NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except percentages, shares, per share amounts, or as otherwise stated)
(unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with the Financial Accounting Standards Board (FASB) Standard Accounting Codification ("Codification"), which is the authoritative source of generally accepted accounting principles ("GAAP") for nongovernmental entities in the United States. The interim financial statements do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the
three and nine
months ended
September 30, 2012
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2012
. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2011
.
The preparation of financial statements in conformity with the Codification requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
There have been no significant changes to our significant accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2011
that have had a significant impact on our Condensed Consolidated Financial Statements or notes thereto.
2. Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04,
Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
("ASU 2011-04")
.
This ASU amends current fair value measurement and disclosure guidance to include increased transparency around valuation input and investment categorization, particularly for level 3 fair value measurements. ASU 2011-04 is effective for fiscal years and interim periods beginning after December 15, 2011, with early adoption not permitted. The Company's fair value of its
8%
Senior Notes due 2014 (the "Senior Notes") is derived using quoted prices for similar liabilities in active markets (Level 2 inputs) and it does not currently have Level 3 measurements; therefore, the adoption of ASU 2011-04 did not have an impact on our Condensed Consolidated Financial Statements.
In September 2011, the FASB issued ASU No. 2011-08,
Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment
(“ASU 2011-08”), which simplifies how an entity tests goodwill for impairment. The standard permits an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Accordingly, an entity will no longer be required to calculate the fair value of a reporting unit in the step one test unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. ASU 2011-08 is effective for our annual goodwill impairment assessment for the fiscal year ended December 31, 2012 and is not expected have an impact on our Condensed Consolidated Financial Statements.
In December 2011, the FASB issued ASU No. 2011-11,
Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities
("ASU 2011-11"), to require entities to disclose information about offsetting and related arrangements of financial and derivative instruments. ASU 2011-11 is effective for the fiscal year ended December 31, 2013 and is not expected to have an impact on our Condensed Consolidated Financial Statements as the Company does not currently have a master netting or similar arrangement with respect to our derivative instruments.
3. Derivative Instruments and Hedging Activities
Derivative Financial Instruments
The Company uses 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 its 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.
The Company does 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.
Cash Flow Hedges
The Company hedges a portion of anticipated operating expenses denominated in the Indian rupee with forward exchange contracts that have maturities of
twelve months
or less and are designated as hedging instruments. The 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). The effective portion of the derivative's gain or loss is initially reported as a component of accumulated 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.
The forward contract receivables (payables) are included in the Condensed Consolidated Balance Sheets under the captions "Prepaid expenses and other current assets" and "Accrued expenses and other liabilities" as applicable. 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. Net foreign currency exchange gains (losses) are included in the Condensed Consolidated Statements of Income under the caption "Interest income and other, net."
Derivative Instruments in the Condensed Consolidated Balance Sheets
The gross notional and fair value of derivative financial instruments in the Condensed Consolidated Balance Sheets were recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
|
Gross Notional
|
|
Prepaid Expenses and Other Current Assets
|
|
Accrued Expenses and Other Liabilities
|
|
Gross Notional
|
|
Prepaid Expenses and Other Current Assets
|
|
Accrued Expenses and Other Liabilities
|
Foreign currency forward contract not designated as hedging instruments
|
$
|
57,598
|
|
|
$
|
684
|
|
|
$
|
—
|
|
|
$
|
64,451
|
|
|
$
|
—
|
|
|
$
|
364
|
|
Foreign currency forward contract designated as hedging instruments
|
$
|
17,967
|
|
|
$
|
1,126
|
|
|
$
|
—
|
|
|
$
|
42,373
|
|
|
$
|
—
|
|
|
$
|
4,046
|
|
Effects of Derivative Instruments on Income and Other Comprehensive Income
The before-tax effect of derivative instruments not designated as hedging instruments on the Condensed Consolidated Statements of Income for the
three and nine
months ended
September 30, 2012
and
2011
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Income on Derivative
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
Location
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Foreign exchange contracts not designated as hedges
|
Interest income and other, net
|
|
$
|
927
|
|
|
$
|
(2,586
|
)
|
|
$
|
1,430
|
|
|
$
|
(637
|
)
|
The before-tax effect of derivative instruments in cash flow hedging for the
three and nine
months ended
September 30, 2012
and
2011
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivative (Effective Portion)
|
|
Gain (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)
|
|
Gain (Loss) Recognized in Income Derivative (Ineffective portion and Amount Excluded from Effectiveness Testing)
|
|
Three Months
Ended September 30,
|
|
|
|
Three Months
Ended September 30,
|
|
|
|
Three Months
Ended September 30,
|
|
2012
|
|
2011
|
|
Location
|
|
2012
|
|
2011
|
|
Location
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts designated as hedges
|
$
|
973
|
|
|
$
|
(2,801
|
)
|
|
General and administration
|
|
$
|
(985
|
)
|
|
$
|
54
|
|
|
Interest income and other, net
|
|
$
|
546
|
|
|
$
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivative (Effective Portion)
|
|
Gain (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)
|
|
Gain (Loss) Recognized in Income Derivative (Ineffective portion and Amount Excluded from Effectiveness Testing)
|
|
Nine Months
Ended September 30,
|
|
|
|
Nine Months
Ended September 30,
|
|
|
|
Nine Months
Ended September 30,
|
|
2012
|
|
2011
|
|
Location
|
|
2012
|
|
2011
|
|
Location
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts designated as hedges
|
$
|
556
|
|
|
$
|
(2,906
|
)
|
|
General and administration
|
|
$
|
(3,700
|
)
|
|
$
|
120
|
|
|
Interest income and other, net
|
|
$
|
1,703
|
|
|
$
|
1,496
|
|
4. Goodwill and Other Intangibles, net
Goodwill consists of the following:
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
Gross goodwill
|
$
|
241,090
|
|
|
$
|
241,090
|
|
Accumulated impairment losses
|
(9,713
|
)
|
|
(9,713
|
)
|
Goodwill, net
|
$
|
231,377
|
|
|
$
|
231,377
|
|
Other identifiable intangibles consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Amount
|
Customer-based
|
$
|
257,983
|
|
|
$
|
(181,762
|
)
|
|
$
|
76,221
|
|
|
$
|
257,983
|
|
|
$
|
(155,318
|
)
|
|
$
|
102,665
|
|
Technology-based
|
90,147
|
|
|
(64,856
|
)
|
|
25,291
|
|
|
90,147
|
|
|
(59,749
|
)
|
|
30,398
|
|
Marketing-based
|
19,491
|
|
|
(12,818
|
)
|
|
6,673
|
|
|
19,491
|
|
|
(10,672
|
)
|
|
8,819
|
|
Other amortized intangible assets, net
|
$
|
367,621
|
|
|
$
|
(259,436
|
)
|
|
$
|
108,185
|
|
|
$
|
367,621
|
|
|
$
|
(225,739
|
)
|
|
$
|
141,882
|
|
Goodwill.
We had
no
impairment of our goodwill balances during the
nine
months ended
September 30, 2012
the next annual impairment test will be performed in fourth quarter
2012
. As of
September 30, 2012
, the goodwill balance has been allocated to our reporting units as follows:
$227.7 million
to
Supply Chain
and
$3.7 million
to
Pricing and Revenue Management.
To date our
Pricing and Revenue Management
segment has not achieved its current year revenue projections and may not achieve our original projections for 2012, which could result in a revenue decline from 2011. We have considered this impairment indicator and evaluated impairment for the segment's assets for the quarter ended September 30, 2012 and have determined that there is no impairment. We will continue to monitor the revenues and projections for
Pricing and Revenue Management
and it is possible that this assessment could lead to an impairment against this business segment, which includes $3.7 million in a goodwill intangible asset, if there is a further decline in the segment's operating results.
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.
Amortization expense is reported in the Condensed Consolidated Statements of Income within cost of revenues under the caption "Amortization of acquired software technology" and in operating expenses under the caption "Amortization of intangibles." As of
September 30, 2012
we expect amortization expense for the remainder of
2012
and thereafter to be as follows:
|
|
|
|
|
|
|
|
Amortization
|
For the Year Ending December 31,
|
|
Expense
|
2012, remainder thereof
|
|
$
|
11,233
|
|
2013
|
|
44,240
|
|
2014
|
|
27,352
|
|
2015
|
|
13,006
|
|
2016
|
|
11,489
|
|
Thereafter
|
|
865
|
|
Total
|
|
$
|
108,185
|
|
5. Restructuring Reserves
2012 Restructuring Plan
We expect to record restructuring charges of approximately
$2.5
million during fiscal 2012 to re-align certain areas of our services group and some other administrative positions to a more central strategy. During the
nine
months ending
September 30, 2012
we have incurred
$2.5
million of restructuring charges related to employee termination benefits and severance. As of
September 30, 2012
, approximately
$2.3
million of costs associated with these restructuring charges have been paid and
$0.2
million is included under the caption "Accrued expenses and other liabilities" and we expect to pay these costs by December 31, 2012.
A summary of the restructuring charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
Additions
|
|
Cash
|
|
Non-Cash
|
|
Impact of
Changes in
Exchange
|
|
Balance
|
Description of charge
|
|
Reserve
|
|
to Reserves
|
|
Charges
|
|
Settlements
|
|
Rates
|
|
September 30, 2012
|
Employee severance and termination benefits
|
|
$
|
2,449
|
|
|
$
|
1
|
|
|
$
|
(2,256
|
)
|
|
$
|
—
|
|
|
$
|
(34
|
)
|
|
$
|
160
|
|
2010 Restructuring Plan
We recorded restructuring charges of
$19.5 million
in 2010 and
$1.6 million
in 2011 primarily for termination benefits, office closures and contract terminations associated with the acquisition of i2 Technologies, Inc. ("i2") and the continued transition of additional on-shore activities to our Center of Excellence facilities. The charges include
$14.9 million
for termination benefits related to a workforce reduction of approximately
200
employees primarily in general and administrative, sales and marketing
and product development positions primarily in the Americas. In addition, the charges include
$6.0 million
for estimated costs to close and integrate redundant office facilities and for the integration of information technology and termination of certain i2 contracts that have no future economic benefit to the Company and are incremental to the other costs that will be incurred by the combined Company. As of
September 30, 2012
, approximately
$17.9 million
of the costs associated with these restructuring charges have been paid,
$1.2 million
is included under the caption "Accrued expenses and other liabilities" and
$0.3 million
is included under the caption "Accrued exit and disposal obligations".
A summary of the restructuring charges is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
Additions
|
|
Cash
|
|
Non-Cash
|
|
Impact of
Changes in
Exchange
|
|
Balance
|
|
Adjustments
|
|
Cash
|
|
Non-Cash
|
|
Impact of
Changes in
Exchange
|
|
Balance
|
Description of charge
|
|
Reserve
|
|
to Reserves
|
|
Charges
|
|
Settlements
|
|
Rates
|
|
December 31, 2011
|
|
to Reserves
|
|
Charges
|
|
Settlements
|
|
Rates
|
|
September 30, 2012
|
Termination benefits
|
|
$
|
14,098
|
|
|
$
|
826
|
|
|
$
|
(14,990
|
)
|
|
$
|
—
|
|
|
$
|
73
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Office closures and other restructuring
|
|
5,380
|
|
|
789
|
|
|
(2,652
|
)
|
|
(996
|
)
|
|
70
|
|
|
2,591
|
|
|
(163
|
)
|
|
(255
|
)
|
|
(416
|
)
|
|
(11
|
)
|
|
1,746
|
|
Total
|
|
$
|
19,478
|
|
|
$
|
1,615
|
|
|
$
|
(17,642
|
)
|
|
$
|
(996
|
)
|
|
$
|
143
|
|
|
$
|
2,598
|
|
|
$
|
(162
|
)
|
|
$
|
(263
|
)
|
|
$
|
(416
|
)
|
|
$
|
(11
|
)
|
|
$
|
1,746
|
|
The balance in the reserve for office closures is primarily related to redundant office facility leases in Dallas, Texas and the United Kingdom and will be reduced as payments are made over the related lease terms that extend through 2014.
6. Acquisition Reserves
We recorded initial acquisition reserves of
$47.4 million
for restructuring charges and other direct costs associated with the acquisition of Manugistics in 2006. The restructuring charges were primarily related to facility closures, employee severance and termination benefits and other direct costs associated with the acquisition, including investment banker fees, change-in-control payments, and legal and accounting costs. The unused portion of the acquisition reserves at
September 30, 2012
includes
$0.8 million
of current liabilities under the caption "Accrued expenses and other liabilities" and
$2.7 million
of non-current liabilities under the caption "Accrued exit and disposal obligations."
A summary of the charges and adjustments recorded against the reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
|
|
Adjustments
|
|
Cash
|
|
Impact of
Changes in
Exchange
|
|
Balance
|
|
Adjustment
|
|
Cash
|
|
Impact of
Changes in
Exchange
|
|
Balance
|
Description of charge
|
|
Reserve
|
|
to Reserves
|
|
Charges
|
|
Rates
|
|
December 31, 2011
|
|
to Reserves
|
|
Charges
|
|
Rates
|
|
September 30, 2012
|
Acquisition reserves:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office closures, lease termination and sublease costs
|
|
$
|
29,212
|
|
|
$
|
651
|
|
|
$
|
(22,837
|
)
|
|
$
|
(862
|
)
|
|
$
|
6,164
|
|
|
$
|
(438
|
)
|
|
$
|
(2,412
|
)
|
|
$
|
138
|
|
|
$
|
3,452
|
|
Employee severance and termination benefits
|
|
3,607
|
|
|
(840
|
)
|
|
(2,842
|
)
|
|
75
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
IT projects, contract termination penalties, capital lease buyouts and other costs to exits activities of Manugistics
|
|
1,450
|
|
|
222
|
|
|
(1,672
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
34,269
|
|
|
33
|
|
|
(27,351
|
)
|
|
(787
|
)
|
|
6,164
|
|
|
(438
|
)
|
|
(2,412
|
)
|
|
138
|
|
|
3,452
|
|
Direct costs:
|
|
13,125
|
|
|
6
|
|
|
(13,131
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
47,394
|
|
|
$
|
39
|
|
|
$
|
(40,482
|
)
|
|
$
|
(787
|
)
|
|
$
|
6,164
|
|
|
$
|
(438
|
)
|
|
$
|
(2,412
|
)
|
|
$
|
138
|
|
|
$
|
3,452
|
|
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 at
December 31, 2011
. As of
September 30, 2012
,
$0.3 million
remains in current liabilities under the caption of "Accrued expenses and other liabilities" and
$0.1 million
remains in non-current liabilities under the caption "Accrued exit and disposal obligations."
7. Long-term Debt
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.
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. In connection with the failure to timely file the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2012, we elected to pay an additional
50
basis points per annum of interest on the Senior Notes to gain forbearance under the terms of our Indenture, dated as of December 10, 2009, by and among the Company, the guarantors thereto, and U.S. Bank National Association, as trustee (the "Indenture"), governing the Senior Notes. The period during which we were required to pay additional interest on the Senior Notes began on June 1, 2012 and ended August 6, 2012. We have incurred approximately
$0.3 million
in
additional interest on the Senior Notes during 2012. The obligations under the Senior Notes are fully and unconditionally guaranteed on a senior basis by substantially all of our existing and future domestic subsidiaries (including, following the merger, i2 and its domestic subsidiaries).
At any time prior to December 15, 2012, we may redeem up to
35%
of the aggregate principal amount of the Senior Notes at a redemption price equal to
108%
of the principal amount, plus accrued and unpaid interest, with the cash proceeds of an equity offering of our common stock. At any time prior to December 15, 2012, we may also redeem all or a part of the Senior Notes at a redemption price equal to
100%
of the principal amount, plus accrued and unpaid interest and a “make whole” premium calculated as the greater of (i)
1%
of the principal amount of the Senior Notes redeemed or (ii) the excess of the present value of the redemption price of the Senior Notes redeemed at December 15, 2012 over the principal amount the Senior Notes redeemed. In addition, we may redeem the Senior Notes on or after December 15, 2012 at a redemption price of
104%
of the principal amount, and on or
after December 15, 2013 at a redemption price of
100%
of the principal amount, plus accrued and unpaid interest. The Senior Notes rank equally in right of payment with all existing and future senior debt and are senior in right of payment to all subordinated debt.
The Senior Notes contain certain restrictive covenants including (i) a requirement to repurchase the Senior Notes at price equal to
101%
of the principal amount, plus accrued and unpaid interest, in the event of a change in control and (ii) restrictions that limit our ability to pay dividends, make investments, incur additional indebtedness, create liens, issue preferred stock or consolidate, merge, sell or otherwise dispose of all or substantially all of our or their assets. The Senior Notes also provide for customary events of default and in the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding Senior Notes will become due and payable immediately without further action or notice. If any other event of default occurs or is continuing, the trustee or holders of at least
25%
in aggregate principal amount of the then outstanding Senior Notes may declare all the Senior Notes to be due and payable immediately.
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 using quoted prices for similar liabilities in active markets (Level 2 inputs) of the Senior Notes was
$287.4 million
and
$296.3 million
, respectively, at
September 30, 2012
and
December 31, 2011
.
Line of Credit
On March 18, 2011, we entered into a credit agreement with Wells Fargo Capital Finance, LLC and certain other lenders party thereto (the "Credit Agreement"). The Credit Agreement provides for cash borrowings and letters of credit under a
$100 million
senior secured revolving credit facility, the proceeds of which the Company may use for working capital and other general corporate purposes. Loans under the Credit Agreement will mature on September 15, 2014, subject to extension to March 18, 2016 under certain circumstances. In connection with the execution of the line of credit, the Company incurred approximately
$1.7 million
in debt issuance costs which will be amortized to interest expense over the length of the agreement. To date, the Company has not borrowed any amount under the Credit Agreement.
Interest on the outstanding balance will accrue on outstanding loans under the Credit Agreement at a floating rate based on, at the Company's election, (i) LIBOR (subject to reserve requirements) or (ii) the greatest of (a) the Federal Funds Rate plus 1/2%, (b) three-month LIBOR plus
1%
and (c) Wells Fargo Bank, National Association's prime rate (such greatest rate, the "Base Rate"), in each case, plus an applicable margin. The applicable margins with respect to LIBOR-based loans and Base Rate loans are
2.0%
and
1.0%
, respectively, and may increase or decrease based on the Company's total leverage ratio.
The Company's obligations under the Credit Agreement are secured by a first priority lien on substantially all of the assets of the Company and the guarantors, which include the Company's material domestic subsidiaries. The Credit Agreement includes customary limitations on the Company's ability to, among other things, incur debt, grant liens, make acquisitions and other investments, make certain restricted payments such as dividend payments, dispose of assets or undergo a change of control. The Credit Agreement also requires the Company to maintain a minimum fixed charge ratio, a maximum total leverage ratio and, under certain circumstances, a minimum liquidity requirement.
The failure to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2012 caused us to be in nonpayment default under our Credit Agreement. We obtained waivers under our Credit Agreement with respect to these defaults, which were cured by the filing of those reports on August 6, 2012.
8. Legal Proceedings
i2 Technologies, Inc. v.
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) alleged 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. On February 25, 2011, the Company, i2 and Oracle Corporation entered into a settlement agreement. Under the settlement agreement, the parties entered into a cross-license arrangement and dismissed with prejudice their respective litigation claims related to the patent infringement dispute. In addition, the Company received a one-time cash payment of
$35.0 million
from Oracle Corporation, 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 recorded the settlement in the first quarter of 2011.
Sky Technologies LLC v. JDA Software Group, et al.
On May 11, 2011, Sky Technologies LLC (“Sky”) filed a lawsuit for patent infringement against the Company and a number of other entities, including Microsoft, Siemens and Dassault Systemes, in the United States District Court for the District of Massachusetts (No. 6:11-cv-10833-WGY), alleging infringement of a number of patents. Sky amended its complaint on October 17, 2011 to add additional claims. In response to the amended complaint, on October 17, 2011, the Company filed counterclaims against Sky, alleging that Sky breached the terms of a Settlement and License Agreement entered into between Sky and i2 Technologies, Inc. in 2005. The Company recorded an accrual of
$4.0 million
in fiscal 2011 as it believed this to be its best estimate of the probable loss.
On April 5, 2012, the Company and Sky entered into a settlement agreement. The terms of the settlement agreement included the following: (i) the Company would pay
$4.0 million
to Sky by April 12, 2012; (ii) dismissal with prejudice of all legal proceedings related to the litigation, (iii) mutual releases and covenants not to sue; and (iv) Sky granting a license to the Company of Sky's patents. The company recorded the settlement in the fourth quarter 2011.
Beaver County Retirement Fund v JDA Software Group Inc, C.A. No. 7446-ML
On April 20, 2012, Beaver County Retirement Fund, a stockholder of the Company, commenced an action in the Delaware Court of Chancery (C.A. No. 7446-ML) seeking access to certain books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law. On May 15, 2012, the Company filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted. To date, no briefing schedule on the Company's motion to dismiss has been set by the Court of Chancery. At this time, the outcome of this case is uncertain, therefore, no estimation can be made of an amount of probable loss.
SEC Inquiries; Audit Committee Investigation
In January 2012, we disclosed that we received a subpoena from the Division of Enforcement and a comment letter from the Division of Corporation Finance of the SEC requesting information and documents related to revenue recognition and other accounting and financial reporting matters for certain past fiscal years. In response to the SEC's inquiries, our Audit Committee promptly commenced an investigation into our revenue recognition policies and the application of these policies during the periods in question, engaged an outside accounting firm separate from our independent auditors and engaged special counsel to undertake a fact-finding investigation. Our outside legal counsel also assisted in this investigation.
In conjunction with this investigation, we:
|
|
•
|
responded to comment letters from the SEC's Division of Corporation Finance regarding its revenue recognition policies and the restatement and believe we have addressed the SEC's comments although the SEC's review is not complete and they may have further comments; and
|
|
|
•
|
provided the SEC's Division of Enforcement with information and documents it requested.
|
The Audit Committee, with its outside advisors, has completed the internal investigation. The investigation uncovered no evidence of fraud or intentional wrongdoing. The Company continues to cooperate with the SEC in connection with its investigation.
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. In determining whether litigation could have a material and adverse effect on our financial statements, we first review loss probability and whether a loss can be reasonably estimated according to Accounting Standard Codification (ASC) 450-20, and then review whether resulting contingencies are material to us. The matters described above are either immaterial or potential losses corresponding to such matters cannot be reasonably estimated.
9. Share-Based Compensation
The Company has a stock-based compensation program that provides the Board of Directors broad discretion in creating
equity incentives for employees, officers, directors and consultants. This program includes stock purchase rights, stock bonuses, restricted stock, restricted stock units, performance awards, performance units and deferred compensation awards.
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 2011 that provide for contingently issuable performance share awards or restricted stock units upon achievement of defined performance threshold goals.
In August 2012, the Board approved a stock-based incentive program for 2012 ("2012 Performance Program"). The 2012 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 2012. A partial pro-rata issuance of performance share awards will be made if we achieve a minimum adjusted EBITDA performance threshold. The 2012 Performance Program provides for the issuance of up to approximately
$18.8 million
of targeted value of contingently issuable performance share awards. The performance share awards will vest
50%
on the date in 2013 that the Company issues its 2012 audited financial statements 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 2012 and share-based compensation will be recognized over the requisite service periods that run from the date of board approval through February 2015. The amount of stock based compensation expense related to the 2012 Performance Program was
$2.4 million
for the quarter ended September 30, 2012.
The Company has recognized stock-based compensation as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Cost of maintenance services
|
$
|
210
|
|
|
$
|
117
|
|
|
$
|
492
|
|
|
$
|
458
|
|
Cost of consulting services
|
538
|
|
|
407
|
|
|
1,213
|
|
|
1,590
|
|
Product development
|
556
|
|
|
284
|
|
|
1,087
|
|
|
1,520
|
|
Sales and marketing
|
906
|
|
|
223
|
|
|
2,004
|
|
|
3,083
|
|
General and administrative
|
1,942
|
|
|
1,075
|
|
|
3,920
|
|
|
5,510
|
|
Total stock-based compensation expense
|
$
|
4,152
|
|
|
$
|
2,106
|
|
|
$
|
8,716
|
|
|
$
|
12,161
|
|
10. Income Taxes
For the
nine months ended
September 30, 2012
, income taxes were calculated using the liability method. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events, which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on our estimated tax expense for the year.
We recorded an income tax provision of
$7.4 million
and
$11.4 million
for the three months ended
September 30, 2012
and
2011
, respectively, representing effective income tax rates of
40.2%
and
38.5%
, respectively. We recorded an income tax provision of
$16.5 million
and
$21.3 million
for the
nine months ended
September 30, 2012
and
2011
, respectively, representing effective income tax rates of
38.5%
and
21.2%
, respectively. Our effective income tax rate during the
three and nine
months ended
September 30, 2012
differs from our statutory rate of
35%
primarily due to the mix of net income by jurisdiction, state income taxes (net of federal benefit), settlement of foreign audits and other nondeductible items. Our effective income tax rate during the
three and nine
months ended
September 30, 2011
differs from our statutory rate of
35%
primarily due to the mix of net income by jurisdiction, state income taxes (net of federal benefit) and the tax benefits related to a specified tax deduction that offsets a substantial portion of our litigation settlements received in the first quarter 2011 as well as settlement of foreign tax liabilities in the second quarter 2011.
As of
September 30, 2012
approximately
$7.3 million
of unrecognized tax benefits would impact our effective tax rate if recognized. It is reasonably possible that approximately
$0.2 million
of unrecognized tax benefits will be recognized within the next twelve months. We have recorded a valuation allowance against the Arizona research and development credit, certain state net operating losses and certain foreign tax attribute carryforwards as we do not expect to be able to utilize them prior to their expiration.
We treat interest and penalties related to uncertain tax positions as a component of income tax expense. We have accrued interest and penalties/(benefits) related to uncertain tax positions of
$0.1 million
and
$0.3 million
in the
nine
months ended
September 30, 2012
and
2011
, respectively. As of
September 30, 2012
and
December 31, 2011
there are approximately
$3.2 million
and
$3.1 million
, respectively, of interest and penalty accruals related to uncertain tax positions which are reflected in the Condensed
Co
nsolidated Balance Sheet under the caption “Liability for uncertain tax positions.” To the extent interest and penalties are not
assessed with respect to the uncertain tax positions, the accrued amounts for interest and penalties will be reduced and reflected as a reduction of the overall tax provision.
We conduct business globally and, as a result, JDA Software Group, Inc. or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subjected to examination by taxing authorities throughout the world, including the United States, India and the United Kingdom. We are currently under audit in the U.S. for the 2010 and 2011 tax years. Audits are in process in India covering multiple years. The finalization of these audits has not yet occurred. However, we do not anticipate any material adjustments.
We have participated in the Compliance Audit Assurance Program ("CAP") since 2007. The Internal Revenue Service has completed their review of our tax returns for 2010 and prior years. No material adjustments have been made as a result of these examinations.
11. Earnings per Share
The dilutive effect of all 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. 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. 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. For the
three and nine
months ended
September 30, 2012
and
2011
, respectively, less than
0.1 million
shares were excluded from the calculation of diluted earnings per share applicable to common shareholder calculations, as these shares relate to anti-dilutive stock options and restricted stock-based awards as calculated using the treasury stock method and could be dilutive in the future.
Earnings per share for
three and nine
months ended
September 30, 2012
and
2011
are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Numerator:
|
|
|
|
|
|
|
|
Net income
|
$
|
11,051
|
|
|
$
|
18,287
|
|
|
$
|
26,355
|
|
|
$
|
79,113
|
|
Denominator:
|
|
|
|
|
|
|
|
Shares used in computing basic earnings per share
|
42,969
|
|
|
42,511
|
|
|
42,852
|
|
|
42,334
|
|
Dilutive common stock equivalents
|
222
|
|
|
284
|
|
|
140
|
|
|
381
|
|
Shares used in computing diluted earnings per share
|
43,191
|
|
|
42,795
|
|
|
42,992
|
|
|
42,715
|
|
Basic earnings per share
|
$
|
0.26
|
|
|
$
|
0.43
|
|
|
$
|
0.62
|
|
|
$
|
1.87
|
|
Diluted earnings per share
|
$
|
0.26
|
|
|
$
|
0.43
|
|
|
$
|
0.61
|
|
|
$
|
1.85
|
|
12. Segment Information
JDA is 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. The Company has licensed its software to more than
6,000
customers worldwide. The Company reports operations within the following segments, which is how our chief operating decision maker views, evaluates and makes decisions about resource allocations within our business:
|
|
•
|
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")
.
|
|
|
•
|
Pricing and Revenue Management
.
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, income before income taxes and depreciation attributable to each of these reportable business segments for the
three and nine
months ended
September 30, 2012
and
2011
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Revenues:
|
|
|
|
|
|
|
|
Supply Chain
|
$
|
160,147
|
|
|
$
|
166,850
|
|
|
$
|
481,579
|
|
|
$
|
489,964
|
|
Pricing and Revenue Management
|
4,373
|
|
|
6,249
|
|
|
13,884
|
|
|
16,175
|
|
|
$
|
164,520
|
|
|
$
|
173,099
|
|
|
$
|
495,463
|
|
|
$
|
506,139
|
|
Income (Loss) Before Income Taxes:
|
|
|
|
|
|
|
|
Supply Chain
|
$
|
54,694
|
|
|
$
|
60,399
|
|
|
$
|
162,318
|
|
|
$
|
163,036
|
|
Pricing and Revenue Management
|
(499
|
)
|
|
1,270
|
|
|
(1,864
|
)
|
|
954
|
|
Other (see below)
|
(35,731
|
)
|
|
(31,939
|
)
|
|
(117,594
|
)
|
|
(63,583
|
)
|
|
$
|
18,464
|
|
|
$
|
29,730
|
|
|
$
|
42,860
|
|
|
$
|
100,407
|
|
Depreciation:
|
|
|
|
|
|
|
|
Supply Chain
|
$
|
3,693
|
|
|
$
|
3,132
|
|
|
$
|
10,974
|
|
|
$
|
9,692
|
|
Pricing and Revenue Management
|
81
|
|
|
95
|
|
|
261
|
|
|
305
|
|
|
$
|
3,774
|
|
|
$
|
3,227
|
|
|
$
|
11,235
|
|
|
$
|
9,997
|
|
Other:
|
|
|
|
|
|
|
|
General and administrative
|
$
|
21,009
|
|
|
$
|
15,815
|
|
|
$
|
70,354
|
|
|
$
|
54,488
|
|
Amortization of intangible assets
|
9,530
|
|
|
9,562
|
|
|
28,590
|
|
|
28,872
|
|
Restructuring charge and adjustments to acquisition-related reserves
|
(163
|
)
|
|
768
|
|
|
2,280
|
|
|
1,279
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,500
|
)
|
Interest expense and amortization of loan fees
|
6,608
|
|
|
6,435
|
|
|
19,562
|
|
|
19,085
|
|
Interest income and other, net
|
(1,253
|
)
|
|
(641
|
)
|
|
(3,192
|
)
|
|
(2,641
|
)
|
|
$
|
35,731
|
|
|
$
|
31,939
|
|
|
$
|
117,594
|
|
|
$
|
63,583
|
|
Income before income taxes 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.
13. Condensed Consolidating Financial Information
Pursuant to the Indenture governing the Senior Notes detailed in Note 10 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2011
, the Company's obligations under the Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by substantially all of its existing and future domestic subsidiaries. Pursuant to Regulation S-X, Section 210.3-10(f), the Company is 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 the Condensed Consolidating Balance Sheets as of
September 30, 2012
and
December 31, 2011
, the Condensed Consolidating Statements of Income for the
three and nine
months ended
September 30, 2012
and
2011
, the Condensed Consolidated Statements of Comprehensive Income for the
three and nine
months ended
September 30, 2012
and 2011 and the Condensed Consolidating Statements of Cash Flow for the
nine months ended
September 30, 2012
and
2011
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. In connection with the restatement of our historical results as described in Note 14, “Restatement of Previously Issued Financial Statements,” the Company also made the following adjustments to its historical presentation of its consolidating financial information: (i) movement of cash and restricted cash from the Guarantor Subsidiaries column to the JDA Software Group, Inc. column to reflect the underlying ownership of the cash, (ii) movement of portion of the intercompany accounts cash flows amongst the columns to reflect the underlying ownership of the intercompany accounts, (iii) movement of the payments of direct costs from acquisitions from investing activities on the cash flow statement to operating activities to align with the restated Consolidated Statements of Cash Flows and (iv) movement of the effect of exchange rates on cash and cash equivalents from the Guarantor Subsidiaries column to the Non-Guarantor Subsidiaries column on the cash flow statement to reflect the effect of translation amounts. The condensed consolidating financial information should be read in conjunction with the Condensed Consolidated Financial Statements herein as well as in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on form 10-K for the year ended
December 31, 2011
.
Unaudited Condensed Consolidating Balance Sheets
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
150,354
|
|
|
$
|
184,934
|
|
|
$
|
72,996
|
|
|
$
|
—
|
|
|
$
|
408,284
|
|
Restricted cash — current portion
|
—
|
|
|
2,794
|
|
|
210
|
|
|
—
|
|
|
3,004
|
|
Account receivable, net
|
—
|
|
|
75,458
|
|
|
21,356
|
|
|
—
|
|
|
96,814
|
|
Deferred tax assets — current portion
|
—
|
|
|
32,250
|
|
|
4,410
|
|
|
—
|
|
|
36,660
|
|
Prepaid expenses and other current assets
|
9,069
|
|
|
8,330
|
|
|
9,324
|
|
|
—
|
|
|
26,723
|
|
Total current assets
|
159,423
|
|
|
303,766
|
|
|
108,296
|
|
|
—
|
|
|
571,485
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
|
Restricted cash — long-term portion
|
—
|
|
|
—
|
|
|
410
|
|
|
—
|
|
|
410
|
|
Property and equipment, net
|
—
|
|
|
44,931
|
|
|
7,724
|
|
|
—
|
|
|
52,655
|
|
Goodwill
|
—
|
|
|
231,377
|
|
|
—
|
|
|
—
|
|
|
231,377
|
|
Other intangibles, net
|
—
|
|
|
108,185
|
|
|
—
|
|
|
—
|
|
|
108,185
|
|
Deferred tax assets — long-term portion
|
—
|
|
|
238,259
|
|
|
5,813
|
|
|
—
|
|
|
244,072
|
|
Other non-current assets
|
4,099
|
|
|
1,057
|
|
|
13,755
|
|
|
—
|
|
|
18,911
|
|
Investment in subsidiaries
|
277,123
|
|
|
10,070
|
|
|
—
|
|
|
(287,193
|
)
|
|
—
|
|
Inter-company accounts
|
571,183
|
|
|
(560,795
|
)
|
|
(10,388
|
)
|
|
—
|
|
|
—
|
|
Total non-current assets
|
852,405
|
|
|
73,084
|
|
|
17,314
|
|
|
(287,193
|
)
|
|
655,610
|
|
Total Assets
|
$
|
1,011,828
|
|
|
$
|
376,850
|
|
|
$
|
125,610
|
|
|
$
|
(287,193
|
)
|
|
$
|
1,227,095
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
6,984
|
|
|
$
|
1,358
|
|
|
$
|
—
|
|
|
$
|
8,342
|
|
Accrued expenses and other liabilities
|
6,673
|
|
|
35,773
|
|
|
38,314
|
|
|
—
|
|
|
80,760
|
|
Deferred revenue — current portion
|
—
|
|
|
106,560
|
|
|
9,812
|
|
|
—
|
|
|
116,372
|
|
Total current liabilities
|
6,673
|
|
|
149,317
|
|
|
49,484
|
|
|
—
|
|
|
205,474
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
273,626
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
273,626
|
|
Accrued exit and disposal obligations
|
—
|
|
|
466
|
|
|
2,307
|
|
|
—
|
|
|
2,773
|
|
Liability for uncertain tax positions
|
—
|
|
|
1,768
|
|
|
1,426
|
|
|
—
|
|
|
3,194
|
|
Deferred revenue — long-term portion
|
—
|
|
|
5,229
|
|
|
23
|
|
|
—
|
|
|
5,252
|
|
Other non-current liabilities
|
—
|
|
|
4,230
|
|
|
1,017
|
|
|
—
|
|
|
5,247
|
|
Total non-current liabilities
|
273,626
|
|
|
11,693
|
|
|
4,773
|
|
|
—
|
|
|
290,092
|
|
Total Liabilities
|
280,299
|
|
|
161,010
|
|
|
54,257
|
|
|
—
|
|
|
495,566
|
|
Stockholders’ Equity
|
731,529
|
|
|
215,840
|
|
|
71,353
|
|
|
(287,193
|
)
|
|
731,529
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
1,011,828
|
|
|
$
|
376,850
|
|
|
$
|
125,610
|
|
|
$
|
(287,193
|
)
|
|
$
|
1,227,095
|
|
Condensed Consolidating Balance Sheets
December 31, 2011
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
150,171
|
|
|
$
|
93,285
|
|
|
$
|
42,056
|
|
|
$
|
—
|
|
|
$
|
285,512
|
|
Restricted cash — current portion
|
—
|
|
|
8,515
|
|
|
218
|
|
|
—
|
|
|
8,733
|
|
Account receivable, net
|
—
|
|
|
89,656
|
|
|
25,122
|
|
|
—
|
|
|
114,778
|
|
Deferred tax assets — current portion
|
—
|
|
|
27,543
|
|
|
4,520
|
|
|
—
|
|
|
32,063
|
|
Prepaid expenses and other current assets
|
9,362
|
|
|
45
|
|
|
15,177
|
|
|
—
|
|
|
24,584
|
|
Total current assets
|
159,533
|
|
|
219,044
|
|
|
87,093
|
|
|
—
|
|
|
465,670
|
|
Non-Current Assets:
|
|
|
|
|
|
|
|
|
|
Restricted cash — long-term portion
|
—
|
|
|
—
|
|
|
652
|
|
|
—
|
|
|
652
|
|
Property and equipment, net
|
—
|
|
|
45,920
|
|
|
6,621
|
|
|
—
|
|
|
52,541
|
|
Goodwill
|
—
|
|
|
231,377
|
|
|
—
|
|
|
—
|
|
|
231,377
|
|
Other intangibles, net
|
—
|
|
|
141,882
|
|
|
—
|
|
|
—
|
|
|
141,882
|
|
Deferred tax assets — long-term portion
|
—
|
|
|
252,469
|
|
|
5,802
|
|
|
—
|
|
|
258,271
|
|
Other non-current assets
|
5,536
|
|
|
1,047
|
|
|
13,982
|
|
|
—
|
|
|
20,565
|
|
Investment in subsidiaries
|
235,908
|
|
|
41,030
|
|
|
—
|
|
|
(276,938
|
)
|
|
—
|
|
Inter-company accounts
|
568,429
|
|
|
(580,202
|
)
|
|
11,773
|
|
|
—
|
|
|
—
|
|
Total non-current assets
|
809,873
|
|
|
133,523
|
|
|
38,830
|
|
|
(276,938
|
)
|
|
705,288
|
|
Total Assets
|
$
|
969,406
|
|
|
$
|
352,567
|
|
|
$
|
125,923
|
|
|
$
|
(276,938
|
)
|
|
$
|
1,170,958
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
5,954
|
|
|
$
|
1,786
|
|
|
$
|
—
|
|
|
$
|
7,740
|
|
Accrued expenses and other liabilities
|
5,023
|
|
|
36,986
|
|
|
31,102
|
|
|
—
|
|
|
73,111
|
|
Deferred revenue — current portion
|
—
|
|
|
84,237
|
|
|
23,980
|
|
|
—
|
|
|
108,217
|
|
Total current liabilities
|
5,023
|
|
|
127,177
|
|
|
56,868
|
|
|
—
|
|
|
189,068
|
|
Non-Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
273,210
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
273,210
|
|
Accrued exit and disposal obligations
|
—
|
|
|
1,142
|
|
|
2,784
|
|
|
—
|
|
|
3,926
|
|
Liability for uncertain tax positions
|
—
|
|
|
1,645
|
|
|
2,453
|
|
|
—
|
|
|
4,098
|
|
Deferred revenue — long-term portion
|
—
|
|
|
7,804
|
|
|
311
|
|
|
—
|
|
|
8,115
|
|
Other non-current liabilities
|
—
|
|
|
588
|
|
|
780
|
|
|
—
|
|
|
1,368
|
|
Total non-current liabilities
|
273,210
|
|
|
11,179
|
|
|
6,328
|
|
|
—
|
|
|
290,717
|
|
Total Liabilities
|
278,233
|
|
|
138,356
|
|
|
63,196
|
|
|
—
|
|
|
479,785
|
|
Stockholders’ Equity
|
691,173
|
|
|
214,211
|
|
|
62,727
|
|
|
(276,938
|
)
|
|
691,173
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
969,406
|
|
|
$
|
352,567
|
|
|
$
|
125,923
|
|
|
$
|
(276,938
|
)
|
|
$
|
1,170,958
|
|
Unaudited Condensed Consolidating Statements of Income
Three Months Ended
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Software licenses
|
$
|
—
|
|
|
$
|
27,297
|
|
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
27,544
|
|
Subscriptions and other recurring revenues
|
—
|
|
|
3,909
|
|
|
—
|
|
|
—
|
|
|
3,909
|
|
Maintenance services
|
—
|
|
|
61,615
|
|
|
7,169
|
|
|
—
|
|
|
68,784
|
|
Product revenues
|
—
|
|
|
92,821
|
|
|
7,416
|
|
|
—
|
|
|
100,237
|
|
Consulting services
|
—
|
|
|
38,924
|
|
|
20,166
|
|
|
—
|
|
|
59,090
|
|
Reimbursed expenses
|
—
|
|
|
3,266
|
|
|
1,927
|
|
|
—
|
|
|
5,193
|
|
Service revenues
|
—
|
|
|
42,190
|
|
|
22,093
|
|
|
—
|
|
|
64,283
|
|
Total revenues
|
—
|
|
|
135,011
|
|
|
29,509
|
|
|
—
|
|
|
164,520
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
—
|
|
|
1,034
|
|
|
—
|
|
|
—
|
|
|
1,034
|
|
Amortization of acquired software technology
|
—
|
|
|
1,702
|
|
|
—
|
|
|
—
|
|
|
1,702
|
|
Cost of maintenance services
|
—
|
|
|
9,111
|
|
|
4,990
|
|
|
—
|
|
|
14,101
|
|
Cost of product revenues
|
—
|
|
|
11,847
|
|
|
4,990
|
|
|
—
|
|
|
16,837
|
|
Cost of consulting services
|
—
|
|
|
28,871
|
|
|
16,862
|
|
|
—
|
|
|
45,733
|
|
Reimbursed expenses
|
—
|
|
|
3,266
|
|
|
1,927
|
|
|
—
|
|
|
5,193
|
|
Cost of service revenues
|
—
|
|
|
32,137
|
|
|
18,789
|
|
|
—
|
|
|
50,926
|
|
Total cost of revenues
|
—
|
|
|
43,984
|
|
|
23,779
|
|
|
—
|
|
|
67,763
|
|
GROSS PROFIT
|
—
|
|
|
91,027
|
|
|
5,730
|
|
|
—
|
|
|
96,757
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Product development
|
—
|
|
|
11,277
|
|
|
7,020
|
|
|
—
|
|
|
18,297
|
|
Sales and marketing
|
—
|
|
|
15,579
|
|
|
8,686
|
|
|
—
|
|
|
24,265
|
|
General and administrative
|
985
|
|
|
16,264
|
|
|
3,760
|
|
|
—
|
|
|
21,009
|
|
Amortization of intangibles
|
—
|
|
|
9,530
|
|
|
—
|
|
|
—
|
|
|
9,530
|
|
Restructuring charges
|
—
|
|
|
2
|
|
|
(165
|
)
|
|
—
|
|
|
(163
|
)
|
Total operating expenses
|
985
|
|
|
52,652
|
|
|
19,301
|
|
|
—
|
|
|
72,938
|
|
OPERATING INCOME (LOSS)
|
(985
|
)
|
|
38,375
|
|
|
(13,571
|
)
|
|
—
|
|
|
23,819
|
|
Interest expense and amortization of loan fees
|
6,383
|
|
|
185
|
|
|
40
|
|
|
—
|
|
|
6,608
|
|
Interest income and other, net
|
(777
|
)
|
|
17,714
|
|
|
(18,190
|
)
|
|
—
|
|
|
(1,253
|
)
|
Income tax provision
|
(2,505
|
)
|
|
8,211
|
|
|
1,707
|
|
|
—
|
|
|
7,413
|
|
Equity in earnings of subsidiaries, net
|
15,137
|
|
|
2,365
|
|
|
—
|
|
|
(17,502
|
)
|
|
—
|
|
NET INCOME (LOSS)
|
$
|
11,051
|
|
|
$
|
14,630
|
|
|
$
|
2,872
|
|
|
$
|
(17,502
|
)
|
|
$
|
11,051
|
|
Unaudited Condensed Consolidating Statements of Income
Nine Months Ended
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Software licenses
|
$
|
—
|
|
|
$
|
84,263
|
|
|
$
|
714
|
|
|
$
|
—
|
|
|
$
|
84,977
|
|
Subscriptions and other recurring revenues
|
—
|
|
|
11,695
|
|
|
—
|
|
|
—
|
|
|
11,695
|
|
Maintenance services
|
—
|
|
|
173,032
|
|
|
29,280
|
|
|
—
|
|
|
202,312
|
|
Product revenues
|
—
|
|
|
268,990
|
|
|
29,994
|
|
|
—
|
|
|
298,984
|
|
Consulting services
|
—
|
|
|
122,195
|
|
|
57,657
|
|
|
—
|
|
|
179,852
|
|
Reimbursed expenses
|
—
|
|
|
10,860
|
|
|
5,767
|
|
|
—
|
|
|
16,627
|
|
Service revenues
|
—
|
|
|
133,055
|
|
|
63,424
|
|
|
—
|
|
|
196,479
|
|
Total revenues
|
—
|
|
|
402,045
|
|
|
93,418
|
|
|
—
|
|
|
495,463
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
—
|
|
|
3,469
|
|
|
—
|
|
|
—
|
|
|
3,469
|
|
Amortization of acquired software technology
|
—
|
|
|
5,107
|
|
|
—
|
|
|
—
|
|
|
5,107
|
|
Cost of maintenance services
|
—
|
|
|
26,569
|
|
|
15,866
|
|
|
—
|
|
|
42,435
|
|
Cost of product revenues
|
—
|
|
|
35,145
|
|
|
15,866
|
|
|
—
|
|
|
51,011
|
|
Cost of consulting services
|
—
|
|
|
88,796
|
|
|
48,842
|
|
|
—
|
|
|
137,638
|
|
Reimbursed expenses
|
—
|
|
|
10,860
|
|
|
5,767
|
|
|
—
|
|
|
16,627
|
|
Cost of service revenues
|
—
|
|
|
99,656
|
|
|
54,609
|
|
|
—
|
|
|
154,265
|
|
Total cost of revenues
|
—
|
|
|
134,801
|
|
|
70,475
|
|
|
—
|
|
|
205,276
|
|
GROSS PROFIT
|
—
|
|
|
267,244
|
|
|
22,943
|
|
|
—
|
|
|
290,187
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Product development
|
—
|
|
|
34,539
|
|
|
21,562
|
|
|
—
|
|
|
56,101
|
|
Sales and marketing
|
—
|
|
|
46,838
|
|
|
26,794
|
|
|
—
|
|
|
73,632
|
|
General and administrative
|
3,700
|
|
|
54,627
|
|
|
12,027
|
|
|
—
|
|
|
70,354
|
|
Amortization of intangibles
|
—
|
|
|
28,590
|
|
|
—
|
|
|
—
|
|
|
28,590
|
|
Restructuring charges
|
—
|
|
|
439
|
|
|
1,841
|
|
|
—
|
|
|
2,280
|
|
Total operating expenses
|
3,700
|
|
|
165,033
|
|
|
62,224
|
|
|
—
|
|
|
230,957
|
|
OPERATING INCOME (LOSS)
|
(3,700
|
)
|
|
102,211
|
|
|
(39,281
|
)
|
|
—
|
|
|
59,230
|
|
Interest expense and amortization of loan fees
|
18,904
|
|
|
534
|
|
|
124
|
|
|
—
|
|
|
19,562
|
|
Interest income and other, net
|
(1,700
|
)
|
|
51,311
|
|
|
(52,803
|
)
|
|
—
|
|
|
(3,192
|
)
|
Income tax provision
|
(7,944
|
)
|
|
20,141
|
|
|
4,308
|
|
|
—
|
|
|
16,505
|
|
Equity in earnings of subsidiaries, net
|
39,315
|
|
|
5,901
|
|
|
—
|
|
|
(45,216
|
)
|
|
—
|
|
NET INCOME (LOSS)
|
$
|
26,355
|
|
|
$
|
36,126
|
|
|
$
|
9,090
|
|
|
$
|
(45,216
|
)
|
|
$
|
26,355
|
|
Unaudited Condensed Consolidating Statements of Income
Three Months Ended
September 30, 2011
(As Restated)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Software licenses
|
$
|
—
|
|
|
$
|
34,660
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
34,726
|
|
Subscriptions and other recurring revenues
|
—
|
|
|
3,738
|
|
|
—
|
|
|
—
|
|
|
3,738
|
|
Maintenance services
|
—
|
|
|
47,448
|
|
|
20,184
|
|
|
—
|
|
|
67,632
|
|
Product revenues
|
—
|
|
|
85,846
|
|
|
20,250
|
|
|
—
|
|
|
106,096
|
|
Consulting services
|
—
|
|
|
37,338
|
|
|
23,632
|
|
|
—
|
|
|
60,970
|
|
Reimbursed expenses
|
—
|
|
|
3,762
|
|
|
2,271
|
|
|
—
|
|
|
6,033
|
|
Service revenues
|
—
|
|
|
41,100
|
|
|
25,903
|
|
|
—
|
|
|
67,003
|
|
Total revenues
|
—
|
|
|
126,946
|
|
|
46,153
|
|
|
—
|
|
|
173,099
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
—
|
|
|
1,009
|
|
|
—
|
|
|
—
|
|
|
1,009
|
|
Amortization of acquired software technology
|
—
|
|
|
1,726
|
|
|
—
|
|
|
—
|
|
|
1,726
|
|
Cost of maintenance services
|
—
|
|
|
8,531
|
|
|
5,123
|
|
|
—
|
|
|
13,654
|
|
Cost of product revenues
|
—
|
|
|
11,266
|
|
|
5,123
|
|
|
—
|
|
|
16,389
|
|
Cost of consulting services
|
—
|
|
|
26,699
|
|
|
17,806
|
|
|
—
|
|
|
44,505
|
|
Reimbursed expenses
|
—
|
|
|
3,762
|
|
|
2,271
|
|
|
—
|
|
|
6,033
|
|
Cost of service revenues
|
—
|
|
|
30,461
|
|
|
20,077
|
|
|
—
|
|
|
50,538
|
|
Total cost of revenues
|
—
|
|
|
41,727
|
|
|
25,200
|
|
|
—
|
|
|
66,927
|
|
GROSS PROFIT
|
—
|
|
|
85,219
|
|
|
20,953
|
|
|
—
|
|
|
106,172
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Product development
|
—
|
|
|
11,219
|
|
|
7,528
|
|
|
—
|
|
|
18,747
|
|
Sales and marketing
|
—
|
|
|
15,636
|
|
|
10,120
|
|
|
—
|
|
|
25,756
|
|
General and administrative
|
(54
|
)
|
|
11,936
|
|
|
3,933
|
|
|
—
|
|
|
15,815
|
|
Amortization of intangibles
|
—
|
|
|
9,562
|
|
|
—
|
|
|
—
|
|
|
9,562
|
|
Restructuring charges
|
—
|
|
|
370
|
|
|
398
|
|
|
—
|
|
|
768
|
|
Total operating expenses
|
(54
|
)
|
|
48,723
|
|
|
21,979
|
|
|
—
|
|
|
70,648
|
|
OPERATING INCOME (LOSS)
|
54
|
|
|
36,496
|
|
|
(1,026
|
)
|
|
—
|
|
|
35,524
|
|
Interest expense and amortization of loan fees
|
6,249
|
|
|
137
|
|
|
49
|
|
|
—
|
|
|
6,435
|
|
Interest income and other, net
|
108
|
|
|
4,735
|
|
|
(5,484
|
)
|
|
—
|
|
|
(641
|
)
|
Income tax provision
|
(2,425
|
)
|
|
12,418
|
|
|
1,450
|
|
|
—
|
|
|
11,443
|
|
Equity in earnings of subsidiaries, net
|
22,165
|
|
|
1,634
|
|
|
—
|
|
|
(23,799
|
)
|
|
—
|
|
NET INCOME (LOSS)
|
$
|
18,287
|
|
|
$
|
20,840
|
|
|
$
|
2,959
|
|
|
$
|
(23,799
|
)
|
|
$
|
18,287
|
|
Unaudited Condensed Consolidating Statements of Income
Nine Months Ended
September 30, 2011
(As Restated)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Software licenses
|
$
|
—
|
|
|
$
|
100,525
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
100,591
|
|
Subscriptions and other recurring revenues
|
—
|
|
|
12,582
|
|
|
—
|
|
|
—
|
|
|
12,582
|
|
Maintenance services
|
—
|
|
|
139,208
|
|
|
59,337
|
|
|
—
|
|
|
198,545
|
|
Product revenues
|
—
|
|
|
252,315
|
|
|
59,403
|
|
|
—
|
|
|
311,718
|
|
Consulting services
|
—
|
|
|
117,588
|
|
|
59,568
|
|
|
—
|
|
|
177,156
|
|
Reimbursed expenses
|
—
|
|
|
11,012
|
|
|
6,253
|
|
|
—
|
|
|
17,265
|
|
Service revenues
|
—
|
|
|
128,600
|
|
|
65,821
|
|
|
—
|
|
|
194,421
|
|
Total revenues
|
—
|
|
|
380,915
|
|
|
125,224
|
|
|
—
|
|
|
506,139
|
|
COST OF REVENUES:
|
|
|
|
|
|
|
|
|
|
Cost of software licenses
|
—
|
|
|
3,139
|
|
|
—
|
|
|
—
|
|
|
3,139
|
|
Amortization of acquired software technology
|
—
|
|
|
5,393
|
|
|
—
|
|
|
—
|
|
|
5,393
|
|
Cost of maintenance services
|
—
|
|
|
26,958
|
|
|
15,418
|
|
|
—
|
|
|
42,376
|
|
Cost of product revenues
|
—
|
|
|
35,490
|
|
|
15,418
|
|
|
—
|
|
|
50,908
|
|
Cost of consulting services
|
—
|
|
|
86,857
|
|
|
51,158
|
|
|
—
|
|
|
138,015
|
|
Reimbursed expenses
|
—
|
|
|
11,012
|
|
|
6,253
|
|
|
—
|
|
|
17,265
|
|
Cost of service revenues
|
—
|
|
|
97,869
|
|
|
57,411
|
|
|
—
|
|
|
155,280
|
|
Total cost of revenues
|
—
|
|
|
133,359
|
|
|
72,829
|
|
|
—
|
|
|
206,188
|
|
GROSS PROFIT
|
—
|
|
|
247,556
|
|
|
52,395
|
|
|
—
|
|
|
299,951
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Product development
|
—
|
|
|
36,139
|
|
|
22,462
|
|
|
—
|
|
|
58,601
|
|
Sales and marketing
|
—
|
|
|
47,154
|
|
|
30,206
|
|
|
—
|
|
|
77,360
|
|
General and administrative
|
(120
|
)
|
|
43,440
|
|
|
11,168
|
|
|
—
|
|
|
54,488
|
|
Amortization of intangibles
|
—
|
|
|
28,872
|
|
|
—
|
|
|
—
|
|
|
28,872
|
|
Restructuring charges
|
—
|
|
|
616
|
|
|
663
|
|
|
—
|
|
|
1,279
|
|
Litigation settlement
|
—
|
|
|
(37,500
|
)
|
|
—
|
|
|
—
|
|
|
(37,500
|
)
|
Total operating expenses
|
(120
|
)
|
|
118,721
|
|
|
64,499
|
|
|
—
|
|
|
183,100
|
|
OPERATING INCOME (LOSS)
|
120
|
|
|
128,835
|
|
|
(12,104
|
)
|
|
—
|
|
|
116,851
|
|
Interest expense and amortization of loan fees
|
18,499
|
|
|
398
|
|
|
188
|
|
|
—
|
|
|
19,085
|
|
Interest income and other, net
|
(1,100
|
)
|
|
24,158
|
|
|
(25,699
|
)
|
|
—
|
|
|
(2,641
|
)
|
Income tax provision
|
(6,566
|
)
|
|
24,880
|
|
|
2,980
|
|
|
—
|
|
|
21,294
|
|
Equity in earnings of subsidiaries, net
|
89,826
|
|
|
(9,918
|
)
|
|
—
|
|
|
(79,908
|
)
|
|
—
|
|
NET INCOME (LOSS)
|
$
|
79,113
|
|
|
$
|
69,481
|
|
|
$
|
10,427
|
|
|
$
|
(79,908
|
)
|
|
$
|
79,113
|
|
Unaudited Condensed Consolidating Statements of Comprehensive Income
Three Months Ended
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
(In thousands)
|
Net income
|
|
$
|
11,051
|
|
|
$
|
14,630
|
|
|
$
|
2,872
|
|
|
$
|
(17,502
|
)
|
|
$
|
11,051
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
|
4,104
|
|
|
(61
|
)
|
|
(589
|
)
|
|
650
|
|
|
4,104
|
|
Unrealized (losses) gains on cash flow hedges, net of tax
|
|
973
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
973
|
|
Reclassification adjustment for gains in net income
|
|
985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
985
|
|
Other comprehensive (loss) income
|
|
6,062
|
|
|
(61
|
)
|
|
(589
|
)
|
|
650
|
|
|
6,062
|
|
Comprehensive income
|
|
$
|
17,113
|
|
|
$
|
14,569
|
|
|
$
|
2,283
|
|
|
$
|
(16,852
|
)
|
|
$
|
17,113
|
|
Unaudited Condensed Consolidating Statements of Comprehensive Income
Nine Months Ended
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
(In thousands)
|
Net income
|
|
$
|
26,355
|
|
|
$
|
36,126
|
|
|
$
|
9,090
|
|
|
$
|
(45,216
|
)
|
|
$
|
26,355
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
|
1,900
|
|
|
936
|
|
|
970
|
|
|
(1,906
|
)
|
|
1,900
|
|
Unrealized (losses) gains on cash flow hedges, net of tax
|
|
556
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
556
|
|
Reclassification adjustment for gains in net income
|
|
3,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,700
|
|
Other comprehensive income
|
|
6,156
|
|
|
936
|
|
|
970
|
|
|
(1,906
|
)
|
|
6,156
|
|
Comprehensive income
|
|
$
|
32,511
|
|
|
$
|
37,062
|
|
|
$
|
10,060
|
|
|
$
|
(47,122
|
)
|
|
$
|
32,511
|
|
Unaudited Condensed Consolidating Statements of Comprehensive Income
Three Months Ended
September 30, 2011
(As Restated)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
(In thousands)
|
Net income
|
|
$
|
18,287
|
|
|
$
|
20,840
|
|
|
$
|
2,959
|
|
|
$
|
(23,799
|
)
|
|
$
|
18,287
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
|
(8,070
|
)
|
|
(550
|
)
|
|
1,579
|
|
|
(1,029
|
)
|
|
(8,070
|
)
|
Unrealized (losses) gains on cash flow hedges, net of tax
|
|
(2,801
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,801
|
)
|
Reclassification adjustment for gains in net income
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
Other comprehensive income
|
|
(10,925
|
)
|
|
(550
|
)
|
|
1,579
|
|
|
(1,029
|
)
|
|
(10,925
|
)
|
Comprehensive income
|
|
$
|
7,362
|
|
|
$
|
20,290
|
|
|
$
|
4,538
|
|
|
$
|
(24,828
|
)
|
|
$
|
7,362
|
|
Unaudited Condensed Consolidating Statements of Comprehensive Income
Nine Months Ended
September 30, 2011
(As Restated)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA
Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
(In thousands)
|
Net income
|
|
$
|
79,113
|
|
|
$
|
69,481
|
|
|
$
|
10,427
|
|
|
$
|
(79,908
|
)
|
|
$
|
79,113
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of tax
|
|
(4,943
|
)
|
|
(794
|
)
|
|
2,178
|
|
|
(1,384
|
)
|
|
(4,943
|
)
|
Unrealized (losses) gains on cash flow hedges, net of tax
|
|
(2,906
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,906
|
)
|
Reclassification adjustment for gains in net income
|
|
(120
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(120
|
)
|
Other comprehensive income
|
|
(7,969
|
)
|
|
(794
|
)
|
|
2,178
|
|
|
(1,384
|
)
|
|
(7,969
|
)
|
Comprehensive income
|
|
$
|
71,144
|
|
|
$
|
68,687
|
|
|
$
|
12,605
|
|
|
$
|
(81,292
|
)
|
|
$
|
71,144
|
|
Unaudited Condensed Consolidating Statements of Cash Flows
Nine Months Ended
September 30, 2012
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net Cash Provided by (Used in) Operating Activities
|
$
|
1,054
|
|
|
$
|
90,707
|
|
|
$
|
26,393
|
|
|
$
|
—
|
|
|
$
|
118,154
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
—
|
|
|
5,721
|
|
|
250
|
|
|
—
|
|
|
5,971
|
|
Purchase of property and equipment
|
—
|
|
|
(5,044
|
)
|
|
(3,831
|
)
|
|
—
|
|
|
(8,875
|
)
|
Proceeds from disposal of property and equipment
|
—
|
|
|
64
|
|
|
333
|
|
|
—
|
|
|
397
|
|
Net cash provided by (used in) investing activities
|
—
|
|
|
741
|
|
|
(3,248
|
)
|
|
—
|
|
|
(2,507
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Issuance of common stock—equity plans
|
2,399
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,399
|
|
Purchase of treasury stock and other, net
|
(3,270
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,270
|
)
|
Proceeds from bank advances
|
—
|
|
|
—
|
|
|
7,090
|
|
|
—
|
|
|
7,090
|
|
Change in inter-company receivable/payable
|
—
|
|
|
201
|
|
|
(201
|
)
|
|
—
|
|
|
—
|
|
Net cash (used in) provided by financing activities
|
(871
|
)
|
|
201
|
|
|
6,889
|
|
|
—
|
|
|
6,219
|
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
906
|
|
|
—
|
|
|
906
|
|
Net increase in cash and cash equivalents
|
183
|
|
|
91,649
|
|
|
30,940
|
|
|
—
|
|
|
122,772
|
|
Cash and Cash Equivalents, Beginning of Period
|
150,171
|
|
|
93,285
|
|
|
42,056
|
|
|
—
|
|
|
285,512
|
|
Cash and Cash Equivalents, End of Period
|
$
|
150,354
|
|
|
$
|
184,934
|
|
|
$
|
72,996
|
|
|
$
|
—
|
|
|
$
|
408,284
|
|
Unaudited Condensed Consolidating Statements of Cash Flows
Nine Months Ended
September 30, 2011
(As Restated)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JDA Software
Group, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net Cash Provided by (Used in) Operating Activities
|
$
|
105,089
|
|
|
$
|
20,272
|
|
|
$
|
4,680
|
|
|
$
|
—
|
|
|
$
|
130,041
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
(26
|
)
|
|
(2,201
|
)
|
|
(66
|
)
|
|
—
|
|
|
(2,293
|
)
|
Purchase of property and equipment
|
—
|
|
|
(5,787
|
)
|
|
(1,838
|
)
|
|
—
|
|
|
(7,625
|
)
|
Proceeds from disposal of property and equipment
|
—
|
|
|
51
|
|
|
—
|
|
|
—
|
|
|
51
|
|
Net cash (used in) provided by investing activities
|
(26
|
)
|
|
(7,937
|
)
|
|
(1,904
|
)
|
|
—
|
|
|
(9,867
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Issuance of common stock—equity plans
|
5,261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,261
|
|
Purchase of treasury stock and other, net
|
(5,166
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,166
|
)
|
Debt issuance costs
|
(1,727
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,727
|
)
|
Conversion of warrants
|
671
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
671
|
|
Change in inter-company receivable/payable
|
—
|
|
|
(398
|
)
|
|
398
|
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
(961
|
)
|
|
(398
|
)
|
|
398
|
|
|
—
|
|
|
(961
|
)
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1,173
|
)
|
|
—
|
|
|
(1,173
|
)
|
Net increase in cash and cash equivalents
|
104,102
|
|
|
11,937
|
|
|
2,001
|
|
|
—
|
|
|
118,040
|
|
Cash and Cash Equivalents, Beginning of Period
|
46,012
|
|
|
87,619
|
|
|
37,987
|
|
|
—
|
|
|
171,618
|
|
Cash and Cash Equivalents, End of Period
|
$
|
150,114
|
|
|
$
|
99,556
|
|
|
$
|
39,988
|
|
|
$
|
—
|
|
|
$
|
289,658
|
|
14. Restatement of Previously Issued Financial Statements
As disclosed in our Form 10-K for the year ended December 31, 2011, on April 10, 2012, we concluded that previously issued financial statements should not be relied upon due to certain revenue recognition adjustments. The decision to restate our financial statements was based on the results of an internal review of our historical revenue recognition policies and the application of these policies. All information presented in the accompanying Condensed Consolidated Financial Statements and the related notes include all such restatement adjustments.
Impact of Corrections on Previously Issued Consolidated Financial Statements
Revenue Related Adjustments:
Certain revenue recognition adjustments were noted during the internal reviews performed by management. Adjustments were primarily related to the following areas within revenue recognition:
|
|
•
|
In the course of our review, we identified software license and associated services agreements that were deemed to be linked but previously accounted for as separate transactions. To correct these items, we have recognized software license revenue for such transactions when the services agreement was executed, which was often the quarter immediately following the time when the license agreement is executed.
|
|
|
•
|
The restatement reflects our determination that vendor specific objective evidence (“VSOE”) of fair value did not exist for our cloud services (“Cloud Services”) and certain types of consulting arrangements. To correct these items, revenue associated with certain software license agreements and related services was deferred and recognized over the longest period for any undelivered services, often three years, or when VSOE of fair value was obtained, commencing once services began.
|
Other Adjustments:
In connection with the restatement, the Company also recorded certain aggregated adjustments during the restatement periods that were previously considered immaterial. As part of the restatement, these adjustments have now been reflected in the periods in which the item arose.
The following tables summarize the effects of the restatement on the condensed consolidated financial statements of income for the
three and nine
months ended
September 30, 2011
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2011
|
|
Nine Months Ended September 30, 2011
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
Software licenses
|
$
|
33,139
|
|
|
$
|
1,587
|
|
|
$
|
34,726
|
|
|
$
|
91,534
|
|
|
$
|
9,057
|
|
|
$
|
100,591
|
|
Maintenance services
|
68,261
|
|
|
(629
|
)
|
|
67,632
|
|
|
199,129
|
|
|
(584
|
)
|
|
198,545
|
|
Product revenues
|
105,138
|
|
|
958
|
|
|
106,096
|
|
|
303,245
|
|
|
8,473
|
|
|
311,718
|
|
Consulting services
|
60,392
|
|
|
578
|
|
|
60,970
|
|
|
177,069
|
|
|
87
|
|
|
177,156
|
|
Service revenues
|
66,425
|
|
|
578
|
|
|
67,003
|
|
|
194,334
|
|
|
87
|
|
|
194,421
|
|
Total revenues
|
171,563
|
|
|
1,536
|
|
|
173,099
|
|
|
497,579
|
|
|
8,560
|
|
|
506,139
|
|
Cost of maintenance services
|
13,704
|
|
|
(50
|
)
|
|
13,654
|
|
|
42,362
|
|
|
14
|
|
|
42,376
|
|
Cost of product revenues
|
16,439
|
|
|
(50
|
)
|
|
16,389
|
|
|
50,894
|
|
|
14
|
|
|
50,908
|
|
Cost of consulting services
|
44,821
|
|
|
(316
|
)
|
|
44,505
|
|
|
138,998
|
|
|
(983
|
)
|
|
138,015
|
|
Cost of service revenues
|
50,854
|
|
|
(316
|
)
|
|
50,538
|
|
|
156,263
|
|
|
(983
|
)
|
|
155,280
|
|
Total cost of revenues
|
67,293
|
|
|
(366
|
)
|
|
66,927
|
|
|
207,157
|
|
|
(969
|
)
|
|
206,188
|
|
Gross Profit
|
104,270
|
|
|
1,902
|
|
|
106,172
|
|
|
290,422
|
|
|
9,529
|
|
|
299,951
|
|
Product development
|
18,946
|
|
|
(199
|
)
|
|
18,747
|
|
|
58,889
|
|
|
(288
|
)
|
|
58,601
|
|
Sales and marketing
|
26,144
|
|
|
(388
|
)
|
|
25,756
|
|
|
77,748
|
|
|
(388
|
)
|
|
77,360
|
|
General and administrative
|
16,018
|
|
|
(203
|
)
|
|
15,815
|
|
|
54,420
|
|
|
68
|
|
|
54,488
|
|
Restructuring charges
|
768
|
|
|
—
|
|
|
768
|
|
|
1,749
|
|
|
(470
|
)
|
|
1,279
|
|
Total operating expenses
|
71,438
|
|
|
(790
|
)
|
|
70,648
|
|
|
184,178
|
|
|
(1,078
|
)
|
|
183,100
|
|
Operating income
|
32,832
|
|
|
2,692
|
|
|
35,524
|
|
|
106,244
|
|
|
10,607
|
|
|
116,851
|
|
Interest income and other, net
|
(521
|
)
|
|
(120
|
)
|
|
(641
|
)
|
|
(2,672
|
)
|
|
31
|
|
|
(2,641
|
)
|
Income before income taxes
|
26,918
|
|
|
2,812
|
|
|
29,730
|
|
|
89,831
|
|
|
10,576
|
|
|
100,407
|
|
Income tax provision
|
10,115
|
|
|
1,328
|
|
|
11,443
|
|
|
17,381
|
|
|
3,913
|
|
|
21,294
|
|
Net income
|
16,803
|
|
|
1,484
|
|
|
18,287
|
|
|
72,450
|
|
|
6,663
|
|
|
79,113
|
|
Basic net income per common share
|
$
|
0.40
|
|
|
$
|
0.03
|
|
|
$
|
0.43
|
|
|
$
|
1.71
|
|
|
$
|
0.16
|
|
|
$
|
1.87
|
|
Diluted net income per common share
|
$
|
0.39
|
|
|
$
|
0.04
|
|
|
$
|
0.43
|
|
|
$
|
1.70
|
|
|
$
|
0.15
|
|
|
$
|
1.85
|
|
The adjustments reflected in the table above include the following:
|
|
•
|
Adjustments to revenue related to the lack of vendor specific objective evidence of fair value for Cloud Services and certain Consulting Services currencies and offerings, identification of linked contracts that should have been accounted for as a single arrangement, and the consideration of platform transfer rights on revenue recognition.
|
|
|
•
|
Adjustments to cost of revenue and operating expenses related to certain employee expenses, costs associated with the acquisition of i2, and the result of certain changes in assumptions related to equity compensation.
|
|
|
•
|
Provision for income taxes includes adjustments to deferred tax assets and income tax effects of other restatement adjustments.
|
The following tables present the effect of the restatement adjustments on the condensed consolidated statements of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2011
|
|
Nine Months Ended September 30, 2011
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
Net income
|
$
|
16,803
|
|
|
$
|
1,484
|
|
|
$
|
18,287
|
|
|
$
|
72,450
|
|
|
$
|
6,663
|
|
|
$
|
79,113
|
|
Foreign currency translation adjustment, net of tax
|
(8,075
|
)
|
|
5
|
|
|
(8,070
|
)
|
|
(4,958
|
)
|
|
15
|
|
|
(4,943
|
)
|
Unrealized gains (losses) on cash flow hedges, net of tax
|
(2,856
|
)
|
|
55
|
|
|
(2,801
|
)
|
|
(3,026
|
)
|
|
120
|
|
|
(2,906
|
)
|
Reclassification adjustment for (gains) losses in net income
|
—
|
|
|
(54
|
)
|
|
(54
|
)
|
|
—
|
|
|
(120
|
)
|
|
(120
|
)
|
Other comprehensive income
|
(10,931
|
)
|
|
6
|
|
|
(10,925
|
)
|
|
(7,984
|
)
|
|
15
|
|
|
(7,969
|
)
|
Comprehensive income
|
5,872
|
|
|
1,490
|
|
|
7,362
|
|
|
64,466
|
|
|
6,678
|
|
|
71,144
|
|
The following table presents the effect of the restatement adjustments on the condensed consolidated statements of cash flows as well as the reclassification of payments of direct costs related to acquisitions in net cash provided by (used in) investing activities to net cash provided by operating activities as these amounts reflect certain acquired lease payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011
|
|
As Reported
|
|
Adjustments
|
|
As Restated
|
Net income
|
$
|
72,450
|
|
|
$
|
6,663
|
|
|
$
|
79,113
|
|
Stock-based compensation
|
13,073
|
|
|
(912
|
)
|
|
12,161
|
|
Deferred income taxes
|
14,652
|
|
|
3,914
|
|
|
18,566
|
|
Accounts receivable
|
(17,674
|
)
|
|
878
|
|
|
(16,796
|
)
|
Prepaid expenses and other assets
|
(12,772
|
)
|
|
9,798
|
|
|
(2,974
|
)
|
Accounts payable
|
(13,817
|
)
|
|
(1,140
|
)
|
|
(14,957
|
)
|
Accrued expenses and other liabilities
|
9,749
|
|
|
(9,090
|
)
|
|
659
|
|
Deferred revenue
|
20,935
|
|
|
(12,690
|
)
|
|
8,245
|
|
Net cash provided by operating activities
|
132,620
|
|
|
(2,579
|
)
|
|
130,041
|
|
Payment of direct costs related to acquisitions
|
(2,579
|
)
|
|
2,579
|
|
|
—
|
|
Net cash used in investing activities
|
(12,446
|
)
|
|
2,579
|
|
|
(9,867
|
)
|
See also Note 13, “Condensed Consolidating Financial Information,” for a description of the Company's adjustments to its historical presentation of its condensed consolidating financial information.
15. Subsequent Events
Merger Agreement
On November 1, 2012, the Company announced that it has entered into an Agreement and Plan of Merger with RP Crown Parent, LLC and RP Crown Acquisition Sub, LLC ("Purchaser"), affiliates of RedPrairie which will result in the Company becoming a private company.
Under the terms of the merger agreement, which has been unanimously approved by the Company's Board of Directors, Purchaser will acquire all of the outstanding shares of the Company's common stock for
$45.00
per share in cash and will commence a tender offer for all of the outstanding shares of the Company no later than November 15, 2012.
The transaction is conditioned upon, among other things, satisfaction of the minimum tender condition described in the merger agreement, the receipt of the Federal Trade Commission's approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, and other customary closing conditions.