Exhibit 99.1
| | | | | |
Contact: | | Dennis Story | | Terrie O’Hanlon |
| | | Chief Financial Officer | | Chief Marketing Officer |
| | | Manhattan Associates, Inc. | | Manhattan Associates, Inc. |
| | | 678-597-7115 | | 678-597-7120 |
| | | dstory@manh.com | | tohanlon@manh.com |
Manhattan Associates Reports Fourth Quarter and Full Year
2008 Revenue and Earnings
ATLANTA — February 10, 2009 —Leading supply chain optimization provider Manhattan Associates, Inc. (NASDAQ: MANH) today reported fourth quarter 2008 Earnings Per Share (EPS) in line with adjusted guidance previously issued for the quarter.
The Company’s fourth quarter adjusted diluted earnings per share, a non-GAAP measure,
were $0.26 compared to $0.37 in the 2007 fourth quarter, and within the Company’s previously issued guidance range of $0.24 to $0.34 for the quarter ended December 31, 2008. GAAP diluted earnings per share were $0.08, a 76% decrease compared to the fourth quarter of 2007, due to a fourth quarter restructuring charge and an 11% drop in fourth quarter revenue compared to the fourth quarter of 2007. In 2008, the Company posted fourth quarter revenue of $75.7 million, and full-year revenue of $337.2 million, essentially flat with 2007 full-year revenue.
Manhattan Associates President and CEO Pete Sinisgalli commented, “Fourth quarter results were about as expected. The selling environment continued to be quite difficult, with several opportunities pushing into 2009. Nonetheless, with the actions we took during the fourth quarter to lower headcount and reduce expenses, we were able to post a decent financial result. More important, during the fourth quarter and throughout 2008, we made significant progress extending our market-leading suite of Supply Chain Optimization solutions.”
“We do not expect the market to improve until the latter half of 2009 at the earliest,” Sinisgalli continued. “ However, we will continue to place significant energy into developing and advancing the world’s leading suite of Supply Chain Optimization solutions, so that when markets return to more normal activity levels, we will be poised to capture significant market share,” he concluded.
FOURTH QUARTER FINANCIAL SUMMARY:
Summarized results for the 2008 fourth quarter, as compared to the 2007 fourth quarter, follow:
Earnings Per Share
| • | | Adjusted diluted earnings per share, a non-GAAP measure, were $0.26 compared to $0.37 in Q4 2007, representing a decrease of 30%. |
| • | | GAAP diluted earnings per share decreased 76% to $0.08 per share, which includes the impact of a restructuring charge of $4.7 million associated with the workforce reduction initiative executed in the fourth quarter and disclosed in the Company’s Q3 2008 earnings release. |
Revenue
| • | | Consolidated revenue decreased 11% to $75.7 million. Currency changes during the quarter negatively affected total revenue by $2.2 million, or 3%. |
| | - | | License revenue decreased 26%, to $13.8 million. |
| |
| | - | | Services revenue decreased 6%, to $53.8 million. |
Operating Income
| • | | Adjusted operating income, a non-GAAP measure, was $7.2 million compared to $13.3 million in the prior year quarter. |
| • | | GAAP operating income was $0.4 million compared to $11.5 million in Q4 2007, which includes the $4.7 million restructuring charge related to the Company’s Q4 workforce reduction. |
Cash
| • | | The Company posted record cash flow from operations, both for the full year and in the fourth quarter. Cash flow from operations in Q4 2008 was $18.3 million, 17% higher than in the fourth quarter of 2007, with Days Sales Outstanding of 78 days. Full-year cash flow from operations totaled $63.8 million, a 67% increase over 2007. |
| • | | Cash and investments on-hand at December 31, 2008 was $88.7 million compared to $72.8 million at December 31, 2007. |
Common Share Repurchase
| • | | The Company repurchased 651,614 common shares totaling $10.0 million at an average share price of $15.35 in the fourth quarter of 2008. The Company has $15.0 million in remaining share repurchase authority. |
FULL YEAR FINANCIAL SUMMARY:
Summarized results for the full year of 2008, as compared to the full year of 2007, follow:
Earnings Per Share
| • | | Adjusted diluted earnings per share, a non-GAAP measure, increased 6% to a record $1.38 versus $1.30 in 2007. |
| • | | GAAP diluted earnings per share were $0.94, a decrease of 17% compared to $1.13 per share for full year 2007. Excluding unusual adjustments taken in the second half of 2008, GAAP diluted earnings per share increased 3%. |
Revenue
| • | | Consolidated revenue in 2008 was essentially flat at $337.2 million compared to $337.4 million for the full year 2007. Currency changes for the full year did not significantly impact total revenue. |
| | - | | License revenue decreased 11%, to $65.3 million. |
| |
| | - | | Services revenue increased 4% and totaled $236.0 million. |
Operating Income
| • | | Adjusted operating income, a non-GAAP measure, was $44.3 million compared to $50.5 million in 2007, down 12% on lower license revenue. |
| • | | GAAP operating income was $26.0 million compared to $43.1 million in 2007, a decrease of 40% on lower license revenue and unusual charges taken in the second half of 2008. Excluding $9.9 million of unusual charges, GAAP operating income decreased 17%. |
Tax Rate
| • | | GAAP and non-GAAP effective tax rates were 27.6% and 32.5% respectively, compared to 35.5% on a GAAP and non-GAAP basis in the full year of 2007. The lower tax rates primarily resulted from tax contingency reserves released due to expiring tax audit statutes, and from realizing tax credits associated with research and development and job training. |
Common Share Repurchase
| • | | The Company repurchased approximately 1.7 million common shares during the full year of 2008 at an average share price of $20.52, for a total investment of $35.0 million. |
SALES ACHIEVEMENTS:
Significant sales-related achievements during the quarter include:
| | • | | Closing four contracts of $1.0 million or more in recognized license revenue during the quarter. During 2008, the Company closed 15 contracts of this size. |
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| | • | | Completing software license wins with new customers such as A.N. Deringer, Inc., BUT International SAS, Carolina Logistics Services, LLC, Fasteners for Retail, J.J. Taylor Companies, Inc., Loglibris, Optimal LTD, Pfizer, Inc., QVC, Inc. and Wakefern |
| | | | Food Corporation. |
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| | • | | Expanding partnerships with existing customers such as Al-Shiwari Group, American Eagle Outfitters, Bakkavor Limited, Bed Bath & Beyond, Inc., Benjamin Moore, Genuine Parts Company, InterDesign, LeSaint Logistics, Maersk Distribution Services, McKesson Corporation, Performance Team Freight Systems, Sara Lee Corporation, simplehuman LLC, Staples, Sunglass Hut Trading Company and Whirlpool Corporation. |
2009 GUIDANCE
Manhattan Associates provided the following diluted earnings per share guidance for the first quarter and full year 2009. A full reconciliation of GAAP to non-GAAP diluted earnings per share is included in the supplemental information attached to this release.
| | | | | | | | | | | | | | | | | |
| | | Fully Diluted EPS |
| | | Per Share range | | % Growth range |
GAAP Earnings Per Share | | | | | | | | | | | | | | | | |
| Q1 2009 - diluted earnings per share | | $ | 0.15 | | | $ | 0.25 | | | | -50 | % | | | -17 | % |
| Full year 2009 - diluted earnings per share | | $ | 1.03 | | | $ | 1.28 | | | | 10 | % | | | 36 | % |
| | | | | | | | | | | | | | | | | |
Adjusted Earnings Per Share | | | | | | | | | | | | | | | | |
| Q1 2009 - diluted earnings per share | | $ | 0.20 | | | $ | 0.30 | | | | -43 | % | | | -14 | % |
| Full year 2009 - diluted earnings per share | | $ | 1.23 | | | $ | 1.48 | | | | -11 | % | | | 7 | % |
Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. These statements are forward-looking. Actual results may differ materially, especially in the current uncertain economic environment. These statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of this release.
Manhattan Associates will make its earnings release and published expectations available on its website (www.manh.com). Beginning March 15, 2009, Manhattan Associates will observe a “Quiet Period” during which Manhattan Associates and its representatives will not comment concerning previously published financial expectations. Prior to the start of the Quiet Period, the public can continue to rely on the expectations published in this 2009 Guidance section as still being Manhattan Associates’ current expectation on matters covered, unless Manhattan Associates publishes a notice stating otherwise. During the Quiet Period, previously published expectations should be considered historical only, speaking only as of or prior to the Quiet Period, and Manhattan Associates disclaims any obligation to update any previously published financial expectations during the Quiet Period. The Quiet Period will extend until the date when Manhattan Associates’ next quarterly earnings release is published, currently scheduled for the third week of April 2009.
CONFERENCE CALL
The Company’s conference call regarding its fourth quarter financial results will be held at
4:30 p.m. Eastern Time on Tuesday, February 10, 2008. Investors are invited to listen to a live webcast of the conference call through the investor relations section of Manhattan Associates’ website. To listen to the live webcast, please go to Manhattan’s website at least 15 minutes before the call to download and install any necessary audio software. For those who cannot listen to the webcast live, a telephone replay can be accessed shortly after the call by dialing +1.800.642.1687 in the U.S. and Canada, or +1.706.645.9291 outside the U.S., and entering the conference identification number 80024471, and a webcast replay is available atwww.manh.com. The telephone replay will be available for two weeks after the call, and webcast replay will be available until Manhattan Associates publishes its second quarter 2009 earnings release.
GAAP VERSUS NON-GAAP PRESENTATION
The Company provides adjusted operating income, adjusted net income and adjusted earnings per share in this press release as additional information regarding the Company’s operating results. These measures are not in accordance with — or an alternative for — GAAP, and may be different from non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that the presentation of these non-GAAP financial measures facilitates investors’ understanding of its historical
operating trends, because it provides important supplemental measurement information in evaluating the operating results of its business, as distinct from results that include items that are not indicative of ongoing operating results. The Company consequently believes that the presentation of these non-GAAP financial measures provides investors with useful insight into its profitability. This release should be read in conjunction with its Form 8-K earnings release filing for the quarter ended December 31, 2008.
The non-GAAP adjusted operating income, adjusted net income and adjusted earnings per share exclude the impact of acquisition-related costs and the amortization thereof, the recapture of previously recognized sales tax expense, stock option expense under SFAS 123(R), asset impairment charges, and restructuring charges, all net of income tax effects, and unusual tax adjustments. A reconciliation of the Company’s GAAP financial measures to non-GAAP adjustments is included in the supplemental information attached to this release.
The Company has also presented its revenue, operating income and adjusted operating income growth between periods excluding the effect of changes in exchange rates between the U.S. dollar and the functional currencies of its foreign subsidiaries. Certain information regarding the effect of currency exchange rate fluctuation on results is included in note 5 to the supplemental information attached to this release.
ABOUT MANHATTAN ASSOCIATES, INC.
Manhattan Associates continues to deliver on its 18-year heritage of providing global supply chain excellence to more than 1,200 customers worldwide that consider supply chain optimization core to their strategic market leadership. The company’s supply chain innovations include: Manhattan SCOPE™, a portfolio of software solutions and technology that leverages a Supply Chain Process Platform to help organizations optimize their supply chains from planning through execution; Manhattan ILS™, a portfolio of distribution management and transportation management solutions built on Microsoft® .NET technology; and Manhattan Carrier™, a suite of supply chain solutions specifically addressing the needs of the motor carrier industry. For more information, please visitwww.manh.com.
This press release may contain “forward-looking statements” relating to Manhattan Associates, Inc. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those Contemplated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those
indicated by such forward-looking statements are delays in product development, undetected software errors, competitive pressures, technical difficulties, market acceptance, availability of technical personnel, changes in customer requirements, risks of international operations and general economic conditions. Additional risk factors are set forth in Item 1A. of the Company’s Annual Report onForm 10-K for the year ended December 31, 2007. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Revenue: | | | | | | | | | | | | | | | | |
| Software license | | $ | 13,834 | | | $ | 18,577 | | | $ | 65,313 | | | $ | 73,031 | |
| Services | | | 53,818 | | | | 57,053 | | | | 235,967 | | | | 226,153 | |
| Hardware and other | | | 7,999 | | | | 9,363 | | | | 35,921 | | | | 38,217 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total Revenue | | | 75,651 | | | | 84,993 | | | | 337,201 | | | | 337,401 | |
| | | | | | | | | | | | | | | | | |
| Costs and Expenses: | | | | | | | | | | | | | | | | |
| Cost of license | | | 1,648 | | | | 1,289 | | | | 5,961 | | | | 5,334 | |
| Cost of services | | | 26,195 | | | | 28,127 | | | | 116,707 | | | | 109,758 | |
| Cost of hardware and other | | | 6,651 | | | | 7,757 | | | | 29,270 | | | | 32,268 | |
| Research and development | | | 11,496 | | | | 11,278 | | | | 48,407 | | | | 46,594 | |
| Sales and marketing | | | 11,350 | | | | 13,229 | | | | 51,177 | | | | 53,406 | |
| General and administrative | | | 10,108 | | | | 8,440 | | | | 37,145 | | | | 33,366 | |
| Depreciation and amortization | | | 3,168 | | | | 3,356 | | | | 12,699 | | | | 13,617 | |
| Asset impairment charges | | | — | | | | — | | | | 5,205 | | | | — | |
| Restructuring charge | | | 4,667 | | | | — | | | | 4,667 | | | | — | |
| | | | | | | | | | | | | |
| Total costs and expenses | | | 75,283 | | | | 73,476 | | | | 311,238 | | | | 294,343 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 368 | | | | 11,517 | | | | 25,963 | | | | 43,058 | |
| | | | | | | | | | | | | | | | | |
| Other income, net | | | 1,667 | | | | 1,599 | | | | 5,545 | | | | 4,608 | |
| | | | | | | | | | | | | |
| Income before income taxes | | | 2,035 | | | | 13,116 | | | | 31,508 | | | | 47,666 | |
| Income tax provision | | | 57 | | | | 4,662 | | | | 8,710 | | | | 16,915 | |
| | | | | | | | | | | | | |
| Net income | | $ | 1,978 | | | $ | 8,454 | | | $ | 22,798 | | | $ | 30,751 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.08 | | | $ | 0.34 | | | $ | 0.95 | | | $ | 1.17 | |
| Diluted earnings per share | | $ | 0.08 | | | $ | 0.33 | | | $ | 0.94 | | | $ | 1.13 | |
| | | | | | | | | | | | | | | | | |
| Weighted average number of shares: | | | | | | | | | | | | | | | | |
| Basic | | | 23,500 | | | | 25,066 | | | | 24,053 | | | | 26,174 | |
| Diluted | | | 23,549 | | | | 25,983 | | | | 24,328 | | | | 27,329 | |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
RECONCILIATION OF SELECTED GAAP TO NON-GAAP MEASURES
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Operating income | | $ | 368 | | | $ | 11,517 | | | $ | 25,963 | | | $ | 43,058 | |
Stock option expense(a) | | | 1,383 | | | | 799 | | | | 5,458 | | | | 4,274 | |
Purchase amortization(b) | | | 759 | | | | 1,083 | | | | 3,253 | | | | 4,653 | |
Sales tax recoveries(c) | | | — | | | | (146 | ) | | | (234 | ) | | | (1,438 | ) |
Asset impairment charges(d) | | | — | | | | — | | | | 5,205 | | | | — | |
Restructuring charge(f) | | | 4,667 | | | | — | | | | 4,667 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted operating income (Non-GAAP) | | $ | 7,177 | | | $ | 13,253 | | | $ | 44,312 | | | $ | 50,547 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income tax provision | | $ | 57 | | | $ | 4,662 | | | $ | 8,710 | | | $ | 16,915 | |
Stock option expense(a) | | | 481 | | | | 283 | | | | 1,897 | | | | 1,517 | |
Purchase amortization(b) | | | 263 | | | | 385 | | | | 1,130 | | | | 1,652 | |
Sales tax recoveries(c) | | | — | | | | (51 | ) | | | (81 | ) | | | (510 | ) |
Asset impairment charges(d) | | | — | | | | — | | | | (94 | ) | | | — | |
Unusual tax adjustments(e) | | | 381 | | | | — | | | | 3,032 | | | | — | |
Restructuring charge(f) | | | 1,622 | | | | — | | | | 1,622 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted income tax provision (Non-GAAP) | | $ | 2,804 | | | $ | 5,279 | | | $ | 16,216 | | | $ | 19,574 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net income | | $ | 1,978 | | | $ | 8,454 | | | $ | 22,798 | | | $ | 30,751 | |
Stock option expense(a) | | | 902 | | | | 516 | | | | 3,561 | | | | 2,757 | |
Purchase amortization(b) | | | 496 | | | | 698 | | | | 2,123 | | | | 3,001 | |
Sales tax recoveries(c) | | | — | | | | (95 | ) | | | (153 | ) | | | (928 | ) |
Asset impairment charges(d) | | | — | | | | — | | | | 5,299 | | | | — | |
Unusual tax adjustments(e) | | | (381 | ) | | | — | | | | (3,032 | ) | | | — | |
Restructuring charge(f) | | | 3,045 | | | | — | | | | 3,045 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted Net income (Non-GAAP) | | $ | 6,040 | | | $ | 9,573 | | | $ | 33,641 | | | $ | 35,581 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Diluted EPS | | $ | 0.08 | | | $ | 0.33 | | | $ | 0.94 | | | $ | 1.13 | |
Stock option expense(a) | | | 0.04 | | | | 0.02 | | | | 0.15 | | | | 0.10 | |
Purchase amortization(b) | | | 0.02 | | | | 0.03 | | | | 0.09 | | | | 0.11 | |
Sales tax recoveries(c) | | | — | | | | (0.00 | ) | | | (0.01 | ) | | | (0.03 | ) |
Asset impairment charges(d) | | | — | | | | — | | | | 0.22 | | | | — | |
Unusual tax adjustments(e) | | | (0.02 | ) | | | — | | | | (0.12 | ) | | | — | |
Restructuring charge(f) | | | 0.13 | | | | — | | | | 0.13 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted Diluted EPS (Non-GAAP) | | $ | 0.26 | | | $ | 0.37 | | | $ | 1.38 | | | $ | 1.30 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Fully Diluted Shares | | | 23,549 | | | | 25,983 | | | | 24,328 | | | | 27,329 | |
| | |
| (a) | | SFAS 123(R) requires us to expense stock options issued to employees. Because stock option expense is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us. Thus, we have excluded the impact of this expense from adjusted non-GAAP results. The stock option expense is included in the following GAAP operating expense lines for the three and twelve months ended December 31, 2008 and 2007: |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Cost of services | | $ | 118 | | | $ | 22 | | | $ | 476 | | | $ | 343 | |
| Research and development | | | 199 | | | | 171 | | | | 790 | | | | 645 | |
| Sales and marketing | | | 436 | | | | 266 | | | | 1,717 | | | | 1,381 | |
| General and administrative | | | 630 | | | | 340 | | | | 2,475 | | | | 1,905 | |
| | | | | | | | | | | | | |
| Total stock option expense | | $ | 1,383 | | | $ | 799 | | | $ | 5,458 | | | $ | 4,274 | |
| | | | | | | | | | | | | |
| | |
| (b) | | Adjustments represent purchase amortization from prior acquisitions. Such amortization is commonly excluded from GAAP net income by companies in our industry and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results to that of our competitors. |
| |
| (c) | | Adjustment represents recoveries of previously expensed sales tax resulting primarily from the expiration of the sales tax audit statutes in certain states. Because we have recognized the full potential amount of the sales tax expense in prior periods, any recovery of that expense resulting from the expiration of the statutes or the collection of tax from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of any event occurring within our control during the current period. Thus, we have excluded these recoveries from adjusted non-GAAP results. |
| | |
| (d) | | During the quarter ended September 30, 2008, we recorded an impairment charge of $1.7 million, writing down the remaining balance of a $2.0 million investment in a technology company we made in July 2003. We recorded the additional impairment due to a down round of financing in which our preferred share ownership was converted into common stock, eliminating our preference rights associated with liquidation, thereby substantially impairing our ability to recoup our investment. In addition, we recorded an impairment charge of $3.5 million on an investment in an auction rate security. We reduced the carrying value to zero due to credit downgrades of the underlying issuer and the bond insurer as well as increasing publicly reported exposure to bankruptcy risk by the issuer. We do not include these impairment charges in our assessment of our operating results. Due to the unusual nature of these items and consistent with our past treatment, we have excluded the effect of these impairments from adjusted non-GAAP results because they are not indicative of ongoing operating performance. |
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| (e) | | The majority of the adjustment represents release of income tax reserves resulting from expiration of tax audit statutes for U.S. federal income tax returns filed for 2004 and prior. During 2008, we completed our IRS audit examination for the 2005 return identifying no significant contingencies or errors. Because we recorded the majority of the income tax reserves through retained earnings in conjunction with the adoption of FIN 48 on January 1, 2007, the release of the reserves would overstate the current period net income derived from our core operations. The reserve reversal is partially offset by $0.6 million tax expense on the repatriation of cash from a foreign subsidiary associated with the settlement of several large intercompany balances in order to reduce the unrealized foreign exchange gain/loss volatility in other income. The majority of the large intercompany balances were associated with a non-operating legal entity in Europe. We do not include this tax in our assessment of our operating performance as it does not relate to our core operations. Thus, we have excluded these tax adjustments from adjusted non-GAAP results. |
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| (f) | | During the quarter ended December 31, 2008, we committed to and initiated plans to reduce our workforce by 170 positions due to intermediate term market demand and to realign our capacity with demand forecasts. As a result of this initiative, we recorded a restructuring charge of approximately $4.7 million in the fourth quarter of 2008. The restructuring charge primarily consists of employee severance, outplacement services, and payout of unused vacation. We do not believe that the restructuring charge is common cost that resulted from normal operating activities. Consequently, we have excluded this charge from adjusted non-GAAP results. |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| | | | | | | | | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | |
ASSETS | | | | | | | | |
| Current Assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 85,739 | | | $ | 44,675 | |
| Short term investments | | | — | | | | 17,904 | |
| Accounts receivable, net of allowance of $5,566 and $6,618 in 2008 and 2007, respectively | | | 63,896 | | | | 72,534 | |
| Deferred income taxes | | | 6,667 | | | | 6,602 | |
| Prepaid expenses and other current assets | | | 6,979 | | | | 8,646 | |
| | | | | | | |
| Total current assets | | | 163,281 | | | | 150,361 | |
| |
| Property and equipment, net | | | 21,721 | | | | 24,421 | |
| Long-term investments | | | 2,967 | | | | 10,193 | |
| Acquisition-related intangible assets, net | | | 6,438 | | | | 9,691 | |
| Goodwill, net | | | 62,276 | | | | 62,285 | |
| Deferred income taxes | | | 10,932 | | | | 9,846 | |
| Other assets | | | 2,606 | | | | 4,863 | |
| | | | | | | |
| Total assets | | $ | 270,221 | | | $ | 271,660 | |
| | | | | | | |
| | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 8,480 | | | $ | 9,112 | |
| Accrued compensation and benefits | | | 17,429 | | | | 19,357 | |
| Accrued and other liabilities | | | 16,188 | | | | 10,040 | |
| Deferred revenue | | | 32,984 | | | | 31,817 | |
| Income taxes payable | | | 6,811 | | | | 8,156 | |
| | | | | | | |
| Total current liabilities | | | 81,892 | | | | 78,482 | |
| | | | | | | | | |
| Other non-current liabilities | | | 8,490 | | | | 7,473 | |
| | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2008 or 2007 | | | — | | | | — | |
| Common stock, $.01 par value; 100,000,000 shares authorized; 23,581,109 and 24,899,919 shares issued and outstanding at December 31, 2008 and 2007, respectively | | | 234 | | | | 249 | |
| Additional paid-in capital | | | — | | | | 17,744 | |
| Retained earnings | | | 182,882 | | | | 165,189 | |
| Accumulated other comprehensive (loss) income | | | (3,277 | ) | | | 2,523 | |
| | | | | | | |
| Total shareholders’ equity | | | 179,839 | | | | 185,705 | |
| | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 270,221 | | | $ | 271,660 | |
| | | | | | | |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | | |
| | | Twelve Months Ended | |
| | | December 31, | |
| | | 2008 | | | 2007 | |
Operating activities: | | | | | | | | |
| Net income | | $ | 22,798 | | | $ | 30,751 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 12,699 | | | | 13,617 | |
| Asset impairment charge | | | 5,205 | | | | — | |
| Stock compensation | | | 8,864 | | | | 6,199 | |
| Loss on disposal of equipment | | | 156 | | | | 12 | |
| Tax benefit of stock awards exercised/vested | | | 202 | | | | 1,835 | |
| Excess tax benefits from stock based compensation | | | (100 | ) | | | (721 | ) |
| Deferred income taxes | | | (1,389 | ) | | | (2,759 | ) |
| Unrealized foreign currency gain | | | (694 | ) | | | (1,419 | ) |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable, net | | | 7,077 | | | | (10,618 | ) |
| Other assets | | | 2,691 | | | | 3,451 | |
| Accounts payable, accrued and other liabilities | | | 5,997 | | | | (5,339 | ) |
| Income taxes | | | (1,324 | ) | | | 1,528 | |
| Deferred revenue | | | 1,659 | | | | 1,737 | |
| | | | | | | |
| Net cash provided by operating activities | | | 63,841 | | | | 38,274 | |
| | | | | | | |
| | | | | | | | | |
Investing activities: | | | | | | | | |
| Purchase of property and equipment | | | (7,708 | ) | | | (9,401 | ) |
| Net maturities of investments | | | 21,623 | | | | 84,517 | |
| | | | | | | |
| Net cash provided by investing activities | | | 13,915 | | | | 75,116 | |
| | | | | | | |
| | | | | | | | | |
Financing activities: | | | | | | | | |
| Purchase of common stock | | | (35,107 | ) | | | (99,931 | ) |
| Excess tax benefits from stock based compensation | | | 100 | | | | 721 | |
| Proceeds from issuance of common stock from options exercised | | | 3,177 | | | | 10,910 | |
| | | | | | | |
| Net cash used in financing activities | | | (31,830 | ) | | | (88,300 | ) |
| | | | | | | |
| | | | | | | | | |
| Foreign currency impact on cash | | | (4,862 | ) | | | 1,136 | |
| | | | | | | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 41,064 | | | | 26,226 | |
| Cash and cash equivalents at beginning of year | | | 44,675 | | | | 18,449 | |
| | | | | | | |
| Cash and cash equivalents at end of year | | $ | 85,739 | | | $ | 44,675 | |
| | | | | | | |
| | | | | | | | | |
| Supplemental disclosures of cash flow information- noncash investing activity: | | | | | | | | |
| Tenant improvements funded by landlord | | $ | — | | | $ | 7,918 | |
| | | | | | | |
MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION
| 1. | | GAAP and Adjusted Earnings per share by quarter are as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
GAAP Diluted EPS | | $ | 0.19 | | | $ | 0.32 | | | $ | 0.29 | | | $ | 0.33 | | | $ | 0.30 | | | $ | 0.37 | | | $ | 0.18 | | | $ | 0.08 | | | $ | 1.13 | | | $ | 0.94 | |
Adjustments to GAAP: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock option expense | | | 0.03 | | | | 0.03 | | | | 0.03 | | | | 0.02 | | | | 0.03 | | | | 0.04 | | | | 0.04 | | | | 0.04 | | | | 0.10 | | | | 0.15 | |
| Purchase amortization | | | 0.03 | | | | 0.03 | | | | 0.03 | | | | 0.03 | | | | 0.02 | | | | 0.02 | | | | 0.02 | | | | 0.02 | | | | 0.11 | | | | 0.09 | |
| Sales tax recoveries | | | (0.01 | ) | | | (0.02 | ) | | | (0.01 | ) | | | — | | | | (0.01 | ) | | | — | | | | — | | | | — | | | | (0.03 | ) | | | (0.01 | ) |
| Asset impairment charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 0.22 | | | | — | | | | — | | | | 0.22 | |
| Non-recurring tax adjustments | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (0.11 | ) | | | (0.02 | ) | | | — | | | | (0.12 | ) |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 0.13 | | | | — | | | | 0.13 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted Diluted EPS | | $ | 0.23 | | | $ | 0.36 | | | $ | 0.34 | | | $ | 0.37 | | | $ | 0.35 | | | $ | 0.42 | | | $ | 0.34 | | | $ | 0.26 | | | $ | 1.30 | | | $ | 1.38 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2. | | Revenues and operating income (loss) by reportable segment are as follows (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Americas | | $ | 68,446 | | | $ | 75,599 | | | $ | 69,850 | | | $ | 70,427 | | | $ | 72,129 | | | $ | 73,551 | | | $ | 67,957 | | | $ | 63,609 | | | $ | 284,322 | | | $ | 277,246 | |
| EMEA | | | 5,844 | | | | 9,809 | | | | 10,463 | | | | 10,733 | | | | 12,028 | | | | 11,961 | | | | 10,083 | | | | 8,726 | | | | 36,849 | | | | 42,798 | |
| APAC | | | 3,900 | | | | 4,221 | | | | 4,276 | | | | 3,833 | | | | 4,167 | | | | 4,978 | | | | 4,696 | | | | 3,316 | | | | 16,230 | | | | 17,157 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 78,190 | | | $ | 89,629 | | | $ | 84,589 | | | $ | 84,993 | | | $ | 88,324 | | | $ | 90,490 | | | $ | 82,736 | | | $ | 75,651 | | | $ | 337,401 | | | $ | 337,201 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GAAP Operating Income (Loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Americas | | $ | 8,734 | | | $ | 12,338 | | | $ | 8,894 | | | $ | 10,334 | | | $ | 7,065 | | | $ | 10,643 | | | $ | 1,618 | | | $ | (477 | ) | | $ | 40,300 | | | $ | 18,849 | |
| EMEA | | | (1,321 | ) | | | 1,145 | | | | 1,432 | | | | 1,166 | | | | 2,055 | | | | 2,215 | | | | 1,292 | | | | 1,078 | | | | 2,422 | | | | 6,640 | |
| APAC | | | (131 | ) | | | 189 | | | | 261 | | | | 17 | | | | (31 | ) | | | 406 | | | | 332 | | | | (233 | ) | | | 336 | | | | 474 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 7,282 | | | $ | 13,672 | | | $ | 10,587 | | | $ | 11,517 | | | $ | 9,089 | | | $ | 13,264 | | | $ | 3,242 | | | $ | 368 | | | $ | 43,058 | | | $ | 25,963 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustments (pre-tax): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Americas: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock option expense | | $ | 1,121 | | | $ | 1,130 | | | $ | 1,224 | | | $ | 799 | | | $ | 1,304 | | | $ | 1,372 | | | $ | 1,399 | | | $ | 1,383 | | | $ | 4,274 | | | $ | 5,458 | |
| Purchase amortization | | | 1,195 | | | | 1,195 | | | | 1,180 | | | | 1,083 | | | | 881 | | | | 844 | | | | 769 | | | | 759 | | | | 4,653 | | | | 3,253 | |
| Sales tax recoveries | | | (373 | ) | | | (650 | ) | | | (269 | ) | | | (146 | ) | | | (234 | ) | | | — | | | | — | | | | — | | | | (1,438 | ) | | | (234 | ) |
| Asset impairment charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,205 | | | | — | | | | — | | | | 5,205 | |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,369 | | | | — | | | | 4,369 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 1,943 | | | | 1,675 | | | | 2,135 | | | | 1,736 | | | | 1,951 | | | | 2,216 | | | | 7,373 | | | | 6,511 | | | | 7,489 | | | | 18,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMEA: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 204 | | | | — | | | | 204 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 204 | | | | — | | | | 204 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
APAC: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Restructuring charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 94 | | | | — | | | | 94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 94 | | | | — | | | | 94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Adjustments | | $ | 1,943 | | | $ | 1,675 | | | $ | 2,135 | | | $ | 1,736 | | | $ | 1,951 | | | $ | 2,216 | | | $ | 7,373 | | | $ | 6,809 | | | $ | 7,489 | | | $ | 18,349 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Adjusted non-GAAP Operating Income (Loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Americas | | $ | 10,677 | | | $ | 14,013 | | | $ | 11,029 | | | $ | 12,070 | | | $ | 9,016 | | | $ | 12,859 | | | $ | 8,991 | | | $ | 6,034 | | | $ | 47,789 | | | $ | 36,900 | |
| EMEA | | | (1,321 | ) | | | 1,145 | | | | 1,432 | | | | 1,166 | | | | 2,055 | | | | 2,215 | | | | 1,292 | | | | 1,282 | | | | 2,422 | | | | 6,844 | |
| APAC | | | (131 | ) | | | 189 | | | | 261 | | | | 17 | | | | (31 | ) | | | 406 | | | | 332 | | | | (139 | ) | | | 336 | | | | 568 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 9,225 | | | $ | 15,347 | | | $ | 12,722 | | | $ | 13,253 | | | $ | 11,040 | | | $ | 15,480 | | | $ | 10,615 | | | $ | 7,177 | | | $ | 50,547 | | | $ | 44,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 3. | | Our services revenue consists of fees generated from professional services and customer support and software enhancements related to our software products as follows (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
| Professional services | | $ | 38,831 | | | $ | 39,865 | | | $ | 41,488 | | | $ | 38,946 | | | $ | 41,718 | | | $ | 42,866 | | | $ | 40,693 | | | $ | 33,728 | | | $ | 159,130 | | | $ | 159,005 | |
| Customer support and software enhancements | | | 15,969 | | | | 15,998 | | | | 16,949 | | | | 18,107 | | | | 18,119 | | | | 19,423 | | | | 19,330 | | | | 20,090 | | | | 67,023 | | | | 76,962 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total services revenue | | $ | 54,800 | | | $ | 55,863 | | | $ | 58,437 | | | $ | 57,053 | | | $ | 59,837 | | | $ | 62,289 | | | $ | 60,023 | | | $ | 53,818 | | | $ | 226,153 | | | $ | 235,967 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 4. | | Hardware and other revenue includes the following items (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
| Hardware revenue | | $ | 6,666 | | | $ | 7,270 | | | $ | 5,614 | | | $ | 5,661 | | | $ | 7,141 | | | $ | 5,428 | | | $ | 5,756 | | | $ | 4,916 | | | $ | 25,211 | | | $ | 23,241 | |
| Billed Travel | | | 2,971 | | | | 3,098 | | | | 3,235 | | | | 3,702 | | | | 3,034 | | | | 3,408 | | | | 3,155 | | | | 3,083 | | | | 13,006 | | | | 12,680 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Hardware and other revenue | | $ | 9,637 | | | $ | 10,368 | | | $ | 8,849 | | | $ | 9,363 | | | $ | 10,175 | | | $ | 8,836 | | | $ | 8,911 | | | $ | 7,999 | | | $ | 38,217 | | | $ | 35,921 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION
| 5. | | Impact of Currency Fluctuation |
| |
| | | The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
| Revenue | | $ | 748 | | | $ | 992 | | | $ | 1,049 | | | $ | 1,231 | | | $ | 1,131 | | | $ | 1,189 | | | $ | 132 | | | $ | (2,209 | ) | | $ | 4,020 | | | $ | 243 | |
| Costs and Expenses | | | 858 | | | | 1,306 | | | | 1,629 | | | | 1,892 | | | | 1,601 | | | | 911 | | | | (331 | ) | | | (3,112 | ) | | | 5,685 | | | | (931 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Income | | | (110 | ) | | | (314 | ) | | | (580 | ) | | | (661 | ) | | | (470 | ) | | | 278 | | | | 463 | | | | 903 | | | | (1,665 | ) | | | 1,174 | |
| Foreign currency gains (losses) in other income | | | (22 | ) | | | (602 | ) | | | 897 | | | | 892 | | | | 1,641 | | | | 299 | | | | 542 | | | | 1,395 | | | | 1,165 | | | | 3,877 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | (132 | ) | | $ | (916 | ) | | $ | 317 | | | $ | 231 | | | $ | 1,171 | | | $ | 577 | | | $ | 1,005 | | | $ | 2,298 | | | $ | (500 | ) | | $ | 5,051 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Manhattan Associates has a large research and development center in Bangalore, India. The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
| Operating Income | | $ | (14 | ) | | $ | (443 | ) | | $ | (693 | ) | | $ | (725 | ) | | $ | (619 | ) | | $ | 59 | | | $ | 540 | | | | 1,248 | | | $ | (1,875 | ) | | $ | 1,228 | |
| Foreign currency gains (losses) in other income | | | (82 | ) | | | (536 | ) | | | (312 | ) | | | (248 | ) | | | 94 | | | | 385 | | | | 787 | | | | 549 | | | | (1,178 | ) | | | 1,815 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total impact of changes in the Indian Rupee | | $ | (96 | ) | | $ | (979 | ) | | $ | (1,005 | ) | | $ | (973 | ) | | $ | (525 | ) | | $ | 444 | | | $ | 1,327 | | | $ | 1,797 | | | $ | (3,053 | ) | | $ | 3,043 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 6. | | Other income includes the following components (in thousands): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2008 | | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD | |
| Interest income | | $ | 1,114 | | | $ | 900 | | | $ | 722 | | | $ | 707 | | | $ | 660 | | | $ | 351 | | | $ | 385 | | | $ | 272 | | | $ | 3,443 | | | $ | 1,668 | |
| Foreign currency gains (losses) | | | (22 | ) | | | (602 | ) | | | 897 | | | | 892 | | | | 1,641 | | | | 299 | | | | 542 | | | | 1,395 | | | | 1,165 | | | | 3,877 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total other income | | $ | 1,092 | | | $ | 298 | | | $ | 1,619 | | | $ | 1,599 | | | $ | 2,301 | | | $ | 650 | | | $ | 927 | | | $ | 1,667 | | | $ | 4,608 | | | $ | 5,545 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
7. Capital expenditures are as follows (in thousands): |
| |
| | | 2007 | | 2008 | | 2007 | | | 2008 | |
| | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | 1st Qtr | | | 2nd Qtr | | | 3rd Qtr | | | 4th Qtr | | | YTD | | | YTD |
| Capital expenditures | | $ | 2,956 | | | $ | 3,511 | | | $ | 1,467 | | | $ | 1,467 | | | $ | 2,716 | | | $ | 2,844 | | | $ | 1,258 | | | $ | 890 | | | $ | 9,401 | | | $ | 7,708 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 8. | | Stock Repurchase Activity |
| |
| | | In 2008, we repurchased approximately 1.7 million shares of common stock totaling $35.0 million at an average price of $20.52. In 2007, we repurchased 3.6 million shares of common stock totaling $100.0 million at an average price of $28.05. |
| |
| 9. | | Effective Tax Rate Reconciliation for GAAP and Adjusted Results (in thousands except tax rate and per share data): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2008 | | | Twelve Months Ended December 31, 2008 | |
| | | Income | | | | | | | | | | | | | | | | | | | Income | | | | | | | | | | | | | |
| | | before | | | | | | | | | | | | | | | | | | | before | | | Income | | | | | | | | | | |
| | | income | | | Income tax | | | Net | | | Diluted | | | Effective | | | income | | | tax | | | Net | | | Diluted | | | Effective | |
| | | taxes | | | provision | | | income | | | EPS | | | Tax Rate | | | taxes | | | provision | | | income | | | EPS | | | Tax Rate | |
| GAAP results before impairment charges | | $ | 2,035 | | | $ | 707 | | | $ | 1,328 | | | $ | 0.06 | | | | 34.75 | % | | $ | 36,713 | | | $ | 12,757 | | | $ | 23,956 | | | $ | 0.98 | | | | 34.75 | % |
Impairment of technology investment(a) | | | — | | | | — | | | | — | | | | — | | | | | | | | (1,730 | ) | | | 94 | | | | (1,824 | ) | | | (0.07 | ) | | | | |
Impairment of auction rate security (a) | | | — | | | | — | | | | — | | | | — | | | | | | | | (3,475 | ) | | | — | | | | (3,475 | ) | | | (0.14 | ) | | | | |
Provision to return adjustments(b) | | | — | | | | (269 | ) | | | 269 | | | | 0.01 | | | | | | | | — | | | | (1,109 | ) | | | 1,109 | | | | 0.05 | | | | | |
Unusual tax adjustments(c) | | | — | | | | (381 | ) | | | 381 | | | | 0.02 | | | | | | | | — | | | | (3,032 | ) | | | 3,032 | | | | 0.12 | | | | | |
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| GAAP results- reported | | $ | 2,035 | | | $ | 57 | | | $ | 1,978 | | | $ | 0.08 | | | | 2.81 | % | | $ | 31,508 | | | $ | 8,710 | | | $ | 22,798 | | | $ | 0.94 | | | | 27.64 | % |
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| Adjusted results | | $ | 8,844 | | | $ | 3,073 | | | $ | 5,771 | | | $ | 0.25 | | | | 34.75 | % | | $ | 49,857 | | | $ | 17,325 | | | $ | 32,532 | | | $ | 1.34 | | | | 34.75 | % |
Provision to return adjustments(b) | | | — | | | | (269 | ) | | | 269 | | | | 0.01 | | | | | | | | | | | | (1,109 | ) | | | 1,109 | | | | 0.05 | | | | | |
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| Adjusted results- reported | | $ | 8,844 | | | $ | 2,804 | | | $ | 6,040 | | | $ | 0.26 | | | | 31.71 | % | | $ | 49,857 | | | $ | 16,216 | | | $ | 33,641 | | | $ | 1.38 | | | | 32.53 | % |
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| (a) | | During the quarter ended September 30, 2008, we recorded an impairment charge of $1.7 million, writing down the remaining balance of a $2.0 million investment in a technology company we made in July 2003. We recorded the additional impairment due to a down round of financing in which our preferred share ownership was converted into common stock, eliminating our preference rights associated with liquidation, thereby substantially impairing our ability to recoup our investment. In addition, we recorded an impairment charge of $3.5 million on an investment in an auction rate security. We reduced the carrying value to zero due to credit downgrades of the underlying issuer and the bond insurer as well as increasing publicly reported exposure to bankruptcy risk by the issuer. We recorded a tax valuation allowance against these capital losses as we do not have any future capital gains to offset these losses. |
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| (b) | | Provision to return adjustments include the true-up of the 2007 tax provision to the 2007 tax return filed in the third quarter of 2008. The majority of the adjustments relate to research and development and job training tax credits. |
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| (c) | | The majority of the adjustment represents release of income tax reserves resulting from expiration of tax audit statutes for U.S. federal income tax returns filed for 2004 and prior. During 2008, we completed our IRS audit examination for the 2005 return identifying no significant contingencies or errors. The reserve reversal is partially offset by $0.6 million tax expense on the repatriation of cash from a foreign subsidiary associated with the settlement of several large intercompany balances in order to reduce the unrealized foreign exchange gain/loss volatility in other income. The majority of the large intercompany balances were associated with a non-operating legal entity in Europe. |
