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Contract Manufacturing solutions for
manufacturers of aerospace and defense products including order
management, repair management and financial management; and
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Store Systems that provide retailers with
point-of-sale,
labor management and back office applications to capture,
analyze and transmit certain sales, store inventory and other
operational information to corporate level merchandise
operations systems.
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Our software solutions also include a comprehensive set of tools
for advanced decision support and analysis covering strategic
business planning, forecasting, promotional planning,
distribution planning, manufacturing planning and scheduling,
price and revenue optimization, inventory optimization,
collaborative synchronization of inventory, distribution,
production and material plans, category management and workforce
management. Many of our products can be and are sold to multiple
customer types and most of our products are sold across each of
our geographic regions.
Business
Segments
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
6
business segments and beginning with first quarter 2010 have
reported our operations within the following segments:
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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.
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Pricing and Revenue Management (previously known as 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
Pricing and Revenue Management segment is centrally
managed by a team that has global responsibilities for this
market.
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Disclosures of certain financial information regarding our
business segments and geographic regions are included in our
consolidated financial statements as of December 31, 2010
and 2009, and for each of the years in the three-year period
ended December 31, 2010, which are included elsewhere
herein.
Business
Opportunities and Growth Strategies
Since our founding in 1985, JDA has expanded from a provider of
inventory management software solutions for the retail industry
to a global leader in supply chain management software solutions
serving multiple end-markets such as retail, consumer,
manufacturing and wholesale/distribution. The company has grown
through a combination of organic growth and acquisitions.
JDA plans to continue to expand through a combination of organic
growth and acquisition, and intends to implement the following
strategies:
Focus on Core Competency: Supply chain
products and services help customers cut costs by improving
efficiency and growing revenues by better matching demand with
supply. Even in the recent recession our customers continued to
license and purchase JDAs products because of their high
return on investment, creating a business opportunity for the
company. We plan to continue to focus on the supply chain
management space, utilizing our deep expertise and expanding our
product offerings and end-markets.
Increase Add-On Sales to Existing Customers: A
significant portion of our sales are from existing customers. We
plan to pursue additional sales opportunities with these
customers by both cross-selling JDA and i2 products and
offerings and up-selling additional products and services.
Invest in New Business Opportunities: We will
continue to invest in growth initiatives that fit into our
strategy of focusing on our core SCM competency, expanding our
presence globally, and broadening our product and service
offerings. For example,
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Leverage our Managed Services Value
Proposition: We intend to leverage the investment
we have made in our managed services organization over the past
two years to drive organic revenue growth in 2011. We believe
our managed services offerings provide both new and existing
customers with an effective alternative to reduce their costs of
operations, to operate effectively with constrained resources,
leverage outside domain expertise to augment their personnel and
improve the value they can derive from JDA products.
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Introduce a Mid-Market Supply Chain
Offering: We have developed a configured, supply
chain offering for mid-sized companies that can be quickly
implemented in order to optimize supply chain processes and
provide a platform for growth. The offering is built around the
best practices that have been integrated into JDA products and
services over our more than 25 years of supply chain
experience.
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Maintain Competitiveness Through Low-Cost Delivery
Models: In 2008, we outlined a strategy to expand
our operations in India and create a Center of Excellence
(CoE) in Hyderabad, India. We continue to execute
plans to grow the size and capabilities of this CoE facility.
The CoE is designed to complement and enhance our existing
on-shore business model across multiple activities including
research and development, customer support, services and
internal administration, supporting our growth with high quality
services at a lower cost structure. As a result of our
acquisition of i2, our CoE capabilities and capacity have been
significantly expanded with the addition of a second location in
Bangalore, India.
Expand Marketing and Indirect Sales
Alliances: We will continue to develop and expand
our marketing and indirect sales alliances, which help promote
JDA solutions globally. We will also utilize, to a greater
extent, our JDA Alliance Connection program, first launched in
2007. This program is designed to provide increased value to our
sales agents and distributors and to maximize their ability to
generate additional revenues for both themselves and JDA.
Product
Strategy
In April of 2010 we launched a multi-year product roadmap that
will result in the merging of the acquired i2 suite of products
and underlying technologies with the existing JDA product suite.
This merging process is well underway and as of the end of 2010
we are on track with our plans. When completed, the resulting
suite of SCM, merchandising and pricing solutions will be one of
the most comprehensive offerings ever made available to our
target market. We expect the unique capabilities of this broad
suite of products to drive large multi-product suite purchases,
enhance cross-selling opportunities and enable JDA to maintain
its competitive leadership.
In 2011 our product strategy is starting the transition from a
product orientation to a solution orientation. This process
allows customers to implement suites of JDA products to obtain
enhanced business benefit by connecting business processes
across the enterprise and with trading partners.
As we continue to develop our Managed Services offerings, we are
increasingly capable of delivering our advanced solutions as a
service. We expect this trend to form a growing part of
JDAs
go-to-market
offering in the coming years. We believe the early success
achieved by our Managed Services business indicates customer
readiness to purchase solutions in this paradigm.
Investment
Protection Program
We have established an Investment Protection Program to protect
our customers investment in JDA products as we migrate to
new technology platforms and merge the i2 Technologies
solutions in accordance with our published product roadmap.
Under the Investment Protection Program, existing maintenance
paying customers are provided with the right to
like-for-like
functionality in a new technology platform without the need to
pay an additional license fee subject to certain conditions,
including a requirement that the new solution has no more than
minimal differences in price, features and functionality from
the existing products. Customers will pay any required
third-party charges associated with the new technology platform.
Services
The key components of our services are as follows:
Maintenance
Services
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Customer Support Solutions. We offer
comprehensive customer support solutions to help customers
optimize their investment in our products. Our standard
maintenance services agreement entitles customers to receive
unspecified new product releases (exclusive of those that
introduce significant new functionality), comprehensive error
diagnosis and correction, global phone, email and internet
support, a customer relationship management portal that provides
24 x 7 self-service for managing and reporting issues, and
access to an online user community and searchable solution
knowledge-base. Customers have the option of choosing
maintenance service programs that extend hours of coverage,
incorporate support for custom configurations, or provide
special attention through periods of high activity or upgrade
processing. The vast
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majority of our customers have participated in one or more of
our customer support solutions programs. Support renewal trends
in our install-base remain strong with our average annualized
retention rate for 2010 at approximately 96%.
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Consulting
Services
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Implementation Services. Our implementation
services group consists of project managers, business
consultants, systems analysts and technical personnel with
extensive retail, manufacturing, and distribution industry
experience. The implementation services group assists our
customers in all phases of systems implementation, including
program and project management, business process analysis and
design, systems planning and design, customer-specific
configuration of application modules and
on-site
implementation or conversion from existing systems. We also
offer a variety of post-implementation services designed to
maximize our customers return on their software
investment, which include enhanced utilization reviews, system
and process health checks, upgrade assessment and planning and
executive strategic planning sessions. Implementation services
are generally billed bi-weekly on an hourly basis or pursuant to
the terms of a fixed price contract. In addition, we augment our
services on large-scale implementations and extensive business
process re-engineering projects with third-party business
partners, consulting firms and system integrators.
Implementation engagements have typically ranged from one month
for certain Space & Category Management solutions to
over two years for our larger Merchandise Operations Systems,
Demand Management and Allocation, Replenishment &
Fulfillment solutions; however, the time required to complete a
project can vary significantly based on the size and supply
chain complexity of the customer as well as the number and type
of applications being implemented.
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Strategic Business Services. We offer
Strategic Business Services that provide high-level strategic
consulting and assistance to our customers before, during and
after the implementation of technology by aligning and
integrating business activities, organizational structure,
performance measures and systems processes to achieve maximum
effectiveness.
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Performance Engineering Services. We provide a
range of technical services that enable our customers to
optimize the interactions between our software solutions and
industry standard technologies including database software,
operating systems, middleware, and hardware and networks. We
also offer specific performance tuning and re-engineering
services to enhance throughput and response time of our
solutions, and to optimize the use of networks and storage
devices.
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Training Services. We offer a comprehensive
education and training program for our customers, associates and
business partners through our Training Services. Training
Services include multimodal process and solution training,
role-based certification tracks, benchmarking surveys and
services and best practice/business strategy information.
Training Services features a curriculum for each of our software
solutions, and prepaid bundled training packages that range from
basic overviews, implementation and technical/developer classes
to business process education and key topics and techniques for
the supply chain. Courses are offered at our in-house classroom
facilities, and through customized
on-site
classes. In addition, we offer JDALearn.com, a web-based
education alternative sold on a subscription basis, which
provides online learning in areas such as replenishment and
allocation, category management, space and floor planning, and
merchandise planning. We also license our training content and
provide services to customize the content to fit specific
customer needs.
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Managed Services. Our Managed Services, which
we began offering in late 2009, expands our existing hosted
services and includes: (i) outsourced operations for
information technology, data and application management and
hosting; (ii) workforce augmentation; (iii) management
of process and user information; (iv) business process
execution services including analysis and recommendations; and
(v) business optimization services such as network design,
demand classification, inventory policy and channel clustering.
We also offer enhanced support services that provide customers
with difficult to find technical and database administration
skills, and an outsource alternative to help desk and other
information technology services. We believe our Managed Services
offering provides customers with effective alternatives to
reduce their
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costs of operations, operate effectively with constrained
resources, leverage outside domain expertise to augment their
personnel and improve the value they derive from their JDA
products.
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Sales and
Marketing
We market our products and services primarily through our direct
sales force, and have created dedicated sales organizations in
each of our geographic regions. We continue to develop a network
of value-added resellers, or VARs, and other marketing and
indirect sales alliances that support and help us attain our
goals. We use VARs extensively in our European and Asian regions
and we believe this model helps us to achieve a stronger
presence in those geographies within these diverse markets where
we do not have direct operations. Our partners enable us to
operate with broader international coverage than would be
possible if we undertook all of our sales activities directly.
JDA has also been expanding relationships with systems
integrators to assist with delivery of services on many of our
larger projects involving larger Tier One customers.
Sales to new customers have historically required between three
and twelve months. Sales cycles are typically longer for larger
dollar projects, large multi-national organizations and
companies in certain geographic regions. During the past several
years, we have noted an increased requirement for senior
executive, board of directors or significant equity investor
approval for larger dollar contracts that have lengthened the
traditional time from selection to the execution of a software
agreement. We believe our ability to offer a comprehensive
portfolio of integrated software applications that customers can
install independently or as a complete solution, has created
increased cross-selling opportunities to existing customers.
Competition
We believe that although our markets are subject to intense
competition, the number of competitors in many of our
application markets has decreased over the past five years. We
believe the principal competitive factors in our markets are
(i) reputation for delivering successful projects,
(ii) feature and functionality, (iii) available
deployment models that accelerate the time to value,
(iv) product and services reputation, (v) performance
and scalability, (vi) the quality of customer base,
(vii) the perception of vendor viability,
(viii) retail and supply chain industry expertise,
(ix) total cost of ownership, (x) technology platform
and (xi) quality of customer support across multiple
regions for global customers.
We have two types of competitors: the first type being composed
of Oracle Corporation (Oracle) and SAP AG, two
large horizontal software companies that have each increased
their presence in the retail and manufacturing marketplace over
the past few years, and the second type being the smaller point
solution providers who typically focus on limited solution
areas. We believe that Oracle and SAP AG represent our more
important long-term competitors as we expand our product
offerings and compete
head-to-head
with them on broader system selection opportunities. We also
expect Oracle and SAP AG to provide more aggressive competition
for us due to the strength of their brands, financial resources
and their position in the enterprise software market.
Proprietary
Rights
Our success and competitive position is dependent in part upon
our ability to develop and maintain the proprietary aspect of
our technology. The reverse engineering, unauthorized copying,
or other misappropriation of our technology could enable third
parties to benefit from our technology without paying
for it.
We rely on a combination of copyrights, trade secrets,
trademarks, confidentiality procedures, contractual restrictions
and patents to protect our proprietary technology. We seek to
protect the source code to our software, documentation and other
written materials under trade secret and copyright laws.
Effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. We license
our software products under signed license agreements that
impose restrictions on the licensees ability to utilize
the software and do not permit the re-sale, sublicense or other
transfer of the software. Finally, we seek to avoid disclosure
of our intellectual property by requiring employees and
independent consultants to execute confidentiality agreements
with us and by restricting access to our source code.
10
We license and integrate technology from third parties in
certain of our software products. Examples of third-party
software imbedded in our products include the following: the
WebLogic application from BEA Systems, Inc. (acquired by Oracle)
or the IBM Websphere applications for use in most of the JDA
Enterprise Architecture and ABPP platform solutions; the IBM
InfoSphere DataStage Application Server for use in our
Enterprise Planning and merchandising systems, Cognos (acquired
by IBM) for use in JDA Reporting and JDA Analytics; iLog CPlex
(acquired by IBM) for use in certain of our transportation,
scheduling, supply chain planning 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
from Sun Microsystems (acquired by Oracle) for use in certain of
our Demand Management, Allocation, Replenishment and
Fulfillment, Transportation and Logistics Management and Store
Systems applications. Our third party licenses generally require
us to pay royalties and fulfill confidentiality obligations. We
also resell Oracle database licenses.
Our standard software license agreements contain an infringement
indemnity clause under which we agree to indemnify and hold
harmless our customers and business partners against liability
and damages arising from claims of various intellectual property
infringement by our products. These terms constitute a form of
guarantee that is subject to the disclosure requirements, but
not the initial recognition or measurement provisions of
Accounting Standard Codification (ASC)
460 Guarantees. We have never lost an
infringement claim and our costs to defend such lawsuits have
been insignificant. Although it is possible that in the future
third parties may claim that our current or potential future
software solutions infringe on their intellectual property
rights, we do not currently expect a significant impact on our
business, operating results, or financial condition.
Employees
As of February 22, 2011, we had approximately
3,000 employees. Our employees in Germany are represented
by a Works Council. Although there are no formal employee
representative bodies in other countries, the employees of
certain of our foreign subsidiaries are covered by national,
regional or sectoral collective agreements as required by
statute or standard local practice. We believe that our
relations with our employees are good and we have never had a
work stoppage.
Available
Information
Our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those filed or furnished pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, are available free of charge from our website
at www.jda.com, as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
Securities and Exchange Commission.
We operate in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section
describes material risks and uncertainties that we believe may
adversely affect our business, financial condition, results of
operations or the market price of our stock. This section should
be read in conjunction with the audited Consolidated Financial
Statements and Notes thereto, and Managements Discussion
and Analysis of Financial Condition and Results of Operations
contained elsewhere in this
Form 10-K.
Risks
Related To Our Business
We may
not be able to sustain profitability in the future.
Our ability to sustain profitability will depend, in part, on
our ability to:
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attract and retain an adequate client base;
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manage effectively a larger and more global business with
larger, complex tier one projects;
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react to changes, including technological changes, in the
markets we target or operate in;
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deploy our services in additional markets or industry segments;
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respond to competitive developments and challenges;
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attract and retain experienced and talented personnel; and
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establish strategic business relationships.
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We may not be able to do any of these successfully, and our
failure to do so is likely to have a negative impact on our
operating results and cash flows, which could affect our ability
to make payments on the $275 million principle
8.0% Senior Notes issued in December 2009.
We have a
substantial amount of debt, which could impact our ability to
obtain future financing or pursue our growth strategy.
In order to complete the acquisition of i2 in January 2010, we
incurred $275 million of long-term debt through the
issuance of Senior Notes. Cash flow from operations was
$65.2 million, $96.5 million and $47.1 million
for the years ended December 31, 2010, 2009 and 2008,
respectively. Our indebtedness could have significant adverse
effects on our business, including the following:
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we must use a substantial portion of our cash flow from
operations to pay interest on our indebtedness, which will
reduce the funds available to us for operations and other
purposes;
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our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes
may be impaired;
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our indebtedness could place us at a competitive disadvantage
compared to our competitors that may have proportionately less
debt;
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our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate may be limited;
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our indebtedness may make us more vulnerable to economic
downturns and adverse developments in our business; and
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The instruments governing the Senior Notes contain, and the
instruments governing any indebtedness we may incur in the
future may contain, restrictive covenants that limit our ability
to engage in activities that may be in our long-term best
interests. Our failure to comply with these covenants could
result in an event of default which, if not cured or waived,
could result in the acceleration of all or a portion of our
outstanding indebtedness.
Payments
on our indebtedness will require a significant amount of
cash.
As a result of financial, business, economic and other factors,
many of which we cannot control, our business may not generate
sufficient cash flow from operations in the future and our
currently anticipated growth in revenue and cash flow may not be
realized, either or both of which could result in our being
unable to repay indebtedness, including our outstanding notes,
or to fund other liquidity needs. If we do not have sufficient
cash resources in the future, we may be required to refinance
all or part of our then existing debt, sell assets, issue stock
or borrow more money. There can be no assurance that we will be
able to accomplish any of these alternatives on terms acceptable
to us or at all. In addition, the terms of existing or future
debt agreements may restrict us from adopting any of these
alternatives.
We may
incur substantial additional indebtedness that could further
exacerbate the risks associated with our indebtedness.
We may incur substantial additional indebtedness in the future.
Although the indenture governing our outstanding notes contains
restrictions on our incurrence of additional debt, these
restrictions are subject to a number of qualifications and
exceptions, and we could incur substantial additional secured or
unsecured indebtedness, which may include a credit facility that
may include financial ratio requirements and covenants. If we
incur additional debt, the risks related to our leverage and
debt service requirements would increase.
12
We may
not receive significant revenues from our current research and
development efforts, which may limit our business from
developing in ways that we currently anticipate.
Developing and localizing software is expensive and the
investment in product development often involves a long payback
cycle. We have made and expect to continue making significant
investments in software research and development and related
product opportunities. If product life cycles shorten or key
technologies upon which we depend change rapidly, we may need to
make high levels of expenditures for research and development
that could adversely affect our operating results if not offset
by corresponding revenue increases. We believe that we must
continue to dedicate a significant amount of resources to our
research and development efforts to maintain our competitive
position. However, it is difficult to estimate when, if ever, we
will receive significant revenues from these investments.
We may
misjudge when software sales will be realized, which may
materially reduce our revenue and cash flow and adversely affect
our business.
Software license revenues in any quarter depend substantially
upon contracts signed and the related delivery 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 of directors or executive management of
our customers decide to decrease their information technology
budgets. When this type of behavior occurs among existing or
potential customers, then we may face a significant reduction in
new software sales. We have seen an increasing number of our
prospects indicate to us that they can sign agreements prior to
the end of our quarter, when in fact their approval process
precludes them from being able to complete the transaction until
after the end of our quarter. In addition, because of the
current economic condition, we may need to increase our use of
alternate licensing models that reduce the amount of software
revenue we recognize upon shipment of our software.
Each of these circumstances adds to the difficulty of accurately
forecasting the timing of deals. We expect to experience
continued difficulty in accurately forecasting the timing of
deals. If we receive any significant cancellation or deferral of
customer orders, or if we are unable to conclude license
negotiations by the end of a fiscal quarter, our quarterly
operating results will be lower than anticipated.
In addition to the above, we may be unable to recognize revenues
associated with certain projects assumed in the acquisition of
i2 in accordance with our expectations. i2 historically
recognized a significant portion of revenues from sales of
software solutions and development projects over time using the
percentage of completion method of contract accounting. Failure
to complete project phases in accordance with the overall
project plan can create variability in our expected revenue
streams if we are not able to recognize revenues related to
particular projects because of delays in development and
delivery.
We may
face liability if our products are defective or if we make
errors implementing our products.
Our software products are highly complex and sophisticated. As a
result, they could contain design defects, software errors or
security problems that are difficult to detect and correct. In
particular, it is common for complex software programs such as
ours to contain undetected errors, particularly in early
versions of our products. Errors are discovered only after the
product has been implemented and used over time with different
computer systems and in a variety of applications and
environments. Despite extensive testing, we have in the past
discovered certain defects or errors in our products or custom
configurations only after our software products have been used
by many clients.
13
In addition, implementation of our products may involve
customer-specific configuration by third parties or us, and may
involve integration with systems developed by third parties. Our
clients may occasionally experience difficulties integrating our
products with other hardware or software in their particular
environment that are unrelated to defects in our products. Such
defects, errors or difficulties may cause future delays in
product introductions, result in increased costs and diversion
of development resources, require design modifications or impair
customer satisfaction with our products. If clients experience
significant problems with implementation of our products or are
otherwise dissatisfied with their functionality or performance,
or if our products fail to achieve market acceptance for any
reason, our market reputation could suffer, and we could be
subject to claims for significant damages. There can be no
assurances that the contractual provisions in our customer
agreements that limit our liability and exclude consequential
damages will be enforced. Any such damages claim could impair
our market reputation and could have a material adverse affect
on our business, operating results and financial condition.
We may
have difficulty implementing our software products, which would
harm our business and relations with customers.
Our software products are complex and perform or directly affect
mission-critical functions across many different functional and
geographic areas of the enterprise. Consequently, implementation
of our software products can be a lengthy process, and
commitment of resources by our clients is subject to a number of
significant risks over which we have little or no control. The
implementation time for certain of our applications can be
longer and more complicated than our other applications as they
typically:
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involve more significant integration efforts in order to
complete implementation;
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require the execution of implementation procedures in multiple
layers of software;
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offer a customer more deployment options and other configuration
choices;
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require more training; and
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may involve third party integrators to change business processes
concurrent with the implementation of the software.
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Delays in the implementations of any of our software products,
whether by our business partners or by us, may result in client
dissatisfaction, disputes with our customers, damage to our
reputation or cancellation of large projects. With the i2
acquisition, we have increased the number of large, complex
projects with global tier one customers. Cancellation of a
large, global implementation project could have a material
adverse affect on our operating results.
Our
operating results may be adversely affected as a result of our
failure to meet contractual obligations under fixed-price
contracts within our estimated cost structure.
A portion of our consulting services revenues are derived under
fixed price arrangements that require us to provide identified
deliverables for a fixed fee. Our failure to meet our
contractual obligations under fixed price contracts within our
estimated cost structure may result in our having to record the
cost related to the performance of services in the period that
the services were rendered, but delay the timing of revenue
recognition to a future period in which the obligations are met,
which may cause our operating results to suffer.
Litigation
could harm our business.
We may be subject to legal proceedings and claims involving
customer, stockholder, consumer, competition and other issues on
a global basis. As described in Item 15,
Note 12 Legal Proceedings in Part IV
of this
Form 10-K,
we are currently engaged in a number of legal proceedings,
including litigation with Dillards and a group of former
i2s shareholders. These legal proceedings are subject to
inherent uncertainties, and unfavorable rulings could occur and
could have a material adverse effect on our business, financial
position, results of operations or cash flows.
14
We may
have difficulty developing our new managed services offering,
which could reduce future revenue growth
opportunities.
We have limited experience operating our applications for our
customers under our Managed Services offering, either on a
hosted or remote basis. We began these services in late 2009 and
through December 31, 2010 they represented a very small
part of our revenues. We have hired management personnel with
significant expertise in operating a managed services business,
and we have begun to make capital expenditures for this
business. We may encounter difficulties developing our Managed
Services into a mature services offering, or the rate of
adoption by our customers may be slower than anticipated. If our
Managed Services business does not grow or operate as expected,
it could divert management resources, harm our strategy and
reduce opportunities for future revenue growth.
The
enforcement and protection of our intellectual property rights
may be expensive and could divert our valuable
resources.
We rely primarily on patent, copyright and trademark laws, as
well as nondisclosure and confidentiality agreements and other
methods, to protect our proprietary information, technologies
and processes. Policing unauthorized use of our products and
technologies is difficult and time-consuming. Unauthorized
parties may try to copy or reverse engineer portions of our
products, circumvent our security devices or otherwise obtain
and use our intellectual property. We cannot be certain that the
steps we have taken will prevent the misappropriation or
unauthorized use of our proprietary information and
technologies, particularly in foreign countries where the laws
may not protect our proprietary intellectual property rights as
fully or as readily as United States laws. We cannot be certain
that the laws and policies of any country, including the United
States, or the practices of any of the standards bodies, foreign
or domestic, with respect to intellectual property enforcement
or licensing will not be changed in a way detrimental to our
licensing program or to the sale or use of our products or
technology.
We may need to litigate to enforce our intellectual property
rights, protect our trade secrets or determine the validity and
scope of proprietary rights of others. As a result of any such
litigation, we could lose our ability to enforce one or more
patents or incur substantial unexpected operating costs. Any
action we take to enforce our intellectual property rights could
be costly and could absorb significant management time and
attention and could result in counterclaims, which, in turn,
could negatively impact our operating results. In addition,
failure to protect our trademark rights could impair our brand
identity.
Third
parties may claim we infringe their intellectual property
rights, which would result in an increase in litigation and
other related costs.
We periodically receive notices or claims from others that we
are infringing upon their intellectual property rights,
especially patent rights. We expect the number of such claims
will increase as the functionality of products overlap and the
volume of issued software patents continues to increase.
Responding to any infringement claim, regardless of its
validity, could:
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be time-consuming, costly
and/or
result in litigation;
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divert managements time and attention from developing our
business;
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require us to pay monetary damages or involve settlement
payments, either of which could be significant;
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require us to enter into royalty and licensing agreements that
we would not normally find acceptable;
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require us to stop selling or to redesign certain of our
products; or
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require us to satisfy indemnification obligations to our
customers.
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If a successful claim is made against us and we fail to develop
or license a substitute technology, our business, results of
operations, financial condition or cash flows could be adversely
affected.
15
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. Our third-party licenses
generally require us to pay royalties and fulfill
confidentiality obligations. 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 likely face delays in the releases of our software
until equivalent technology can be identified, licensed or
developed, and integrated into our software products. These
delays, if they occur, could harm our business, operating
results and financial condition. It is also possible that
intellectual property acquired from third parties through
acquisitions, mergers, licenses, or otherwise obtained may not
have been adequately protected, or infringes another parties
intellectual property rights.
We may
face difficulties in our highly competitive markets, which may
make it difficult to attract and retain clients and grow
revenues.
The supply chain software market continues to consolidate and
this has resulted in larger, new competitors with significantly
greater financial and marketing resources and more numerous
technical resources than we possess. This could create a
significant competitive advantage for our competitors and
negatively impact our business. It is difficult to estimate what
long term effect these acquisitions will have on our competitive
environment. We have encountered competitive situations with
certain enterprise software vendors where, in order to encourage
customers to purchase licenses of their specific applications
and gain market share, we suspect they have also offered to
license at no charge certain of their retail
and/or
supply chain software applications that compete with our
solutions. If large competitors such as Oracle and SAP AG are
willing to license their retail, supply chain
and/or other
applications at no charge, it may result in a more difficult
competitive environment for our products. We cannot guarantee
that we will be able to compete successfully for customers or
acquisition targets against our current or future competitors,
or that competition will not have a material adverse effect on
our business, operating results and financial condition.
We encounter competitive products from a different set of
vendors in many of our primary product categories. We believe
that while our markets are subject to intense competition, the
number of competitors in many of our application markets has
decreased over the past five years. We believe the principal
competitive factors in our markets are feature and
functionality, the depth of planning and optimization provided
and available deployment models. We compete on the basis of our
reputation for delivering successful projects that deliver
valuable results, our product features and functionality,
available deployment models that accelerate the time to value,
the reputation of our products and services, the performance and
scalability of our products, the quality of our customer base,
the perception of vendor viability, our retail and supply chain
industry expertise, our lower total cost of ownership, 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 face competition from low-cost off-shore service providers
and smaller boutique consulting firms. This competition is
expected to continue and our on-shore hourly rates are much
higher than those offered by these competitors. As these
competitors gain more experience with our products, the quality
gap between our service offerings and theirs may diminish,
resulting in decreased revenues and profits from our consulting
practice. In addition, we face increased competition for
services work from ex-employees of JDA who offer services
directly or through lower cost boutique consulting firms. These
competitive service providers have taken business from JDA and
while some are still relatively small compared to our consulting
services business, if they grow successfully, it
16
will be largely at our expense. We continue to attempt to
improve our competitive position by further developing and
increasing the utilization of our offshore consulting services
at our CoE facilities in Hyderabad and Bangalore; however, we
cannot guarantee these efforts will be successful or enhance our
ability to compete.
There are
many risks associated with international operations, which may
negatively impact our overall business and
profitability.
International revenues represented approximately 44% of our
total revenues for the year ended December 31, 2010 and
approximately 40% of our total revenues in the two years ended
December 31, 2009 and, 2008 on both an actual and pro forma
basis, after giving effect to the acquisition of i2, and we
expect to generate a significant portion of our revenues from
international sales in the future.
Our international business operations are subject to risks
associated with international activities, including:
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currency fluctuations, the impact of which could significantly
increase as a result of:
|
Ø
our continuing expansion of the CoE in India; and
Ø
the acquisition of i2, as the majority of i2s
international expenses, including the compensation expense of
over 65% of its employees, is denominated in currencies other
than the U.S. Dollar;
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higher operating costs due to the need to comply with local laws
or regulations;
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lower margins on consulting services;
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competing against low-cost service providers;
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unexpected changes in employment and other regulatory
requirements;
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tariffs and other trade barriers;
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costs and risks of adapting our products for use in foreign
countries;
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longer payment cycles in certain countries;
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potentially negative tax consequences;
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difficulties in staffing and managing geographically disparate
operations;
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greater difficulty in safeguarding intellectual property,
licensing and other trade restrictions;
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ability to negotiate and have enforced favorable contract
provisions;
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repatriation of earnings;
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the challenges of finding qualified management for our
international operations;
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greater incidences of corruption in certain jurisdictions;
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varying and stricter privacy laws;
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general economic conditions in international markets; and
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developing and deploying the skills required to service our
broad set of product offerings across the markets we serve.
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We expect that an increasing portion of our international
software license, consulting services and maintenance services
revenues will be denominated in foreign currencies, subjecting
us to fluctuations in foreign currency exchange rates. If we
expand our international operations, exposures to gains and
losses on foreign currency transactions may increase. We use
derivative financial instruments, primarily forward exchange
contracts, to manage a majority of the foreign currency exchange
exposure associated with net short-term foreign denominated
assets and liabilities which exist as part of our ongoing
business operations and the anticipated costs and expenses
associated with our CoE facilities in India. We cannot guarantee
that any currency exchange strategy would be successful in
avoiding exchange-related losses.
17
If we
experience expansion delays or difficulties with our Center of
Excellence in India, our costs may increase and our margins may
decrease.
We are continuing the expansion of our CoE facilities located in
Hyderabad and Bangalore, India. In order to take advantage of
cost efficiencies associated with Indias lower wage scale,
we expanded the CoE during 2008 beyond a research and
development center to include consulting services, customer
support and information technology resources. We believe that a
properly functioning CoE will be important in achieving desired
long-term operating results. Although we have not yet fully
utilized certain of the service capabilities of the CoE, we
believe progress is being made. We are satisfied with the
progress of our product development, information technology and
other administrative support functions at the CoE. We are also
beginning to gain leverage from the CoE in our consulting
services business, and we expect the overall share of consulting
services work performed by the CoE will continue to increase. We
have also started to leverage the CoE in our customer support
organization although we believe there remain further
opportunities to increase this leverage. 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. If our costs
increase or our margins significantly negatively impact our
operating results, we may decide to move these activities to new
locations around the globe.
Additional risks associated with our CoE strategy include, but
are not limited to:
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the
slower-than-expected
rate of internal adoption of our planned mix of
on-shore/off-shore services;
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potential negative impact on customer satisfaction and retention
with moving more customer support cases off-shore;
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significant increases in labor costs or the tax structure in
India;
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increased risk of associate attrition due to the improvement of
the Indian economy and job market;
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terrorist activities in the region;
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inability to hire or retain sufficient personnel with the
necessary skill sets to meet our needs;
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economic, security and political conditions in India;
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inadequate facilities or communications infrastructure; and
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local law or regulatory issues.
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Economic,
political and market conditions can adversely affect our revenue
and profitability.
Our revenue and profitability depend on the overall demand for
our software and related services. Historically, events such as
terrorist attacks, natural catastrophes and contagious diseases
have created uncertainties in our markets and caused disruptions
in our sales cycles. A regional
and/or
global change in the economy or financial markets, such as the
current protracted global economic downturn, could result in
delay or cancellation of customer purchases. A downturn in the
economy 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. 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. A prolonged economic downturn may
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.
18
We may be
unable to retain key personnel, which could materially impact
our ability to further develop our business.
While the rate of retention of our associates is high compared
to industry averages, our operations are dependent upon our
ability to attract and retain highly skilled associates and the
loss of certain key individuals to any of our competitors could
adversely impact our business. Our performance depends in large
part on the continued performance of our executive officers and
other key employees.
In addition, we do not have in place key person life
insurance policies on any of our employees. The loss of the
services of key executive officers or employees without a
successor in place, or any difficulties associated with a
successor, could negatively affect our financial performance.
We may
have difficulty integrating future acquisitions, which would
reduce the anticipated benefits of those transactions.
We intend to continually evaluate potential acquisitions of
complementary businesses, products and technologies, including
those that are significant in size and scope. In pursuit of our
strategy to acquire complementary products, we have completed
eleven acquisitions over the past thirteen years, including our
acquisitions of i2 in January 2010 and of Manugistics in July
2006. The risks we have encountered in acquisitions include:
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if we incur significant debt to finance a future acquisition and
our combined business does not perform as expected, we may have
difficulty complying with debt covenants;
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if we use our stock to make a future acquisition, it will dilute
existing shareholders;
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we may have difficulty assimilating the operations and personnel
of any acquired company;
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the challenge and additional investment involved to integrate
new products and technologies into our sales and marketing
process;
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we may have difficulty effectively integrating any acquired
technologies or products with our current products and
technologies, particularly where such products reside on
different technology platforms, or overlap with our products;
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our ongoing business may be disrupted by transition and
integration issues;
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customer purchases and projects may become delayed until we
publish a combined product roadmap, and once we do publish the
roadmap it may disrupt additional purchases and projects;
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the costs and complexity of integrating the internal information
technology infrastructure of each acquired business with ours
may be greater than expected and require capital investments;
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we may not be able to retain key technical and managerial
personnel from an acquired business;
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we may be unable to achieve the financial and strategic goals
for any acquired and combined businesses;
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we may have difficulty in maintaining controls, procedures and
policies during the transition and integration period following
a future acquisition;
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our relationships with partner companies or third-party
providers of technology or products could be adversely affected;
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our relationships with employees and customers could be impaired;
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our due diligence process may fail to identify significant
issues with product quality, product architecture, legal or tax
contingencies, customer obligations, revenue recognition and
product development, among other things;
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as successor, we may be subject to certain liabilities of our
acquisition targets;
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19
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we may be required to sustain significant exit or impairment
charges if products acquired in business combinations are
unsuccessful; and
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adverse outcomes in legal proceedings.
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Our failure to effectively integrate any future acquisition
would adversely affect the benefit of such transaction,
including potential synergies or sales growth opportunities, to
the extent in or the time frame anticipated.
Government
contracts are subject to unique costs, terms, regulations,
claims and penalties that could reduce their profitability to
us.
As a result of the acquisition of Manugistics, we acquired a
number of contracts with the U.S. government. Government
contracts entail many unique risks, including, but not limited
to, the following:
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early termination of contracts by the government;
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costly and complex competitive bidding process;
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required extensive use of subcontractors, whose work may be
deficient or not performed in a timely manner;
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significant penalties associated with employee misconduct in the
highly regulated government marketplace;
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changes or delays in government funding that could negatively
impact contracts; and
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onerous contractual provisions unique to the government such as
most favored customer provisions.
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These risks may make the contracts less profitable or cause them
to be terminated, which would adversely affect the business.
If we do
not identify, adopt and develop product architecture that is
compatible with emerging industry standards, our products will
be less attractive to customers.
The markets for our software products are characterized by rapid
technological change, evolving industry standards, changes in
customer requirements and frequent new product introductions and
enhancements. We continuously evaluate new technologies and when
appropriate implement into our products advanced technology such
as our current JDA Enterprise Architecture platform effort.
However, if we fail in our product development efforts to
accurately address in a timely manner, evolving industry
standards, new technology advancements or important third-party
interfaces or product architectures, sales of our products and
services may suffer.
Our software products can be licensed with a variety of popular
industry standard platforms and are authored in various
development environments using different programming languages
and underlying databases and architectures. There may be future
or existing platforms that achieve popularity in the marketplace
that may not be compatible with our software product design.
Developing and maintaining consistent software product
performance across various technology platforms could place a
significant strain on our resources and software product release
schedules, which could adversely affect our results of
operations.
We may be
impacted by shifts in consumer preferences affecting the supply
chain that could reduce our revenues.
We are dependent upon and derive most of our revenue from the
supply chain linking manufacturers, distributors and retailers
to consumers, or 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 these markets. If the consumer
products supply chain vertical experiences a decline in
business, it could have a significant adverse impact on our
business prospects, particularly if it is a prolonged decline.
The recent economic downturn caused declines in certain areas of
the consumer products supply chain. If economic conditions
deteriorate further 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.
20
Risks
Related To Our Stock
Our
quarterly operating results may fluctuate significantly, which
could adversely affect the price of our stock.
Our quarterly operating results have varied in the past and are
expected to continue to vary in the future. If our quarterly or
annual operating results, particularly our software revenues,
fail to meet managements or analysts expectations,
the price of our stock could decline. Many factors may cause
these fluctuations, including:
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The difficulty of predicting demand for our software products
and services, including the size and timing of individual
contracts and our ability to recognize revenue with respect to
contracts signed in a given quarter, particularly with respect
to our larger customers;
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Changes in the length and complexity of our sales cycle,
including changes in the contract approval process at our
customers and potential customers that now require a formal
proposal process, a longer decision making period and additional
layers of customer approval, often including authorization of
the transaction by senior executives, boards of directors and
significant equity investors;
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Competitive pricing pressures and competitive success or failure
on significant transactions;
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Customer order deferrals resulting from the anticipation of new
products, economic uncertainty, disappointing operating results
by the customer, management changes, corporate reorganizations
or otherwise;
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The timing of new software product and technology introductions
and enhancements to our software products or those of our
competitors, and market acceptance of our new software products
and technology;
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Lack of desired features and functionality in our individual
products or our suite of products;
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Changes in the number, size or timing of new and renewal
maintenance contracts or cancellations;
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Unplanned changes in our operating expenses;
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Changes in the mix of domestic and international revenues, or
expansion or contraction of international operations;
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Our ability to complete fixed price consulting contracts within
budget;
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Foreign currency exchange rate fluctuations;
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Lower-than-anticipated
utilization in our consulting services group as a result of
increased competition, reduced levels of software sales, reduced
implementation times for our products, changes in the mix of
demand for our software products, mergers and consolidations
within our customer base, or other reasons; and
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Our limited ability to reduce costs in the short term to
compensate for any unanticipated shortfall in product or
services revenue.
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The adoption of new accounting standards
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Charges to earnings resulting from past or future acquisitions
or internal reorganizations may also adversely affect our
operating results. Under the acquisition method of accounting,
we allocate the total purchase price to an acquired
companys net tangible assets, amortizable intangible
assets and in-process research and development, if any, based on
their fair values as of the date of the acquisition and record
the excess of the purchase price over those fair values as
goodwill. Managements estimates of fair value are based
upon 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:
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Loss on impairment of goodwill
and/or other
intangible assets due to economic conditions or an extended
decline in the market price of our stock below book value;
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Changes in the useful lives or the amortization of identifiable
intangible assets;
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Accrual of newly identified pre-merger contingent liabilities,
in which case the related charges could be required to be
included in earnings in the period in which the accrual is
determined to the extent it is identified subsequent to the
finalization of the purchase price allocation;
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21
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Charges to income to eliminate certain JDA pre-merger activities
that duplicate those of the acquired company or to reduce our
cost structure; and
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Changes in deferred tax assets and valuation allowances.
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In addition, fluctuations in the price of our common stock may
expose us to the risk of securities class action lawsuits.
Defending against such lawsuits could result in substantial
costs and divert managements attention and resources.
Furthermore, any settlement or adverse determination of these
lawsuits could subject us to significant liabilities.
Our
ability to use U.S. net operating loss carryforwards and credit
carryforwards might be limited
Our ability to utilize net operating losses (NOLs),
built-in losses (BILs), and tax credit carryforwards
to offset our future taxable income
and/or to
recover previously paid taxes would be limited if we were to
undergo an ownership change within the meaning of
Section 382 of the Internal Revenue Code (the
IRC). In general, an ownership change
occurs whenever the percentage of the stock of a corporation
owned by 5-percent shareholders (within the meaning
of Section 382 of the IRC) increases by more than
50 percentage points over the lowest percentage of the
stock of such corporation owned by such 5-percent
shareholders at any time over the testing period.
An ownership change under Section 382 of the IRC would
establish an annual limitation to the amount of NOLs, BILs, and
tax credit carryforwards we could utilize to offset our taxable
income in any single year. The application of these limitations
might prevent full utilization of the deferred tax assets
attributable to our NOLs, BILs, and tax credit carryforwards.
Anti-takeover
provisions in our organizational documents and Delaware law
could prevent or delay a change in control.
Our certificate of incorporation, which authorizes the issuance
of blank check preferred stock and Delaware state
corporate laws which restrict business combinations between a
corporation and 15% or more owners of outstanding voting stock
of the corporation for a three-year period, individually or in
combination, may discourage, delay or prevent a merger or
acquisition that a JDA stockholder may consider favorable.
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Item 1B.
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Unresolved
Staff Comments None
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We own our corporate office facility in Scottsdale, Arizona. The
corporate office facility includes a 136,000 square foot,
three-story office building, a two-story parking garage, and
approximately 8.8 acres of land upon which these structures
are located. The corporate office is used for certain of our
sales, marketing, consulting, customer support, training, and
product development functions, as well as executive and
administrative functions. As of December 31, 2010, we have
leased approximately 24,000 square feet of excess office
space in our corporate office facility, and have identified an
additional 13,000 square feet that is available for lease.
We currently lease office space in the Americas for 15 regional
sales and support offices across the United States and
Latin America, and for 23 other international sales and support
offices located in major cities throughout Europe, Asia,
Australia, Japan and the CoE facilities in Bangalore and
Hyderabad, India. The leases are primarily non-cancelable
operating leases with initial terms ranging from one to
20 years that expire at various dates through the year
2018. None of the leases contain contingent rental payments;
however, certain of the leases contain scheduled rent increases
and renewal options. We expect that in the normal course of
business most of these leases will be renewed or that suitable
additional or alternative space will be available on
commercially reasonable terms as needed. We believe our existing
facilities are adequate for our current needs and for the
foreseeable future. As of December 31, 2010, we have sublet
approximately 204,000 square feet of excess office space
through 2014, and have identified an additional
70,000 square feet that we are trying to sublet.
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Item 3.
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Legal
Proceedings
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Information pertaining to legal proceedings can be found in
Note 12. Legal Proceedings to our Condensed
Consolidated Financial Statements elsewhere in this Annual
Report on
Form 10-K,
and is incorporated by reference herein.
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Item 4.
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Removed
and Reserved
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22
PART II
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Item 5.
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Market
for Registrants Common Equity and Related Stockholder
Matters
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Our common stock trades on the NASDAQ Stock Market
(NASDAQ) under the symbol JDAS. The
following table sets forth, for the periods indicated, the high
and low sales prices per share of our common stock for the two
most recent fiscal years as reported on NASDAQ.
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High
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Low
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2010
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First Quarter
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$
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29.95
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$
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24.94
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Second Quarter
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$
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31.72
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$
|
21.75
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Third Quarter
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$
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25.98
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$
|
21.03
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Fourth Quarter
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$
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28.82
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$
|
20.76
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2009
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First Quarter
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$
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13.64
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$
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9.04
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Second Quarter
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$
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16.15
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$
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10.62
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Third Quarter
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$
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23.87
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$
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14.71
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Fourth Quarter
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$
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26.25
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$
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19.57
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On February 22, 2011, the closing sale price for our common
stock was $29.60 per share. On this date, there were
approximately 315 holders of record of our common stock, one of
which is Cede & Co., a nominee for the Depository
Trust Company (DTC). All of the shares of
common stock held by brokerage firms, banks and other financial
institutions as nominees for beneficial owners are deposited
into participant accounts at DTC and therefore are considered to
be held of record by Cede & Co. as one shareholder. We
have never declared or paid any cash dividend on our common
stock. Since we presently intend to retain future earnings to
finance the growth and development of our business, we do not
anticipate paying cash dividends on our common stock in the
foreseeable future.
See Item 1A for a discussion of factors which have and may
continue to impact our operating results and adversely affect
the market price of our common stock. See Item 12 for
information regarding securities authorized for issuance under
equity compensation plans.
23
Stock
Performance Graph
The graph below compares the cumulative total return on our
Common Stock with the NASDAQ Stock Market index
(U.S. companies) and the cumulative total return of NASDAQ
Computer and Data Processing Stocks (Peer Group) for the period
from December 31, 2005 to December 31, 2010. The
comparison assumes that $100 was invested on December 31,
2005 in our Common Stock and in each of the comparison indices,
and assumes reinvestment of dividends.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2010
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12/31/2005
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12/31/2006
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12/31/2007
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12/31/2008
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12/31/2009
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12/31/2010
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JDA Software Group, Inc.
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$
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100.0
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$
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80.9
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$
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120.2
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$
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77.2
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$
|
149.7
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$
|
164.6
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Nasdaq Stock Market (U.S. Companies)
|
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100.0
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109.8
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119.1
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57.4
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82.5
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97.9
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NASDAQ Computer and Data Processing Stocks (Peer Group)
|
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100.0
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112.3
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137.2
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79.0
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129.1
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146.6
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The information contained in the Stock Performance Graph shall
not be deemed to be soliciting material or to be filed with the
SEC nor shall such information be incorporated by reference into
any future filing under the Securities Act of 1933, as amended,
or the Exchange Act, except to the extent we specifically
incorporate it by reference into such filing.
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Item 6.
|
Selected
Financial Data
|
The following selected financial data should be read in
conjunction with our consolidated financial statements and
related notes and with Managements Discussion and
Analysis of Financial Condition and Results of Operations
included elsewhere herein. The selected consolidated financial
data presented below under the captions Consolidated
Statement of Operations Data and Consolidated
Balance Sheet Data for, and as of the end of, each of the
years in the five-year period ended December 31, 2010, are
derived from the audited consolidated financial statements of
JDA Software Group, Inc. The consolidated financial statements
as of December 31, 2010 and 2009, and for each of the years
in the three-year period ended December 31, 2010, together
with the report of the independent registered public accounting
firm, are included elsewhere herein.
24
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Year Ended December 31,
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2010
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2009
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2008
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2007
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|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
617,209
|
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
$
|
373,575
|
|
|
$
|
277,467
|
|
Operating income
|
|
|
46,428
|
|
|
|
39,880
|
|
|
|
20,308
|
|
|
|
48,777
|
|
|
|
7,295
|
|
Net income (loss)
|
|
|
17,718
|
|
|
|
26,339
|
|
|
|
3,124
|
|
|
|
26,522
|
|
|
|
(466
|
)
|
Income (loss) attributable to common shareholders
|
|
$
|
17,718
|
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
$
|
26,522
|
|
|
$
|
(11,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net (loss) income per common share
|
|
$
|
0.43
|
|
|
$
|
0.51
|
|
|
$
|
0.09
|
|
|
$
|
0.79
|
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net (loss) income per common share
|
|
$
|
0.42
|
|
|
$
|
0.50
|
|
|
$
|
0.09
|
|
|
$
|
0.76
|
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic net income per common share
|
|
|
41,173
|
|
|
|
34,936
|
|
|
|
34,339
|
|
|
|
33,393
|
|
|
|
29,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income per common share
|
|
|
41,710
|
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
34,740
|
|
|
|
29,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
171,618
|
|
|
$
|
75,974
|
|
|
$
|
32,696
|
|
|
$
|
95,288
|
|
|
$
|
53,599
|
|
Restricted cash(1)
|
|
|
34,855
|
|
|
|
287,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(1)
|
|
|
186,664
|
|
|
|
345,672
|
|
|
|
32,139
|
|
|
|
67,863
|
|
|
|
41,103
|
|
Goodwill and other intangible assets(2),(3)
|
|
|
414,261
|
|
|
|
254,936
|
|
|
|
282,489
|
|
|
|
311,355
|
|
|
|
345,000
|
|
Total assets(1),(2),(3),(4)
|
|
|
1,113,528
|
|
|
|
821,666
|
|
|
|
524,776
|
|
|
|
622,225
|
|
|
|
624,744
|
|
Long-term debt(1),(2),(4)
|
|
|
272,695
|
|
|
|
272,250
|
|
|
|
|
|
|
|
92,536
|
|
|
|
137,813
|
|
Redeemable preferred stock(2)
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Stockholders equity(3),(5)
|
|
|
624,107
|
|
|
|
411,436
|
|
|
|
341,495
|
|
|
|
335,796
|
|
|
|
290,352
|
|
|
|
|
(1) |
|
The increase in restricted cash, total assets, working capital
and long term debt in 2009 resulted primarily from the net
proceeds from the sale of $275 million of five-year,
8.0% Senior Notes. The net proceeds from the sale of the
Senior Notes, together with cash on hand at JDA and i2, were
subsequently used, together with cash on hand at JDA and i2, to
fund the cash portion of the merger consideration in the
acquisition of i2 Technologies on January 28, 2010.
See the footnotes to the Consolidated Financial Statements for a
complete discussion of these transactions. |
|
(2) |
|
The increase in total assets in 2006 resulted primarily from the
goodwill and other intangible assets recorded in the acquisition
of Manugistics Group, Inc. To finance the acquisition, we
entered into a credit agreement for $175 million of
aggregate long-term loans and issued 50,000 shares of
Series B Preferred Stock for $50 million in cash to a
private equity investment firm. See the footnotes to the
Consolidated Financial Statements for a complete discussion of
these transactions. |
|
(3) |
|
The increase in total assets and stockholders equity in
2010 resulted primarily from the acquisition of
i2 Technologies, Inc. See the footnotes to the Consolidated
Financial Statements for a complete discussion of this
transaction. |
|
(4) |
|
The decrease in total assets in 2008 resulted primarily from the
payment of a $20 million one-time reverse termination fee
and $6.8 million of other finance and related costs
associated with an abandoned acquisition and the payment of
$99.6 million of long-term borrowings. See Item 7,
Managements Discussion and Analysis of Financial Condition
and Results of Operations and the footnotes to the Consolidated
Financial Statements for a complete discussion of these
transactions. |
|
(5) |
|
We have never declared or paid a cash dividend on our common
stock. |
25
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Managements discussion and analysis of financial condition
and results of operations contain certain forward-looking
statements that are made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward-looking statements include statements
concerning, among other things, our business strategy, including
anticipated trends and developments in and management plans for
our business and the markets in which we operate; future
financial results, operating results, revenues, gross margin,
operating expenses, products, projected costs and capital
expenditures; research and development programs; sales and
marketing initiatives; and competition. Forward-looking
statements are generally accompanied by words such as
will or expect and other words with
forward-looking connotations. All forward-looking statements
included in this
Form 10-K
are based upon information available to us as of the filing date
of this
Form 10-K.
We undertake no obligation to update any of these
forward-looking statements for any reason. These forward-looking
statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of
activity, performance, or achievements to differ materially from
those expressed or implied by these statements. These factors
include the matters discussed in the section entitled Risk
Factors elsewhere in this
Form 10-K.
You should carefully consider the risks and uncertainties
described under this section.
Significant
Trends and Developments in Our Business
Legal Proceedings (see Note 12Legal
Proceedings to our Condensed Consolidated Financial
Statements elsewhere in this Annual Report on
Form 10-K,
and is incorporated by reference herein). On
December 2, 2010, we met with Dillards for a
mediation session. During that mediation session, settlement
offers were exchanged, but no agreement was reached. Therefore,
on December 23, 2010 i2 Technologies, Inc.
(i2), which was acquired by JDA Software Group, Inc.
(the Company) on January 28, 2010, filed a
Notice of Appeal to the Dallas Court of Appeals. We currently
estimate the potential loss for this matter to range between
$19 million (the highest settlement offer exchanged) and
$237 million (representing a maximum award for lost
profits, punitive damages and pre-judgment interest), plus
post-judgment interest. The appeals process is not expected to
be resolved prior to the end of 2011. There can be no assurance
that it will be successful or that the litigation will be
settled on terms acceptable to JDA. Management has determined
that the best estimate of the potential outcome of this matter
is $19.0 million, of which $5.0 million was recorded
on the opening balance sheet of i2 following JDAs
acquisition of i2 in January 2010 and $14.0 million was
recorded in December 2010 in the Consolidated Statements of
Income under the capital Litigation provision and in
Consolidated Balance Sheets under the caption Accrued
expenses and other liabilities.
As previously reported, on April 29, 2009, i2 filed a
lawsuit against Oracle Corporation in the United States District
Court for the Eastern District of Texas, alleging infringement
of i2 patents related to supply chain management, available to
promise software and other enterprise applications. On
April 22, 2010, Oracle Corporation filed counterclaims
against i2 and the Company (of which i2 is now a wholly-owned
subsidiary), alleging infringement of certain Oracle Corporation
patents. On February 25, 2011, the Company, i2 and Oracle
Corporation entered into a settlement agreement (the
Agreement). Under the Agreement, the parties entered
into a cross-license arrangement and dismissed their respective
litigation claims related to the patent infringement dispute
with prejudice. In addition, the Company is entitled to receive
a one-time cash payment of $35.0 million from Oracle
Corporation, payable within seven days of the Agreement date, as
well as a $2.5 million license and technical support credit
from Oracle Corporation that must be used by the Company within
two years. The Company intends to account for this settlement as
a reduction of operating expenses in the first quarter of 2011
under the caption Litigation Settlement in the
consolidated statement of income.
We Have Incurred Significant Unplanned Legal
Expenses. Legal expenses incurred for the year
ended December 31, 2010 from inherited i2 litigation were
$9.4 million, in addition to the $14.0 million pre-tax
non- cash charge associated with an i2 litigation matter. We
expect our legal expenses to be higher than normal until we
resolve these matters.
Acquisition of i2 Technologies, Inc. On
January 28, 2010, we completed the acquisition of
i2 Technologies, Inc. (i2) for approximately
$600.0 million, which includes cash consideration of
approximately $432.0 million and the issuance of
approximately 6.2 million shares of our common stock (see
Note 2). Additionally, in December 2009, we issued
$275 million of five-year, 8.0% Senior Notes (the
Senior Notes, see Note 9). During 2010, we
successfully consolidated the operations of i2 into those of JDA
and achieved approximately $22.9 million or 115% of our
total targeted net cost synergies.
26
For the years ended December 31, 2010 and 2009, we expensed
approximately $8.1 million and $4.8 million,
respectively, of costs related to the acquisition of i2. These
costs, which consist primarily of investment banking fees,
commitment fees on unused bank financing, legal and accounting
fees, are included in the consolidated statements of income
under the caption Acquisition-related costs.
Financial Position and Cash Flow Provided by
Operations. We had working capital of
$186.7 million at December 31, 2010 compared to
$345.7 million at December 31, 2009. The working
capital balances include cash of $206.5 million and
$363.8 million, respectively, which includes restricted
cash of $34.9 million and $287.9 million,
respectively. The restricted cash balance at December 31,
2009 consisted primarily of net proceeds from the issuance of
the Senior Notes (see Contractual Obligations ) of
approximately $265 million, which together with cash on
hand at JDA and i2, was used to fund the cash portion of the
merger consideration in the acquisition of i2 on
January 28, 2010.
Net accounts receivable were $102.1 million or 54 days
sales outstanding (DSO) at December 31, 2010
compared to $68.9 million or 58 days DSO at
December 31, 2009. 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 may have installment payment terms, seasonality,
shifts in customer buying patterns, the timing of customer
payments, 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.
We generated $65.2 million in cash from operating
activities for the year ended December 31, 2010 compared to
$96.5 million for the year ended December 31, 2009.
The decrease in cash flow is due primarily to a
$8.6 million decrease in the current period net income,
which includes $8.1 million of acquisition-related costs,
$20.9 million of restructuring charges, $23.4 million
in inherited i2 litigation expenses (including the
$14.0 million labeled as Litigation provision)
and $1.6 million of non-recurring, transition-related costs
for salaries and retention bonuses for i2 employees. In
addition, changes in working capital utilized approximately
$23.3 million of cash in 2010 and provided approximately
$18.6 million of cash in 2009, due primarily to the timing
and payment of accounts receivable and decreases in deferred
revenue and income taxes payable. Operating cash flows in 2010
were negatively impacted by decreases in deferred revenue
balances from maintenance and other recurring revenue contracts
assumed in the i2 acquisition that were renewed prior to the
acquisition and for which the related cash was collected by i2
prior to the acquisition close date.
Future Tax Benefits From the i2
Acquisition. We acquired net operating loss carry
forwards and other favorable tax attributes such as amortization
of intangibles and capitalized research and development costs
and expect future cash tax benefits of approximately
$210 million of which we expect $110 million to be
realized over the next five years (2010 through 2014). As a
result, we do not expect to pay significant federal income taxes
through 2014.
Results
of Operations
Revenues
The following table summarizes revenues and the components of
total revenue as a percentage of total revenue (in thousands,
except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
|
Year Ended December 31,
|
|
|
Change from
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Software licenses
|
|
$
|
109,546
|
|
|
|
18
|
%
|
|
$
|
84,913
|
|
|
|
22
|
%
|
|
$
|
89,196
|
|
|
|
23
|
%
|
|
$
|
24,633
|
|
|
$
|
(4,283
|
)
|
Subscriptions and other recurring revenues
|
|
|
21,143
|
|
|
|
3
|
%
|
|
$
|
3,873
|
|
|
|
1
|
%
|
|
$
|
3,702
|
|
|
|
1
|
%
|
|
|
17,270
|
|
|
|
171
|
|
Maintenance services
|
|
|
246,241
|
|
|
|
40
|
%
|
|
|
179,336
|
|
|
|
46
|
%
|
|
|
182,844
|
|
|
|
47
|
%
|
|
|
66,905
|
|
|
|
(3,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
376,930
|
|
|
|
61
|
%
|
|
|
268,122
|
|
|
|
69
|
%
|
|
|
275,742
|
|
|
|
71
|
%
|
|
|
108,808
|
|
|
|
(7,620
|
)
|
Service revenues
|
|
|
240,279
|
|
|
|
39
|
%
|
|
|
117,678
|
|
|
|
31
|
%
|
|
|
114,590
|
|
|
|
29
|
%
|
|
|
122,601
|
|
|
|
3,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
617,209
|
|
|
|
100
|
%
|
|
$
|
385,800
|
|
|
|
100
|
%
|
|
$
|
390,332
|
|
|
|
100
|
%
|
|
$
|
231,409
|
|
|
$
|
(4,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
The following tables summarize the impact of the i2 acquisition
on our product and service revenues for the year ended
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
i2
|
|
|
|
|
|
Combined
|
|
|
Software and Subscription Revenues
|
|
$
|
79,122
|
|
|
|
61
|
%
|
|
$
|
51,567
|
|
|
|
39
|
%
|
|
$
|
130,689
|
|
Maintenance Revenues
|
|
|
185,764
|
|
|
|
75
|
%
|
|
|
60,477
|
|
|
|
25
|
%
|
|
|
246,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product Revenues
|
|
|
264,886
|
|
|
|
70
|
%
|
|
|
112,044
|
|
|
|
30
|
%
|
|
|
376,930
|
|
Services Revenues
|
|
|
143,355
|
|
|
|
60
|
%
|
|
|
96,924
|
|
|
|
40
|
%
|
|
|
240,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
408,241
|
|
|
|
66
|
%
|
|
$
|
208,968
|
|
|
|
34
|
%
|
|
$
|
617,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
and Subscription Revenues
The following table summarizes software and subscription
revenues by region (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
|
Year Ended December 31,
|
|
|
Change from
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Americas
|
|
$
|
93,613
|
|
|
$
|
57,169
|
|
|
$
|
67,046
|
|
|
$
|
36,444
|
|
|
$
|
(9,877
|
)
|
Europe
|
|
|
21,482
|
|
|
|
18,684
|
|
|
|
18,646
|
|
|
|
2,798
|
|
|
|
38
|
|
Asia/Pacific
|
|
|
15,594
|
|
|
|
12,933
|
|
|
|
7,206
|
|
|
|
2,661
|
|
|
|
5,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total software & subscription revenues
|
|
$
|
130,689
|
|
|
$
|
88,786
|
|
|
$
|
92,898
|
|
|
$
|
41,903
|
|
|
$
|
(4,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in software and subscription revenues in 2010
compared to 2009 is primarily due to the acquisition of i2 and
the increase in large transactions (transactions greater than
$1.0 million). There were 25 large transactions in 2010 as
compared to 19 large transactions in 2009.
The decrease in software and subscription revenues in the
Americas region in 2009 compared to 2008 is due primarily to a
decrease in license revenues recognized from large transactions.
Notably, in 2008 we recognized a license sale in fourth quarter
for $11.5 million which was the largest license transaction
in our history. The increase in software license revenues in the
Asia/Pacific region in 2009 compared to 2008 is due primarily to
an increase in license revenues recognized from large
transactions, including one large transaction in second quarter
2009 which was the largest license transaction ever recognized
in the Asia/Pacific region.
Maintenance
Services
Maintenance services revenues increased in 2010 compared to 2009
primarily due to $60.5 million of new incremental
maintenance revenues from the i2 products and the
year-over-year
improvement in retention rates. The annualized retention rate in
2010 increased to 95.6 percent from 92.4 percent in
2009. In addition, net favorable foreign exchange rate variances
increased maintenance services revenues in 2010 by
$3.0 million compared to 2009 due primarily to the
strengthening of the U.S. Dollar against European
currencies.
Maintenance services revenues decreased in 2009 compared to 2008
primarily due to unfavorable foreign exchange rate variances of
approximately $7.4 million due primarily to the
strengthening of the U.S. Dollar against European
currencies. Excluding the impact of the unfavorable foreign
exchange rate variance, maintenance services revenues increased
approximately $3.9 million in 2009 compared to 2008 as
maintenance revenues from new software sales, rate increases on
annual renewals and reinstatements of previously suspended and
cancelled maintenance agreements more than offset decreases in
maintenance revenues due to attrition.
Service
Revenues
Service revenues, which include consulting services, managed
services, training revenues, net revenues from our hardware
reseller business and reimbursed expenses, increased in 2010
compared to 2009 primarily due to $96.9 million of new
incremental service revenues from i2. Excluding these
incremental revenues, our core consulting services business
increased approximately $25.7 million in 2010 compared to
2009 primarily as a result
28
of our improved software sales performance over the past three
years and an increase in billable hours from certain large
ongoing projects in each of our regions.
Service revenues increased in 2009 compared to 2008 primarily
due to increases in consulting services revenue, utilization and
realized average hourly billing rates in the Americas region and
the Pricing and Revenue Management reportable business
segment, offset in part by decreases in consulting services
revenue and lower realized average hourly billing rates in the
EMEA and Asia/Pacific regions and a $0.7 million decrease
in non-consulting services (training and hosting services,
hardware sales and reimbursed expenses).
Gross
Profits (in thousands, except percentage amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Total gross profit on product revenues
|
|
$
|
313,084
|
|
|
$
|
217,796
|
|
|
$
|
221,232
|
|
Total gross profit on service revenues
|
|
|
50,591
|
|
|
|
22,333
|
|
|
|
22,118
|
|
Product gross profit as a percentage of products sales
|
|
|
83
|
%
|
|
|
81
|
%
|
|
|
80
|
%
|
Service gross profit as a percentage of services
|
|
|
21
|
%
|
|
|
19
|
%
|
|
|
19
|
%
|
Gross Profit on Product Revenues. The increase
in gross profits of $95.3 million on product revenues in
2010 as compared to 2009 primarily relates to: the increase in
product revenues of $108.8 million, offset in part by
$1.0 million of higher costs of software licenses related
to increases in royalties on embedded third-party software
applications, $3.1 million of higher amortization of
software technology acquired in the i2 acquisition and
$9.4 million of an increase in the cost of maintenance
services related to increased salaries, incentive compensation
and related benefits resulting from the associates added in the
i2 acquisition and an increase in maintenance royalties and fees
paid to third parties who provide first level support to certain
of our customers.
The decrease in gross profits on product revenues of
$3.4 million in 2009 as compared to 2008 primarily relates
to the decrease in product revenue of $7.6 million. This
decrease in revenue was partially offset by: a decrease in the
cost of software licenses primarily related to a decrease in
royalties on embedded third-party software applications, offset
in part by an increase in royalties on certain third party
applications that we resell; a decrease in amortization of
acquired software technology primarily related to the cessation
of amortization on certain acquired technology that became fully
amortized; and a decrease in cost of maintenance services
primarily related to a decrease in salaries and related benefits
and a $0.4 million decrease in maintenance royalties and
fees paid to third parties who provide first level support to
certain of our customers. Although the average customer support
headcount increased 4% in 2009 compared to 2008, salaries and
related benefits decreased approximately $2.1 million as
new and replacement positions were filled with lower cost
resources at the CoE.
Gross Profit on Service Revenues. The increase
in gross profits of $28.3 million on services revenues in
2010 as compared to 2009 primarily relates to an increase in
service revenue of $122.6 million, offset in part by an
increase in salaries, incentive compensation and related
benefits resulting from the associates added in the i2
acquisition, a $16.3 million increase in outside contractor
costs, and a $3.9 million increase in travel costs.
There was no significant change in the gross profit on services
revenues in 2009 as compared to 2008 as both service revenues
and service costs were not materially different in either period.
Operating
Expenses
Product
Development
The following table summarizes product development expenses in
dollars and as a percentage of total revenues (in thousands,
except percentage amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Product development
|
|
$
|
72,158
|
|
|
|
12
|
%
|
|
$
|
51,318
|
|
|
|
13
|
%
|
|
$
|
53,866
|
|
|
|
14
|
%
|
|
$
|
20,840
|
|
|
$
|
(2,548
|
)
|
29
Product development expense dollars increased in 2010 compared
to 2009 primarily due to an increase in salaries, incentive
compensation and related benefits resulting from the associates
added in the i2 acquisition; however, decreased as a percentage
of revenue as a result operating leverage achieved in 2010.
Product development expense decreased in 2009 compared to 2008
primarily due to a decrease in salaries and related benefits.
Although the average product development headcount increased
over 13% in 2009 compared to 2008, salaries and related benefits
decreased as new and replacement positions were filled with
lower cost resources at the CoE.
Sales and
Marketing
The following table summarizes sales and marketing expenses in
dollars and as a percentage of total revenues (in thousands,
except percentage amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Sales and marketing
|
|
$
|
91,329
|
|
|
|
15
|
%
|
|
$
|
66,001
|
|
|
|
17
|
%
|
|
$
|
66,468
|
|
|
|
17
|
%
|
|
$
|
25,328
|
|
|
$
|
(467
|
)
|
Sales and marketing expense dollars increased in 2010 compared
to 2009 primarily due to an increase in salaries, incentive
compensation, travel expenses and related benefits resulting
from the associates added in the i2 acquisition; however,
decreased as a percentage of revenue as a result of operating
leverage achieved in 2010.
There was no significant change in sales and marketing expense
in 2009 as compared to 2008.
General
and Administrative
The following table summarizes general and administrative
expenses in dollars and as a percentage of total revenues (in
thousands, except percentage amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
General and administrative
|
|
$
|
72,299
|
|
|
|
12
|
%
|
|
$
|
47,664
|
|
|
|
12
|
%
|
|
$
|
44,963
|
|
|
|
12
|
%
|
|
$
|
24,635
|
|
|
$
|
2,701
|
|
General and administrative expense dollars increased in 2010
compared to 2009 primarily due to an increase in legal costs of
which $9.4 million were related to the ongoing litigation
between Dillards and i2 and the patent infringement
litigation i2 filed against Oracle Corporation and an increase
in salaries, incentive compensation and related benefits
resulting from the associates added in the i2 acquisition. These
increases in costs were partially offset by as a result of the
operating leverage achieved in 2010 and resulted in comparable
percentage of revenue as compared to 2009.
General and administrative expense increased in 2009 compared to
2008. The increase is due primarily to a $1.4 million
increase in share-based compensation resulting from an increase
in the value of equity awards issued under the 2009 Performance
Plan compared to the 2008 Performance Plan and the costs
associated with certain equity inducement awards granted to new
executive officers. The increase in general and administrative
expense in 2009 compared to 2008 also includes a
$1.2 million increase in the provision for doubtful
accounts associated primarily with two specific accounts and a
$0.3 million increase in legal and accounting fees, offset
in part by a decrease in salaries and benefits. Although the
average general and administrative headcount increased
approximately 1% in 2009 compared to 2008, salaries and related
benefits decreased $0.6 million as new and replacement
positions were filled with lower cost resources at the CoE.
Amortization
of Intangibles (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Amortization of intangibles
|
|
$
|
38,415
|
|
|
$
|
23,633
|
|
|
$
|
24,303
|
|
|
$
|
14,782
|
|
|
$
|
(670
|
)
|
The increase in amortization of intangibles in 2010 compared to
2009 is due primarily to the amortization on customer list and
trademark intangible assets acquired in the i2 acquisition,
offset in part to the cessation of amortization on certain
trademark intangibles from prior acquisitions that are now fully
amortized.
30
The decrease in amortization of intangibles in 2009 compared to
2008 is due primarily to the cessation of amortization on
certain trademark and customer list intangibles that are now
fully amortized.
Restructuring
Charges (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Restructuring charges
|
|
$
|
20,931
|
|
|
$
|
6,865
|
|
|
$
|
8,382
|
|
|
$
|
14,066
|
|
|
$
|
(1,517
|
)
|
The 2010 restructuring 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 CoE facilities. The
charges include $14.1 million for termination benefits
related to a workforce reduction of approximately 200 associates
primarily in product development, sales, information technology
and other administrative positions primarily in the Americas. In
addition, the charges include $6.9 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. The remaining
$2.2 million is expected to be paid during fiscal 2011.
Restructuring charges in 2009 include (i) a
$6.5 million charge for 2009 restructuring activities,
(ii) a $0.4 million adjustment to reduce estimated
restructuring reserves established in prior years, (iii) an
adjustment of $1.4 million to increase certain Manugistics
acquisition reserves based on our revised estimate of sublease
rentals and market adjustments on an unfavorable office facility
in the United Kingdom, (iv) the reversal of
$0.8 million in contingency reserves established in the
initial purchase accounting on the Manugistics acquisition and
(v) $0.1 million in adjustments to other
acquisition-related reserves. The charge for 2009 restructuring
activities is primarily associated with the transition of
additional on-shore activities to the CoE and certain
restructuring activities in the EMEA sales organization. The
charges include termination benefits related to a workforce
reduction of 86 full-time employees (FTE) in
product development, service, support, sales and marketing,
information technology and other administrative positions,
primarily in the Americas region. In addition, the restructuring
charges include approximately $2.0 million in severance and
other termination benefits under separation agreements with two
former executives.
Restructuring charges in 2008 include a $8.0 million charge
for 2008 restructuring activities and $0.4 million in net
adjustments to increase certain Manugistics acquisition reserves
based on our revised estimates of the restructuring costs to
exit certain activities of Manugistics primarily related to
facility closures and employee severance and termination
benefits. The charge for 2008 restructuring activities was
primarily associated with our transition of certain on-shore
activities to the CoE and included $7.9 million for
termination benefits, primarily related to a workforce reduction
of 100 FTE in product development, consulting and sales-related
positions across all of our geographic regions and
$0.1 million for office closure and integration costs of
redundant office facilities.
Other
Operating Expenses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Acquisition-related costs
|
|
$
|
8,115
|
|
|
$
|
4,768
|
|
|
$
|
|
|
|
$
|
3,347
|
|
|
$
|
4,768
|
|
Cost of abandoned acquisition
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,060
|
|
|
$
|
|
|
|
$
|
(25,060
|
)
|
Litigation provision
|
|
$
|
14,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14,000
|
|
|
$
|
|
|
Acquisition-Related Costs. During 2010 we
expensed approximately $8.1 million of costs related to the
acquisition of i2. These costs consist primarily of investment
banking fees, commitment fees on unused bank financing, legal,
accounting and other outside professional fees. During 2009 we
expensed approximately $4.8 million of costs related to the
acquisition of i2. These costs consisted primarily of investment
banking fees, commitment fees on unused bank financing, legal
and accounting fees.
Costs of Abandoned Acquisition. We expensed
$25.1 million in costs associated with an abandoned
acquisition in the fourth quarter 2008, including a
$20 million non-refundable reverse termination fee and
$5.1 million of legal, accounting and other
acquisition-related fees.
31
Litigation Provision. We expensed
$14.0 million in 2010 related to our litigation with
Dillards. See Note 12 for further information.
Interest
Expense and Other Income (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Interest expense and amortization of loan fees
|
|
$
|
24,758
|
|
|
$
|
2,712
|
|
|
$
|
10,349
|
|
|
$
|
22,046
|
|
|
$
|
(7,637
|
)
|
Finance costs on abandoned acquisition
|
|
$
|
|
|
|
$
|
(767
|
)
|
|
$
|
5,292
|
|
|
$
|
767
|
|
|
$
|
(6,059
|
)
|
Interest income and other, net
|
|
$
|
1,683
|
|
|
$
|
1,253
|
|
|
$
|
2,791
|
|
|
$
|
430
|
|
|
$
|
(1,538
|
)
|
Interest Expense and Amortization of Loan
Fees. The increase in interest expense and
amortization of loan fees in 2010 compared to 2009 is due
primarily to $23.4 million of interest on the Senior Notes
issued and amortization of $1.4 million on the original
issue discount on the Senior Notes and related loan origination
fees. The decrease in 2009 compared to 2008 is due primarily to
the repayment in full during 2008 of all remaining borrowings on
term loans used to finance the acquisition of Manugistics, the
accelerated amortization of related loan origination fees and an
$0.9 million payment in consideration for early termination
of a related interest rate swap.
Finance Costs on Abandoned Acquisition. During
2008, we accrued $5.3 million in finance costs related to
loan origination ($3.4 million) and ticking
fees ($1.9 million) on debt financing related to an
abandoned acquisition. During 2009, approximately
$0.8 million of the ticking fees were waived
pursuant to a mutual release agreement and the related expense
was reversed.
Interest Income and Other, Net. There was no
significant change in interest income and other, net in 2010 as
compared to 2009. The decrease in 2009 compared to 2008 is due
primarily to a $1.5 million decrease in interest on
invested funds as the excess cash balances that were held in
interest bearing accounts during 2008 were used to repay the
remaining balance of the term loans used to finance the
acquisition of Manugistics.
Income
Tax Provision (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar
|
|
|
Year Ended December 31,
|
|
Change from
|
|
|
2010
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Income tax provision
|
|
$
|
5,635
|
|
|
$
|
12,849
|
|
|
$
|
4,334
|
|
|
$
|
(7,214
|
)
|
|
$
|
8,515
|
|
Our effective income tax rates were 24.1% and 32.8% in 2010 and
2009, respectively. Our effective income tax rate takes into
account the source of taxable income, domestically by state and
internationally by country, and available income tax credits.
The effective tax rate in 2010 is lower than the United States
federal statutory rate of 35% due to the release of income tax
reserves resulting from expiring tax statutes for
U.S. state income tax returns and recording the benefit of
research and development (R&D) credits. The
effective tax rate in 2009 is lower than the United States
federal statutory rate of 35% due primarily to recording the
benefit of R&D credits, Section 199 deduction and the
benefit of previously unrecorded net operating losses.
Our effective income tax rates were 32.8% and 58.1% in 2009 and
2008, respectively. Our effective income tax rate takes into
account the source of taxable income, domestically by state and
internationally by country, and available income tax credits.
The effective tax rate in 2009 is lower than the United States
federal statutory rate of 35% due primarily to recording the
benefit of R&D credits, Section 199 deduction and the
benefit of previously unrecorded net operating losses. The
effective tax rate in 2008 is higher than the federal statutory
rate of 35% due to increases in the liability for unrecognized
tax benefits and other adjustments including those related to
income tax examinations.
Consideration
Paid in Excess of Carrying Value on the Repurchase of Redeemable
Preferred Stock
We entered into a purchase agreement in September 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
1.4 million shares of JDA common stock into which the
Series B Preferred Stock is convertible). The agreed
purchase price included $19.5 million, which represents the
conversion of 1.4 million shares of common stock at the
conversion price of $13.875, and $8.6 million, which
represents consideration paid in excess of the conversion price
of $13.875 ($6.125 per share). The consideration paid in excess
of the conversion price was charged to retained earnings in the
same manner as a dividend on preferred stock, and reduced the
income applicable to common shareholders in the calculation of
earnings per share for 2009.
32
Segments
Data
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.
|
|
|
|
Pricing and Revenue Management (previously known as 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
Pricing and Revenue Management 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 years ended December 31, 2010 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
597,061
|
|
|
$
|
354,402
|
|
|
$
|
369,947
|
|
Pricing and Revenue Management
|
|
|
20,148
|
|
|
|
31,398
|
|
|
|
20,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
617,209
|
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
201,730
|
|
|
$
|
114,174
|
|
|
$
|
121,015
|
|
Pricing and Revenue Management
|
|
|
(1,542
|
)
|
|
|
8,636
|
|
|
|
2,001
|
|
Other (see below)
|
|
|
(153,760
|
)
|
|
|
(82,930
|
)
|
|
|
(102,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,428
|
|
|
$
|
39,880
|
|
|
$
|
20,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
11,306
|
|
|
$
|
7,336
|
|
|
$
|
7,610
|
|
Pricing and Revenue Management
|
|
|
1,477
|
|
|
|
1,049
|
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,783
|
|
|
$
|
8,385
|
|
|
$
|
8,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
72,299
|
|
|
$
|
47,664
|
|
|
$
|
44,963
|
|
Amortization of intangible assets
|
|
|
38,415
|
|
|
|
23,633
|
|
|
|
24,303
|
|
Restructuring charge and adjustments to acquisition-related
reserves
|
|
|
20,931
|
|
|
|
6,865
|
|
|
|
8,382
|
|
Acquisition-related costs
|
|
|
8,115
|
|
|
|
4,768
|
|
|
|
|
|
Costs of abandoned acquistion
|
|
|
|
|
|
|
|
|
|
|
25,060
|
|
Litigation provision
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
153,760
|
|
|
$
|
82,930
|
|
|
$
|
102,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
The combined operating income reported in the reportable
business segments excludes $153.8 million,
$82.9 million and $102.7 million of general and
administrative expenses and other charges in 2010, 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.
Liquidity
and Capital Resources
We had working capital of $186.7 million at
December 31, 2010 compared to $345.7 million at
December 31, 2009. The working capital balance at
December 31, 2010 and 2009 includes $171.6 million and
$76.0 million, respectively, in cash and cash equivalents.
In addition, working capital at December 31, 2009 includes
$287.9 million of restricted cash, consisting primarily of
net proceeds from the issuance of the Senior Notes (see
Contractual Obligations), which together with cash on
hand at JDA and i2, was used to fund the cash portion of the
merger consideration in the acquisition of i2 on
January 28, 2010. During 2010, we generated
$65.2 million in cash flow from operating activities.
Net accounts receivable were $102.1 million, or
54 days sales outstanding (DSO), at
December 31, 2010 compared to $68.9 million, or 58
DSO, at December 31, 2009. Our quarterly DSO results
historically increase during the first quarter of each year due
to the heavy annual maintenance renewal billings that occur
during this time frame and then typically decrease slowly over
the remainder of the year. DSO results can fluctuate
significantly on a quarterly basis due to a number of factors
including the percentage of total revenues that comes from
software license sales, which typically have installment payment
terms, seasonality, shifts in customer buying patterns, the
timing of customer payments and annual maintenance renewals,
lengthened contractual payment terms in response to competitive
pressures, the underlying mix of products and services, and the
geographic concentration of revenues.
Cash Flow
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net cash provided by operating activities
|
|
$
|
65,172
|
|
|
$
|
96,481
|
|
|
$
|
47,092
|
|
Net cash provided by (used in) investing activities
|
|
|
19,736
|
|
|
|
(300,037
|
)
|
|
|
(12,704
|
)
|
Net cash provided by (used in) financing activities
|
|
|
10,243
|
|
|
|
245,968
|
|
|
|
(95,481
|
)
|
Effect of foreign currency translation on cash and cash
equivalents
|
|
|
493
|
|
|
|
866
|
|
|
|
(1,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
95,644
|
|
|
$
|
43,278
|
|
|
$
|
(62,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities provided cash of $65.2 million,
$96.5 million and $47.1 million in 2010, 2009 and
2008, respectively. The principle sources of our cash flow from
operations are typically net income adjusted for depreciation
and amortization and bad debt provisions, collections on
accounts receivable and increases in deferred maintenance
revenue. The decrease in cash flow is due primarily to a
$8.6 million decrease in the current period net income,
which includes $8.1 million of acquisition-related costs,
$20.9 million of restructuring charges, $23.4 million
in inherited i2 litigation expenses (including the
$14.0 million labeled as Litigation provision)
and $1.6 million of non-recurring, transition-related costs
for salaries and retention bonuses for i2 employees. In
addition, changes in working capital utilized approximately
$23.3 million of cash in 2010 and provided approximately
$18.6 million of cash in 2009, due primarily to the timing
and payment of accounts receivable and decreases in deferred
revenue and income taxes payable. Operating cash flows in 2010
were negatively impacted by decreases in deferred revenue
balances from maintenance and other recurring revenue contracts
assumed in the i2 acquisition that were renewed prior to the
acquisition and for which the related cash was collected by i2
prior to the acquisition close date.
The increase in cash flow from operations in 2009 compared to
2008 is due primarily to a $23.2 million increase in net
income, a $9.9 million net decrease in accounts receivable
resulting from the higher volume of software sales over the
second half of 2008 that were collected in 2009 (compared to an
increase of $6.6 million in 2008), and a $4.2 million
increase in deferred revenue (compared to decrease of
$6.7 million in 2008) due primarily
34
to favorable foreign exchange rate variances, offset in part by
a $4.6 million decrease in accrued expenses (compared to a
$3.9 million increase in 2008) due to primarily to the
payment of the higher commissions and bonuses resulting from the
Companys improved operating performance in 2008. Cash flow
from operating activities in 2008 was impacted by
$30.4 million in costs paid
and/or
accrued in connection with the abandoned acquisition of i2,
including a $20 million non-refundable reverse termination
fee, $5.3 million in finance costs and $5.1 million of
legal, accounting and other acquisition-related costs.
Investing activities provided $19.7 million of cash
in 2010 and utilized cash of $300.0 million and
$12.7 million 2009 and 2008, respectively. Investing
activities in 2009 include a $287.9 million increase in
restricted cash balances, the majority of which represents the
net proceeds from the issuance of the Senior Notes. The net
proceeds from the sale of the Senior Notes, which exclude the
original issue discount ($2.8 million) and other debt
issuance costs ($7.2 million) were placed in escrow and
together with cash on hand at JDA and i2, were used to fund the
cash portion of the merger consideration in the acquisition of
i2 on January 28, 2010. The restricted cash balances also
include the transfer of an additional $17.1 million in
funds from our available cash balances into escrow in order to
effect the transaction and $4.1 million in cash balances
that are being used to collateralize a standby letter of credit.
Investing activities in 2010, 2009 and 2008 include capital
expenditures of $16.9 million, $7.1 million and
$8.6 million, respectively, and payment of direct costs
related to acquisitions of $3.6 million, $5.1 million
and $4.2 million, respectively. Direct costs related to
acquisitions in 2009 include the purchase of a 49.1% equity
interest in the registered share capital of Strategix.
Financing activities provided cash of $10.2 million
and $246.0 million in 2010 and 2009 and utilized cash of
$95.5 million in 2008, respectively. Financing activities
in 2010 include proceeds from the issuance of common stock under
our stock plans and the repurchase of shares tendered by
employees for payment of applicable statutory withholding taxes
on the issuance of restricted stock. Financing activities in
2009 include proceeds from the issuance of the Senior Notes, net
of $2.8 million of original issue discount, and
$14.8 million in proceeds from the issuance of stock
($12.6 million from the exercise of stock options and
$2.3 million from the purchase of common shares under the
Employee Stock Purchase Plan), offset in part by the
$28.1 million redemption of the remaining Series B
Convertible Preferred Stock, $6.5 million in purchases of
treasury stock ($2.9 million for 265,715 shares of
common stock repurchased pursuant to our approved stock
repurchase program, $1.6 million for the repurchase of
shares tendered by employees for payment of applicable statutory
withholding taxes on the issuance of restricted stock, and
$2.0 million for the purchase of 100,000 shares of
converted common stock), and $6.5 million of debt issuance
costs related to the issuance of the Senior Notes. Financing
activities in 2008 included the repayment of $99.6 million
of term loans and other long-term debt assumed in the
acquisition of Manugistics and proceeds from the issuance of
common stock under our stock plans and the repurchase of shares
tendered by employees for payment of applicable statutory
withholding taxes on the issuance of restricted stock.
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.
Contractual Obligations. The following
summarizes scheduled principal maturities and interest on
long-term debt and our operating lease obligations as of
December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2011
|
|
|
2012-2013
|
|
|
2014-2015
|
|
|
After 2015
|
|
|
Long-term debt
|
|
$
|
275,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
275,000
|
|
|
$
|
|
|
Interest on long-term debt
|
|
|
88,000
|
|
|
|
22,000
|
|
|
|
44,000
|
|
|
|
22,000
|
|
|
|
|
|
Operating leases
|
|
|
59,396
|
|
|
|
22,547
|
|
|
|
25,465
|
|
|
|
6,627
|
|
|
|
4,757
|
|
Contracted sublease rentals
|
|
|
10,323
|
|
|
|
5,527
|
|
|
|
4,104
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
432,719
|
|
|
$
|
50,074
|
|
|
$
|
73,569
|
|
|
$
|
304,319
|
|
|
$
|
4,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt consists of the Senior Notes issued on
December 10, 2009 at an initial offering price of 98.988%.
The net proceeds from the sale of the Senior Notes, which
exclude the original issue discount ($2.8 million) and
other debt issuance costs ($7.2 million) were placed in
escrow and subsequently used,
35
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2
(see Note 2 to consolidated financial statements).
The Senior Notes have a five-year term and mature on
December 15, 2014. Interest is computed on the basis of a
360-day year
composed of twelve
30-day
months, and is payable semi-annually on June 15 and December 15
of each year, beginning on June 15, 2010. The obligations
under the Senior Notes are fully and unconditionally guaranteed
on a senior basis by substantially all of our existing and
future domestic subsidiaries (including, following the Merger,
i2 and its domestic subsidiaries).
Operating lease obligations represent future minimum lease
payments under non-cancelable operating leases at
December 31, 2010. We currently lease office space in the
Americas for 15 regional sales and support offices across the
United States and Latin America, and for 23 other international
sales and support offices located in major cities throughout
Europe, Asia, Australia, Japan and the CoE facilities in
Bangalore and Hyderabad, India. The leases are primarily
non-cancelable operating leases with initial terms ranging from
one to 20 years that expire at various dates through the
year 2018. None of the leases contain contingent rental
payments; however, certain of the leases contain scheduled rent
increases and renewal options. We expect that in the normal
course of business most of these leases will be renewed or that
suitable additional or alternative space will be available on
commercially reasonable terms as needed. In addition, we lease
various computers, telephone systems, automobiles, and office
equipment under non-cancelable operating leases with initial
terms ranging from 12 to 48 months. Certain of the
equipment leases contain renewal options and we expect that in
the normal course of business some or all of these leases will
be renewed or replaced by other leases.
The contractual obligations shown in the table above exclude
$6.9 million in non-current liabilities for uncertain tax
positions as we are unable to make reasonably reliable estimates
of the period of expected cash settlement with the respective
taxing authorities.
We believe our cash and cash equivalents and net cash provided
from operations will provide adequate liquidity to meet our
normal operating requirements and that our existing facilities
are adequate for at least the next twelve months. Although we do
not anticipate the appeals process for the Dillards matter
to be resolved prior to the end of 2011, we believe that we have
sufficient cash available to fund an adverse resolution within
the estimated potential outcomes in this matter based on our
December 31, 2010 ending cash balances and our 2011
projected cash flow from operations.
Critical
Accounting Policies
We have identified the policies below as critical to our
business operations and the understanding of our results of
operations. The impact and any associated risks related to these
policies on our business operations is discussed throughout
Managements Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our
reported and expected financial results. The preparation of this
Annual Report on
Form 10-K
requires us to make estimates and assumptions that affect the
reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from
those estimates.
|
|
|
|
|
Revenue recognition. Our revenue recognition
policy is significant because our revenue is a key component of
our results of operations. In addition, our revenue recognition
determines the timing of certain expenses such as commissions
and royalties. We follow specific and detailed guidelines in
measuring revenue; however, certain judgments affect the
application of our revenue policy.
|
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;
36
Ø
Collection is considered probable; and
Ø
Vendor-specific objective evidence of fair value
(VSOE) exists for all undelivered elements.
Our customer arrangements typically contain multiple elements
that include software, maintenance, managed services, consulting
and training services and from
time-to-time,
options for future purchases of software products not previously
licensed to the customer. The fees from these arrangements are
allocated to the various elements based on VSOE. Under the
residual method, if an arrangement contains undelivered
elements, the VSOE of the undelivered elements is deferred and
the revenue recognized as the elements are delivered. If we are
unable to determine VSOE for any undelivered element included in
an arrangement, we will defer revenue recognition until evidence
of VSOE exists or the element without VSOE is delivered. If VSOE
does not exist for an undelivered element that is delivered
ratably (i.e., maintenance services or managed services), all
revenue in the arrangement including the software license will
be recognized ratably until evidence of VSOE exists. In
addition, if a software license contains milestones, customer
acceptance criteria or a cancellation right, the software
revenue is recognized upon the achievement of the milestone or
upon the earlier of customer acceptance, or the expiration of
the acceptance period or cancellation right. For arrangements
that provide for significant services or custom development that
are essential to the softwares functionality, the software
license revenue and contracted services are recognized under the
percentage of completion method. We measure
progress-to-completion
on arrangements involving significant services or custom
development that are essential to the softwares
functionality using input measures, primarily labor hours, which
relate hours incurred to date to total estimated hours at
completion. We regularly 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.
Subscription and other recurring revenues include fees for
access rights to software solutions that are offered under a
subscription-based delivery model where the users do not take
possession of the software. Under this model, the software
applications are hosted by the Company or by a third party and
the customer accesses and uses the software on an as-needed
basis over the internet or via a dedicated line. The underlying
arrangements typically (i) include a single fee for the
service that is billed monthly, quarterly or annually,
(ii) cover a period from 36 to 60 months and
(iii) do not provide the customer with an option to take
delivery of the software at any time during or after the
subscription term. In addition, subscription and other recurring
revenues include subscription-based software license revenues
where the customer has taken physical possession of the software
for a defined period of time. Subscription revenues are
recognized ratably over the subscription term beginning on the
commencement dates of each contract.
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 available from a number of
suppliers, and are generally not essential to the functionality
of our software products. Consulting services include project
management, system planning, design and implementation, customer
configurations, and training. These services are generally
billed bi-weekly on an hourly basis or pursuant to the terms of
a fixed price contract. Consulting services revenue billed on an
hourly basis is recognized as the work is performed. Under fixed
price service contracts and milestone-based arrangements that
include services that are not essential to the functionality of
our software products, consulting services revenue is recognized
using the proportional performance method. We measure
progress-to-completion
under the proportional performance method by using input
measures, primarily labor hours, which relate hours incurred to
date to total estimated hours at completion. We continually
update and revise our estimates of input measures. If our
estimates indicate that a loss will be incurred, the entire loss
is recognized in that period. Training revenues are included in
consulting revenues in the Companys consolidated
statements of
37
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.
Consulting and training services, when sold with subscription
offerings, are accounted for separately if they have standalone
value to the customer and there is VSOE for the undelivered
elements. In these situations, the consulting and training
revenues are recognized as the services are rendered for time
and material contracts or when milestones are achieved and
accepted by the customer under fixed price service contracts. If
the consulting and training services sold with the subscription
offerings do not quality for separate accounting, all fees from
the arrangement are treated as a single unit of accounting and
recognized ratably over the subscription term.
Managed service offerings are separately priced and stated in
our arrangements with the related revenues included in service
revenues. Managed services typically include implementation lab
services, advance customer support and software and hardware
administration services, and are billed monthly, quarterly or
annually with the revenue recognized ratably over the term of
the contract.
The timing of revenue recognition on software licenses and other
revenues could be significantly impacted if we are unable to
maintain VSOE on one or more undelivered elements during any
quarterly period. Loss of VSOE could result in (i) the
complete deferral of all revenues or (ii) ratable
recognition of all revenues under a customer arrangement until
such time as VSOE is re-established. If we are unable to
re-establish VSOE on one or more undelivered elements for an
extended period of time it would impact our ability to
accurately forecast the timing of quarterly revenues, which
could have a material adverse effect on our business, financial
position, results of operations or cash flows.
|
|
|
|
|
Extension of Credit and 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 only recognize revenue when we believe
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. 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. We have a history of collecting
software payments when they come due without providing refunds
or concessions. Consulting services are generally billed
bi-weekly and maintenance services are billed annually or
monthly. For those customers who are significantly delinquent or
whose credit deteriorates, we typically put the account on hold
and do not recognize any further services revenue, and may as
appropriate withdraw support
and/or our
implementation staff until the situation has been resolved.
|
We do not have significant billing or collection problems. We
review each past due account and provide specific reserves based
upon the information we gather from various sources including
our customers, subsequent cash receipts, consulting services
project teams, members of each regions management, and
credit rating services such as Dun and Bradstreet. Although
infrequent and unpredictable, from time to time certain of our
customers have filed bankruptcy, and we have been required to
refund the pre-petition amounts collected and settle for less
than the face value of their remaining receivable pursuant to a
bankruptcy court order. In these situations, as soon as it
becomes probable that the net realizable value of the receivable
is impaired, we provide reserves on the receivable. In addition,
we monitor economic conditions in the various geographic regions
in which we operate to determine if general reserves or
adjustments to our credit policy in a region are appropriate for
deteriorating conditions that may impact the net realizable
value of our receivables.
|
|
|
|
|
Goodwill and Intangible Assets. Our business
combinations have typically resulted in goodwill and other
intangible assets. These intangible assets affect the amount of
future period amortization expense and potential impairment
charges we may incur. The determination of the value of such
intangible assets and the
|
38
|
|
|
|
|
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 2010, 2009 or 2008
with respect to the goodwill allocated to our Supply Chain
and Pricing and Revenue Management reportable business
segments, noting that our reportable business segments fair
value were approximately 120% and 40% greater than their book
values, respectively. Absent future indications of impairment,
the next annual impairment test will be performed in fourth
quarter 2011.
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
their estimated remaining useful life of five years.
|
|
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|
|
Income Taxes. We account for income taxes
using the asset and liability method. Under the asset and
liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
|
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.
Management must make significant assumptions, judgments and
estimates to determine our current provision for income taxes
and also our deferred tax assets and liabilities and any
valuation allowance to be recorded against our net deferred tax
asset. Valuation allowances are established to reduce deferred
tax assets to the amount that will more likely than not be
realized. To the extent that a determination is made to
establish or adjust a valuation allowance, the expense or
benefit is recorded in the period in which the determination is
made.
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|
|
Derivative Instruments and Hedging
Activities. The accounting for changes in the
fair value of a derivative depends on the intended use of the
derivative and the resulting designation. For a derivative
instrument
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39
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|
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|
|
designated and qualifying as a cash flow hedge, the effective
portion of the derivatives gain or loss is initially
reported as a component of cumulative other comprehensive income
(loss) and subsequently reclassified into earnings when the
hedged exposure affects earnings. The ineffective portion of the
gain or loss is reported in earnings immediately. For derivative
instruments that are not designated as cash flow hedges, changes
in fair value are recognized in earnings in the period of
change. We do not hold or issue derivative financial instruments
for speculative trading purposes.
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|
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|
|
|
Legal and Other Contingencies. As discussed in
Note 12 Legal Proceedings to our consolidated
Financial Statements elsewhere in this Annual Report on
Form 10-K,
we are subject to various legal proceedings and claims that
arise in the ordinary course of business. In accordance with
GAAP, we record a liability when it is probable that a loss has
been incurred and the amount is reasonably estimable. There is
significant judgment required in both the probability
determination and as to whether an exposure can be reasonably
estimated. In managements opinion, we do not have a
potential liability related to any current legal proceedings and
claims that would individually or in the aggregate materially
adversely affect our financial condition or operating results.
However, the outcomes of legal proceedings and claims brought
against us are subject to significant uncertainty. Should we
fail to prevail in any of these legal matters, the operating
results of a particular reporting period could be materially
adversely affected.
|
Recent
Accounting Pronouncements
In September 2009, FASB issued an amendment to its accounting
guidance on certain revenue arrangements with multiple
deliverables that enables a vendor to account for products and
services (deliverables) separately rather than as a combined
unit. The revised guidance establishes a selling price hierarchy
for determining the selling price of a deliverable, which is
based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) managements
best estimate of selling price. This guidance also eliminates
the residual method of allocation and requires that the
arrangement consideration be allocated at the inception of the
arrangement to all deliverables. In addition, this guidance
significantly expands required disclosures related to such
revenue arrangements that have multiple deliverables. The
revised guidance is effective for revenue arrangements entered
into or materially modified in fiscal years beginning on or
after June 15, 2010 with early adoption permitted. We
adopted the new guidance effective January 1, 2011 and
based on our initial assessment, the new guidance would not have
had a material impact on our 2010 financial statements or the
new revenue arrangements entered into during 2010, specifically
those involving the delivery of software-as-a-service and
certain other managed service offerings with software access
rights. The ultimate impact on our consolidated financial
statements will depend on the nature and terms of the revenue
arrangements entered into or materially modified after the
adoption date. The new guidance does not significantly change
the accounting for the majority of our existing and future
revenue arrangements that are subject to specific guidance in
sections 605 and 985 of the Codification (see Revenue
Recognition discussion above).
In December 2009, FASB issued new guidance for improvements to
financial reporting by enterprises involved with variable
interest entities. The new guidance provides an amendment to its
consolidation guidance for variable interest entities and the
definition of a variable interest entity and requires enhanced
disclosures to provide more information about an
enterprises involvement in a variable interest entity.
This amendment also requires ongoing assessments of whether an
enterprise is the primary beneficiary of a variable interest
entity and is effective for reporting periods beginning after
December 15, 2009. The implementation of this guidance did
not have a significant impact on our consolidated financial
position or results of operations.
In January 2010, FASB issued an amendment to its accounting
guidance for fair value measurements which adds new requirements
for disclosures about transfers into and out of Levels 1
and 2 and separate disclosures about purchases, sales,
issuances, and settlements related to Level 3 measurements.
The revised guidance also clarifies existing fair value
disclosures about the level of disaggregation and about inputs
and valuation techniques used to measure fair value. The
amendment is effective for the first reporting period beginning
after December 15, 2009, except for the requirements to
provide the Level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which will be
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. Early
adoption is permitted. The implementation of this guidance did
not have a significant impact on our consolidated financial
position or results of operations.
40
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We are exposed to certain market risks in the ordinary course of
our business. These risks result primarily from changes in
foreign currency exchange rates and interest rates. In addition,
our international operations are subject to risks related to
differing economic conditions, changes in political climate,
differing tax structures, and other regulations and restrictions.
Foreign currency exchange rates. Our
international operations expose us to foreign currency exchange
rate changes that could impact translations of foreign
denominated assets and liabilities into U.S. dollars and
future earnings and cash flows from transactions denominated in
different currencies. International revenues represented
approximately 40% of our total revenues in 2010, 2009 and 2008.
In addition, the identifiable net assets of our foreign
operations represented 20% and 19% of consolidated net assets at
December 31, 2010 and 2009, respectively. 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 a net unrealized foreign currency exchange gain of
$5.4 million and $5.3 million in 2010 and 2009,
respectively. We recorded net foreign currency exchange losses
of $0.7 million in 2010 and net gains of $0.7 million
and $0.5 million in 2009 and 2008, respectively, which are
included in the condensed consolidated statements of income
under the caption Interest Income and other, net.
Foreign currency gains and losses will continue to result from
fluctuations in the value of the currencies in which we conduct
operations as compared to the U.S. Dollar, and future
operating results will be affected to some extent by gains and
losses from foreign currency exposure. We prepared sensitivity
analyses of our exposures from foreign net working capital as of
December 31, 2010 to assess the impact of hypothetical
changes in foreign currency rates. Based upon the results of
these analyses, a 10% adverse change in all foreign currency
rates from the December 31, 2010 rates would result in a
currency translation loss of approximately $1.9 million
before tax.
We use derivative financial instruments, primarily forward
exchange contracts, to manage a majority of the foreign currency
exchange exposure associated with net short-term foreign
currency denominated assets and liabilities that exist as part
of our ongoing business operations that are denominated in a
currency other than the functional currency of the subsidiary.
The exposures relate primarily to the gain or loss recognized in
earnings from the settlement of current foreign denominated
assets and liabilities. We do not enter into derivative
financial instruments for trading or speculative purposes. The
forward exchange contracts generally have maturities of
90 days or less and are not designated as hedging
instruments. Forward exchange contracts are
marked-to-market
at the end of each reporting period, using quoted prices for
similar assets or liabilities in active markets (Level 2
inputs), with gains and losses recognized in other income offset
by the gains or losses resulting from the settlement of the
underlying foreign currency denominated assets and liabilities.
At December 31, 2010, we had forward exchange contracts
with a notional value of $68.8 million and an associated
net forward contract receivable of $0.7 million. 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 $0.4 million. These
derivatives are not designated as hedging instruments. We
prepared sensitivity analyses of the impact of changes in
foreign currency exchange rates on our forward exchange
contracts at December 31, 2010. Based on the results of
these analyses, a 10% adverse change in all foreign currency
rates from the December 31, 2010 rates would result in a
net forward contract liability of $5.8 million that would
increase the underlying currency translation loss on our net
foreign assets.
In the fourth quarter of 2010, we also began a cash flow hedging
program under which we hedge a portion of anticipated operating
expenses denominated in the Indian Rupee. The forward exchange
contracts have maturities of twelve months or less and are
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. The effective
portion of the derivatives gain or loss is initially
reported as a component of cumulative other comprehensive income
(loss) and subsequently reclassified into earnings when the
hedged exposure affects earnings. The ineffective portion of the
gain or loss is reported in earnings immediately. At
December 31, 2010, we had forward exchange contracts with a
notional value of $30.7 million and an associated net
41
forward contract receivable of $0.4 million. We prepared
sensitivity analyses of the impact of changes in foreign
currency exchange rates on our forward exchange contracts at
December 31, 2010. Based on the results of these analyses,
a 10% adverse change in all foreign currency rates from the
December 31, 2010 rates would result in a net forward
contract liability of $2.2 million.
The forward contract receivables (payables) are included in the
consolidated balance sheets under the caption captions
Prepaid expenses and other current assets and
Accrued expenses and other liabilities,
respectively. The notional values represent the amount of
foreign currencies to be purchased or sold at maturity and does
not represent our exposure on these contracts.
Interest rates. At December 31, 2010 and
2009, our excess cash balances are included in our operating
account. Cash balances in foreign currencies overseas are
operating balances and are invested in short-term deposits of
the local operating bank. Interest income earned on investments
is reflected in our financial statements under the caption
Interest income and other, net. Investments in both
fixed rate and floating rate interest earning instruments carry
a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less
income than expected if interest rates fall.
We issued $275 million of Senior Notes in December 2009 at
an initial offering price of 98.988%. The net proceeds from the
sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($7.2 million) were placed in escrow and subsequently used,
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2 on
January 28, 2010. The Senior Notes mature in 2014. Interest
accrues on the Senior Notes at a fixed rate of 8% per annum,
payable semi-annually in cash on June 15 and December 15 of each
year, commencing on June 15, 2010.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Our consolidated financial statements as of December 31,
2010 and 2009, and for each of the three years in the period
ended December 31, 2010, together with the report of the
independent registered public accounting firm of
Deloitte & Touche LLP, are included in this
Form 10-K
as required by
Rule 14a-3(b).
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Item 9.
|
Changes
In and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure Controls and Procedures. During and
subsequent to the reporting period, and under the supervision
and with the participation of our management, including our
principal executive officer and principal financial and
accounting officer, we conducted an evaluation of our disclosure
controls and procedures that were in effect at the end of the
period covered by this report. Disclosure controls and
procedures is defined under
Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the Act)
as those controls and other procedures of an issuer that are
designed to ensure that the information required to be disclosed
by the issuer in the reports it files or submits under the Act
is recorded, processed, summarized and reported, within the time
periods specified in the Commissions rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it
files or submits under the Act is accumulated and communicated
to the issuers management, including its principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Based on their
evaluation, our principal executive officer and principal
financial and accounting officer have concluded that our
disclosure controls and procedures that were in effect on
December 31, 2010 were effective to ensure that information
required to be disclosed in our reports to be filed under the
Act is accumulated and communicated to management, including the
chief executive officer and chief financial officer, to allow
timely decisions regarding disclosures and is recorded,
processed, summarized and reported within the time periods
specified in the Securities and Exchange Commissions rules
and forms.
42
Managements Report on Internal Control Over Financial
Reporting. Our management is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in
Rule 13a-15(f)
under the Act. Management conducted an evaluation of the
effectiveness of our internal control over financial reporting
based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its
evaluation under the Internal Control Integrated
Framework, management concluded that our internal control
over financial reporting was effective as of December 31,
2010. The effectiveness of our internal control over financial
reporting as of December 31, 2010 has been audited by
Deloitte & Touche LLP, an independent registered
accounting firm, as stated in their attestation report, which is
included herein.
Changes in Internal Control Over Financial
Reporting. The term internal control over
financial reporting is defined under
Rule 13a-15(f)
under the Act and refers to the process of a company that is
designed by, or under the supervision of, the issuers
principal executive and principal financial officers, or persons
performing similar functions, and effected by the issuers
board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that: (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (ii) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made only in accordance
with authorizations of management and directors of the issuer;
and (iii) provide reasonable assurance regarding the
prevention or timely detection of unauthorized acquisition, use
or disposition of the issuers assets that could have a
material effect on the financial statements.
There were no changes in our internal controls over financial
reporting during the three months ended December 31, 2010
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
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|
Item 9B.
|
Other
Information
None
|
43
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
JDA Software Group, Inc.
Scottsdale, Arizona
We have audited the internal control over financial reporting of
JDA Software Group, Inc. and subsidiaries (the
Company) as of December 31, 2010, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2010, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2010 of the Company and our report dated
March 1, 2011 expressed an unqualified opinion on those
financial statements.
/s/ DELOITTE &
TOUCHE LLP
Phoenix, Arizona
March 1, 2011
44
PART III
Certain information required by Part III is omitted from
this
Form 10-K,
as we intend to file our Proxy Statement pursuant to
Regulation 14A not later than 120 days after the end
of the fiscal year covered by this
Form 10-K,
and certain information included therein is incorporated herein
by reference.
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|
Item 10.
|
Board
of Directors, Executive Officers and Corporate
Governance
|
The information relating to our board of directors and executive
officers is incorporated by reference to the Proxy Statement
under the captions Proposal 1 Election of
Directors, Corporate Governance, and
Executive Officers of the Company. Information
relating to our Audit Committee Members and the designation of
our Audit Committee Financial Expert, beneficial ownership
reporting compliance under Section 16(a) of the Exchange
Act, and the adoption of a Code of Ethics, is incorporated by
reference to the proxy statement under the captions
Corporate Governance Committees of our Board
of Directors, Section 16(a) Beneficial
Ownership Reporting Compliance, Report of the Audit
Committee, and Corporate Governance Code
of Business Conduct and Ethics.
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|
Item 11.
|
Executive
Compensation
|
The information relating to executive compensation is
incorporated by reference to the Proxy Statement under the
captions Executive Compensation, Potential
Payments upon Termination or Change in Control,
Compensation of Directors, and Compensation
Committee Interlocks and Insider Participation.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information relating to security ownership of certain
beneficial owners and management and related stockholder matters
is incorporated by reference to the Proxy Statement under the
captions Security Ownership of Certain Beneficial Owners
and Management, and Securities Authorized for
Issuance under Equity Compensation Plans.
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|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information relating to certain relationships and related
transactions is incorporated by reference to the Proxy Statement
under the caption Transactions with Related Persons.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information relating to principal accountant fees and
services is incorporated by reference to the Proxy Statement
under the captions Report of the Audit
Committee Principal Accounting Firm Fees and
Report of the Audit Committee Policy for
Approving Audit and Permitted Non-Audit Services of the
Independent Auditor.
Certain information required by Part III is omitted from
this
Form 10-K,
as we intend to file our Proxy Statement pursuant to
Regulation 14A not later than 120 days after the end
of the fiscal year covered by this
Form 10-K,
and certain information included therein is incorporated herein
by reference.
45
PART IV
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Item 15.
|
Exhibits
and Financial Statement Schedules
|
a. The following documents are filed as part of this Report:
1. Financial Statements
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
|
Consolidated Balance Sheets December 31, 2010
and 2008
|
|
|
|
|
Consolidated Statements of Income Three Years Ended
December 31, 2010
|
|
|
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income (Loss) Three Years Ended
December 31, 2010
|
|
|
|
|
Consolidated Statements of Cash Flows Three Years
Ended December 31, 2010
|
|
|
|
|
Notes to Consolidated Financial Statements Three
Years Ended December 31, 2010
|
|
|
|
|
2. Financial Statement Schedules None
3. Exhibits See Exhibit Index.
46
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
JDA Software Group, Inc.
Scottsdale, Arizona
We have audited the accompanying consolidated balance sheets of
JDA Software Group, Inc. and subsidiaries (the
Company) as of December 31, 2010 and 2009, and
the related consolidated statements of income,
stockholders equity, comprehensive income (loss), and cash
flows for each of the three years in the period ended
December 31, 2010. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of JDA
Software Group, Inc. and subsidiaries as of December 31,
2010 and 2009, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2010, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2010, based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 1, 2011 expressed an
unqualified opinion on the Companys internal control over
financial reporting.
/s/ DELOITTE &
TOUCHE LLP
Phoenix, Arizona
March 1, 2011
47
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except share amounts)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
171,618
|
|
|
$
|
75,974
|
|
Restricted cash
|
|
|
34,855
|
|
|
|
287,875
|
|
Accounts receivable, net
|
|
|
102,118
|
|
|
|
68,883
|
|
Deferred tax assets current portion
|
|
|
43,753
|
|
|
|
19,142
|
|
Prepaid expenses and other current assets
|
|
|
27,723
|
|
|
|
15,667
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
380,067
|
|
|
|
467,541
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
47,447
|
|
|
|
40,842
|
|
Goodwill
|
|
|
226,863
|
|
|
|
135,275
|
|
Other intangibles, net
|
|
|
187,398
|
|
|
|
119,661
|
|
Deferred tax assets long-term portion
|
|
|
255,386
|
|
|
|
44,350
|
|
Other non-current assets
|
|
|
16,367
|
|
|
|
13,997
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
733,461
|
|
|
|
354,125
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,113,528
|
|
|
$
|
821,666
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
21,092
|
|
|
$
|
7,192
|
|
Accrued expenses and other liabilities
|
|
|
83,938
|
|
|
|
45,523
|
|
Income taxes payable
|
|
|
318
|
|
|
|
3,489
|
|
Deferred revenue current portion
|
|
|
88,055
|
|
|
|
65,665
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
193,403
|
|
|
|
121,869
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
272,695
|
|
|
|
272,250
|
|
Accrued exit and disposal obligations
|
|
|
7,360
|
|
|
|
7,341
|
|
Liability for uncertain tax positions
|
|
|
6,873
|
|
|
|
8,770
|
|
Deferred revenue long-term portion
|
|
|
9,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
296,018
|
|
|
|
288,361
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
489,421
|
|
|
|
410,230
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contigencies (Notes 11 and 12)
|
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value; 2,000 shares
authorized; none issued and outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 100,000 shares
authorized; 43,896 and 36,323 shares issued, respectively
|
|
|
439
|
|
|
|
363
|
|
Additional paid-in capital
|
|
|
550,177
|
|
|
|
356,065
|
|
Retained earnings
|
|
|
91,732
|
|
|
|
74,014
|
|
Accumulated other comprehensive income
|
|
|
8,980
|
|
|
|
3,267
|
|
Less treasury stock, at cost, 1,970 and 1,786 shares,
respectively
|
|
|
(27,221
|
)
|
|
|
(22,273
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
624,107
|
|
|
|
411,436
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,113,528
|
|
|
$
|
821,666
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
109,546
|
|
|
$
|
84,913
|
|
|
$
|
89,196
|
|
Subscriptions and other recurring revenues
|
|
|
21,143
|
|
|
|
3,873
|
|
|
|
3,702
|
|
Maintenance services
|
|
|
246,241
|
|
|
|
179,336
|
|
|
|
182,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
376,930
|
|
|
|
268,122
|
|
|
|
275,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
220,417
|
|
|
|
107,618
|
|
|
|
104,072
|
|
Reimbursed expenses
|
|
|
19,862
|
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
240,279
|
|
|
|
117,678
|
|
|
|
114,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
617,209
|
|
|
|
385,800
|
|
|
|
390,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
4,256
|
|
|
|
3,241
|
|
|
|
3,499
|
|
Amortization of acquired software technology
|
|
|
7,047
|
|
|
|
3,920
|
|
|
|
5,277
|
|
Cost of maintenance services
|
|
|
52,543
|
|
|
|
43,165
|
|
|
|
45,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
63,846
|
|
|
|
50,326
|
|
|
|
54,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
169,826
|
|
|
|
85,285
|
|
|
|
81,954
|
|
Reimbursed expenses
|
|
|
19,862
|
|
|
|
10,060
|
|
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
189,688
|
|
|
|
95,345
|
|
|
|
92,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
253,534
|
|
|
|
145,671
|
|
|
|
146,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
363,675
|
|
|
|
240,129
|
|
|
|
243,350
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
72,158
|
|
|
|
51,318
|
|
|
|
53,866
|
|
Sales and marketing
|
|
|
91,329
|
|
|
|
66,001
|
|
|
|
66,468
|
|
General and administrative
|
|
|
72,299
|
|
|
|
47,664
|
|
|
|
44,963
|
|
Amortization of intangibles
|
|
|
38,415
|
|
|
|
23,633
|
|
|
|
24,303
|
|
Restructuring charges
|
|
|
20,931
|
|
|
|
6,865
|
|
|
|
8,382
|
|
Acquisition-related costs
|
|
|
8,115
|
|
|
|
4,768
|
|
|
|
|
|
Cost of abandoned acquisition
|
|
|
|
|
|
|
|
|
|
|
25,060
|
|
Litigation provision
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
317,247
|
|
|
|
200,249
|
|
|
|
223,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
46,428
|
|
|
|
39,880
|
|
|
|
20,308
|
|
Interest expense and amortization of loan fees
|
|
|
(24,758
|
)
|
|
|
(2,712
|
)
|
|
|
(10,349
|
)
|
Finance costs on abandoned acquisition
|
|
|
|
|
|
|
767
|
|
|
|
(5,292
|
)
|
Interest income and other, net
|
|
|
1,683
|
|
|
|
1,253
|
|
|
|
2,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
23,353
|
|
|
|
39,188
|
|
|
|
7,458
|
|
Income tax provision
|
|
|
(5,635
|
)
|
|
|
(12,849
|
)
|
|
|
(4,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
17,718
|
|
|
|
26,339
|
|
|
|
3,124
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Applicable to Common Shareholders
|
|
$
|
17,718
|
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Applicable to Common Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
$
|
0.43
|
|
|
$
|
0.51
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
$
|
0.42
|
|
|
$
|
0.50
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing basic net income per common share
|
|
|
41,173
|
|
|
|
34,936
|
|
|
|
34,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted net income per common share
|
|
|
41,710
|
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprenhensive
|
|
|
Treasury
|
|
|
|
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Gain (Loss)
|
|
|
Stock
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balance, December 31, 2007
|
|
$
|
314
|
|
|
$
|
292,168
|
|
|
$
|
53,144
|
|
|
$
|
3,814
|
|
|
$
|
(13,644
|
)
|
|
$
|
335,796
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
|
|
|
7
|
|
|
|
7,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,806
|
|
Vesting of restricted stock units
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
4,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,324
|
|
Tax benefit stock compensation
|
|
|
|
|
|
|
(1,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,638
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,086
|
)
|
|
|
(2,086
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
3,124
|
|
Accumulated other comprehensive gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289
|
|
|
|
|
|
|
|
289
|
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,120
|
)
|
|
|
|
|
|
|
(6,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
325
|
|
|
|
302,649
|
|
|
|
56,268
|
|
|
|
(2,017
|
)
|
|
|
(15,730
|
)
|
|
|
341,495
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
|
|
|
10
|
|
|
|
12,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,580
|
|
Issuance of common stock ESPP
|
|
|
1
|
|
|
|
2,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,269
|
|
Vesting of restricted stock units
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of unvested equity awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
2
|
|
|
|
8,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,080
|
|
Conversion of redeemable preferred stock
|
|
|
22
|
|
|
|
30,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,525
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,543
|
)
|
|
|
(6,543
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
26,339
|
|
|
|
|
|
|
|
|
|
|
|
26,339
|
|
Accumulated other comprehensive gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration paid for Series B preferred stock in
excess of carrying value
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,284
|
|
|
|
|
|
|
|
5,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
363
|
|
|
|
356,065
|
|
|
|
74,014
|
|
|
|
3,267
|
|
|
|
(22,273
|
)
|
|
|
411,436
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
|
|
|
8
|
|
|
|
12,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,192
|
|
Issuance of common stock ESPP
|
|
|
1
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,701
|
|
Issuance of stock in i2 Technologies acquisition, net
|
|
|
63
|
|
|
|
167,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,621
|
|
Forfeiture of unvested equity awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
4
|
|
|
|
11,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,494
|
|
Conversion of warrants
|
|
|
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,948
|
)
|
|
|
(4,948
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
17,718
|
|
|
|
|
|
|
|
|
|
|
|
17,718
|
|
Accumulated other comprehensive gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
375
|
|
Foreign translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,338
|
|
|
|
|
|
|
|
5,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
$
|
439
|
|
|
$
|
550,176
|
|
|
$
|
91,732
|
|
|
$
|
8,980
|
|
|
$
|
(27,221
|
)
|
|
$
|
624,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
50
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Net income
|
|
$
|
17,718
|
|
|
$
|
26,339
|
|
|
$
|
3,124
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
|
|
5,338
|
|
|
|
5,284
|
|
|
|
(6,120
|
)
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
289
|
|
Unrealized gains (losses) on cash flow hedges, net of tax
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in other comprehensive income (loss)
|
|
|
5,713
|
|
|
|
5,284
|
|
|
|
(5,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income
|
|
$
|
23,431
|
|
|
$
|
31,623
|
|
|
$
|
(2,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,718
|
|
|
$
|
26,339
|
|
|
$
|
3,124
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
58,246
|
|
|
|
37,239
|
|
|
|
39,280
|
|
Provision for doubtful accounts
|
|
|
1,000
|
|
|
|
1,900
|
|
|
|
750
|
|
Amortization of loan fees
|
|
|
1,970
|
|
|
|
110
|
|
|
|
3,672
|
|
Excess tax benefits from stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1,638
|
|
Net (gain) loss on disposal of property and equipment
|
|
|
(9
|
)
|
|
|
(42
|
)
|
|
|
9
|
|
Stock-based compensation
|
|
|
11,494
|
|
|
|
8,095
|
|
|
|
4,324
|
|
Deferred income taxes
|
|
|
(1,949
|
)
|
|
|
4,242
|
|
|
|
1,784
|
|
Changes in assets and liabilities, net of effects from business
acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,613
|
)
|
|
|
9,894
|
|
|
|
(6,590
|
)
|
Income tax receivable
|
|
|
2,347
|
|
|
|
365
|
|
|
|
116
|
|
Prepaid expenses and other assets
|
|
|
(7,485
|
)
|
|
|
(1,768
|
)
|
|
|
2,055
|
|
Accounts payable
|
|
|
11,397
|
|
|
|
4,525
|
|
|
|
(346
|
)
|
Accrued expenses and other liabilities
|
|
|
1,970
|
|
|
|
(4,608
|
)
|
|
|
3,938
|
|
Income tax payable
|
|
|
(6,592
|
)
|
|
|
5,964
|
|
|
|
27
|
|
Deferred revenue
|
|
|
(22,322
|
)
|
|
|
4,226
|
|
|
|
(6,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
65,172
|
|
|
|
96,481
|
|
|
|
47,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
253,020
|
|
|
|
(287,875
|
)
|
|
|
|
|
Purchase of i2 Technologies, Inc.
|
|
|
(213,427
|
)
|
|
|
|
|
|
|
|
|
Payment of direct costs related to acquisitions
|
|
|
(3,625
|
)
|
|
|
(5,110
|
)
|
|
|
(4,242
|
)
|
Purchase of property and equipment
|
|
|
(16,866
|
)
|
|
|
(7,136
|
)
|
|
|
(8,594
|
)
|
Proceeds from dipsosal of property and equipment
|
|
|
634
|
|
|
|
84
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
19,736
|
|
|
|
(300,037
|
)
|
|
|
(12,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity plans
|
|
|
15,370
|
|
|
|
14,849
|
|
|
|
7,806
|
|
Excess tax benefits for stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(1,638
|
)
|
Purchase of treasury stock and other, net
|
|
|
(5,127
|
)
|
|
|
(6,543
|
)
|
|
|
(2,086
|
)
|
Redemption of redeemable preferred stock
|
|
|
|
|
|
|
(28,068
|
)
|
|
|
|
|
Proceeds from issuance of long-term debt, net of discount
|
|
|
|
|
|
|
272,217
|
|
|
|
|
|
Debt issuance costs
|
|
|
|
|
|
|
(6,487
|
)
|
|
|
|
|
Principal payments on term loan agreement
|
|
|
|
|
|
|
|
|
|
|
(99,563
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
10,243
|
|
|
|
245,968
|
|
|
|
(95,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
493
|
|
|
|
866
|
|
|
|
(1,499
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
95,644
|
|
|
|
43,278
|
|
|
|
(62,592
|
)
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
75,974
|
|
|
|
32,696
|
|
|
|
95,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
171,618
|
|
|
$
|
75,974
|
|
|
$
|
32,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
52
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
14,501
|
|
|
$
|
3,854
|
|
|
$
|
3,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
22,481
|
|
|
$
|
1,149
|
|
|
$
|
7,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received for income tax refunds
|
|
$
|
1,841
|
|
|
$
|
856
|
|
|
$
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-cash Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase of goodwill recorded in acquisitions
|
|
$
|
91,588
|
|
|
$
|
|
|
|
$
|
714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in acquisition of i2 Technologies, Inc.
|
|
$
|
167,621
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of redeemable preferred stock to common stock
|
|
$
|
|
|
|
$
|
30,525
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
53
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
(in thousands, except percentages, shares, per share
amounts or as otherwise stated)
|
|
1.
|
Nature of
Business and Summary of Significant Accounting
Policies
|
Nature of Business. We are a leading provider
of sophisticated enterprise software solutions designed
specifically to address the supply chain requirements of global
consumer products companies, manufacturers,
wholesale/distributors and retailers, as well as government and
aerospace defense contractors and travel, transportation,
hospitality and media organizations, and we have licensed our
software to over 6,000 customers worldwide. Our solutions enable
customers to plan, manage and optimize the coordination of
supply, demand and flows of inventory throughout the supply
chain to the consumer. We conduct business in three geographic
regions that have separate management teams and reporting
structures: the Americas (United States, Canada, and Latin
America), Europe (Europe, Middle East and Africa), and
Asia/Pacific. Our corporate offices are located in Scottsdale,
Arizona.
Principles of Consolidation and Basis of
Presentation. The consolidated financial
statements are stated in U.S. dollars and include the
accounts of JDA Software Group, Inc. and our subsidiaries, all
of which are wholly owned. All intercompany balances and
transactions have been eliminated in consolidation. The
consolidated financial statements have been prepared in
accordance with the FASB Standard Accounting Codification
(Codification), which is the authoritative source of
generally accepted accounting principles (GAAP) for
nongovernmental entities in the United States.
Certain reclassifications have been made to the Consolidated
Statements of Income for the years ended December 31, 2010,
2009 and 2008 to conform to the current presentation. In the
Consolidated Statements 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. In addition, we have
corrected the presentation of stockholders equity accounts
in the consolidated balance sheet and consolidated statements of
stockholders equity as of and for the years ended
December 31, 2009 and 2008 by eliminating the
$5.3 million and $2.9 million balance of
Deferred compensation against Additional paid
in capital, respectively. We also corrected the
Consolidated Statements of Comprehensive Income to remove the
$8.6 million under the caption Consideration paid for
Series B preferred stock in excess of carrying value
for 2009 as this represents a dividend and should not have been
shown as a component of comprehensive income.
Use of Estimates. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Significant estimates include the allowance for doubtful
accounts, which is based upon an evaluation of our
customers ability to pay and general economic conditions;
the useful lives of intangible assets and the recoverability or
impairment of tangible and intangible asset values; deferred
revenues; purchase accounting allocations and related reserves;
legal and other contingencies which are recorded when it is
probable that a loss has been incurred and the amount is
reasonably estimable; and our effective income tax rate and the
valuation allowance applied against deferred tax assets which
are based upon our expectations of future taxable income,
allowable deductions, and projected tax credits. Actual results
may differ from these estimates.
Foreign Currency Translation. The financial
statements of our international subsidiaries are translated into
U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities and at an average exchange rate
for the revenues and expenses reported in each fiscal period. We
have determined that the functional currency of each foreign
subsidiary is the local currency and as such, foreign currency
translation adjustments are recorded as a separate component of
stockholders equity. Transaction gains and losses, and
unrealized gains and losses on short-term intercompany
receivables and payables and foreign denominated receivables,
are included in results of operations as incurred.
54
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash and Cash Equivalents. Cash and cash
equivalents consist of cash held in bank demand deposits. The
restricted cash balance at December 31, 2009 consists
primarily of proceeds from the issuance of long-term debt (see
Note 9), which were subsequently used to fund a portion of
the cash merger consideration in the acquisition of
i2 Technologies, Inc. i2 (see Note 2).
Property and Equipment and Long-Lived
Assets. Property and equipment are stated at cost
less accumulated depreciation and amortization. Property and
equipment are depreciated on a straight-line basis over the
following estimated useful lives: computers, internal use
software, furniture and fixtures two to seven years;
buildings and improvements fifteen to forty years;
automobiles three years; leasehold
improvements the shorter of the initial lease term
or the estimated useful life of the asset.
Business Combinations. The acquisition of i2
on January 28, 2010 (see Note 2) was 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, are expensed in the
period incurred; (ii) non-controlling interests are valued
at fair value at the acquisition date; (iii) in-process
research and development is recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
(iv) restructuring costs associated with a business
combination are expensed subsequent to the acquisition date; and
(v) changes in deferred tax asset valuation allowances and
income tax uncertainties after the acquisition date are
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, 2010. There were
no business combinations in 2008 and 2009.
Goodwill and Intangible Assets. Goodwill
represents the excess of the purchase price over the net assets
acquired in our business combinations. Goodwill is tested
annually for impairment, or more frequently if events or changes
in business circumstances indicate the asset might be impaired,
by comparing a weighted average of the fair value of future cash
flows under the Discounted Cash Flow Method of the Income
Approach and the Guideline Company Method to
the carrying value of the goodwill allocated to our reporting
units. We found no indication of impairment of our goodwill
balances during 2010, 2009 and 2008 with respect to the goodwill
allocated to our Supply Chain and Pricing and Revenue
Management reportable business segments (see Note 5).
Absent future indications of impairment, the next annual
impairment test will be performed in fourth quarter 2011.
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 life of five years.
|
|
|
|
|
Revenue recognition. Our revenue recognition
policy is significant because our revenue is a key component of
our results of operations. In addition, our revenue recognition
determines the timing of
|
55
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
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 objective evidence of fair value
(VSOE) exists for all undelivered elements.
|
Our customer arrangements typically contain multiple elements
that include software, maintenance, managed services, consulting
and training services and from
time-to-time,
options for future purchases of software products not previously
licensed to the customer. The fees from these arrangements are
allocated to the various elements based on VSOE. Under the
residual method, if an arrangement contains undelivered
elements, the VSOE of the undelivered elements is deferred and
the revenue recognized as the elements are delivered. If we are
unable to determine VSOE for any undelivered element included in
an arrangement, we will defer revenue recognition until evidence
of VSOE exists or the element without VSOE is delivered. If VSOE
does not exist for an undelivered element that is delivered
ratably (i.e., maintenance services or managed services), all
revenue in the arrangement including the software license will
be recognized ratably until evidence of VSOE exists. In
addition, if a software license contains milestones, customer
acceptance criteria or a cancellation right, the software
revenue is recognized upon the achievement of the milestone or
upon the earlier of customer acceptance, or the expiration of
the acceptance period or cancellation right. For arrangements
that provide for significant services or custom development that
are essential to the softwares functionality, the software
license revenue and contracted services are recognized under the
percentage of completion method. We measure
progress-to-completion
on arrangements involving significant services or custom
development that are essential to the softwares
functionality using input measures, primarily labor hours, which
relate hours incurred to date to total estimated hours at
completion. We regularly 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.
Subscription and other recurring revenues include fees for
access rights to software solutions that are offered under a
subscription-based delivery model where the users do not take
possession of the software. Under this model, the software
applications are hosted by the Company or by a third party and
the customer accesses and uses the software on an as-needed
basis over the internet or via a dedicated line. The underlying
arrangements typically (i) include a single fee for the
service that is billed monthly, quarterly or annually,
(ii) cover a period from 36 to 60 months and
(iii) do not provide the customer with an option to take
delivery of the software at any time during or after the
subscription term. In addition, subscription and other recurring
revenues include subscription-based software license revenues
where the customer has taken physical possession of the software
for a defined period of time. Subscription revenues are
recognized ratably over the subscription term beginning on the
commencement dates of each contract.
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
56
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 available from a number of
suppliers, and are generally not essential to the functionality
of our software products. Consulting services include project
management, system planning, design and implementation, customer
configurations, and training. These services are generally
billed bi-weekly on an hourly basis or pursuant to the terms of
a fixed price contract. Consulting services revenue billed on an
hourly basis is recognized as the work is performed. Under fixed
price service contracts and milestone-based arrangements that
include services that are not essential to the functionality of
our software products, consulting services revenue is recognized
using the proportional performance method. We measure
progress-to-completion
under the proportional performance method by using input
measures, primarily labor hours, which relate hours incurred to
date to total estimated hours at completion. We continually
update and revise our estimates of input measures. If our
estimates indicate that a loss will be incurred, the entire loss
is recognized in that period. Training revenues are included in
consulting revenues in the Companys consolidated
statements of income and are recognized once the training
services are provided. VSOE for consulting and training services
is based upon the hourly or per class rates charged when those
services are sold separately.
Consulting and training services, when sold with subscription
offerings, are accounted for separately if they have standalone
value to the customer and there is VSOE for the undelivered
elements. In these situations, the consulting and training
revenues are recognized as the services are rendered for time
and material contracts or when milestones are achieved and
accepted by the customer under fixed price service contracts. If
the consulting and training services sold with the subscription
offerings do not quality for separate accounting, all fees from
the arrangement are treated as a single unit of accounting and
recognized ratably over the subscription term.
Managed service offerings are separately priced and stated in
our arrangements with the related revenues included in service
revenues. Managed services typically include implementation lab
services, advance customer support and software and hardware
administration services, and are billed monthly, quarterly or
annually with the revenue recognized ratably over the term of
the contract.
|
|
|
|
|
Extension of Credit and 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 only recognize any revenue when we believe
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. 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. 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.
|
Software License Indemnification. Our standard
software license agreements contain an infringement indemnity
clause under which we agree to indemnify and hold harmless our
customers and business partners against liability and damages
arising from claims of various copyright or other intellectual
property infringement by our products. We have never lost an
infringement claim and our costs to defend such lawsuits have
been insignificant. Although it is possible that in the future
third parties may claim that our current or potential
57
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
future software solutions infringe on their intellectual
property, we do not currently expect a significant impact on our
business, operating results, or financial condition.
Reimbursed Expenses. We classify reimbursed
expenses in both service revenues and cost of service revenues
in our consolidated statements of income.
Product Development. The costs to develop new
software products and enhancements to existing software products
are expensed as incurred until technological feasibility has
been established. We consider technological feasibility to have
occurred when all planning, designing, coding and testing have
been completed according to design specifications. Once
technological feasibility is established, any additional costs
would be capitalized. We believe our current process for
developing software is essentially completed concurrent with the
establishment of technological feasibility, and accordingly, no
costs have been capitalized.
Restructuring Charges. Restructuring charges
include charges for the costs of exit or disposal activities and
adjustments to acquisition-related reserves and other
liabilities recorded in connection with business combinations.
The liability for costs associated with exit or disposal
activities is measured initially at fair value and only
recognized when the liability is incurred, rather than at the
date the Company committed to the exit plan. Restructuring
charges are not directly identified with a particular business
segment and as a result, management does not consider these
charges in the evaluation of the operating income (loss) from
the business segments. We recorded restructuring charges of
$20.9 million, $6.9 million and $8.4 million in
2010, 2009 and 2008, respectively (see Notes 7 and 8).
Derivative Instruments and Hedging
Activities. The accounting for changes in the
fair value of a derivative depends on the intended use of the
derivative and the resulting designation. For a derivative
instrument designated and qualifying as a cash flow hedge, the
effective portion of the derivatives gain or loss is
initially reported as a component of cumulative other
comprehensive income (loss) and subsequently reclassified into
earnings when the hedged exposure affects earnings. The
ineffective portion of the gain or loss is reported in earnings
immediately. For derivative instruments that are not designated
as cash flow hedges, changes in fair value are recognized in
earnings in the period of change. We do not hold or issue
derivative financial instruments for speculative trading
purposes.
We use derivative financial instruments, primarily forward
exchange contracts, to manage a majority of the foreign currency
exchange exposure associated with net short-term foreign
currency denominated assets and liabilities that exist as part
of our ongoing business operations that are denominated in a
currency other than the functional currency of the subsidiary.
The exposures relate primarily to the gain or loss recognized in
earnings from the settlement of current foreign denominated
assets and liabilities. We do not enter into derivative
financial instruments for trading or speculative purposes. The
forward exchange contracts generally have maturities of
90 days or less and are not designated as hedging
instruments. Forward exchange contracts are
marked-to-market
at the end of each reporting period, using quoted prices for
similar assets or liabilities in active markets (Level 2
inputs), with gains and losses recognized in other income offset
by the gains or losses resulting from the settlement of the
underlying foreign currency denominated assets and liabilities.
At December 31, 2010, we had forward exchange contracts
with a notional value of $68.8 million and an associated
net forward contract receivable of $0.7 million. 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 $0.4 million.
In the fourth quarter of 2010, we also began a cash flow hedging
program under which we hedge a portion of anticipated operating
expenses denominated in the Indian Rupee. The forward exchange
contracts have maturities of twelve months or less and are
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. The effective
portion of the derivatives gain or loss is initially
reported as a component of cumulative other comprehensive income
(loss) and subsequently reclassified into earnings when the
hedged exposure affects earnings. The ineffective portion of the
gain or loss is reported in earnings immediately. At
58
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
December 31, 2010, we had forward exchange contracts with a
notional value of $30.7 million and an associated net
forward contract receivable of $0.4 million.
The forward contract receivables (payables) are included in the
consolidated balance sheets under the captions Prepaid
expenses and other current assets and Accrued
expenses and other liabilities, respectively. The notional
values represent 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 losses of
$0.7 million in 2010 and net gains of $0.7 million and
$0.5 million in 2009 and 2008, respectively, which are
included in the condensed consolidated statements of income
under the caption Interest Income and other, net.
Stock-Based Compensation. Compensation expense
for awards of restricted stock, restricted stock units,
performance share awards and other forms of equity based
compensation are based on the market price of the underlying
common stock as of the date of grant, amortized over the
applicable vesting period of the awards (generally 3 years)
using graded vesting (see Note 14).
As of December 31, 2010, we had approximately
0.5 million stock options outstanding with exercise prices
ranging from $10.33 to $27.50 per share. Stock options are no
longer used for share-based compensation (see Note 14).
Income Taxes. We account for income taxes
using the asset and liability method. Under the asset and
liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
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.
Management must make significant assumptions, judgments and
estimates to determine our current provision for income taxes
and also our deferred tax assets and liabilities and any
valuation allowance to be recorded against our net deferred tax
asset. Valuation allowances are established to reduce deferred
tax assets to the amount that will more likely than not be
realized. To the extent that a determination is made to
establish or adjust a valuation allowance, the expense or
benefit is recorded in the period in which the determination is
made.
Earnings per Share. From July 2006 through
September 8, 2009, the Company had two classes of
outstanding capital stock, common stock and Series B
preferred stock. The Series B preferred stock, which was
issued in connection with acquisition of Manugistics (see
Note 13), was a participating security such that in the
event a dividend was declared or paid on the common stock, the
Company would have been required to simultaneously declare and
pay a dividend on the Series B preferred stock as if the
Series B preferred stock had been converted into common
stock. Companies that have participating securities are required
to apply the two-class method to compute basic earnings per
share. Under the two-class computation method, basic earnings
per 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.
59
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During third quarter 2009, all shares of the Series B
preferred stock were either converted into shares of common
stock or repurchased for cash, including $8.6 million paid
in excess of the conversion price (see Note 13). The excess
consideration was charged to retained earnings in the same
manner as a dividend on preferred stock and reduced the income
applicable to common shareholders in the calculation of earnings
per share for 2009. The calculation of diluted earnings per
share applicable to common shareholders for 2009 includes the
assumed conversion of the Series B preferred stock into
common stock as of the beginning of the period, weighted for the
actual days and number of shares outstanding during the period.
The calculation of diluted earnings per share applicable to
common shareholders for 2008 includes the assumed conversion of
the Series B preferred stock into common stock as of the
beginning of the period.
The dilutive effect of outstanding stock options and unvested
restricted stock units and performance share awards is included
in the diluted earnings per share calculations for 2010, 2009
and 2008 using the treasury stock method (see Note 18).
Recent
Accounting Pronouncements
In September 2009, FASB issued an amendment to its accounting
guidance on certain revenue arrangements with multiple
deliverables that enables a vendor to account for products and
services (deliverables) separately rather than as a combined
unit. The revised guidance establishes a selling price hierarchy
for determining the selling price of a deliverable, which is
based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) managements
best estimate of selling price. This guidance also eliminates
the residual method of allocation and requires that the
arrangement consideration be allocated at the inception of the
arrangement to all deliverables. In addition, this guidance
significantly expands required disclosures related to such
revenue arrangements that have multiple deliverables. The
revised guidance is effective for revenue arrangements entered
into or materially modified in fiscal years beginning on or
after June 15, 2010 with early adoption permitted. We
adopted the new guidance effective January 1, 2011 and
based on our initial assessment, the new guidance would not have
had a material impact on our 2010 financial statements. The
ultimate impact on our consolidated financial statements will
depend on the nature and terms of the revenue arrangements
entered into or materially modified after the adoption date. The
new guidance does not significantly change the accounting for
the majority of our existing and future revenue arrangements
that are subject to specific guidance in sections 605 and
985 of the Codification (see Revenue Recognition
discussion above).
In December 2009, FASB issued new guidance for improvements to
financial reporting by enterprises involved with variable
interest entities. The new guidance provides an amendment to its
consolidation guidance for variable interest entities and the
definition of a variable interest entity and requires enhanced
disclosures to provide more information about an
enterprises involvement in a variable interest entity.
This amendment also requires ongoing assessments of whether an
enterprise is the primary beneficiary of a variable interest
entity and is effective for reporting periods beginning after
December 15, 2009. The implementation of this guidance did
not have a significant impact on our consolidated financial
position or results of operations.
In January 2010, FASB issued an amendment to its accounting
guidance for fair value measurements which adds new requirements
for disclosures about transfers into and out of Levels 1
and 2 and separate disclosures about purchases, sales,
issuances, and settlements related to Level 3 measurements.
The revised guidance also clarifies existing fair value
disclosures about the level of disaggregation and about inputs
and valuation techniques used to measure fair value. The
amendment is effective for the first reporting period beginning
after December 15, 2009, except for the requirements to
provide the Level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which will be
effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. The
implementation of this guidance did not have a significant
impact on our consolidated financial position or results of
operations.
60
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Acquisition
of i2 Technologies, Inc. (2010)
On January 28, 2010, we completed the acquisition of i2 for
approximately $600.0 million, which includes cash
consideration of approximately $432.0 million and the
issuance of approximately 6.2 million shares of our common
stock with an acquisition date fair value of approximately
$168.0 million, or $26.88 per share, determined on the
basis of the closing market price of our common stock on the
date of acquisition (the Merger). The combination of
JDA and i2 creates a market leader in the supply chain
management market. We believe this combination provides JDA with
(i) a strong, complementary presence in new markets such as
discrete manufacturing and transportation; (ii) enhanced
scale; (iii) a more diversified, global customer base of
over 6,000 customers; (iv) a comprehensive product suite
that provides
end-to-end
supply chain management (SCM) solutions;
(v) incremental revenue opportunities associated with
cross-selling of products and services among our existing
customer base; and (vi) an ability to increase
profitability through net cost synergies in the first six to
nine months after the Merger.
On December 10, 2009, we issued $275 million of
five-year, 8.0% Senior Notes (the Senior Notes)
at an initial offering price of 98.988%. The net proceeds from
the sale of the Senior Notes, which exclude the original issue
discount ($2.8 million) and other debt issuance costs
($7.2 million) were placed in escrow and subsequently used,
together with cash on hand at JDA and i2, to fund the cash
portion of the merger consideration in the acquisition of i2
(see Note 9).
For the years ended December 31, 2010 and 2009, we expensed
approximately $8.1 million and $4.8 million,
respectively, of costs related to the acquisition of i2. These
costs, which consist primarily of investment banking fees,
commitment fees on unused bank financing, legal and accounting
fees, are included in the consolidated statements of income
under the caption Acquisition-related costs.
The following table summarizes the fair values of the assets
acquired and liabilities assumed at the date of acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
Weighted Average
|
|
|
|
|
|
|
Life
|
|
|
Amortization Period
|
|
|
Cash
|
|
$
|
218,348
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
31,361
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
31,360
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
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
|
|
|
204,939
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
6,323
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
91,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
700,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(56,028
|
)
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
(44,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(100,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired from i2 Technologies, Inc.
|
|
$
|
599,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the merger consideration used to
acquire i2:
|
|
|
|
|
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
|
|
|
|
|
|
|
As of the date of the acquisition, the gross contractual amount
of trade accounts receivable acquired was $34.2 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 $0.3 million, 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
$19.2 million and $237 million and $0.1 million
and $1.2 million, respectively. See Note 12 for a
discussion of legal proceedings.
The following unaudited pro-forma consolidated results of
operations for the years ended December 31, 2010 and 2009
assume the i2 acquisition occurred as of January 1 of each year
and include acquisition related costs. 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.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2010
|
|
2009
|
|
Total revenues
|
|
$
|
632,236
|
|
|
$
|
608,610
|
|
Net income
|
|
$
|
3,246
|
|
|
$
|
51,934
|
|
Diluted earnings per share
|
|
$
|
0.08
|
|
|
$
|
1.25
|
|
The amounts of i2 revenues and earnings (loss) included in our
consolidated statements of operations for the years ended
December 31, 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
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
Revenues
|
|
(Loss)
|
|
i2 operating results from January 28, 2010 to
December 31, 2010
|
|
$
|
208,968
|
|
|
|
*
|
|
i2 operating results from January 1, 2010 to
December 31, 2010
|
|
$
|
223,994
|
|
|
|
*
|
|
i2 operating results from January 1, 2009 to
December 31, 2009
|
|
$
|
222,810
|
|
|
$
|
34,359
|
|
|
|
|
* |
|
We are unable to provide separate disclosure of the earnings
(loss) of i2 from January 28, 2010 (date of acquisition) to
December 31, 2010 and the pro-forma results from
January 1, 2010 to December 31, 2010 as the operating
expenses of the combined company were co-mingled at the date of
acquisition. |
Acquisition
of Equity Interest in European-based Strategix Enterprise
Technology (2009)
In July 2009, we purchased 49.1% of the registered share capital
of Strategix Enterprise Technology GMBH and Strategix Enterprise
Technology sp.z.o.o. (collectively, Strategix) for
cash. The initial investment, which is not material to our
financial statements, is reflected in the consolidated balance
sheet under the caption Other non-current assets,
and in the consolidated statement of cash flows as an investing
activity under the caption Payment
62
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of direct costs related to acquisitions. The adjustments
to record our equity share of Strategixs earnings from the
date of purchase through December 31, 2010 are reflected in
the consolidated statements of income, net of tax, under the
caption Interest income and other, net, The
transaction provides for additional annual purchase price
earn-outs in each of 2009, 2010 and 2011 if defined performance
milestones are achieved. No additional purchase price earn-out
has been earned as of December 31, 2010. We have an option
to purchase the remaining registered share capital of Strategix
beginning on the third anniversary date of the transaction based
on defined operating metrics. Strategix has been a distributor
of our supply and category management applications in Central
and Eastern Europe and Russia since 2004. As part of this
transaction, Strategix now has access to our entire suite of
products, and we believe such access can expand our presence
with retail, manufacturing and wholesale-distribution customers
in these markets. We have also acquired the rights to various
applications developed by Strategix that are designed to enhance
certain of our space and category management solutions, plus a
suite of SAP integration tools.
|
|
3.
|
Accounts
Receivable, Net
|
At December 31, 2010 and 2009 accounts receivable consist
of the following:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Trade receivables
|
|
$
|
106,358
|
|
|
$
|
75,661
|
|
Less: allowance for doubtful accounts
|
|
|
(4,240
|
)
|
|
|
(6,778
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
102,118
|
|
|
$
|
68,883
|
|
|
|
|
|
|
|
|
|
|
A summary of changes in the allowance for doubtful accounts for
the three-year period ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of period
|
|
$
|
6,778
|
|
|
$
|
5,139
|
|
|
$
|
7,030
|
|
Provision for doubtful accounts
|
|
|
1,000
|
|
|
|
1,900
|
|
|
|
750
|
|
Deductions, net
|
|
|
(3,538
|
)
|
|
|
(261
|
)
|
|
|
(2,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,240
|
|
|
$
|
6,778
|
|
|
$
|
5,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Property
and Equipment, Net
|
At December 31, 2010 and 2009 property and equipment
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Computers, internal use software, furniture & fixtures
and automobiles
|
|
$
|
93,462
|
|
|
$
|
83,520
|
|
Land and buildings
|
|
|
26,652
|
|
|
|
26,652
|
|
Leasehold improvements
|
|
|
8,763
|
|
|
|
7,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,877
|
|
|
|
117,572
|
|
Less: accumulated depreciation
|
|
|
(81,430
|
)
|
|
|
(76,730
|
)
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
$
|
47,447
|
|
|
$
|
40,842
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for 2010, 2009 and 2008 was
$12.8 million, $9.7 million and $9.7 million,
respectively.
|
|
5.
|
Goodwill
and Other Intangibles, Net
|
Goodwill. We recorded $91.6 million of
goodwill in 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 19). We
63
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
found no indication of impairment of our goodwill balances
during 2010, 2009 and 2008, and, absent future indicators of
impairment, the next annual impairment test will be performed in
fourth quarter 2011. As of December 31, 2010 and 2009, the
goodwill balance has been allocated to our reporting units as
follows: $223.2 million and $131.6 million to
Supply Chain and $3.7 million and $3.7 million
to Pricing and Revenue Management, respectively.
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 December 31, 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).
Identifiable intangibles consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill
|
|
$
|
236,576
|
|
|
$
|
|
|
|
$
|
144,988
|
|
|
$
|
|
|
Accumulated impairment losses
|
|
|
(9,713
|
)
|
|
|
|
|
|
|
(9,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net
|
|
|
226,863
|
|
|
|
|
|
|
|
135,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-based
|
|
|
257,983
|
|
|
|
(119,835
|
)
|
|
|
183,383
|
|
|
|
(84,119
|
)
|
Technology-based
|
|
|
90,147
|
|
|
|
(52,654
|
)
|
|
|
65,847
|
|
|
|
(45,607
|
)
|
Marketing-based
|
|
|
19,491
|
|
|
|
(7,734
|
)
|
|
|
5,191
|
|
|
|
(5,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other amortized intangible assets, net
|
|
|
367,621
|
|
|
|
(180,223
|
)
|
|
|
254,421
|
|
|
|
(134,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and other intangible assets
|
|
$
|
594,484
|
|
|
$
|
(180,223
|
)
|
|
$
|
389,696
|
|
|
$
|
(134,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the years ended December 31, 2010,
2009 and 2008 was $45.5 million, $27.6 million and
$29.6 million, respectively. The increase in amortization
in 2010 compared to 2009 is due to amortization on the
identifiable intangible assets recorded in the acquisition of i2.
64
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 December 31, 2010, we expect
amortization expense for the next five years and thereafter to
be as follows:
|
|
|
|
|
For the Year Ending December 31,
|
|
Amortization Expense
|
|
|
2011
|
|
$
|
45,519
|
|
2012
|
|
|
44,932
|
|
2013
|
|
|
44,243
|
|
2014
|
|
|
27,357
|
|
2015
|
|
|
12,997
|
|
Thereafter
|
|
|
12,350
|
|
|
|
|
|
|
Total
|
|
$
|
187,398
|
|
|
|
|
|
|
|
|
6.
|
Accrued
Expenses and Other Liabilities
|
At December 31, 2010 and 2009, accrued expenses and other
liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Accrued compensation and benefits
|
|
$
|
38,672
|
|
|
$
|
28,292
|
|
Acquisition reserves (Note 7)
|
|
|
4,845
|
|
|
|
4,585
|
|
Accrued costs on terminated acquisition of i2 (Note 2)
|
|
|
1,150
|
|
|
|
1,150
|
|
Accrued royalties
|
|
|
2,185
|
|
|
|
2,982
|
|
Accrued interest
|
|
|
978
|
|
|
|
1,344
|
|
Customer deposits
|
|
|
1,884
|
|
|
|
1,104
|
|
Restructuring charges (Note 8)
|
|
|
2,904
|
|
|
|
378
|
|
Accrued legal
|
|
|
21,424
|
|
|
|
1,141
|
|
Accrued taxes
|
|
|
4,841
|
|
|
|
1,792
|
|
Other accrued expenses and liabitilies
|
|
|
5,055
|
|
|
|
2,755
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,938
|
|
|
$
|
45,523
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2007
and included in the final purchase price allocation. All
adjustments made subsequent to September 30, 2007,
including a $1.4 million increase recorded in 2009 and a
$1.5 million increase recorded in 2010, have been included in
the consolidated statements of income under the caption
Restructuring charges. Adjustments made in 2010 and
2009 resulted primarily from our revised estimate of sublease
rentals and market adjustments on an unfavorable office facility
lease in the United Kingdom. The unused portion of the
acquisition reserves at December 31, 2010 includes
$4.3 million of current liabilities under the caption
Accrued expenses and other liabilities and
$5.3 million of non-current liabilities under the caption
Accrued exit and disposal obligations.
65
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the charges and adjustments recorded against the
reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Adjustments to
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2010
|
|
|
Acquisition reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office closures, lease termination and sublease costs
|
|
$
|
29,212
|
|
|
$
|
(949
|
)
|
|
$
|
(16,110
|
)
|
|
$
|
(724
|
)
|
|
$
|
11,429
|
|
|
$
|
1,516
|
|
|
$
|
(3,251
|
)
|
|
$
|
(120
|
)
|
|
$
|
9,574
|
|
Employee severance and termination benefits
|
|
|
3,607
|
|
|
|
(767
|
)
|
|
|
(2,468
|
)
|
|
|
125
|
|
|
|
497
|
|
|
|
(73
|
)
|
|
|
(374
|
)
|
|
|
(50
|
)
|
|
|
|
|
IT projects, contract termination penalties, capital lease
buyouts and other costs to exits activities of Manugistics
|
|
|
1,450
|
|
|
|
222
|
|
|
|
(1,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,269
|
|
|
|
(1,494
|
)
|
|
|
(20,250
|
)
|
|
|
(599
|
)
|
|
|
11,926
|
|
|
|
1,443
|
|
|
|
(3,625
|
)
|
|
|
(170
|
)
|
|
|
9,574
|
|
Direct costs:
|
|
|
13,125
|
|
|
|
6
|
|
|
|
(13,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
47,394
|
|
|
$
|
(1,488
|
)
|
|
$
|
(33,381
|
)
|
|
$
|
(599
|
)
|
|
$
|
11,926
|
|
|
$
|
1,443
|
|
|
$
|
(3,625
|
)
|
|
$
|
(170
|
)
|
|
$
|
9,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 will be reduced as payments are made over the related lease
terms that extend through 2018.
In 2010 in connection with our acquisition of i2, we assumed an
unfavorable lease of $1.2 million for the Dallas, Texas office
which was recorded in the purchase price allocation of which
$0.5 million is included in current liabilities under the
caption of Accrued expenses and other liabilities
and $0.7 million is included in non-current liabilities under
the caption Accrued exit and disposal obligations.
2010
Restructuring Charges
We recorded restructuring charges of $21.0 million in the
year ended December 31, 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 $14.1 million for termination benefits related to a
workforce reduction of approximately 200 associates primarily in
product development, sales, information technology and other
administrative positions primarily in the Americas. In addition,
the charges include $6.9 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 December 31, 2010,
approximately $15.0 million of the costs associated with
these restructuring charges have been paid and $2.9 million
is included under the caption Accrued expenses and other
current liabilities and $1.4 million is included under the
caption Accrued exit and disposal obligations. A
summary of the restructuring charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Cash
|
|
|
Non-Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
Charges
|
|
|
Settlements
|
|
|
Rates
|
|
|
2010
|
|
|
Termination benefits
|
|
$
|
14,098
|
|
|
$
|
(13,284
|
)
|
|
$
|
|
|
|
$
|
89
|
|
|
$
|
941
|
|
Office closures and other restructuring
|
|
|
5,380
|
|
|
|
(1,760
|
)
|
|
$
|
(376
|
)
|
|
|
65
|
|
|
|
3,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,478
|
|
|
$
|
(15,006
|
)
|
|
$
|
(376
|
)
|
|
$
|
154
|
|
|
|
4,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2009
Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2010
|
|
|
Termination benefits
|
|
$
|
6,486
|
|
|
$
|
|
|
|
$
|
(6,241
|
)
|
|
$
|
46
|
|
|
$
|
291
|
|
|
$
|
(63
|
)
|
|
$
|
(79
|
)
|
|
$
|
(44
|
)
|
|
$
|
105
|
|
Office closures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,486
|
|
|
$
|
|
|
|
$
|
(6,241
|
)
|
|
$
|
46
|
|
|
$
|
291
|
|
|
$
|
(63
|
)
|
|
$
|
(79
|
)
|
|
$
|
(44
|
)
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded restructuring charges of $6.5 million in 2009
primarily associated with the transition of additional on-shore
activities to the Center of Excellence (CoE) in
India and certain restructuring activities in the EMEA sales
organization. The charges include termination benefits related
to a workforce reduction of 86 full-time employees
(FTE) in product development, service, support,
sales and marketing, information technology and other
administrative positions, primarily in the Americas region. In
addition, the restructuring charges include approximately
$2.0 million in severance and other termination benefits
under separation agreements with two former executives. As of
December 31, 2010, approximately $6.4 million of the
costs associated with these restructuring charges have been paid
and the remaining balance of $0.1 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 2011.
2008
Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
Balance
|
|
|
|
Initial
|
|
|
Adjustments
|
|
|
Cash
|
|
|
Exchange
|
|
|
December 31,
|
|
Description of charge
|
|
Reserve
|
|
|
to Reserves
|
|
|
Charges
|
|
|
Rates
|
|
|
2009
|
|
|
Termination benefits
|
|
$
|
7,891
|
|
|
$
|
(281
|
)
|
|
$
|
(7,442
|
)
|
|
$
|
(168
|
)
|
|
$
|
|
|
Office closures
|
|
|
119
|
|
|
|
(18
|
)
|
|
|
(95
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,010
|
|
|
$
|
(299
|
)
|
|
$
|
(7,537
|
)
|
|
$
|
(174
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recorded restructuring charges of $8.0 million in 2008
primarily associated with our transition of certain on-shore
activities to the CoE. The 2008 restructuring charges included
$7.9 million for termination benefits, primarily related to
a workforce reduction of 100 FTE in product development,
consulting and sales-related positions across all of our
geographic regions and $119,000 for office closure and
integration costs of redundant office facilities. Subsequent
adjustments were made to these reserves in 2009 based on our
revised estimates to complete the restructuring activities and
are included in the consolidated statements of income under the
caption Restructuring charges. As of
December 31, 2009 all costs associated with these
restructuring charges have been paid. A summary of the 2008
restructuring charges is as follows:
Senior
Notes
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
($7.2 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
67
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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 (the
Exchange Offer Registration Statement), enabling
holders to exchange the Senior Notes for registered notes with
terms substantially identical to the terms of the Senior Notes.
We were 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, or September 8, 2010, (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. On November 5, 2010, the Exchange
Offer Registration Statement was declared effective by the SEC.
Under the terms of the exchange and registration rights
agreement, we incurred special interest on the Senior Notes at a
per annum rate of 0.25% of the principal amount of the Senior
Notes from the Registration Deadline through the completion of
the exchange offer. We completed the exchange offer in December
2010.
The fair value and carrying amount of the Senior Notes were
$296.3 million and $272.7 million, respectively at
December 31, 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
$7.2 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 incurred $16.5 million
of interest on the Senior Notes for the year ended
December 31, 2010 and have amortized approximately
$1.4 million of the original issue discount and related
loan origination fees.
68
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2010 and 2009, deferred revenue consists of
deferrals for software license fees, maintenance, consulting and
training and other services as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Software
|
|
$
|
10,238
|
|
|
$
|
1,185
|
|
Maintenance
|
|
|
70,986
|
|
|
|
61,046
|
|
Consulting
|
|
|
5,083
|
|
|
|
2,165
|
|
Training and other
|
|
|
1,748
|
|
|
|
1,269
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue current portion
|
|
|
88,055
|
|
|
|
65,665
|
|
Software
|
|
|
2,926
|
|
|
|
|
|
Maintenance
|
|
|
3,588
|
|
|
|
|
|
Consulting
|
|
|
2,576
|
|
|
|
|
|
Training and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue long-term portion
|
|
|
9,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred revenue
|
|
$
|
97,145
|
|
|
$
|
65,665
|
|
|
|
|
|
|
|
|
|
|
We currently lease office space in the Americas for 15 regional
sales and support offices across the United States and
Latin America, and for 23 other international sales and support
offices located in major cities throughout Europe, Asia,
Australia, Japan and the CoE facilities in Bangalore and
Hyderabad, India. The leases are primarily non-cancelable
operating leases with initial terms ranging from one to
20 years that expire at various dates through the year
2018. None of the leases contain contingent rental payments;
however, certain of the leases contain scheduled rent increases
and renewal options. We expect that in the normal course of
business most of these leases will be renewed or that suitable
additional or alternative space will be available on
commercially reasonable terms as needed. We believe our existing
facilities are adequate for our current needs and for the
foreseeable future. As of December 31, 2010, we have sublet
approximately 204,000 square feet of excess office space
through 2014, and have identified an additional
70,000 square feet that we are trying to sublet. In
addition, we lease various computers, telephone systems,
automobiles, and office equipment under non-cancelable operating
leases with initial terms generally ranging from 12 to
48 months. Certain of the equipment leases contain renewal
options and we expect that in the normal course of business some
or all of these leases will be renewed or replaced by other
leases.
Net rental expense under operating leases in 2010, 2009 and 2008
was $16.9 million, $10.7 million and
$11.0 million, respectively. The following summarizes
future minimum lease obligations under non-cancelable operating
leases at December 31, 2010.
|
|
|
|
|
For the Year Ending December 31,
|
|
Amount
|
|
|
2011
|
|
$
|
22,547
|
|
2012
|
|
|
16,496
|
|
2013
|
|
|
8,969
|
|
2014
|
|
|
4,971
|
|
2015
|
|
|
1,656
|
|
Thereafter
|
|
|
4,757
|
|
|
|
|
|
|
Total
|
|
$
|
59,396
|
|
|
|
|
|
|
69
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We have entered into sublease agreements on excess space in
certain of our leased facilities that will provide sublease
rentals of approximately $5.5 million, $3.1 million,
$1.0 million and $0.7 million in 2011 through 2014,
respectively. We currently have no sublease agreements in place
that provide for sublease rentals beyond 2014.
Dillards, Inc. vs. i2 Technologies, Inc.
In September 2007, Dillards, Inc. filed a lawsuit against
i2 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 Dillards regarding the purchase of two i2
products in the year 2000 under a software license agreement and
related services agreement. Dillards paid i2 approximately
$8.1 million under these two agreements.
As previously reported, on June 15, 2010, a jury in the
District Court of the State of Texas, County of Dallas, returned
an adverse verdict in the litigation between Dillards,
Inc. and i2. On September 30, 2010, the trial court signed
a judgment awarding Dillards $237 million, plus
post-judgment interest of 5% per annum. On October 4, 2010,
i2 posted a $25 million supersedeas bond. By posting the
bond, under Texas law, the execution of the judgment is
suspended, which means the judgment will not have to be paid
during the appeals process. On December 2, 2010, we met
with Dillards for a mediation session. During that
mediation session, settlement offers were exchanged, but no
agreement was reached. Therefore, on December 23, 2010 i2
filed a Notice of Appeal with the Dallas Court of Appeals. The
appeals process is not expected to be resolved prior to the end
of 2011. There can be no assurance that it will be successful or
that the litigation will be settled on terms acceptable to JDA.
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, (e) how management
intends to respond in the event an unfavorable final judgment is
returned by the trial court and (f) settlement discussions.
We currently estimate the potential loss for this matter to
range between $19 million (the highest settlement offer
exchanged) 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 $19.0 million, of which
$5.0 million was recorded on the opening balance sheet of
i2 following JDAs acquisition of i2 in January 2010 and
$14.0 million was recorded in December 2010 in the
Consolidated Statements of Income under the capital
Litigation provision and in the Consolidated Balance
Sheets under the caption Accrued expenses and other
liabilities.
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. On April 22, 2010, Oracle filed
counterclaims against i2 and JDA Software Group, Inc. (of
which i2 is now a wholly-owned subsidiary) alleging the
infringement by i2 of four Oracle patents. In response to
i2s 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
(subsequently reduced by i2 to four patents) and Oracle to
select one patent for the first case.
On February 25, 2011, the Company, i2 and Oracle
Corporation entered into a settlement agreement (the
Agreement). Under the Agreement, the parties entered
into a cross-license arrangement and dismissed their
70
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
respective litigation claims related to the patent infringement
dispute with prejudice. In addition, the Company is entitled to
receive a one-time cash payment of $35.0 million from
Oracle Corporation, payable within seven days of the Agreement
date, as well as a $2.5 million license and technical
support credit from Oracle Corporation that must be used by the
Company within two years. The Company intends to account for
this settlement as a reduction of operating expenses in the
first quarter of 2011 under the caption Litigation
Settlement in the consolidated statement of income.
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 i2s
directors have denied all allegations and discovery is ongoing.
A settlement agreement in principle has been reached among the
parties, which is subject to formal documentation and court
approval. The agreement, if it is finalized and then approved by
the court, will provide that (i) the pendency and
prosecution of the lawsuit and the efforts of plaintiffs
counsel were a reason and cause for the decision by i2s
then board of directors to provide additional disclosures in the
Registration Statement on
Form S-4,
filed with the Securities and Exchange Commission on or about
November 19, 2009, in connection with the Companys
acquisition of i2 and (ii) plaintiffs counsel may
apply to the court for an award of attorneys fees and
costs of $0.5 million to be paid by i2, which will be
funded by its directors and officers liability insurer.
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.
|
|
13.
|
Redeemable
Preferred Stock
|
In connection with the Manugistics Group, Inc.
(Manugistics) acquisition in 2006, we issued
50,000 shares of Series B preferred stock to 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 3.6 million shares of
common stock based on an agreed conversion rate of $13.875.
During third quarter 2009, the private equity investment firm
exercised conversion rights on 30,525 shares of the
Series B preferred stock, which resulted in the issuance of
2.2 million 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 2.2 million 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 a stock purchase agreement with a private equity
investment firm in September 2009 to acquire the remaining
shares of Series B preferred stock for $28.1 million
in cash ($20 per share for each of the 1.4 million shares
of common stock into which the Series B Preferred Stock was
convertible). The agreed purchase price included
$19.5 million, which represents the conversion of
1.4 million shares of common stock at the conversion price
of $13.875, and $8.6 million, which represents
consideration paid in excess of the conversion price of $13.875
($6.125 per share). The consideration paid in excess of the
conversion price was charged to retained earnings in the same
manner as a dividend on preferred stock and reduced the income
applicable to common shareholders in the calculation of earnings
per share for 2009 (see Note 18). As part of the purchase
agreement, we also repurchased 0.1 million shares of our
common stock held by the private equity investment firm for
$2.0 million, or $20 per share (see Note 15).
71
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
14.
|
Share-Based
Compensation
|
Our 2005 Performance Incentive Plan, as amended (2005
Incentive Plan), provides for the issuance of up to
3.8 million shares of common stock to employees,
consultants and directors under stock purchase rights, stock
bonuses, restricted stock, restricted stock units, performance
awards, performance units and deferred compensation awards. The
2005 Incentive Plan contains certain restrictions that limit the
number of shares that may be issued and the amount of cash
awarded under each type of award, including a limitation that
awards granted in any given year can represent no more than two
percent (2%) of the total number of shares of common stock
outstanding as of the last day of the preceding fiscal year.
Awards granted under the 2005 Incentive Plan are in such form as
the Compensation Committee shall from time to time establish and
the awards may or may not be subject to vesting conditions based
on the satisfaction of service requirements or other conditions,
restrictions or performance criteria including the
Companys achievement of annual operating goals. Restricted
stock and restricted stock units may also be granted under the
2005 Incentive Plan as a component of an incentive package
offered to new employees or to existing employees based on
performance or in connection with a promotion, and will
generally vest over a three-year period, commencing at the date
of grant. We measure the fair value of awards under the 2005
Incentive Plan based on the market price of the underlying
common stock as of the date of grant. The fair value of each
award is amortized over the applicable vesting period of the
awards using graded vesting and reflected in the consolidated
statements of income under the captions Cost of
maintenance services, Cost of consulting
services, Product development, Sales and
marketing, and General and administrative.
Annual stock-based incentive programs (Performance
Programs) have been approved for executive officers and
certain other members of our management team for years 2007
through 2010 that provide for contingently issuable performance
share awards or restricted stock units upon achievement of
defined performance threshold goals. A summary of the annual
Performance Programs is as follows:
2011 Performance Program. In January 2011, the
Board approved a stock-based incentive compensation program for
2011 (2011 Performance Program). The 2011
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 2011. A partial pro-rata
issuance of performance share awards will be made if we achieve
a minimum adjusted EBITDA performance threshold. The 2011
Performance Program initially provides for approximately
0.7 million of targeted contingently issuable performance
share awards with a fair value of $20.2 million. The
performance share awards, if any, will be issued after the
issuance of our independent auditors report on our 2011
financial results and will vest 50% upon the date of issuance
with one-half of the remaining 50% vesting on each of the next
two anniversaries of the initial vest date. Our performance
against the defined performance threshold goal will be evaluated
on a quarterly basis throughout 2011 and share-based
compensation will be recognized over the requisite service
period that runs from February 2011 through January 2012. If we
achieve the defined performance threshold goal, we would expect
to recognized approximately $10.1 million of the award as
share-based compensation in 2011.
2010 Performance Program. The 2010 Performance
Program provided 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 were able to achieve a defined adjusted EBITDA
performance threshold goal in 2010. The Companys actual
2010 adjusted EBITDA performance qualified participants to
receive approximately 95% of their target awards. In total,
0.5 million contingently issuable performance share awards
were issued in January 2011 with a grant date fair value of
$12.0 million that is being recognized as share-based
compensation over requisite service periods that run from the
date of Board approval of the 2010 Performance Program through
January 2013. The performance share awards vested 50% upon the
date of issuance with the remaining 50% vesting ratably over a
24-month
period.
2009 Performance Program. The 2009 Performance
Program provided for the issuance of contingently issuable
performance share awards if we were able to achieve
$91.5 million of adjusted EBITDA. The Companys
72
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
actual 2009 adjusted EBITDA performance qualified participants
to receive 100% of their target awards. In total,
0.5 million 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.
2008 Performance Program. The 2008 Performance
Program provided for the issuance of contingently issuable
performance share awards if we were able to achieve
$95 million of adjusted EBITDA. The Companys actual
2008 adjusted EBITDA performance, which exceeded the defined
performance threshold goal of $95 million, qualified
participants to receive approximately 106% of their target
awards. In total, 0.2 million 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.
2007 Performance Program. The 2007 Performance
Program provided for the issuance of contingently issuable
restricted stock units if we were able to successfully integrate
the Manugistics acquisition and achieve $85 million of
adjusted EBITDA. The Companys actual 2007 adjusted EBITDA
performance qualified participants for a pro-rata issuance equal
to 99.25% of their target awards. In total, 0.5 million
restricted stock units were issued in January 2008 with a grant
date fair value of $8.1 million.
As of December 31, 2010, there is approximately
$5.2 million of total unrecognized stock-based compensation
expense under the 2005 Incentive Plan related to non-vested
awards. This compensation is expected to be recognized over the
respective vesting terms of each award through 2013. The
weighted-average term of the unrecognized stock-based
compensation expense is 1.5 years.
The following table summarizes activity under the 2005 Incentive
Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units &
|
|
|
|
|
|
|
Performance Share Awards
|
|
|
Restricted Stock Awards
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Non-vested Balance, December 31, 2007
|
|
|
14
|
|
|
$
|
15.08
|
|
|
|
41
|
|
|
$
|
17.98
|
|
Granted
|
|
|
511
|
|
|
|
15.92
|
|
|
|
10
|
|
|
|
19.86
|
|
Vested
|
|
|
(373
|
)
|
|
|
15.92
|
|
|
|
(26
|
)
|
|
|
18.56
|
|
Forfeited
|
|
|
(28
|
)
|
|
|
16.97
|
|
|
|
|
|
|
|
14.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2008
|
|
|
124
|
|
|
|
15.60
|
|
|
|
25
|
|
|
|
18.14
|
|
Granted
|
|
|
227
|
|
|
|
17.23
|
|
|
|
80
|
|
|
|
15.13
|
|
Vested
|
|
|
(285
|
)
|
|
|
16.59
|
|
|
|
(21
|
)
|
|
|
16.75
|
|
Forfeited
|
|
|
(12
|
)
|
|
|
16.51
|
|
|
|
(10
|
)
|
|
|
20.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2009
|
|
|
54
|
|
|
|
17.01
|
|
|
|
74
|
|
|
|
15.15
|
|
Granted
|
|
|
510
|
|
|
|
13.52
|
|
|
|
8
|
|
|
|
26.78
|
|
Vested
|
|
|
(409
|
)
|
|
|
13.85
|
|
|
|
(38
|
)
|
|
|
17.27
|
|
Forfeited
|
|
|
(45
|
)
|
|
|
13.84
|
|
|
|
(23
|
)
|
|
|
15.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2010
|
|
|
110
|
|
|
$
|
13.59
|
|
|
|
21
|
|
|
$
|
15.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Inducement Awards. In 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 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).
73
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(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. 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.
(ii) 55,000 contingently issuable performance share awards
were granted to Mr. Hathaway (25,000 shares) and
Mr. Zintak (30,000 shares) if the Company was able to
achieve the $91.5 million adjusted EBITDA performance
threshold goal defined under the 2009 Performance Program. The
Companys actual 2009 adjusted EBITDA performance qualified
Mr. Hathaway and Mr. Zintak to receive 100% of their
target awards. A total of 55,000 performance share awards were
issued in January 2010 with a grant date fair value of
$1.0 million 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.
(iii) 100,000 contingently issuable restricted stock units
were granted to Mr. Hathaway (50,000 shares) and
Mr. Zintak (50,000 shares) that will vest in defined
tranches if and when we achieve certain pre-defined performance
milestones. As of December 31, 2010, Mr. Hathaway met
his first milestone and was awarded 16,667 shares.
We recorded total share-based compensation expense of
$1.1 million and $1.2 million related to the Equity
Inducement Awards in the years ended December 31, 2010 and
2009, respectively. As of December 31, 2010, we have
$1.3 million of total unrecognized stock-based compensation
expense related to these awards. This compensation is expected
to be recognized over a weighted average period of
1.4 years.
The following table summarizes Equity Inducement Awards activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units &
|
|
|
|
|
|
|
Performance Share Awards
|
|
|
Restricted Stock Awards
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Units
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Non-vested Balance, December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
17.98
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
17.98
|
|
Granted
|
|
|
55
|
|
|
|
18.11
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(40
|
)
|
|
|
18.11
|
|
|
|
(46
|
)
|
|
|
17.93
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance, December 31, 2010
|
|
|
15
|
|
|
$
|
18.11
|
|
|
|
54
|
|
|
$
|
18.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
74
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following summarizes the combined stock option activity
during the three-year period ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
Options Available
|
|
|
|
|
|
Exercise Price
|
|
|
|
for Grant
|
|
|
Shares
|
|
|
per Share
|
|
|
Balance, December 31, 2007
|
|
|
|
|
|
|
3,231
|
|
|
$
|
6.44 to $27.50
|
|
Plan shares expired
|
|
|
(159
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
159
|
|
|
|
(159
|
)
|
|
$
|
8.56 to $26.96
|
|
Exercised
|
|
|
|
|
|
|
(697
|
)
|
|
$
|
6.44 to $16.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
|
|
|
|
2,375
|
|
|
$
|
6.44 to $27.50
|
|
Plan shares expired
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
26
|
|
|
|
(26
|
)
|
|
$
|
6.44 to $16.80
|
|
Exercised
|
|
|
|
|
|
|
(1,053
|
)
|
|
$
|
6.44 to $21.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
|
|
|
|
1,296
|
|
|
$
|
10.33 to $27.50
|
|
Plan shares expired
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
7
|
|
|
|
(7
|
)
|
|
$
|
11.94 to $16.80
|
|
Exercised
|
|
|
|
|
|
|
(743
|
)
|
|
$
|
10.33 to $27.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
|
|
|
|
546
|
|
|
$
|
10.33 to $27.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average exercise price of outstanding options at
December 31, 2009, options cancelled during 2010, options
exercised during 2010 and outstanding options at
December 31, 2010 were $16.20, $15.44, $16.42 and $15.91,
respectively.
The following summarizes certain weighted average information on
options outstanding at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Options Excercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Life (years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$10.33 to $14.88
|
|
|
264
|
|
|
|
2.74
|
|
|
$
|
12.51
|
|
|
|
264
|
|
|
$
|
12.51
|
|
$15.15 to $21.17
|
|
|
263
|
|
|
|
1.37
|
|
|
$
|
18.53
|
|
|
|
263
|
|
|
$
|
18.53
|
|
$25.33 to $27.50
|
|
|
19
|
|
|
|
1.40
|
|
|
$
|
26.94
|
|
|
|
19
|
|
|
$
|
26.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
546
|
|
|
|
2.03
|
|
|
$
|
15.91
|
|
|
|
546
|
|
|
$
|
15.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during 2010, 2009
and 2008 was $8.5 million, $7.1 million and
$4.3 million, respectively and as of December 31,
2010, the aggregate intrinsic value of outstanding and
exercisable options was $6.6 million.
Employee Stock Purchase Plan. Our employee
stock purchase plan (2008 Purchase Plan) has an
initial reserve of 1.5 million shares and provides eligible
employees with the ability to defer up to 10% of their earnings
for the purchase of our common stock on a semi-annual basis at
85% of the fair market value on the last day of each six-month
offering period that begin on February 1st and
August 1st of each year. The 2008 Purchase Plan is
considered compensatory and, as a result, stock-based
compensation is recognized on the last day of each six-month
offering period in an amount equal to the difference between the
fair value of the stock on the date of purchase and the
discounted purchase price. A total of 0.1 million and
0.2 million shares of common stock were purchased under the
2008 Purchase Plan in 2010 and 2009 at prices ranging from
$19.98 to $22.28 and $9.52 to $17.52, respectively.
75
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following provides tabular disclosure as of
December 31, 2010 of the number of securities to be issued
upon the exercise of outstanding options or vesting of
restricted stock units, the weighted average exercise price of
outstanding options, and the number of securities remaining
available for future issuance under equity compensation plans,
aggregated into two categories plans that have been
approved by stockholders and plans that have not:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
to be Issued
|
|
|
|
|
|
|
|
|
|
Upon Exercise of
|
|
|
|
|
|
Number of Securities
|
|
|
|
Outstanding Options
|
|
|
|
|
|
Remaining Available
|
|
|
|
or Vesting of
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
Resticted Stock
|
|
|
Exercise Price of
|
|
|
Under Equity
|
|
Equity Compensation Plans
|
|
Units
|
|
|
Outstanding Options
|
|
|
Compensation Plans
|
|
|
Approved by stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1996 Option Plan
|
|
|
457
|
|
|
$
|
16.17
|
|
|
|
|
|
1996 Directors Plan
|
|
|
61
|
|
|
$
|
16.23
|
|
|
|
|
|
2005 Performance Incentive Plan
|
|
|
131
|
|
|
$
|
|
|
|
|
2,507
|
|
Employee Stock Purchase Plan
|
|
|
1,214
|
|
|
$
|
|
|
|
|
1,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,863
|
|
|
$
|
16.18
|
|
|
|
3,721
|
|
Not approved by stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1998 Option Plan
|
|
|
29
|
|
|
$
|
11.08
|
|
|
|
|
|
Non-Plan Equity Inducement Awards
|
|
|
169
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,061
|
|
|
$
|
15.91
|
|
|
|
3,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has recognized total stock-based compensation as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of maintenance services
|
|
$
|
482
|
|
|
$
|
590
|
|
|
$
|
319
|
|
Cost of consulting services
|
|
|
1,565
|
|
|
|
1,107
|
|
|
|
307
|
|
Product development
|
|
|
1,149
|
|
|
|
721
|
|
|
|
550
|
|
Sales and marketing
|
|
|
2,628
|
|
|
|
2,188
|
|
|
|
1,058
|
|
General and administrative
|
|
|
5,670
|
|
|
|
3,489
|
|
|
|
2,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
11,494
|
|
|
$
|
8,095
|
|
|
$
|
4,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
Treasury
Stock Purchases
|
On March 5, 2009, the Board adopted a program to repurchase
up to $30 million of our common stock in the open market or
in private transactions at prevailing market prices during the
12-month
period ended March 10, 2010. During 2009, we repurchased
0.3 million 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 2010 and 2009 we also repurchased 0.2 million and
0.1 million common shares, respectively, tendered by
employees for the payment of applicable statutory withholding
taxes on the issuance of restricted shares under the 2005
Performance Incentive Plan. These shares were repurchased in
2010 for $4.9 million at prices ranging from $21.34 to
$30.06 and in 2009 for $1.6 million at prices ranging from
$9.75 to $26.05 per share.
As part of the purchase agreement with a private equity
investment firm (see Note 13), we repurchased
100,000 shares of our common stock for $2.0 million,
or $20 per share in 2009.
76
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
16.
|
Employee
Benefit Plans
|
We maintain a defined 401(k) contribution plan (401(k)
Plan) for the benefit of our employees. Participant
contributions vest immediately and are subject to the limits
established from
time-to-time
by the Internal Revenue Service. We provide discretionary
matching contributions to the 401(k) Plan on an annual basis.
Our matching contributions were 25% in 2010, 2009 and 2008 and
vest 100% after 2 years of service. Our matching
contributions to the 401(k) Plan were $3.1 million,
$2.1 million and $2.1 million in 2010, 2009 and 2008,
respectively.
The income tax provision includes income taxes currently payable
and those deferred due to temporary differences between the
financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future. The
following is a summary of the components of the income tax
provision for the years December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,739
|
|
|
$
|
295
|
|
|
$
|
3,752
|
|
State
|
|
|
(1,947
|
)
|
|
|
1,957
|
|
|
|
347
|
|
Foreign
|
|
|
4,429
|
|
|
|
4,746
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current taxes
|
|
|
6,221
|
|
|
|
6,998
|
|
|
|
3,831
|
|
Deferred taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,074
|
|
|
|
7,604
|
|
|
|
(1,118
|
)
|
State
|
|
|
332
|
|
|
|
634
|
|
|
|
226
|
|
Foreign
|
|
|
(1,992
|
)
|
|
|
(2,387
|
)
|
|
|
1,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
|
(586
|
)
|
|
|
5,851
|
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
5,635
|
|
|
$
|
12,849
|
|
|
$
|
4,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes for 2010, 2009 and 2008 includes
$14.7 million, $7.6 million and $6.3 million of
foreign pretax income, respectively. The following is a summary
of the items that cause recorded income taxes to differ
77
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
from taxes computed using the statutory federal income tax rate
of 35% for the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income before income taxes
|
|
$
|
23,353
|
|
|
$
|
39,188
|
|
|
$
|
7,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax at federal statutory rate
|
|
$
|
8,174
|
|
|
$
|
13,716
|
|
|
$
|
2,610
|
|
Research and development credits
|
|
|
(1,115
|
)
|
|
|
(773
|
)
|
|
|
(930
|
)
|
Meals, entertainment and other non-deductible expenses
|
|
|
942
|
|
|
|
425
|
|
|
|
332
|
|
State income taxes
|
|
|
776
|
|
|
|
1,294
|
|
|
|
59
|
|
Section 199 deduction
|
|
|
(532
|
)
|
|
|
(554
|
)
|
|
|
|
|
Foreign tax rate differential
|
|
|
(1,371
|
)
|
|
|
(451
|
)
|
|
|
(804
|
)
|
Changes in estimate, foreign statutory rates and other
|
|
|
|
|
|
|
(506
|
)
|
|
|
2,582
|
|
Interest and penalties on uncertain tax positions
|
|
|
(1,352
|
)
|
|
|
(386
|
)
|
|
|
365
|
|
Uncertain tax positions
|
|
|
(946
|
)
|
|
|
(170
|
)
|
|
|
|
|
Transaction costs
|
|
|
1,114
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
(55
|
)
|
|
|
254
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
5,635
|
|
|
$
|
12,849
|
|
|
$
|
4,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
24.1
|
%
|
|
|
32.8
|
%
|
|
|
58.1
|
%
|
Significant components of the Companys deferred tax assets
and liabilities as of December 31, 2010 and 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
Current
|
|
|
Non-Current
|
|
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals and reserves
|
|
$
|
18,019
|
|
|
$
|
4,091
|
|
|
$
|
7,342
|
|
|
$
|
6,698
|
|
Deferred revenue
|
|
|
3,673
|
|
|
|
1,161
|
|
|
|
271
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
22,984
|
|
|
|
228,400
|
|
|
|
9,479
|
|
|
|
50,301
|
|
Foreign deferred and NOL
|
|
|
2,236
|
|
|
|
8,990
|
|
|
|
1,322
|
|
|
|
3,054
|
|
Tax credit carryforwards
|
|
|
|
|
|
|
19,174
|
|
|
|
|
|
|
|
11,825
|
|
R&D expenses capitalized
|
|
|
|
|
|
|
39,218
|
|
|
|
1,679
|
|
|
|
3,417
|
|
Property and equipment
|
|
|
|
|
|
|
7,577
|
|
|
|
|
|
|
|
3,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
46,912
|
|
|
|
308,611
|
|
|
|
20,093
|
|
|
|
79,241
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangibles
|
|
|
|
|
|
|
(33,754
|
)
|
|
|
|
|
|
|
(30,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
|
|
|
|
|
(33,754
|
)
|
|
|
|
|
|
|
(30,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax assets
|
|
|
(3,159
|
)
|
|
|
(19,471
|
)
|
|
|
(951
|
)
|
|
|
(4,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
43,753
|
|
|
$
|
255,386
|
|
|
$
|
19,142
|
|
|
$
|
44,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residual United States income taxes have not been provided on
undistributed earnings of our foreign subsidiaries. These
earnings are considered to be indefinitely reinvested and,
accordingly, no provision for United States federal and state
income taxes has been provided thereon. Upon distribution of
those earnings in the form of dividends or otherwise, the
Company would be subject to both United States income taxes and
78
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
withholding taxes payable to various foreign countries less an
adjustment for foreign tax credits. It is not practical to
estimate the amount of additional tax that might be payable on
the foreign earnings.
A reconciliation of the liability for unrecognized income tax
benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Unrecognized tax benefits, beginning of year
|
|
$
|
11,394
|
|
|
$
|
11,721
|
|
Increase (decrease) related to prior year tax positions
|
|
|
|
|
|
|
471
|
|
Increase related to current year tax positions
|
|
|
|
|
|
|
317
|
|
Expirations
|
|
|
(1,753
|
)
|
|
|
(722
|
)
|
Settlements
|
|
|
(545
|
)
|
|
|
(393
|
)
|
Acquired unrecognized tax benefits
|
|
|
5,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits, end of year
|
|
$
|
14,532
|
|
|
$
|
11,394
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010 approximately $14.5 million of
unrecognized tax benefits would impact our effective tax rate if
recognized. It is reasonably possible that approximately
$7.9 million of unrecognized tax benefits will be
recognized within the next 12 months, primarily due to the
expiration in the statute of limitations.
We treat the accrual of interest and penalties related to
uncertain tax positions as a component of income tax expense,
including accruals (benefits) made during 2010, 2009 and 2008 of
($1.4) million, ($0.5) million and $0.6 million
respectively. As of December 31, 2010, 2009 and 2008 there
are approximately $3.0 million, $2.3 million and
$2.6 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 to the overall 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. Our business operations in India have
been granted a tax holiday from income taxes through the tax
year ending March 31, 2011. This tax holiday did not have a
significant impact on our 2010 or 2009 operating results;
however, our overall effective tax rate will be negatively
impacted as the tax holiday period expires. In the normal course
of business we are subjected to examination by taxing
authorities throughout the world, including significant
jurisdictions in the United States, India and the United
Kingdom. We are currently under audit in the US for the 2009 and
2010 tax years. Audits are in process in India covering multiple
years. The examination phase of these audits has not yet been
completed; however, we do not anticipate any material
adjustments. The following table sets forth significant
jurisdictions that have open tax years that are subject to
examination:
|
|
|
|
|
Country
|
|
Open Tax Years Subject to Examination
|
|
United States
|
|
|
2009 - 2010
|
|
United Kingdom
|
|
|
2006 - 2010
|
|
India
|
|
|
2002 - 2010
|
|
JDA Software Group, Inc. accepted an invitation to participate
in the Compliance Audit Assurance Program (CAP)
beginning in 2007. The CAP program was developed by the Internal
Revenue Service to allow for transparency and to remove
uncertainties in tax compliance. CAP is offered by invitation
only to those companies with both a history of immaterial audit
adjustments and a high level of tax complexity and will involve
a review of each quarterly tax provision. The Internal Revenue
Service has completed their review of our 2007, 2008 and 2009
tax returns and no material adjustments have been made as a
result of these examinations.
At December 31, 2010, we have approximately
$5.6 million and $8.2 million of federal and state
research and development tax credit carryforwards, respectively,
that expire at various dates throughout 2030. We also have
79
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately $8.3 million of foreign tax credit
carryforwards that expire between 2018 and 2020. We have
approximately $679 million of federal net operating loss
carryforwards, which are subject to annual limitations
prescribed in section 382 of the Internal Revenue Code,
that expire beginning in 2018. We also have $481 million
and $25.6 million of state and foreign net operating loss
carryforwards, before consideration of valuation allowance or
reduction for uncertain tax positions, that expire beginning in
2015.
As a result of certain realization requirements of ASC Topic
718, the table of deferred tax assets and liabilities shown
above does not include certain deferred tax assets at
December 31, 2010 and 2009 that arose directly from (or the
use of which was postponed by) tax deductions related to equity
compensation in excess of compensation recognized for financial
reporting. Equity will be increased by $13.2 million if and
when such deferred tax assets are ultimately realized. The
Company uses ASC 740 ordering for purposes of determining
when excess tax benefits have been realized.
From July 2006 through September 2008, the Company had two
classes of outstanding capital stock, common stock and
Series B preferred stock. The Series B preferred
stock, which was issued in connection with the acquisition of
Manugistics (see Note 13), was a participating security
such that in the event a dividend was declared or paid on the
common stock, the Company would be required to simultaneously
declare and pay a dividend on the Series B preferred stock
as if the Series B preferred stock had been converted into
common stock. Companies that have participating securities are
required to apply the two-class method to compute basic earnings
per share. Under the two-class computation method, basic
earnings per share is calculated for each class of stock and
participating security considering both dividends declared and
participation rights in undistributed earnings as if all such
earnings had been distributed during the period.
During third quarter 2009, all shares of the Series B
preferred stock were either converted into shares of common
stock or repurchased for cash, including $8.6 million paid
in excess of the conversion price (see Note 13). The excess
consideration was charged to retained earnings in the same
manner as a dividend on preferred stock and reduced the income
applicable to common shareholders in the calculation of earnings
per share for 2009. The calculation of diluted earnings per
share applicable to common shareholders for 2009 includes the
assumed conversion of the Series B preferred stock into
common stock as of the beginning of the period, weighted for the
actual days and number of shares outstanding during the period.
The calculation of diluted earnings per share applicable to
common shareholders for 2008 includes the assumed conversion of
the Series B preferred stock into common stock as of the
beginning of the period.
80
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings per share for the three years ended December 31,
2010 is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net income
|
|
$
|
17,718
|
|
|
$
|
26,339
|
|
|
$
|
3,124
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income applicable to common shareholders
|
|
|
17,718
|
|
|
|
17,746
|
|
|
|
3,124
|
|
Undistributed earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
17,718
|
|
|
|
16,613
|
|
|
|
2,796
|
|
Series B preferred stock
|
|
|
|
|
|
|
1,133
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undistributed earnings
|
|
$
|
17,718
|
|
|
$
|
17,746
|
|
|
$
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
41,173
|
|
|
|
32,706
|
|
|
|
30,735
|
|
Series B preferred stock
|
|
|
|
|
|
|
2,230
|
|
|
|
3,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares basic earnings per share
|
|
|
41,173
|
|
|
|
34,936
|
|
|
|
34,339
|
|
Dilutive common stock equivalents
|
|
|
537
|
|
|
|
322
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares diluted earnings per share
|
|
|
41,710
|
|
|
|
35,258
|
|
|
|
35,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share applicable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
0.43
|
|
|
$
|
0.51
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B preferred stock
|
|
$
|
|
|
|
$
|
0.51
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share applicable to common shareholders
|
|
$
|
0.42
|
|
|
$
|
0.50
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The dilutive effect of outstanding stock options and unvested
restricted stock units and performance share awards is included
in the diluted earnings per share calculations using the
treasury stock method. Diluted earnings per share applicable to
common shareholders excludes 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,
contingently issuable restricted stock units or performance
share awards for which all necessary conditions had not been met
have been excluded from the calculation (see Note 14).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Employee stock options
|
|
|
12
|
|
|
|
795
|
|
|
|
775
|
|
Contingently issuable restricted stock units or performance
shares
|
|
|
|
|
|
|
561
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12
|
|
|
|
1,356
|
|
|
|
998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
81
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Identifiable assets are also attributed to a geographical
region. The geographic distribution of our revenues and
identifiable assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
404,140
|
|
|
$
|
264,681
|
|
|
$
|
269,269
|
|
Europe
|
|
|
109,667
|
|
|
|
82,011
|
|
|
|
87,656
|
|
Asia/Pacific
|
|
|
103,402
|
|
|
|
39,108
|
|
|
|
33,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
617,209
|
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Indentifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
889,576
|
|
|
$
|
695,539
|
|
|
$
|
402,350
|
|
Europe
|
|
|
124,209
|
|
|
|
85,817
|
|
|
|
86,780
|
|
Asia/Pacific
|
|
|
99,743
|
|
|
|
40,310
|
|
|
|
35,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,113,528
|
|
|
$
|
821,666
|
|
|
$
|
524,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues for the Americas include $342.7 million,
$231.3 million and $236.7 million from the United
States in 2010, 2009 and 2008, respectively. Identifiable assets
for the Americas include $850.9 million and
$666.0 million in the United States as of December 31,
2010 and 2009, respectively. The increase in identifiable assets
at December 31, 2010 compared to December 31, 2009
resulted primarily from the acquisition of i2 (see Notes 2
and 9).
No customer accounted for more than 10% of our revenues during
any of the three years ended December 31, 2010.
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.
|
|
|
|
Pricing and Revenue Management (previously known as 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
Pricing and Revenue Management segment is centrally
managed by a team that has global responsibilities for this
market.
|
82
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the revenues, operating income and depreciation
attributable to each of these reportable business segments for
the three years ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
597,061
|
|
|
$
|
354,402
|
|
|
$
|
369,947
|
|
Pricing and Revenue Management
|
|
|
20,148
|
|
|
|
31,398
|
|
|
|
20,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
617,209
|
|
|
$
|
385,800
|
|
|
$
|
390,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
201,730
|
|
|
$
|
114,174
|
|
|
$
|
121,015
|
|
Pricing and Revenue Management
|
|
|
(1,542
|
)
|
|
|
8,636
|
|
|
|
2,001
|
|
Other (see below)
|
|
|
(153,760
|
)
|
|
|
(82,930
|
)
|
|
|
(102,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,428
|
|
|
$
|
39,880
|
|
|
$
|
20,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain
|
|
$
|
11,306
|
|
|
$
|
7,336
|
|
|
$
|
7,610
|
|
Pricing and Revenue Management
|
|
|
1,477
|
|
|
|
1,049
|
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,783
|
|
|
$
|
8,385
|
|
|
$
|
8,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
72,299
|
|
|
$
|
47,664
|
|
|
$
|
44,963
|
|
Amortization of intangible assets
|
|
|
38,415
|
|
|
|
23,633
|
|
|
|
24,303
|
|
Restructuring charge and adjustments to acquisition-related
reserves
|
|
|
20,931
|
|
|
|
6,865
|
|
|
|
8,382
|
|
Acquisition-related costs
|
|
|
8,115
|
|
|
|
4,768
|
|
|
|
|
|
Costs of abandoned acquistion
|
|
|
|
|
|
|
|
|
|
|
25,060
|
|
Litigation provision
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
153,760
|
|
|
$
|
82,930
|
|
|
$
|
102,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income in the Supply Chain and Pricing and
Revenue Management 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.
83
JDA
SOFTWARE GROUP, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
20.
|
Quarterly
Data (Unaudited)
|
The following table presents selected unaudited quarterly
operating results for the two-year period ended
December 31, 2010. We believe that all necessary
adjustments have been included in the amounts shown below to
present fairly the related quarterly results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
(In thousands, except per share amounts)
|
|
Total revenue
|
|
$
|
168,762
|
|
|
$
|
158,443
|
|
|
$
|
158,373
|
|
|
$
|
131,631
|
|
|
$
|
107,123
|
|
|
$
|
95,859
|
|
|
$
|
99,485
|
|
|
$
|
83,333
|
|
Operating income (loss)
|
|
$
|
12,090
|
|
|
$
|
17,535
|
|
|
$
|
17,056
|
|
|
$
|
(253
|
)
|
|
$
|
11,524
|
|
|
$
|
9,480
|
|
|
$
|
14,418
|
|
|
$
|
4,458
|
|
Income (loss) applicable to common shareholders
|
|
$
|
5,847
|
|
|
$
|
8,273
|
|
|
$
|
7,866
|
|
|
$
|
(4,268
|
)
|
|
$
|
8,497
|
|
|
$
|
(2,330
|
)
|
|
$
|
8,935
|
|
|
$
|
2,644
|
|
Basic net income (loss) per common share
|
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.25
|
|
|
$
|
(0.07
|
)
|
|
$
|
0.26
|
|
|
$
|
0.08
|
|
Diluted net income (loss) per common share
|
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
0.19
|
|
|
$
|
(0.11
|
)
|
|
$
|
0.24
|
|
|
$
|
(0.07
|
)
|
|
$
|
0.25
|
|
|
$
|
0.08
|
|
|
|
21.
|
Condensed
Consolidating Financial Information
|
Pursuant to the indenture governing the Senior Notes (see
Note 9) our obligations under the Senior Notes are
fully and unconditionally guaranteed, jointly 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 December 31, 2010 and 2009, and condensed
consolidating statements of income for the years ended
December 31, 2010, 2009, and 2008 and condensed
consolidating statements of cash flow for the years ended
December 31, 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.
84
CONDENSED
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
133,631
|
|
|
$
|
37,987
|
|
|
$
|
|
|
|
$
|
171,618
|
|
Restricted cash
|
|
|
|
|
|
|
34,021
|
|
|
|
834
|
|
|
|
|
|
|
|
34,855
|
|
Account receivable, net
|
|
|
|
|
|
|
79,886
|
|
|
|
22,232
|
|
|
|
|
|
|
|
102,118
|
|
Income tax receivable
|
|
|
9,098
|
|
|
|
(8,685
|
)
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
Deferred tax assets current portion
|
|
|
|
|
|
|
41,512
|
|
|
|
2,241
|
|
|
|
|
|
|
|
43,753
|
|
Prepaid expenses and other current assets
|
|
|
440
|
|
|
|
18,914
|
|
|
|
8,369
|
|
|
|
|
|
|
|
27,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
9,538
|
|
|
|
299,279
|
|
|
|
71,250
|
|
|
|
|
|
|
|
380,067
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
40,147
|
|
|
|
7,300
|
|
|
|
|
|
|
|
47,447
|
|
Goodwill
|
|
|
|
|
|
|
226,863
|
|
|
|
|
|
|
|
|
|
|
|
226,863
|
|
Other intangibles, net
|
|
|
|
|
|
|
187,398
|
|
|
|
|
|
|
|
|
|
|
|
187,398
|
|
Deferred tax assets long-term portion
|
|
|
|
|
|
|
243,837
|
|
|
|
11,549
|
|
|
|
|
|
|
|
255,386
|
|
Other non-current assets
|
|
|
5,636
|
|
|
|
135
|
|
|
|
10,596
|
|
|
|
|
|
|
|
16,367
|
|
Investment in subsidiaries
|
|
|
185,168
|
|
|
|
49,547
|
|
|
|
(7,111
|
)
|
|
|
(227,604
|
)
|
|
|
|
|
Intercompany accounts
|
|
|
697,438
|
|
|
|
(724,996
|
)
|
|
|
27,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
888,242
|
|
|
|
22,931
|
|
|
|
49,892
|
|
|
|
(227,604
|
)
|
|
|
733,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
897,780
|
|
|
$
|
322,210
|
|
|
$
|
121,142
|
|
|
$
|
(227,604
|
)
|
|
$
|
1,113,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
18,892
|
|
|
$
|
2,200
|
|
|
$
|
|
|
|
$
|
21,092
|
|
Accrued expenses and other liabilities
|
|
|
978
|
|
|
|
54,931
|
|
|
|
28,029
|
|
|
|
|
|
|
|
83,938
|
|
Income taxes payable
|
|
|
|
|
|
|
(379
|
)
|
|
|
697
|
|
|
|
|
|
|
|
318
|
|
Deferred revenue current portion
|
|
|
|
|
|
|
64,265
|
|
|
|
23,790
|
|
|
|
|
|
|
|
88,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
978
|
|
|
|
137,709
|
|
|
|
54,716
|
|
|
|
|
|
|
|
193,403
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
272,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,695
|
|
Accrued exit and disposal obligations
|
|
|
|
|
|
|
3,997
|
|
|
|
3,363
|
|
|
|
|
|
|
|
7,360
|
|
Liability for uncertain tax positions
|
|
|
|
|
|
|
4,071
|
|
|
|
2,802
|
|
|
|
|
|
|
|
6,873
|
|
Deferred revenue long-term portion
|
|
|
|
|
|
|
9,090
|
|
|
|
|
|
|
|
|
|
|
|
9,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
272,695
|
|
|
|
17,158
|
|
|
|
6,165
|
|
|
|
|
|
|
|
296,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
273,673
|
|
|
|
154,867
|
|
|
|
60,881
|
|
|
|
|
|
|
|
489,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
624,107
|
|
|
|
167,343
|
|
|
|
60,261
|
|
|
|
(227,604
|
)
|
|
|
624,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
897,780
|
|
|
$
|
322,210
|
|
|
$
|
121,142
|
|
|
$
|
(227,604
|
)
|
|
$
|
1,113,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
CONDENSED
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
47,170
|
|
|
$
|
28,804
|
|
|
$
|
|
|
|
$
|
75,974
|
|
Restricted cash
|
|
|
287,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287,875
|
|
Account receivable, net
|
|
|
|
|
|
|
53,535
|
|
|
|
15,348
|
|
|
|
|
|
|
|
68,883
|
|
Income tax receivable
|
|
|
469
|
|
|
|
5,941
|
|
|
|
(6,410
|
)
|
|
|
|
|
|
|
|
|
Deferred tax assets current portion
|
|
|
|
|
|
|
17,973
|
|
|
|
1,169
|
|
|
|
|
|
|
|
19,142
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
11,273
|
|
|
|
4,394
|
|
|
|
|
|
|
|
15,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
288,344
|
|
|
|
135,892
|
|
|
|
43,305
|
|
|
|
|
|
|
|
467,541
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
35,343
|
|
|
|
5,499
|
|
|
|
|
|
|
|
40,842
|
|
Goodwill
|
|
|
|
|
|
|
135,275
|
|
|
|
|
|
|
|
|
|
|
|
135,275
|
|
Other intangibles, net
|
|
|
|
|
|
|
119,661
|
|
|
|
|
|
|
|
|
|
|
|
119,661
|
|
Deferred tax assets long-term portion
|
|
|
|
|
|
|
37,781
|
|
|
|
6,569
|
|
|
|
|
|
|
|
44,350
|
|
Other non-current assets
|
|
|
6,697
|
|
|
|
124
|
|
|
|
7,176
|
|
|
|
|
|
|
|
13,997
|
|
Investment in subsidiaries
|
|
|
154,166
|
|
|
|
27,575
|
|
|
|
|
|
|
|
(181,741
|
)
|
|
|
|
|
Intercompany accounts
|
|
|
234,479
|
|
|
|
(253,131
|
)
|
|
|
18,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
395,342
|
|
|
|
102,628
|
|
|
|
37,896
|
|
|
|
(181,741
|
)
|
|
|
354,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
683,686
|
|
|
$
|
238,520
|
|
|
$
|
81,201
|
|
|
$
|
(181,741
|
)
|
|
$
|
821,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
6,140
|
|
|
$
|
1,052
|
|
|
$
|
|
|
|
$
|
7,192
|
|
Accrued expenses and other liabilities
|
|
|
|
|
|
|
28,809
|
|
|
|
16,714
|
|
|
|
|
|
|
|
45,523
|
|
Income taxes payable
|
|
|
|
|
|
|
1,255
|
|
|
|
2,234
|
|
|
|
|
|
|
|
3,489
|
|
Deferred revenue current portion
|
|
|
|
|
|
|
44,145
|
|
|
|
21,520
|
|
|
|
|
|
|
|
65,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
80,349
|
|
|
|
41,520
|
|
|
|
|
|
|
|
121,869
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
272,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,250
|
|
Accrued exit and disposal obligations
|
|
|
|
|
|
|
4,723
|
|
|
|
2,618
|
|
|
|
|
|
|
|
7,341
|
|
Liability for uncertain tax positions
|
|
|
|
|
|
|
8,770
|
|
|
|
|
|
|
|
|
|
|
|
8,770
|
|
Deferred revenue long-term portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
272,250
|
|
|
|
13,493
|
|
|
|
2,618
|
|
|
|
|
|
|
|
288,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
272,250
|
|
|
|
93,842
|
|
|
|
44,138
|
|
|
|
|
|
|
|
410,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
411,436
|
|
|
|
144,678
|
|
|
|
37,063
|
|
|
|
(181,741
|
)
|
|
|
411,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
683,686
|
|
|
$
|
238,520
|
|
|
$
|
81,201
|
|
|
$
|
(181,741
|
)
|
|
$
|
821,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
|
|
|
$
|
109,546
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
109,546
|
|
Subscriptions and other recurring revenues
|
|
|
|
|
|
|
21,143
|
|
|
|
|
|
|
|
|
|
|
|
21,143
|
|
Maintenance services
|
|
|
|
|
|
|
172,712
|
|
|
|
73,529
|
|
|
|
|
|
|
|
246,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
|
|
|
|
303,401
|
|
|
|
73,529
|
|
|
|
|
|
|
|
376,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
|
|
|
|
151,681
|
|
|
|
68,736
|
|
|
|
|
|
|
|
220,417
|
|
Reimbursed expenses
|
|
|
|
|
|
|
13,379
|
|
|
|
6,483
|
|
|
|
|
|
|
|
19,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
|
|
|
|
165,060
|
|
|
|
75,219
|
|
|
|
|
|
|
|
240,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
468,461
|
|
|
|
148,748
|
|
|
|
|
|
|
|
617,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
|
|
|
|
4,256
|
|
|
|
|
|
|
|
|
|
|
|
4,256
|
|
Amortization of acquired software technology
|
|
|
|
|
|
|
7,047
|
|
|
|
|
|
|
|
|
|
|
|
7,047
|
|
Cost of maintenance services
|
|
|
|
|
|
|
34,910
|
|
|
|
17,633
|
|
|
|
|
|
|
|
52,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
|
|
|
|
46,213
|
|
|
|
17,633
|
|
|
|
|
|
|
|
63,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
|
|
|
|
119,259
|
|
|
|
50,567
|
|
|
|
|
|
|
|
169,826
|
|
Reimbursed expenses
|
|
|
|
|
|
|
13,379
|
|
|
|
6,483
|
|
|
|
|
|
|
|
19,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
|
|
|
|
132,638
|
|
|
|
57,050
|
|
|
|
|
|
|
|
189,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
178,851
|
|
|
|
74,683
|
|
|
|
|
|
|
|
253,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
289,610
|
|
|
|
74,065
|
|
|
|
|
|
|
|
363,675
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
|
|
|
|
46,640
|
|
|
|
25,518
|
|
|
|
|
|
|
|
72,158
|
|
Sales and marketing
|
|
|
|
|
|
|
57,712
|
|
|
|
33,617
|
|
|
|
|
|
|
|
91,329
|
|
General and administrative
|
|
|
|
|
|
|
58,364
|
|
|
|
13,935
|
|
|
|
|
|
|
|
72,299
|
|
Amortization of intangibles
|
|
|
|
|
|
|
38,415
|
|
|
|
|
|
|
|
|
|
|
|
38,415
|
|
Restructuring charges
|
|
|
|
|
|
|
12,156
|
|
|
|
8,775
|
|
|
|
|
|
|
|
20,931
|
|
Acquisition-related costs
|
|
|
|
|
|
|
8,115
|
|
|
|
|
|
|
|
|
|
|
|
8,115
|
|
Litigation provision
|
|
|
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
235,402
|
|
|
|
81,845
|
|
|
|
|
|
|
|
317,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
|
|
|
54,208
|
|
|
|
(7,780
|
)
|
|
|
|
|
|
|
46,428
|
|
Interest expense and amortization of loan fees
|
|
|
(23,943
|
)
|
|
|
(584
|
)
|
|
|
(231
|
)
|
|
|
|
|
|
|
(24,758
|
)
|
Interest income and other, net
|
|
|
|
|
|
|
(24,755
|
)
|
|
|
26,438
|
|
|
|
|
|
|
|
1,683
|
|
Income tax provision
|
|
|
9,098
|
|
|
|
(9,655
|
)
|
|
|
(5,078
|
)
|
|
|
|
|
|
|
(5,635
|
)
|
Equity in earnings of subsidiaries, net
|
|
|
32,563
|
|
|
|
8,898
|
|
|
|
|
|
|
|
(41,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
17,718
|
|
|
$
|
28,112
|
|
|
$
|
13,349
|
|
|
$
|
(41,461
|
)
|
|
$
|
17,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
|
|
|
$
|
84,913
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
84,913
|
|
Subscriptions and other recurring revenues
|
|
|
|
|
|
|
3,873
|
|
|
|
|
|
|
|
|
|
|
|
3,873
|
|
Maintenance services
|
|
|
|
|
|
|
112,829
|
|
|
|
66,507
|
|
|
|
|
|
|
|
179,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
|
|
|
|
201,615
|
|
|
|
66,507
|
|
|
|
|
|
|
|
268,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
|
|
|
|
66,799
|
|
|
|
40,819
|
|
|
|
|
|
|
|
107,618
|
|
Reimbursed expenses
|
|
|
|
|
|
|
6,872
|
|
|
|
3,188
|
|
|
|
|
|
|
|
10,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
|
|
|
|
73,671
|
|
|
|
44,007
|
|
|
|
|
|
|
|
117,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
275,286
|
|
|
|
110,514
|
|
|
|
|
|
|
|
385,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
|
|
|
|
3,241
|
|
|
|
|
|
|
|
|
|
|
|
3,241
|
|
Amortization of acquired software technology
|
|
|
|
|
|
|
3,920
|
|
|
|
|
|
|
|
|
|
|
|
3,920
|
|
Cost of maintenance services
|
|
|
|
|
|
|
31,546
|
|
|
|
11,619
|
|
|
|
|
|
|
|
43,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
|
|
|
|
38,707
|
|
|
|
11,619
|
|
|
|
|
|
|
|
50,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
|
|
|
|
55,292
|
|
|
|
29,993
|
|
|
|
|
|
|
|
85,285
|
|
Reimbursed expenses
|
|
|
|
|
|
|
6,872
|
|
|
|
3,188
|
|
|
|
|
|
|
|
10,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
|
|
|
|
62,164
|
|
|
|
33,181
|
|
|
|
|
|
|
|
95,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
100,871
|
|
|
|
44,800
|
|
|
|
|
|
|
|
145,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
174,415
|
|
|
|
65,714
|
|
|
|
|
|
|
|
240,129
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
|
|
|
|
40,541
|
|
|
|
10,777
|
|
|
|
|
|
|
|
51,318
|
|
Sales and marketing
|
|
|
|
|
|
|
40,937
|
|
|
|
25,064
|
|
|
|
|
|
|
|
66,001
|
|
General and administrative
|
|
|
|
|
|
|
38,584
|
|
|
|
9,080
|
|
|
|
|
|
|
|
47,664
|
|
Amortization of intangibles
|
|
|
|
|
|
|
23,633
|
|
|
|
|
|
|
|
|
|
|
|
23,633
|
|
Restructuring charges
|
|
|
|
|
|
|
3,723
|
|
|
|
3,142
|
|
|
|
|
|
|
|
6,865
|
|
Acquisition-related costs
|
|
|
|
|
|
|
4,768
|
|
|
|
|
|
|
|
|
|
|
|
4,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
152,186
|
|
|
|
48,063
|
|
|
|
|
|
|
|
200,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
|
|
|
22,229
|
|
|
|
17,651
|
|
|
|
|
|
|
|
39,880
|
|
Interest expense and amortization of loan fees
|
|
|
(2,000
|
)
|
|
|
(538
|
)
|
|
|
(174
|
)
|
|
|
|
|
|
|
(2,712
|
)
|
Finance costs on abandoned acquisition
|
|
|
767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
767
|
|
Interest income and other, net
|
|
|
|
|
|
|
10,965
|
|
|
|
(9,712
|
)
|
|
|
|
|
|
|
1,253
|
|
Income tax provision
|
|
|
469
|
|
|
|
(11,051
|
)
|
|
|
(2,267
|
)
|
|
|
|
|
|
|
(12,849
|
)
|
Equity in earnings of subsidiaries, net
|
|
|
27,103
|
|
|
|
2,399
|
|
|
|
|
|
|
|
(29,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
26,339
|
|
|
|
24,004
|
|
|
|
5,498
|
|
|
|
(29,502
|
)
|
|
|
26,339
|
|
Consideration paid in excess of carrying value on the repurchase
of redeemable preferred stock
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,593
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME APPLICABLE TO COMMON SHAREHOLDERS
|
|
$
|
17,746
|
|
|
$
|
24,004
|
|
|
$
|
5,498
|
|
|
$
|
(29,502
|
)
|
|
$
|
17,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
CONDENSED
CONSOLIDATING STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses
|
|
$
|
|
|
|
$
|
89,196
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
89,196
|
|
Subscriptions and other recurring revenues
|
|
|
|
|
|
|
3,702
|
|
|
|
|
|
|
|
|
|
|
|
3,702
|
|
Maintenance services
|
|
|
|
|
|
|
114,688
|
|
|
|
68,156
|
|
|
|
|
|
|
|
182,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
|
|
|
|
|
207,586
|
|
|
|
68,156
|
|
|
|
|
|
|
|
275,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting services
|
|
|
|
|
|
|
64,939
|
|
|
|
39,133
|
|
|
|
|
|
|
|
104,072
|
|
Reimbursed expenses
|
|
|
|
|
|
|
7,198
|
|
|
|
3,320
|
|
|
|
|
|
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
|
|
|
|
|
|
72,137
|
|
|
|
42,453
|
|
|
|
|
|
|
|
114,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
279,723
|
|
|
|
110,609
|
|
|
|
|
|
|
|
390,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
|
|
|
|
|
|
3,499
|
|
|
|
|
|
|
|
|
|
|
|
3,499
|
|
Amortization of acquired software technology
|
|
|
|
|
|
|
5,277
|
|
|
|
|
|
|
|
|
|
|
|
5,277
|
|
Cost of maintenance services
|
|
|
|
|
|
|
32,397
|
|
|
|
13,337
|
|
|
|
|
|
|
|
45,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
|
|
|
|
|
41,173
|
|
|
|
13,337
|
|
|
|
|
|
|
|
54,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of consulting services
|
|
|
|
|
|
|
50,096
|
|
|
|
31,858
|
|
|
|
|
|
|
|
81,954
|
|
Reimbursed expenses
|
|
|
|
|
|
|
7,198
|
|
|
|
3,320
|
|
|
|
|
|
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenues
|
|
|
|
|
|
|
57,294
|
|
|
|
35,178
|
|
|
|
|
|
|
|
92,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
98,467
|
|
|
|
48,515
|
|
|
|
|
|
|
|
146,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
181,256
|
|
|
|
62,094
|
|
|
|
|
|
|
|
243,350
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development
|
|
|
|
|
|
|
44,592
|
|
|
|
9,274
|
|
|
|
|
|
|
|
53,866
|
|
Sales and marketing
|
|
|
|
|
|
|
40,750
|
|
|
|
25,718
|
|
|
|
|
|
|
|
66,468
|
|
General and administrative
|
|
|
|
|
|
|
35,612
|
|
|
|
9,351
|
|
|
|
|
|
|
|
44,963
|
|
Amortization of intangibles
|
|
|
|
|
|
|
24,303
|
|
|
|
|
|
|
|
|
|
|
|
24,303
|
|
Restructuring charges
|
|
|
|
|
|
|
2,872
|
|
|
|
5,510
|
|
|
|
|
|
|
|
8,382
|
|
Cost of abandoned acquisition
|
|
|
25,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,060
|
|
|
|
148,129
|
|
|
|
49,853
|
|
|
|
|
|
|
|
223,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
(25,060
|
)
|
|
|
33,127
|
|
|
|
12,241
|
|
|
|
|
|
|
|
20,308
|
|
Interest expense and amortization of loan fees
|
|
|
(9,837
|
)
|
|
|
(337
|
)
|
|
|
(175
|
)
|
|
|
|
|
|
|
(10,349
|
)
|
Finance costs on abandoned acquisition
|
|
|
(5,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,292
|
)
|
Interest income and other, net
|
|
|
107
|
|
|
|
8,353
|
|
|
|
(5,669
|
)
|
|
|
|
|
|
|
2,791
|
|
Income tax provision
|
|
|
5,708
|
|
|
|
(8,607
|
)
|
|
|
(1,435
|
)
|
|
|
|
|
|
|
(4,334
|
)
|
Equity in earnings of subsidiaries, net
|
|
|
37,498
|
|
|
|
3,235
|
|
|
|
|
|
|
|
(40,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
3,124
|
|
|
$
|
35,771
|
|
|
$
|
4,962
|
|
|
$
|
(40,733
|
)
|
|
$
|
3,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net Cash Provided by Operating Activities
|
|
$
|
168,512
|
|
|
$
|
(122,434
|
)
|
|
$
|
19,094
|
|
|
$
|
|
|
|
$
|
65,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
253,020
|
|
|
|
(34,021
|
)
|
|
|
(34,021
|
)
|
|
|
|
|
|
|
253,020
|
|
Purchase of i2 Technologies, Inc.
|
|
|
(431,775
|
)
|
|
|
218,348
|
|
|
|
|
|
|
|
|
|
|
|
(213,427
|
)
|
Payment of direct costs related to acquisitions
|
|
|
|
|
|
|
(1,101
|
)
|
|
|
(2,524
|
)
|
|
|
|
|
|
|
(3,625
|
)
|
Purchase of property and equipment
|
|
|
|
|
|
|
(10,597
|
)
|
|
|
(6,269
|
)
|
|
|
|
|
|
|
(16,866
|
)
|
Proceeds from dipsosal of property and equipment
|
|
|
|
|
|
|
603
|
|
|
|
31
|
|
|
|
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(178,755
|
)
|
|
|
173,232
|
|
|
|
25,259
|
|
|
|
|
|
|
|
19,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity plans
|
|
|
15,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,370
|
|
Excess tax benefits for stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock and other, net
|
|
|
(5,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,127
|
)
|
Change in intercompany receivable/payable
|
|
|
|
|
|
|
43,780
|
|
|
|
(43,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
10,243
|
|
|
|
43,780
|
|
|
|
(43,780
|
)
|
|
|
|
|
|
|
10,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
(8,117
|
)
|
|
|
8,610
|
|
|
|
|
|
|
|
493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
86,461
|
|
|
|
9,183
|
|
|
|
|
|
|
|
95,644
|
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
|
|
|
|
47,170
|
|
|
|
28,804
|
|
|
|
|
|
|
|
75,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
|
|
|
$
|
133,631
|
|
|
$
|
37,987
|
|
|
$
|
|
|
|
$
|
171,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net Cash Provided by Operating Activities
|
|
$
|
41,907
|
|
|
$
|
50,952
|
|
|
$
|
3,622
|
|
|
$
|
|
|
|
$
|
96,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
(287,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(287,875
|
)
|
Payment of direct costs related to acquisitions
|
|
|
|
|
|
|
(3,031
|
)
|
|
|
(2,079
|
)
|
|
|
|
|
|
|
(5,110
|
)
|
Purchase of property and equipment
|
|
|
|
|
|
|
(4,670
|
)
|
|
|
(2,466
|
)
|
|
|
|
|
|
|
(7,136
|
)
|
Proceeds from dipsosal of property and equipment
|
|
|
|
|
|
|
35
|
|
|
|
49
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(287,875
|
)
|
|
|
(7,666
|
)
|
|
|
(4,496
|
)
|
|
|
|
|
|
|
(300,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity plans
|
|
|
14,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,849
|
|
Purchase of treasury stock and other, net
|
|
|
(6,543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,543
|
)
|
Redemption of redeemable preferred stock
|
|
|
(28,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,068
|
)
|
Proceeds from issuance of long-term debt, net of discount
|
|
|
272,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
272,217
|
|
Debt issuance costs
|
|
|
(6,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,487
|
)
|
Change in intercompany receivable/payable
|
|
|
|
|
|
|
(6,703
|
)
|
|
|
6,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
245,968
|
|
|
|
(6,703
|
)
|
|
|
6,703
|
|
|
|
|
|
|
|
245,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
(254
|
)
|
|
|
1,120
|
|
|
|
|
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
36,329
|
|
|
|
6,949
|
|
|
|
|
|
|
|
43,278
|
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
|
|
|
|
10,841
|
|
|
|
21,855
|
|
|
|
|
|
|
|
32,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
|
|
|
$
|
47,170
|
|
|
$
|
28,804
|
|
|
$
|
|
|
|
$
|
75,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Group, Inc.
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Elminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net Cash Provided by Operating Activities
|
|
$
|
95,481
|
|
|
$
|
(51,561
|
)
|
|
$
|
3,172
|
|
|
$
|
|
|
|
$
|
47,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of direct costs related to acquisitions
|
|
|
|
|
|
|
(4,242
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,242
|
)
|
Purchase of property and equipment
|
|
|
|
|
|
|
(5,502
|
)
|
|
|
(3,092
|
)
|
|
|
|
|
|
|
(8,594
|
)
|
Proceeds from dipsosal of property and equipment
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
|
|
(9,612
|
)
|
|
|
(3,092
|
)
|
|
|
|
|
|
|
(12,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity plans
|
|
|
7,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,806
|
|
Excess tax benefits for stock-based compensation
|
|
|
(1,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,638
|
)
|
Purchase of treasury stock and other, net
|
|
|
(2,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,086
|
)
|
Principal payments on term loan agreement
|
|
|
(99,563
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99,563
|
)
|
Change in intercompany receivable/payable
|
|
|
|
|
|
|
10,991
|
|
|
|
(10,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(95,481
|
)
|
|
|
10,991
|
|
|
|
(10,991
|
)
|
|
|
|
|
|
|
(95,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
|
|
|
|
286
|
|
|
|
(1,785
|
)
|
|
|
|
|
|
|
(1,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
(49,896
|
)
|
|
|
(12,696
|
)
|
|
|
|
|
|
|
(62,592
|
)
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
|
|
|
|
60,737
|
|
|
|
34,551
|
|
|
|
|
|
|
|
95,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
|
|
|
$
|
10,841
|
|
|
$
|
21,855
|
|
|
$
|
|
|
|
$
|
32,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
JDA SOFTWARE GROUP, INC.
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|
|
|
By:
|
/s/ Hamish
N. J. Brewer
|
Hamish N. J. Brewer
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 1, 2011
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
March 1, 2011:
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
/s/ James
D. Armstrong
James
D. Armstrong
|
|
Chairman of the Board
|
|
|
|
/s/ Hamish
N. J. Brewer
Hamish
N. J. Brewer
|
|
President, Chief Executive Officer
and Director (Principal Executive Officer)
|
|
|
|
/s/ Peter
S. Hathaway
Peter
S. Hathaway
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ J.
Michael Gullard
J.
Michael Gullard
|
|
Director
|
|
|
|
Richard
Haddrill
|
|
Director
|
|
|
|
/s/ Douglas
G. Marlin
Douglas
G. Marlin
|
|
Director
|
|
|
|
/s/ Jock
Patton
Jock
Patton
|
|
Director
|
92
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
2
|
.1
|
|
|
|
Agreement and Plan of Merger by and between JDA Software Group,
Inc., Alpha Acquisition Corp and i2 Technologies, Inc.
dated November 4, 2009. (Incorporated by reference to
Exhibit 2.1 to the Companys Current Report on
Form 8-K
dated November 4, 2009, as filed on November 5, 2009).
|
|
3
|
.1
|
|
|
|
Third Restated Certificate of Incorporation of the Company, as
amended through July 14, 2010. (Incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, as filed on
August 9, 2010).
|
|
3
|
.2
|
|
|
|
Amended and Restated Bylaws of JDA Software Group, Inc. (as
amended through April 22, 2010) (Incorporated by reference
to Exhibit 3.1 to the Companys Current Report on
Form 8-K
dated April 22, 2010, as filed on April 28, 2010).
|
|
3
|
.3
|
|
|
|
Certificate of Designation of rights, preferences, privileges
and restrictions of Series B Convertible Preferred Stock of
JDA Software Group, Inc filed with the Secretary of State of the
State of Delaware on July 5, 2006. (Incorporated by
reference to Exhibit 3.1 to the Companys Current
Report on
Form 8-K
dated July 5, 2006, as filed on July 6, 2006).
|
|
3
|
.4
|
|
|
|
Certificate of Correction filed to correct a certain error in
the Certificate of Designation of rights, preferences,
privileges and restrictions of Series B Convertible
Preferred Stock of JDA Software Group, Inc. filed with the
Secretary of State of the State of Delaware on July 5,
2006. (Incorporated by reference to Exhibit 3.4 to the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006, as filed
on November 9, 2006).
|
|
4
|
.1
|
|
|
|
Specimen Common Stock Certificate of JDA Software Group, Inc.
(Incorporated by reference the Companys Registration
Statement on
Form S-1
(File
No. 333-748),
declared effective on March 14, 1996).
|
|
4
|
.2
|
|
|
|
8.0% Senior Notes Due 2014 Indenture dated as of
December 10, 2009 among JDA Software Group, Inc., the
Guarantors, and U.S. Bank National Association, as trustee.
(Incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
dated December 10, 2009, as filed on December 11,
2009).
|
|
4
|
.3
|
|
|
|
Supplemental Indenture dated as of January 28, 2010 among
JDA Software Group, Inc., i2 Technologies, Inc.,
i2 Technologies US, Inc., the Guarantors and U.S. Bank
National Association, as trustee (Incorporation by reference to
Exhibit 4.3 to the Companys Registration Statement on
Form S-4
(File
No. 333-167429),
as filed on September 9, 2010).
|
|
10
|
.1(1)
|
|
|
|
Form of Indemnification Agreement. (Filed herewith).
|
|
10
|
.2(1)
|
|
|
|
1996 Stock Option Plan, as amended on March 28, 2003.
(Incorporated by reference to Exhibit 10.3 to the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2003, as filed on
March 12, 2004).
|
|
10
|
.3(1)
|
|
|
|
1996 Outside Directors Stock Option Plan and forms of agreement
thereunder. (Incorporated by reference to the Companys
Registration Statement on
Form S-1
(File
No. 333-748),
declared effective on March 14, 1996).
|
|
10
|
.4(1)
|
|
|
|
Executive Employment Agreement between James D. Armstrong and
JDA Software Group, Inc. dated July 23, 2002, together with
Amendment No. 1 effective August 1, 2003 (Incorporated
by reference to Exhibit 10.5 to the Companys Annual
Report on
Form 10-K
for the year ended December 21, 2003, as filed on
March 12, 2004).
|
|
10
|
.5(1)
|
|
|
|
Amended and Restated Executive Employment Agreement between
Hamish N. Brewer and JDA Software Group, Inc. dated
September 8, 2009. (Incorporated by reference to
Exhibit 10.5 to the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, as filed on
March 16, 2010).
|
|
10
|
.6(1)
|
|
|
|
1998 Nonstatutory Stock Option Plan, as amended on
March 28, 2003. (Incorporated Reference to
Exhibit 10.8 to the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003, as filed on
March 12, 2004).
|
|
10
|
.7(1)
|
|
|
|
2005 Performance Incentive Plan (Incorporated by reference to
Exhibit 99.1 to the Companys Current Report on
Form 8-K
dated May 16, 2005, as filed on June 20, 2005).
|
|
10
|
.8
|
|
|
|
2008 Employee Stock Purchase Plan, as amended through
January 27, 2011. (Filed herewith).
|
93
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
10
|
.10(2)
|
|
|
|
Value-Added Reseller License Agreement for Uniface Software
between Compuware Corporation and JDA Software Group, Inc. dated
April 1, 2000, together with Product
Schedule No. One dated June 23, 2000, Product
Schedule No. Two dated September 28, 2001, and
Amendment to Product Schedule No. Two dated
December 23, 2003. (Incorporated by reference to
Exhibit 10.14 to the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003, as filed on
March 12, 2004).
|
|
10
|
.11(1)
|
|
|
|
JDA Software, Inc. 401(k) Profit Sharing Plan, adopted as
amended effective January 1, 2004. (Incorporated by
reference to Exhibit 10.15 to the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2003, as filed on
March 12, 2004).
|
|
10
|
.12(1)
|
|
|
|
Form of Rights Agreement between the Company and ChaseMellon
Shareholder Services, as Rights Agent (including as
Exhibit A the Form of Certificate of Designation,
Preferences and Rights of the Terms of the Series A
Preferred Stock, as Exhibit B the Form of Right
Certificate, and as Exhibit C the Summary of Terms and
Rights Agreement). (Incorporated by reference to Exhibit 1
to the Companys Current Report on
Form 8-K
dated October 2, 1998, as filed on October 28, 1998).
|
|
10
|
.13(1)(3)
|
|
|
|
Form of Incentive Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.20 to the Companys Annual
Report on
Form 10-K
for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.14(1)(3)
|
|
|
|
Form of Nonstatutory Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.21 to the Companys Annual
Report on
Form 10-K
for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.15(1)(4)
|
|
|
|
Form of Amendment of Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers, amending
certain stock options granted pursuant to the JDA Software
Group, Inc. 1996 Stock Option Plan. (Incorporated by reference
to Exhibit 10.22 to the Companys Annual Report on
Form 10-K
for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.16(1)(5)
|
|
|
|
Form of Incentive Stock Option Agreement between JDA Software
Group, Inc. and certain Senior Executive Officers to be used in
connection with stock options granted pursuant to the JDA
Software Group, Inc. 1996 Stock Option Plan. (Incorporated by
reference to Exhibit 10.24 to the Companys Annual
Report on
Form 10-K
for the year ended December 31, 1999, as filed on
March 16, 2000).
|
|
10
|
.17(1)
|
|
|
|
Form of Restricted Stock Unit Agreement to be used in connection
with restricted stock units granted pursuant to the JDA Software
Group, Inc. 2005 Performance Incentive Plan (Incorporated by
reference to Exhibit 99.2 to the Companys Current
Report on
Form 8-K
dated October 28, 2005, as filed on November 3, 2005).
|
|
10
|
.18(1)
|
|
|
|
Standard Form of Restricted Stock Agreement to be used in
connection with restricted stock granted pursuant to the JDA
Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.31 to the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2005, as filed on
March 16, 2006).
|
|
10
|
.19(1)
|
|
|
|
Form of Restricted Stock Agreement to be used in connection with
restricted stock granted to Hamish N. Brewer pursuant to the JDA
Software Group, Inc. 2005 Performance Incentive Plan.
(Incorporated by reference to Exhibit 10.32 to the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2005, as filed on
March 16, 2006).
|
|
10
|
.24(1)(2)
|
|
|
|
Executive Employment Agreement between Pete Hathaway and JDA
Software Group, Inc. dated July 20, 2009. (Incorporated by
reference to Exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q/A
(Amendment No. 1) for the quarterly period ended
September 30, 2009, as filed on December 18, 2009).
|
|
10
|
.25(1)(2)
|
|
|
|
Executive Employment Agreement between Jason Zintak and JDA
Software Group, Inc. dated August 18, 2009. (Incorporated
by reference to Exhibit 10.2 to the Companys
Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2009, as filed
on November 3, 2009).
|
94
|
|
|
|
|
|
|
Exhibit #
|
|
|
|
Description of Document
|
|
|
10
|
.30
|
|
|
|
Exchange and Registration Rights Agreement Between JDA Software
Group, Inc. and certain Purchasers represented by Goldman,
Sachs & Co. and Wells Fargo Securities, LLC, dated
December 10, 2009. (Incorporated by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K
dated December 10, 2009, as filed on December 11,
2009).
|
|
10
|
.31
|
|
|
|
Escrow and Security Agreement Between JDA Software Group, Inc.
and U.S. Bank National Association dated December 10, 2009.
(Incorporated by reference to Exhibit 10.2 to the
Companys Current Report on
Form 8-K
dated December 10, 2009, as filed on December 11,
2009).
|
|
14
|
.1
|
|
|
|
Code of Business Conduct and Ethics. (Incorporated by reference
to Exhibit 14.1 to the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003, as filed on
March 12, 2004).
|
|
21
|
.1
|
|
|
|
Subsidiaries of Registrant. (Filed herewith).
|
|
23
|
.1
|
|
|
|
Consent of Independent Registered Public Accounting Firm. (Filed
herewith).
|
|
31
|
.1
|
|
|
|
Rule 13a-14(a)
Certification of Chief Executive Officer. (Filed herewith).
|
|
31
|
.2
|
|
|
|
Rule 13a-14(a)
Certification of Chief Financial Officer. (Filed herewith).
|
|
32
|
.1
|
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(Filed herewith).
|
|
|
|
(1) |
|
Management contracts or compensatory plans or arrangements
covering executive officers or directors of the Company. |
|
(2) |
|
Confidential treatment has been granted as to part of this
exhibit. |
|
(3) |
|
Applies to James D. Armstrong. |
|
(4) |
|
Applies to Hamish N. Brewer. |
|
(5) |
|
Applies to Senior Executive Officers with the exception of James
D. Armstrong |
95