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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-27876
JDA SOFTWARE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0787377
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
14400 NORTH 87TH STREET
SCOTTSDALE, ARIZONA 85260
(480) 308-3000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days.
YES [X] NO[ ]
The number of shares outstanding of the Registrant's Common
Stock, $0.01 par value, was 24,665,071 as of May 4, 2001.
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JDA SOFTWARE GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Page No.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 ........... 3
Condensed Consolidated Statements of Income for the Three Months Ended
March 31, 2001 and March 31, 2000 ................................................. 4
Condensed Consolidated Statements of Comprehensive Income for the Three
Months ended March 31, 2001 and March 31, 2000 .................................... 5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2001 and March 31, 2000 ................................................. 6
Notes to Interim Condensed Consolidated Financial Statements ............................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 25
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ........................................ 26
Item 5. Other Information .......................................................................... 26
Item 6. Exhibits and Reports on Form 8-K ........................................................... 26
Signature ........................................................................................... 27
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2001 2000
---- ----
ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 77,591 $ 60,794
Marketable securities .................................................. 6,081 15,800
Accounts receivable, net ............................................... 50,400 54,431
Income tax receivable .................................................. 2,628 2,438
Deferred tax asset ..................................................... 2,860 4,327
Prepaid expenses and other current assets .............................. 7,762 7,169
--------- ---------
Total current assets ................................................ 147,322 144,959
Property and Equipment, net .............................................. 21,234 22,320
Goodwill and Other Intangibles, net ...................................... 47,715 48,293
Deferred Tax Asset ....................................................... 4,068 2,900
--------- ---------
Total assets ................................................... $ 220,339 $ 218,472
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ....................................................... $ 3,691 $ 4,213
Accrued expenses and other liabilities ................................. 16,075 15,107
Deferred revenue ....................................................... 13,943 12,887
--------- ---------
Total current liabilities ...................................... 33,709 32,207
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 2,000,000 shares; none
issued or outstanding ............................................... -- --
Common stock, $.01 par value; authorized, 50,000,000 shares; issued
24,844,895 and 24,610,967 shares, respectively ..................... 248 246
Additional paid-in capital ............................................. 183,948 181,861
Retained earnings (deficit) ............................................ 10,929 8,775
Accumulated other comprehensive loss ................................... (6,165) (2,798)
--------- ---------
188,960 188,084
Less treasury stock, at cost, 209,000 and 162,500 shares, respectively . (2,330) (1,819)
--------- ---------
Total stockholders' equity .......................................... 186,630 186,265
--------- ---------
Total liabilities and stockholders' equity ..................... $ 220,339 $ 218,472
========= =========
See notes to condensed consolidated financial statements.
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
REVENUES:
Software licenses .................................... $15,563 $15,502
Maintenance services ................................. 8,949 5,143
------- -------
Product revenues .................................. 24,512 20,645
Consulting services .................................. 22,965 18,555
------- -------
Total revenues .................................... 47,477 39,200
------- -------
COST OF REVENUES:
Cost of software licenses ............................ 666 891
Cost of maintenance services ......................... 2,307 1,774
------- -------
Cost of product revenues .......................... 2,973 2,665
Cost of consulting services .......................... 17,424 15,545
------- -------
Total cost of revenues ............................ 20,397 18,210
------- -------
GROSS PROFIT ............................................. 27,080 20,990
OPERATING EXPENSES:
Product development .................................. 7,857 6,155
Sales and marketing .................................. 8,265 6,462
General and administrative ........................... 5,689 4,009
Amortization of intangibles .......................... 1,816 1,092
Purchased in-process research and development ........ 161 --
Restructuring, asset disposition and other charges ... 749 828
------- -------
Total operating expenses .......................... 24,537 18,546
------- -------
OPERATING INCOME ......................................... 2,543 2,444
Other income, net .................................... 862 1,192
------- -------
INCOME BEFORE INCOME TAXES ............................... 3,405 3,636
Income tax provision ................................. 1,251 1,418
------- -------
NET INCOME ............................................... $ 2,154 $ 2,218
======= =======
BASIC EARNINGS PER SHARE ................................. $ .09 $ .09
======= =======
DILUTED EARNINGS PER SHARE ............................... $ .09 $ .09
======= =======
SHARES USED TO COMPUTE:
Basic earnings per share ............................. 24,538 24,079
======= =======
Diluted earnings per share ........................... 24,681 25,315
======= =======
See notes to condensed consolidated financial statements
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
NET INCOME $ 2,154 $ 2,218
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized holding gain on marketable securities available for
sale, net 29 22
Foreign currency translation adjustment (3,397) (210)
------- -------
COMPREHENSIVE INCOME (LOSS) $(1,214) $ 2,030
======= =======
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ 2,154 $ 2,218
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,800 2,987
Provision for doubtful accounts 500 294
Net loss on disposal of property and equipment 17 41
Write-off of purchased in-process research and development 161 --
Deferred income taxes 299 16
Changes in assets and liabilities:
Accounts receivable 2,342 (4,831)
Income tax receivable (254) 685
Prepaid expenses and other current assets (794) (567)
Accounts payable (699) (438)
Accrued expenses and other liabilities 525 (303)
Deferred revenue 671 531
--------- ---------
Net cash provided by operating activities 8,722 633
--------- ---------
INVESTING ACTIVITIES:
Purchase of marketable securities (663,412) (90,898)
Sales of marketable securities 3,283 --
Maturities of marketable securities 669,877 103,210
Purchase of Zapotec Software, Inc. (1,250) --
Purchase of property and equipment (1,057) (1,426)
Proceeds from disposal of property and equipment 189 300
--------- ---------
Net cash used in investing activities 7,630 11,186
--------- ---------
FINANCING ACTIVITIES:
Issuance of common stock - stock option plan 361 976
Issuance of common stock - employee stock purchase plan 1,725 1,338
Tax benefit - stock options and employee stock purchase plan 4 183
Purchase of treasury stock (511) --
Payments on capital lease obligations (12) (12)
--------- ---------
Net cash provided by financing activities 1,567 2,485
--------- ---------
Effect of exchange rates on cash (1,122) (210)
--------- ---------
Net (decrease) increase in cash and cash equivalents 16,797 14,094
--------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 60,794 58,283
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 77,591 $ 72,377
========= =========
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JDA SOFTWARE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 24 $ 2
======= =======
Income taxes $ 546 $ 420
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of Zapotec Software, Inc.:
Fair value of current assets acquired $ (14)
In-process research and development (161)
Developed software and other intangibles (1,240)
Liabilities assumed 125
Deferred revenue 40
-------
Cash used to purchase Zapotec Software, Inc. $(1,250)
=======
See Notes to Condensed Consolidated Financial Statements.
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JDA SOFTWARE GROUP, INC.
NOTES TO INTERIM 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
have been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include all
of the information and notes required for complete financial statements. In the
opinion of management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and are of a
normal recurring nature. Operating results for the three months ended March 31,
2001 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2001.
2. ACQUISITION OF ZAPOTEC SOFTWARE, INC.
On February 5, 2001 we acquired certain assets of Zapotec Software,
Inc. ("Zapotec") for $1.2 million in cash, and assumed certain trade and other
liabilities, and specific acquisition related liabilities for consulting and
maintenance obligations under assumed contracts. Zapotec's primary product,
ProMax, is an integrated software solution that enables retailers, suppliers and
distributors to manage their trade allowance and promotional programs by
automating the contract fulfillment, claim generation and accounts receivable
process. In addition to ProMax, we acquired Zapotec's Ad Plan application.
Currently in development, Ad Plan is designed to be a vertical Web portal that
will integrate advertising and promotional planning and enable collaborative
budgeting, secondary research, media buying, merchandise content and trade
allowance tracking within a community of resellers, suppliers, advertising
agencies and media companies. The acquisition was accounted for as a purchase,
and accordingly, the operating results of Zapotec have been included in our
consolidated financial statements from the date of acquisition. In connection
with the Zapotec transaction, we expensed $161,000 of purchased in-process
research and development during the first quarter of 2001 and recorded a related
tax benefit of $60,000.
The following pro forma consolidated results of operations for the
three months ended March 31, 2001 and 2000 assume the Zapotec acquisition
occurred as of January 1st of each year. The pro forma results are not
necessarily indicative of the actual results that would have occurred had the
acquisition been completed as of the beginning of each of the periods presented,
nor are they necessarily indicative of future consolidated results.
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
Total revenues............................... $47,488 $39,728
Net income (loss)............................ $2,036 $1,978
Basic earnings (loss) per share.............. $.08 $.08
Diluted earnings (loss) per share............ $.08 $.08
3. EARNINGS PER SHARE
Earnings per share for the three months ended March 31, 2001 and 2000
is calculated as follows:
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
Net income................................... $ 2,154 $ 2,218
Shares - Basic earnings per share............ 24,538 24,079
Dilutive common stock equivalents............ 143 1,236
------- -------
24,681 25,315
======= =======
Basic earnings per share..................... $ .09 $ .09
======= =======
Diluted earnings per share................... $ .09 $ .09
======= =======
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4. RESTRUCTURING AND OTHER CHARGES
During the three months ended March 31, 2001, we recorded restructuring
and other charges of $749,000. The restructuring initiatives involved a
workforce reduction of 32 full-time employees ("FTE") including certain
employees involved in implementation and maintenance services (16 FTE), product
development activities (7 FTE), sales and marketing (7 FTE), and administrative
functions (2 FTE). All workforce reductions associated with this charge were
made on or before March 31, 2001. Other charges consist of the write-off of
certain merger and acquisition costs related to potential acquisitions that were
abandoned.
INITIAL CASH BALANCE AT
DESCRIPTION OF THE CHARGE RESERVE CHARGES MARCH 31, 2001
------------------------- ------- ------- --------------
Severance, benefits and related legal costs ... $ 541 $(365) $ 176
Other charges ................................. 208 (208) --
----- ----- -----
Total .................................. $ 749 $(573) $ 176
----- ----- -----
5. BUSINESS SEGMENTS AND GEOGRAPHIC DATA
We are a leading provider of sophisticated software solutions designed
specifically to address the demand and supply chain management, business
process, decision support, e-commerce and collaborative planning requirements of
the retail industry and its suppliers. Our solutions enable our customers to
collect, manage, organize and analyze information throughout their retail
enterprise, and to interact with suppliers and customers over the Internet at
multiple levels within their organizations. We conduct business in six
geographic regions that have separate management teams and reporting
infrastructures: the United States, Northern Europe (includes the Middle East
and Africa), Southern Europe, Asia/Pacific, Canada and Latin America. Similar
products and services are offered in each geographic region and local management
is evaluated primarily based on total revenues and operating income.
Identifiable assets are also managed by geographical region. The geographic
distribution of our revenues and identifiable assets is as follows:
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
---- ----
REVENUES:
United States $ 27,572 $ 19,379
-------- --------
Northern Europe..................... 8,311 8,122
Southern Europe..................... 1,528 1,594
Asia/Pacific........................ 5,659 6,926
Canada.............................. 3,203 1,127
Latin America....................... 1,909 2,372
-------- --------
Total international.............. 20,610 20,141
-------- --------
Sales and transfers among regions... (705) (320)
-------- --------
Total revenues.............. $ 47,477 $ 39,200
======== ========
MARCH 31, DECEMBER 31,
2001 2000
---- ----
IDENTIFIABLE ASSETS:
United States....................... $170,319 $178,533
-------- --------
Northern Europe..................... 24,843 18,009
Southern Europe..................... 4,467 3,703
Asia/Pacific........................ 9,728 9,075
Canada.............................. 6,562 5,422
Latin America....................... 4,420 3,730
-------- --------
Total international.............. 50,020 39,939
-------- --------
Total identifiable assets... $220,339 $218,472
======== ========
We have organized our business segments around the distinct
requirements of retail enterprises, retail stores, and suppliers to the retail
industry:
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- - Retail Enterprise Systems are corporate level merchandise management
systems that gather and distribute operational information throughout an
organization to support the retail process. These systems provide inventory
control, warehouse and logistics management, merchandising planning and
allocation, space management, trade allowance and promotional program
management, and decision support.
- - In-Store Systems provide point-of-sale, e-commerce and back office
applications that enable a retailer to capture, analyze and transmit
certain sales and other operational information to corporate level
merchandise management systems. In-Store Systems also include Store Portals
which provide retailers with the ability to access enterprise information
on their merchandise management systems, via the Internet, and execute
associated processes to support their store operations.
- - Collaborative Solutions provide applications which enable
business-to-business collaborative planning between the retail industry and
their suppliers. Collaborative Solutions include planogramming tools that
allow users to build, analyze and distribute graphical diagrams for space
management, store layout planning and shelf assortment analysis.
A summary of the revenues, operating income (loss), and depreciation
attributable to each of these business segments for the three months ended March
31, 2001 and 2000 is as follows:
THREE MONTHS ENDED
MARCH 31,
---------
2001 2000
---- ----
REVENUES:
Retail Enterprise Systems.................... $ 34,408 $ 33,184
In-Store Systems............................. 7,239 6,016
Collaborative Solutions...................... 5,830 --
-------- --------
$ 47,477 $ 39,200
======== ========
OPERATING INCOME (LOSS)
Retail Enterprise Systems.................... $ 7,274 $ 6,801
In-Store Systems............................. 1,750 1,572
Collaborative Solutions...................... 1,934 --
Other (see below)............................ (8,415) (5,929)
-------- --------
$ 2,543 $ 2,444
======== ========
DEPRECIATION
Retail Enterprise systems.................... $ 1,550 $ 1,535
In-Store systems............................. 362 360
Collaborative Solutions...................... 72 --
-------- --------
$ 1,984 $ 1,895
======== ========
OTHER:
Amortization of intangible assets............ $ 1,816 $ 1,092
IPR&D charge................................. 161 --
Restructuring, asset disposition and other
charges.................................... 749 828
Administrative costs, bad debt expense and
Other non-allocated expenses............... 5,689 4,009
-------- --------
$ 8,415 $ 5,929
======== ========
The operating income (loss) shown for Retail Enterprise Systems,
In-Store Systems and Collaborative Solutions includes direct expenses for
software licenses, maintenance services, consulting services, sales and
marketing expenses, product development expenses, as well as allocations for
occupancy costs and depreciation expense. The "Other" caption includes
non-allocated costs and other expenses that are not directly identified with a
particular operating segment and which management does not consider in
evaluating the operating income (loss) of the business segment. The improvements
in operating income during the three months ended March 31, 2001 reflect
increased maintenance and consulting services revenues in the Retail Enterprise
Systems and In-Store Systems segments, and the incremental Collaborative
Solutions software and maintenance revenues resulting from the acquisition of
Intactix International, Inc. in April 2000.
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6 TREASURY STOCK REPURCHASE PROGRAM
In October 2000, our Board of Directors authorized a repurchase of up to
two million shares of our outstanding common stock. Under this repurchase
program, we may periodically repurchase shares over a period of twelve months on
the open market at prevailing market prices. We will make the purchase decisions
based upon market conditions and other considerations. The primary purpose of
the repurchase program is to increase shareholder value. Through March 31, 2001
we have repurchased 209,000 shares of our common stock for $2.3 million.
7. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"), which is effective for fiscal years
beginning after June 15, 2000. SFAS No. 133 requires companies to value
derivative financial instruments, including those used for hedging foreign
currency earnings, at current market value with the impact of any change in
market value being charged against earnings in each period. The adoption of SFAS
No. 133 did not have a significant impact on our financial statements. At this
time, we have no derivative instruments or hedging activities.
8. RECLASSIFICATIONS
Certain reclassifications have been made to the March 31, 2000
financial statements to conform to the March 31, 2001 presentation.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements
reflecting management's current forecast of certain aspects of our future. It is
based on current information which we have assessed but which by its nature is
dynamic and subject to rapid and even abrupt changes. Forward looking statements
include statements regarding future operating results, liquidity, capital
expenditures, product development and enhancements, numbers of personnel,
strategic relationships with third parties, and strategy. The forward-looking
statements are generally accompanied by words such as "plan," "estimate,"
"expect," "believe," "should," "would," "could," "anticipate" or other words
that convey uncertainty of future events or outcomes. In particular, we provide
our outlook for software license revenues, maintenance service revenues,
consulting services revenues, consulting services margins, product development
expense, sales and marketing expense, general and administrative expense, and
amortization of intangibles, in each case either for the remainder of 2001 or
for the quarter ending June 30, 2001. Our actual results could differ materially
from those stated or implied by our forward looking statements due to risks and
uncertainties associated with our business. These risks are described throughout
this Quarterly Report on Form 10-Q, which you should read carefully. We would
particularly refer you to the section under the heading "Certain Risks" for an
extended discussion of the risks confronting our business. The forward looking
statements in this Quarterly Report on Form 10-Q should be considered in the
context of these risk factors.
OVERVIEW
We provide sophisticated software solutions to the retail industry and
its suppliers. Our solutions enable our customers to collect, manage, organize
and analyze information throughout their retail enterprise, and to interact with
suppliers and customers over the Internet at multiple levels within their
organizations. We generally offer maintenance services to our software customers
and include maintenance services revenues, together with software license
revenues, in our reported "Product Revenues." We enhance and support our
software business by offering retail specific services that are designed to
enable our clients to rapidly achieve the benefits or our solutions. These
services include project management, system planning, design and implementation,
custom configurations, and training services. Demand for our implementation
services is driven by, and often trails, sales of our software products.
Consulting services revenues are generally more predictable but generate lower
gross margins than software license or maintenance services revenues.
SIGNIFICANT TRENDS AND DEVELOPMENTS IN OUR BUSINESS
Economic Conditions in the Retail Industry. In recent quarters,
including the quarter ended March 31, 2001, we have observed retailers
continuing to pursue information technology initiatives, and have not yet
observed a general, worldwide decline in demand for our products. Nevertheless,
we are concerned about the consolidations within the retail industry, weakening
economic conditions and the disappointing operating results of retailers in
certain of our geographic regions, including the United States where we have
begun to see the impact of a recession, specifically as it relates to the length
and predictability of sales cycles. If these factors persist for an extended
period of time, they could negatively impact the industry, our customers'
ability to pay for our products and services, and lead to an increased number of
bankruptcy filings. Such consolidation and weakening economic conditions have in
the past, and may in the future, negatively impact our revenues, elongate our
selling cycles, reduce the demand for our products and negatively impact our
business, operating results and financial condition.
Business reorganization. We reorganized and expanded our senior
management team during the fourth quarter of 2000 to support our growth plans,
to address the new vertical market opportunities resulting from the Intactix
acquisition, and to accelerate our presence in the business-to-business Internet
market. We have organized our business segments around the distinct requirements
of retail enterprises, retail stores, and suppliers to the retail industry:
- Retail Enterprise Systems are corporate level merchandise
management systems that gather and distribute operational
information throughout an organization to support the retail
process.
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- In-Store Systems provide point-of-sale, e-commerce and back office
applications that enable a retailer to capture, analyze and
transmit certain sales and other operational information to the
corporate level merchandise management systems.
- Collaborative Solutions provide applications which enable
business-to-business collaborative planning between the retail
industry and their suppliers.
New products and expanded markets. We invested $9.1 million in the
three months ended March 31, 2001, and over $143.0 million from 1998 to 2000 in
new product development and the acquisition of complementary products while
still remaining profitable and cash flow positive from operations. We released
enhanced versions of our core software products during 2000 and introduced new
value-added client server applications such as Store Portals and Affinity. In
addition, the acquisitions of Arthur Retail and Intactix have expanded our
product offerings and provided us with collaborative applications that address
new vertical market opportunities with the manufacturers and wholesalers who
supply our traditional retail customers. The Collaborative Solutions business
segment, which includes sales of software license and services to customers
outside our historical retail market, provided 12% of our total revenues for the
three months ended March 31, 2001. Revenues from our IBM iSeries-based products
continue to decrease as a percentage of total revenues due to our expansion into
these new products and markets, and as a result of the increasing popularity of
client server-based solutions.
Impact of the Intactix acquisition on product revenues. Our product
revenues, which consist of software licenses and maintenance services, increased
$3.9 million, or 19% in the three months ended March 31, 2001 compared to the
three months ended March 31, 2000. The improvement in product revenues between
the comparable quarters includes $4.0 million and $2.8 million in software
license and maintenance services revenues, respectively from the Intactix
product line that was acquired in April 2000. In addition to expanding our
vertical market opportunities and product footprint, analytic products such as
the Intactix Space Management Solutions appear to be less affected by the
economic slowdown as they enable our customers to better retain and develop
their customer base and provide a quick return on investment. Conversely, sales
of our merchandise management systems, which typically require a more lengthy
implementation process, have been the most impacted by the current economic
slowdown.
Improved consulting services results and decreased implementation
times. Consulting services revenues increased $4.4 million, or 24% in the three
months ended March 31, 2001 compared to the three months ended March 31, 2000 as
a result of the sales of new software licenses we experienced throughout 2000.
Consulting services revenues typically lag software revenues by as much as one
year. However, we also believe the average implementation times for our software
products have begun to decline due to increased training and expertise in our
consulting organization, ongoing investments in product development that has
improved the functionality in the new releases of our base products, improved
integration among products in the JDA Portfolio of products, and increased
product stability and scalability as our newer products mature. Thus, future
consulting services revenue increases may be less than software license revenue
increases. Consulting services margins improved from 16% to 24% between the
comparable quarters as a result of improved utilization rates and the
realignment of resources within the consulting services organization to reflect
changes in product and geographic demands
Balanced mix between domestic and international business. We have a
well established global presence that has historically resulted in a nearly
50:50 mix between our domestic and international revenues. We believe our
investment in international markets provides expanded growth opportunities as
well as some protection against economic slowdowns that may occur from time to
time in specific geographic regions.
Improved gross profit and strong financial position. Our gross profit
was $27.1 million, or 57% of total revenues for the three months ended March 31,
2001 compared to $21.0 million, or 54% for the three months ended March 31,
2000. This improvement results primarily from increases in maintenance and
consulting services revenues of 74% and 24%, respectively between the comparable
quarters. In addition, consulting services margins increased from 16% to 24%
between the comparable quarters as a result of improved utilization rates and
the realignment of resources within the consulting services organization to
reflect changes in product and geographic demands. Our operating activities
generated $8.7 million in positive cash flow during the three months ended March
31, 2001 and we continue to maintain a strong financial position with $77.6
million in cash and cash equivalents, $6.1 million in marketable securities, and
no debt.
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Acquisition of Zapotec Software, Inc. On February 5, 2001 we acquired
certain assets of Zapotec Software, Inc. ("Zapotec") for $1.2 million in cash,
and assumed certain trade and other liabilities, and specific acquisition
related liabilities for consulting and maintenance obligations under assume
contracts. Zapotec is a niche provider of software solutions that enable
retailers, suppliers and distributors to manage their trade allowance and
promotional programs by automating the contract fulfillment, claim generation
and accounts receivable process.
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
REVENUES
Total revenues for the three months ended March 31, 2001 were $47.5
million, an increase of 21% over the $39.2 million reported in the three months
ended March 31, 2000. Revenues consist of product revenues (software licenses
and maintenance services) and consulting services revenues which represented 52%
and 48%, respectively, of total revenues during the three months ended March 31,
2001, as compared with 53% and 47%, respectively during the three months ended
March 31, 2000. We currently expect total revenues to be in the range of $47.0
million to $49.0 million for second quarter 2001.
Product Revenues
Software Licenses. Software license revenues for three months ended
March 31, 2001 were $15.6 million, or 33% of total revenues, compared to $15.5
million, or 40% of total revenues for the three months ended March 31, 2000. The
results for the three months ended March 31, 2001 include $4.0 million in
incremental software license revenues from the Intactix product line that was
acquired in April 2000. Excluding this favorable impact, our software license
revenues decreased 25% between the comparable quarters. Domestic software
license revenues for the three months ended March 31, 2001 increased 74% over
the comparable quarter of 2000. However, we have begun to see the impact of a
recession in the United States which appears to be causing some delays in our
customers' decision processes and the elongation of our related sales cycles,
particularly with respect to our host system products. In addition,
international software license revenues decreased 40% between the comparable
quarters primarily as a result of delayed purchasing decisions in the
Asia/Pacific and Latin America regions. We currently expect software license
revenues for second quarter 2001 and year 2001 to be in the range of $15.5
million to $16.5 million, and $65.0 million to $70.0 million, respectively.
However, our expected results are sensitive to economic conditions, and
continued deterioration in global economic conditions could materially adversely
affect our anticipated results.
Maintenance Services. Maintenance services revenues for the three
months ended March 31, 2001 were $8.9 million, an increase of 74% over the $5.1
million reported in the three months ended March 31, 2000. Maintenance services
revenues represented 19% of total revenues in the three months ended March 31,
2001 compared to 13% in the comparable quarter of 2000. The increase results
primarily from $2.8 million in incremental maintenance services revenues from
the Intactix product line that was acquired in April 2000 and the increased
demand stemming from the increased sales of new software licenses during 2000.
We currently expect an annual increase in maintenance services revenues of
between 20% to 25% during 2001.
Consulting Services. Consulting services revenues for the three months
ended March 31, 2001 were $23.0 million, an increase of 24% from the $18.6
million reported in three months ended March 31, 2000. Consulting services
revenues represented 48% of total revenues in the three months ended March 31,
2001 compared to 47% in the comparable quarter of 2000. This increase results
from the increase in new software license sales we generated during 2000.
Consulting services revenues typically lag software license revenues by as much
as one year. We currently expect only a modest annual growth of 5% to 10% in our
consulting services revenues during 2001, primarily as a result of the reduced
implementation time frames that our products now require, and due in part to the
economic uncertainty we believe will be present in our markets during the
remainder of 2001. We believe that our software products have become easier and
less expensive to install as a direct result of the investments we have made
over the past two years to improve their stability, scalability, integration and
ease of installation.
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BUSINESS SEGMENT REVENUES
Total revenues in our Retail Enterprise Systems business segment
increased 4% to $34.4 million in the three months ended March 31, 2001 from
$33.2 million in the three months ended March 31, 2000. Software license
revenues in our Retail Enterprise Systems business segment decreased 23% in the
three months ended March 31, 2001 compared to the three months ended March 31,
2000. The decrease in software license revenues is due primarily to decreased
sales of ODBMS, Retail IDEAS, and the Arthur Suite, offset in part by the
incremental revenues from sales of the Intactix products to retail customers. We
believe Retail Enterprise Systems is the business segment most impacted by the
current economic slowdown. Maintenance services revenues for Retail Enterprise
Systems increased 35% between the comparable quarters as a result of our
increased software license install base and the incremental maintenance revenues
from Intactix products sold to retail customers. Consulting services revenues in
this segment increased 17% between the comparable quarters as a result of the
increased sales of new software licenses during 2000.
Total revenues in our In-Store Systems business segment increased 20%
to $7.2 million in the three months ended March 31, 2001 from $6.0 million in
the three months ended March 31, 2000. The increase includes a 6% increase in
software license revenues in the three months ended March 31, 2001 compared to
the three months ended March 31, 2000. Maintenance services revenues for
In-Store Systems increased 20% between the comparable quarters as a result of
our increased software license install base. Consulting services revenues in
this segment increased 32% between the comparable quarters as a result of the
increased sales of new software licenses we experienced during 2000.
Total revenues in our Collaborative Solutions business segment were
$5.8 million, or 12% of total revenues, in the three months ended March 31,
2001. Collaborative Solutions revenues come from outside our historical retail
market and for the three months ended March 31, 2001 consist primarily of the
incremental revenues from sales of Intactix software licenses and related
services to retail suppliers.
GEOGRAPHIC REVENUES
Total revenues in the United States increased 42% to $27.6 million in
the three months ended March 31, 2001 from $19.4 million in the three months
ended March 31, 2000. This increase results primarily from sales of software
licenses and related consulting services revenues for our Intactix and Arthur
Suite applications, and increased maintenance service revenues in all product
categories.
Total revenues in Northern Europe increased 2% to $8.3 million in the
three months ended March 31, 2001 from $8.1 million in the three months ended
March 31, 2000. The increase results from the incremental software license,
consulting services and maintenance services revenues from the Intactix product
line, offset in part by decreases or comparable quarter-over-quarter revenues in
all other product categories. We believe revenues in the Northern European
region continue to be adversely impacted by currency devaluation in countries
adopting the Euro and consolidations in the retail industry in this region.
Total revenues in Southern Europe decreased 4% to $1.5 million in the
three months ended March 31, 2001 from $1.6 million in the three months ended
March 31, 2000. This decrease results primarily from a decrease in sales of
Arthur Suite software licenses, offset in part by the incremental software
license, consulting services and maintenance services revenues from the Intactix
product line.
Total revenues in Asia/Pacific decreased 18% to $5.6 million in the
three months ended March 31, 2001 from $6.9 million in the three months ended
March 31, 2000. The decrease results primarily from a decrease in software
license sales in all product categories except Collaborative Solutions, offset
in part by increased consulting and maintenance services revenues in all product
categories. Over $1.0 million of the decrease occurred in our Japan market as an
exceptionally large new software license was recorded in the prior year quarter.
Total revenues in Canada increased 184% to $3.2 million in the three
months ended March 31, 2001 from $1.1 million in the three months ended March
31, 2000. The increase results from an increase in software license, consulting
services and maintenance services revenues in all product categories.
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Total revenues in Latin America decreased 20% to $1.9 million in the
three months ended March 31, 2001 from $2.4 million in the three months ended
March 31, 2000. The decrease results primarily from a decrease in software
license sales from Retail Enterprise Systems and In-Store Systems, offset in
part by increases in consulting services and maintenance services revenues in
all product categories.
COST OF PRODUCT REVENUES
Cost of Software Licenses. Cost of software licenses was $666,000 for
the three months ended March 31, 2001 as compared to $891,000 in the three
months ended March 31, 2000. The decrease results from the higher mix of
software products in the three months ended March 31, 2001 that do not
incorporate functionality from third party software providers or require the
payment of royalties. Cost of software licenses represented 4% and 6% of
software license revenues in the three months ended March 31, 2001 and 2000,
respectively.
Cost of Maintenance Services. Cost of maintenance services increased
30% to $2.3 million in the three months ended March 31, 2001 from $1.8 million
in the three months ended March 31, 2000. Our support headcount increased 44%
between the comparable quarters to support our growing client base and as of
March 31, 2001 there were 88 individuals involved in our customer support group.
COST OF CONSULTING SERVICES
Cost of consulting services increased 12% to $17.4 million in the three
months ended March 31, 2001 from $15.5 million in the three months ended March
31, 2000. We added 46 additional full-time employees in our consulting services
organization between the comparable quarters and as of March 31, 2001 there were
559 individuals in this function. The additional full-time employees were added
in order to support the increased demand for consulting services resulting from
the increased sales of new software licenses we experienced during 2000. In
addition, we incurred higher costs for outside contractors in the Asia/Pacific
region, and higher travel and training costs during the three months ended March
31, 2001.
GROSS PROFIT
Gross profit for the three months ended March 31, 2001 was $27.0
million, an increase of 29% over the $21.0 million reported in the three months
ended March 31, 2000. Gross profit, as a percentage of total revenues, increased
to 57% in the three months ended March 31, 2001 compared with 54% in the three
months ended March 31, 2000. The increase results from improved consulting
services margins and the $3.8 million increase in maintenance services revenues
between the comparable quarters. Consulting services margins increased from 16%
to 24% between the comparable quarters as a result of improved utilization rates
and the realignment of resources within the consulting services organization to
reflect changes in product and geographic demands. We currently expect
consulting services margins to remain in the range of 24% to 26% throughout the
remainder of 2001.
OPERATING EXPENSES
Product Development. Product development expenses for the three months
ended March 31, 2001 were $7.9 million, a 28% increase over the $6.2 million
reported in the three months ended March 31, 2000. Product development expense
as a percentage of total revenues was 17% in the three months ended March 31,
2001 compared to 16% in the three months ended March 31, 2000. The increase in
product development expenses results primarily from the acquisition of Intactix
in April 2000 and our increased investment in the development of high value-add
applications such as web-based portals and advance analytic solutions. We
believe development of our software is essentially completed concurrent with the
establishment of technological feasibility, and accordingly, no costs have been
capitalized. We currently intend to hold quarterly product development expenses
in the range of 15% to 16% of total revenues for the remainder of 2001. We
believe that with the current breadth of our product suite, we can continue to
effectively develop and market new value-added products with our existing
capacity, absent further product acquisitions.
Sales and Marketing. Sales and marketing expenses for the three months
ended March 31, 2001 were $8.3 million, a 28% increase over the $6.5 million
reported in the three months ended March 31, 2000. Sales and marketing expense
as a percentage of total revenues was 17% in the three months ended March 31,
2001 compared
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to 16% in the three months ended March 31, 2000. The increase in sales and
marketing expenses results primarily from the acquisition of Intactix in April
2000, an increase of 33 full-time employees between the comparable quarters and
compensation increases. We currently intend to hold quarterly sales and
marketing expenses in the range of 17% to 18% of total revenues for the
remainder of 2001.
General and Administrative. General and administrative expenses for the
three months ended March 31, 2001 were $5.7 million, a 42% increase over the
$4.0 million reported in the three months ended March 31, 2000. The increase in
general and administrative expense results primarily from the acquisition of
Intactix in April 2000 and the expenses incurred for outside contractors to
assist in the development of our internal operating systems. General and
administrative expense, as a percentage of total revenues, was 12% in the three
months ended March 31, 2001 compared to 10% in the three months ended March 31,
2000. We currently intend to hold general and administrative expenses in the
range of 12% to 13% of total revenues for the remainder of 2001.
Amortization of Intangibles. Amortization of intangibles for the three
months ended March 31, 2001 was $1.8 million, a 66% increase over the $1.1
million reported in the three months ended March 31, 2000. The increase in
amortization consists primarily of amortization on intangibles recorded in
connection with the acquisition of Intactix in April 2000. The quarterly
amortization of intangibles will increase approximately $47,000 for the
remainder of 2001 due to the acquisition of Zapotec in February 2001.
Purchased In-process Research and Development. In connection with the
acquisition of Zapotec in February 2001, we expensed $161,000 of purchased
in-process research and development and recorded a related tax benefit of
$60,000.
Restructuring, Asset Disposition and Other Charges. We recorded
restructuring and other charges of $749,000 during the three months ended March
31, 2001. The restructuring initiatives involved a workforce reduction of 32
full-time employees in certain implementation service groups, product
development activities, sales and marketing, and administrative functions in the
United States, Europe, Canada, and Latin America. All workforce reductions
associated with this charge were made on or before March 31, 2001. Other charges
consist of the write-off of certain merger and acquisition costs related to
potential acquisitions that were abandoned. A similar restructuring and asset
disposition charge of $828,000 was recorded during the three months ended March
31, 2000. This restructuring initiative involved a workforce reduction of 65
full-time employees in certain implementation service groups and administrative
functions in the United States, Europe and Canada. We believe this reduction
helped stabilize service margins, optimized our labor resources in these
geographic regions, and freed up funds for investment in staff that support
higher growth product lines, including the Arthur Suite and our e-commerce
initiatives. All workforce reductions associated with this charge were made on
or before March 31, 2000.
OPERATING INCOME (LOSS)
Operating income in our Retail Enterprise Systems business segment
increased 7% to $7.3 million in the three months ended March 31, 2001 from $6.8
million in the three months ended March 31, 2000. The increase results primarily
from increased maintenance and consulting services revenues, offset in part by
the 23% decrease in software license sales. In addition, sales and marketing
expenses were lower in the three months ended March 31, 2001 consistent with the
decrease in software license sales between the comparable quarters.
Operating income in our In-Store Systems business segment increased 11%
to $1.8 million in the three months ended March 31, 2001 from $1.6 million in
the three months ended March 31, 2000. The increase results primarily from the
6% increase in software license sales, which have gross margins ranging from 95%
to 100%, together with increased maintenance and consulting services revenues,
offset in part by a 74% increase in operating expenses between the comparable
quarters. The increase in operating expenses reflects the additional costs
incurred in connection with the development of the Store Portals applications
and the realignment of sales and marketing personnel and their related costs.
Operating income in our Collaborative Solutions business segment was
$1.9 million in the three months ended March 31, 2001. The Collaborative
Solutions business segment did not exist prior to the second quarter of 2000 and
its results primarily represent the incremental operating income provided from
sales of Intactix software licenses and related services to retail suppliers.
The acquisition of the Intactix product line in April 2000 provided
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us with an additional client base of 2,500 manufacturers and wholesalers and a
new market for business-to-business collaborative planning between the retailers
and their suppliers.
PROVISION FOR INCOME TAXES
Our effective income tax rate reflects statutory federal, state and
foreign tax rates, partially offset by reductions for research and development
expense tax credits. From time to time, we may be subject to audit by federal,
state and/or foreign taxing authorities. The IRS has completed an audit of our
1996 and 1997 Federal Income Tax Returns. As a result of the audit, we have
received proposed adjustments from the IRS reducing our 1996 and 1997 research
and development expense tax credits. The Company and its tax advisors disagree
with the adjustments proposed by the IRS and we continue to vigorously contest
them. We do not believe that the IRS adjustments, even as currently proposed,
would have a material impact on our business, operating results or financial
condition. We expect our effective tax rate to be 37% in 2001.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through
cash generated from operations and public sales of equity securities. We had
working capital of $113.6 million at March 31, 2001 compared with $112.8 million
at December 31, 2000. Cash and marketable securities at March 31, 2001 were
$83.7 million, an increase of $7.1 million from the $76.6 million reported at
December 31, 2000.
Operating activities provided cash of $8.7 million and $633,000 in the
three months ended March 31, 2001 and 2000, respectively. Cash provided from
operating activities in the three months ended March 31, 2001 resulted primarily
from net income of $2.2 million, $3.8 million of depreciation and amortization,
and a $2.3 million decrease in accounts receivable. Cash provided from operating
activities in the three months ended March 31, 2000 resulted primarily from net
income of $2.2 million and $3.0 million of depreciation and amortization, offset
in part by a $4.8 million increase in accounts receivable. We had net
receivables of $50.4 million, or 96 days sales outstanding ("DSOs") at March 31,
2001 compared to $54.4 million, or 115 DSOs at December 31, 2000, and $36.8
million, or 86 DSOs at March 31, 2000. The conversion of our operations to a new
time and billing system over the last six months of 2000 resulted in some
disruption to our normal billing and collections cycles. Our DSOs declined in
the three months ended March 31, 2001 as the billing system implementation has
been completed and we have been able to refocus our collection efforts. DSOs may
fluctuate significantly on a quarterly basis due to a number of factors
including seasonality, shifts in customer buying patterns, lengthened
contractual payment terms in response to competitive pressures, the underlying
mix of products and services, and the geographic concentration of revenues.
Investing activities provided cash of $7.6 million and $11.2 million in
the three months ended March 31, 2001 and 2000, respectively. Cash provided from
investing activities in the three months ended March 31, 2001 includes the net
maturity of $9.7 million of marketable securities, offset by $1.1 million in
capital expenditures and the $1.2 million cash payment for the acquisition of
Zapotec. Cash provided from investing activities in the three months ended March
31, 2000 includes the net maturity of $12.3 million of marketable securities,
offset in part by $1.4 million in capital expenditures.
Financing activities provided cash of $1.6 million and $2.5 million in
the three months ended March 31, 2001 and 2000, respectively. The activity in
both periods includes proceeds from the issuance of common stock and related tax
benefits under our stock option and employee stock purchase plans. In addition,
the activity for the three months ended March 31, 2001 includes the repurchase
of 46,500 shares of our outstanding stock for $511,000 under our treasury stock
repurchase program. Under the repurchase program, we may periodically repurchase
up to two million shares over a period of twelve months on the open market at
prevailing market prices. We will make the purchase decisions based upon market
conditions and other considerations, and we currently intend to purchase shares
in those quarters in which we have a positive cash flow from operating
activities.
Changes in the currency exchange rates of our foreign operations had
the effect of reducing cash by $1.1 million and $210,000 in the three months
ended March 31, 2001 and 2000, respectively. We did not enter into any
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foreign exchange contracts or engage in similar hedging strategies during the
three months ended March 31, 2001 and 2000.
We believe there are opportunities to grow our business through the
acquisition of complementary or synergistic companies, products and
technologies. We look for acquisitions that can be readily integrated and
accretive to earnings, although we may pursue non-accretive acquisitions that
appear strategically important. We believe the general size of cash acquisitions
we would currently consider to be in the $5.0 million to $50.0 million range. On
February 5, 2001, we acquired certain assets of Zapotec Software, Inc. for $1.2
million in cash, and assumed certain trade and other liabilities and specific
acquisition related liabilities for consulting and maintenance obligations under
assumed contracts. The acquisition was accounted for as a purchase, and
accordingly, the operating results of Zapotec have been included in our
consolidated financial statements from the date of closing. Any material
acquisition could result in a decrease to our working capital depending on the
amount, timing and nature of the consideration to be paid. In addition, any
material acquisitions of complementary or synergistic companies, products or
technologies could require that we obtain additional equity or debt financing.
We believe that our cash and cash equivalents, investments in
marketable securities, and funds generated from operations will provide adequate
liquidity to meet our normal operating requirements for at least the next twelve
months.
EURO CURRENCY
In January 1999, a new currency called the ECU or the "Euro" was
introduced in participating European Economic and Monetary Union ("EMU")
countries. During 2002, all participating EMU countries are expected to be
operating with the Euro as their single currency. During the next two years,
business in participating EMU countries will be conducted in both the existing
national currency and the Euro. As a result, companies operating in or
conducting business in these EMU member countries will need to ensure that their
financial and other software systems are capable of processing transactions and
properly handling these currencies, including the Euro. We currently offer
software products that are designed to be Euro-currency enabled, and we believe
these products can be modified to accommodate any change to Euro currency
requirements. We have also provided warranties in various European contracts
that certain of our products will meet some or all Euro currency requirements.
There can be no assurance, however, that our products will contain all the
necessary changes or meet all the Euro currency requirements. If our software
products do not meet all the Euro currency requirements, our business, operating
results, and financial condition would be materially adversely impacted.
CERTAIN RISKS
Our Operating Results May Fluctuate Significantly Which Could Adversely
Affect the Price of Our Stock. Our quarterly operating results have varied and
are expected to continue to vary in the future. If our quarterly operating
results fail to meet analysts' expectations, the price of our stock could
decline. Many factors may cause these fluctuations, including:
- - demand for our software products and services, including the size and timing
of individual contracts and our ability to recognize revenue currently with
respect to contracts signed in the quarter, particularly with respect to our
significant customers;
- - changes in the length of our sales cycle;
- - competitive pricing pressures;
- - customer order deferrals resulting from the anticipation of new products,
economic uncertainty, disappointing operating results by the customer, or
otherwise;
- - the timing of new software product introductions and enhancements to our
software products or those of our competitors, and market acceptance of our
new software products;
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- - changes in our operating expenses;
- - changes in the mix of domestic and international revenues, or expansion of
international operations;
- - our ability to complete fixed price consulting contracts within budget;
- - employee hiring and retention;
- - foreign currency exchange rate fluctuations;
- - integration issues association with newly acquired businesses;
- - lower-than-anticipated utilization in our consulting services group as a
result of prior reduced levels of software sales, reduced implementation
times for our products, or other reasons; and
- - general industry and economic conditions that could negatively impact the
industry, our customers' ability to pay for our products and services and
which could potentially lead to an increased number of bankruptcy filings
and/or bad debt charges.
We believe it is likely that in some future quarter our operating
results will vary from the expectations of public market analysts or investors.
If this happens, or if adverse conditions prevail, or are perceived to prevail,
with respect to our business or generally, the price of our common stock may
decline. Significant fluctuations have included, or may include in the future,
the following:
- - A Decline in Overall Demand for Our Products or Services. We have in the
past experienced a decline in overall demand for our products we believe as
a result of delayed purchasing decisions related to the millennium change,
external and internal marketing issues, increased competition, longer sales
cycles, a limited number of referenceable implementations in the early years
of product release, and certain design and stability issues in earlier
versions of our products, and/or lack of desired feature and functionality.
We are concerned about the consolidations within the retail industry,
weakening economic conditions and the disappointing results of retailers in
certain of our geographic regions, including the United States where we have
begun to see the impact of a recession. Macroeconomic factors and
disappointing operating results in the retail industry may result in
elongated selling cycles and reduced demand for our products.
- - Fluctuating Gross Margins. Because the gross margins on product revenues
(software licenses and maintenance services) are significantly greater than
the gross margins on consulting services, our combined gross margin has
fluctuated from quarter to quarter, and it may continue to fluctuate
significantly based on revenue mix and consulting services utilization
rates. Consulting services revenues are to a significant extent dependent
upon new software license sales. Although there can be no assurance, we
expect that our utilization rates and service margins will gradually improve
if we experience a sustained increase in demand for our software products.
However, in the event software license revenues fail to meet our
expectations or there is a decline in demand for our software or services,
our consulting services revenues would be adversely impacted.
- - Timing of Software Sales. We typically ship our software products when
contracts are signed. As a result, software license revenues in any quarter
depend substantially upon contracts signed and the related shipment of
software in that quarter. It is therefore difficult for us to predict
revenues. Because of the timing of our sales, we typically recognize a
substantial amount of our software license revenues in the last weeks or
days of the quarter, and we generally derive a significant portion of our
quarterly software license revenues from a small number of relatively large
sales. It is difficult to forecast the timing of large individual software
license sales with a high degree of certainty. Accordingly, large individual
sales have sometimes occurred in quarters subsequent to when we anticipated.
We expect that the foregoing trends will continue. If we receive any
significant cancellation or deferral of customer orders, or we are unable to
conclude license negotiations by the end of a fiscal quarter, our operating
results may be lower than anticipated. In addition, any weakening or
uncertainty in the economy may make it more difficult for us to predict
quarterly results in the future, and could negatively impact our business,
operating results and financial condition for an indefinite period of time.
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- - Managing Expense Levels. Our expense levels are based on our expectations of
future revenues. Since software license sales are typically accompanied by a
significant amount of consulting and maintenance services, the size of our
services organization must be managed to meet our anticipated software
license revenues. As a result, we hire and train service personnel and incur
research and development costs in advance of anticipated software license
revenues. If software revenues fall short of our expectations, or if we are
unable to fully utilize our service personnel, our operating results are
likely to decline because a significant portion of our expenses cannot be
quickly reduced to respond to any unexpected revenue shortfall.
We Are Dependent Upon the Retail Industry. Historically, we have
derived 90% or more of our revenues from the license of software products and
the performance of related services to the retail industry. Our future growth is
critically dependent on increased sales to the retail industry. The success of
our customers is directly linked to economic conditions in the retail industry,
which in turn are subject to intense competitive pressures and are affected by
overall economic conditions. In addition, we believe that the license of our
software products generally involves a large capital expenditure, which is often
accompanied by large-scale hardware purchases or commitments. As a result,
demand for our products and services could decline in the event of instability
or downturns such as that currently being experienced in the retail industry.
Such downturns may cause customers to exit the industry or delay, cancel or
reduce any planned expenditure for information management systems and software
products.
In addition, e-commerce on the Internet has impacted the retail
industry, and the traditional "brick and mortar" retailers that we have
historically served have been facing some competition from Internet-based
retailers. We announced the commercial availability of the MMS.com e-commerce
product during the second half of 1999, and to date there have only been limited
sales of this product. In addition, we have recently announced our intentions to
develop a series of business-to-business e-commerce solutions. These solutions
include Internet Portals which are web-based interfaces that provide retailers
with a one-stop destination for internal users, customers and suppliers to
access multiple information sources and applications, and Affinity, a collection
of open applications designed to enable a retailer to support and proactively
manage their customer information and transactions. Our first Internet Portal,
Store Portal, was commercially released for both MMS and ODBMS in the second
half of 2000. The markets for e-commerce products are new and quickly evolving.
We are unable to predict the full impact this emerging form of commerce will
have on the traditional "brick and mortar" retail operations we have
historically served. If the markets for our MMS.com, Internet Portals, and JDA
Affinity products, or other future web-enabled products fail to develop, develop
more slowly or differently than expected or become saturated with competitors,
or if our e-commerce products are not accepted in the marketplace, our business,
operating results and financial condition could be negatively impacted.
We also believe that the retail industry may be consolidating and that
the industry is from time-to-time subject to increased competition and weakening
economic conditions that could negatively impact the industry, our customers'
ability to pay for our products and services and which have and could
potentially lead to an increased number of bankruptcy filings. Such
consolidation and weakening economic conditions have in the past, and may in the
future, negatively impact our revenues, reduce the demand for our products and
may negatively impact our business, operating results and financial condition.
Ability to Attract and Retain Skilled Personnel Is Important to Our
Growth. Our success is heavily dependent upon our ability to attract, hire,
train, retain and motivate skilled personnel, including sales and marketing
representatives, qualified software engineers involved in ongoing product
development, and consulting personnel who assist in the implementation of our
products and services. The market for such individuals is competitive. Given the
critical roles of our sales, product development and consulting staffs, our
inability to recruit successfully or any significant loss of key personnel in
our sales, product development or consulting staffs would hurt us. The software
industry is characterized by a high level of employee mobility and aggressive
recruiting of skilled personnel. We cannot guarantee that we will be able to
retain our current personnel, attract and retain other highly qualified
technical and managerial personnel in the future, or be able to assimilate the
employees from any acquired businesses. We will continue to adjust the size and
composition of the workforce in our services organization to match the different
product and geographic demand cycles. If we are unable to attract and retain the
necessary technical and managerial personnel, or assimilate the employees from
any acquired businesses, our business, operating results and financial condition
would be adversely affected.
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We Have Only Deployed Certain of Our Software Products On a Limited
Basis, and Have Not Yet Deployed Some Software Products that are Important to
our Future Growth. Certain of our software products, including MMS.com and
Internet Portals, have been commercially released within the last year. Certain
modules of our Affinity and Intellect products are still in beta and under
development, respectively. In addition, we have only recently announced our
intentions to develop or acquire a series of business-to-business e-commerce
solutions, including products in furtherance of our pursuit of the market for
collaborative planning, forecasting and replenishment solutions. The markets for
these products are new and evolving, and we believe that retailers may be
cautious in adopting web-based and other new technologies. Consequently, we
cannot predict the growth rate, if any, and size of the markets for our
e-commerce products or that these markets will continue to develop. Potential
and existing customers may find it difficult, or be unable, to successfully
implement our e-commerce products, or may not purchase our products for a
variety of reasons, including their inability or unwillingness to deploy
sufficient internal personnel and computing resources for a successful
implementation. In addition, we must overcome significant obstacles to
successfully market our newer products, including limited experience of our
sales and consulting personnel. If the markets for our newer products fail to
develop, develop more slowly or differently than expected or become saturated
with competitors, or if our products are not accepted in the marketplace or are
technically flawed, our business, operating results and financial condition will
decline.
There Are Many Risks Associated with International Operations. Our
international revenues represented 43% of total revenues in the three months
ended March 31, 2001 as compared to 48% and 46% in fiscal 2000 and 1999,
respectively. If our international operations grow, we must recruit and hire a
number of new consulting, sales and marketing and support personnel in the
countries we have or will establish offices. Our entry into new international
markets typically requires the establishment of new marketing and distribution
channels as well as the development and subsequent support of localized versions
of our software. International introductions of our products often require a
significant investment in advance of anticipated future revenues. The opening of
our new offices typically results in initial recruiting and training expenses
and reduced labor efficiencies associated with the introduction of products to a
new market. We cannot guarantee that the countries in which we operate will have
a sufficient pool of qualified personnel from which to hire or that we will be
successful at hiring, training or retaining such personnel. In addition, we
cannot assure you that we will be able to successfully expand our international
operations in a timely manner which could negatively impact our business,
operating results and financial condition.
Our international business operations are subject to risks associated
with international activities, including unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs and risks of localizing
products for foreign countries, longer accounts receivable payment cycles in
certain countries, potentially negative tax consequences, difficulties in
staffing and managing geographically disparate operations, greater difficulty in
safeguarding intellectual property, licensing and other trade restrictions,
currency fluctuations, repatriation of earnings, the burdens of complying with a
wide variety of foreign laws, and general economic conditions in international
markets. In addition, consulting services in support of international software
licenses typically have lower gross margins than those achieved domestically due
to generally lower billing rates and/or higher costs in certain of our
international markets. Accordingly, any significant growth in our international
operations may result in further declines in gross margins on consulting
services. We expect that an increasing portion of our international software
license, consulting services and maintenance services revenues will be
denominated in foreign currencies, subjecting us to fluctuations in foreign
currency exchange rates. As we continue to expand our international operations,
exposures to gains and losses on foreign currency transactions may increase. We
may choose to limit such exposure by entering into forward foreign exchange
contracts or engaging in similar hedging strategies. We cannot guarantee that
any currency exchange strategy would be successful in avoiding exchange-related
losses. In addition, revenues earned in various countries where we do business
may be subject to taxation by more than one jurisdiction, which would reduce our
earnings.
Our Markets Are Highly Competitive. The markets for our software
products are highly competitive. We believe the principal competitive factors
are price, feature and functionality, product reputation and referenceable
accounts, retail industry expertise, e-commerce capabilities and quality of
customer support. We encounter competitive products from a different set of
vendors in each of our primary product categories. Our Retail Enterprise Systems
compete with internally developed systems and with third-party developers such
as Essentus, Inc., GERS, Inc., i2 Technologies' Makaro product line, Marketmax,
Inc., Microstrategy, nsb Retail Systems PLC, Radius PLC, Retek, Inc., SAP AG,
and SVI Holdings, Inc. In addition, new competitors may enter our markets and
offer merchandise management systems that target the retail industry.
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The competition for our In-Store Systems is more fragmented than the
competition for our Retail Enterprise Systems. We compete with major hardware
equipment manufacturers such as ICL, NCR and IBM, as well as software companies
such as CRS Business Computers, Datavantage, Inc., nsb Retail Systems PLC, and
Triversity. Our current Collaborative Solutions compete with products from
Marketmax, Inc., AC Nielsen Corporation, and Information Resources, Inc. In the
market for consulting services, we have pursued a strategy of forming informal
working relationships with leading retail systems integrators such as Accenture,
Ernst & Young and PriceWaterhouseCoopers. These integrators, as well as
independent consulting firms such as CAP Gemini, Kurt Salmon Associates, IBM
Global Services, AIG Netplex, CFT Consulting, Lakewest Consulting, SPL and ID
Applications, also represent competition to our consulting services group.
As we continue to develop or acquired e-commerce products, we expect to
face potential competition from business-to-business e-commerce application
providers, including Ariba, Broadvision, Commerce One, Commercialware, i2
Technologies, Manugistics Group, Inc., Microsoft, Inc., Retek, Inc., and
Ecometry Corporation (formerly Smith Gardner). Some of our existing competitors,
as well as a number of potential new competitors, have significantly greater
financial, technical, marketing and other resources than we do, which could
provide them with a significant competitive advantage over us. We cannot
guarantee that we will be able to compete successfully against our current or
future competitors, or that competition will not have a material adverse effect
on our business, operating results and financial condition.
Implementation of Our Products Can Be a Lengthy Process; Our
Fixed-Price Service Contracts May Result In Losses. Our software products are
complex and perform or directly affect mission-critical functions across many
different functional and geographic areas of the enterprise. Consequently,
implementation of our software products can be a lengthy process, and commitment
of resources by our clients is subject to a number of significant risks over
which we have little or no control. Although average implementation times have
recently declined, we believe the implementation of the client/server versions
of our products can be longer and more complicated than our other applications
as they typically (i) appeal to larger retailers who have multiple divisions
requiring multiple implementation projects, (ii) require the execution of
implementation procedures in multiple layers of software, (iii) offer a retailer
more options for product hierarchy, order processing and other configuration
choices, and (iv) involve third party integrators to change business processes
concurrent with the implementation of the software. Delays in the
implementations of any of our software products, whether by us or our business
partners, may result in client dissatisfaction or damage to our reputation and a
decline in our business, operating results and financial condition.
We offer a combination of software products, consulting and maintenance
services to our customers. Typically, we enter into service agreements with our
customers that provide for consulting services on a "time and expenses" basis.
Certain clients have asked for, and we have from time to time entered into,
fixed-price service contracts. We believe that fixed-price service contracts may
increasingly be offered by our competitors to differentiate their product and
service offerings. As a result, we may enter into more fixed-price contracts in
the future. If we are unable to meet our contractual obligations under
fixed-price contracts within our estimated cost structure, our operating results
could suffer.
Our Success Depends Upon Our Proprietary Technology. Our success and
competitive position is dependent in part upon our ability to develop and
maintain the proprietary aspect of our technology. We rely on a combination of
trademark, trade secret, copyright law and contractual restrictions to protect
the proprietary aspects of our technology. We seek to protect the source code to
our software, documentation and other written materials under trade secret and
copyright laws. Effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. We license our software
products under signed license agreements that impose restrictions on the
licensee's ability to utilize the software and do not permit the re-sale,
sublicense or other transfer of the source code. Finally, we seek to avoid
disclosure of our intellectual property by requiring employees and independent
consultants to execute confidentiality agreements with us and by restricting
access to our source code.
We license and integrate technology from third parties in our certain
of our software products. For example, we license the Uniface client/server
application development technology from Compuware, Inc. for use in ODBMS,
certain applications from Silvon Software, Inc. for use in Retail IDEAS, IBM's
Net.commerce merchant server software for use in MMS.com, and the Syncsort
application for use in the Arthur Suite. These third party
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licenses generally require us to pay royalties and fulfill confidentiality
obligations. Our license with Compuware, Inc. was re-negotiated in April 2000,
and requires us to pay moderately higher royalty rates to Compuware, Inc. in the
future. If we are unable to continue to license any of this third party
software, or if the third party licensors do not adequately maintain or update
their products, we would face delays in the releases of our software until
equivalent technology can be identified, licensed or developed, and integrated
into our software products. These delays, if they occur, could have a material
adverse effect on our business, operating results and financial condition. It is
also possible that intellectual property acquired from third parties through
acquisitions, mergers, licenses or otherwise may not have been adequately
protected. The reverse engineering, unauthorized copying, or other
misappropriation of our technology could enable third parties to benefit from
our technology without paying for it.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
software solutions infringe on their intellectual property. We expect that
software product developers and providers of e-commerce products will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlap. In addition, we may find it necessary to
initiate claims or litigation against third parties for infringement of our
proprietary rights or to protect our trade secrets. Any claims, with or without
merit, could be time consuming, result in costly litigation, cause product
shipment delays or require us to enter into royalty or license agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all, which could have a material adverse effect on our
business, operating results and financial condition.
There Are Risks Related To Product Defects, Product Liability, and
Integration Difficulties. Our software products are highly complex and
sophisticated. As a result, they may occasionally contain design defects or
software errors that could be difficult to detect and correct. In addition,
implementation of our products may involve customer-specific configuration by us
or third parties, and may involve integration with systems developed by third
parties. In particular, it is common for complex software programs, such as our
client/server and e-commerce software products, to contain undetected errors
when first released. They are discovered only after the product has been
implemented and used over time with different computer systems and in a variety
of applications and environments. Despite extensive testing, we have in the past
discovered defects or errors in our products or custom configurations only after
our software products have been used by many clients. In addition, our clients
may occasionally experience difficulties integrating our products with other
hardware or software in their environment that are unrelated to defects in our
products. Such defects, errors or difficulties may cause future delays in
product introductions and shipments, result in increased costs and diversion of
development resources, require design modifications or impair customer
satisfaction with our products.
We believe that significant investments in research and development are
required to remain competitive, and that speed to market is critical to our
success. Our future performance will depend in large part on our ability to
enhance our current products and develop new products that achieve market
acceptance. These new products must incorporate state-of-the-art technology,
enable our clients to remain competitive, and facilitate a powerful,
cost-effective means of conducting business-to-consumer and business-to-business
e-commerce on the Internet. If clients experience significant problems with
implementation of our products or are otherwise dissatisfied with their
functionality or performance or if they fail to achieve market acceptance for
any reason, our business, operating results and financial condition would be
negatively impacted.
Our products are typically used by our clients to perform
mission-critical functions. As a result, design defects, software errors, misuse
of our products, incorrect data from external sources or other potential
problems arising from the use of our products could result in financial or other
damages to our clients. Prior to 1998, we did not maintain product liability
insurance. Our license agreements with our clients typically contain provisions
designed to limit our exposure to potential claims as well as any liabilities
arising from such claims. However, such provisions may not effectively protect
us against such claims and the associated liability and costs, particularly in
countries outside the United States.
We Are Dependent on Key Personnel. Our performance depends in large
part on the continued performance of our executive officers and other key
employees, particularly the performance and services of James D. Armstrong our
Chief Executive Officer. We do not have in place "key person" life insurance
policies on any of
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our employees. The loss of the services of Mr. Armstrong or other key executive
officers or employees could negatively affect our financial performance.
We May Have Difficulty Integrating Acquisitions. We continually
evaluate potential acquisitions of complementary businesses, products and
technologies, including those that are significant in size and scope. In pursuit
of our strategy to acquire complementary products, we completed the acquisition
of the assets of Zapotec Software, Inc. on February 5, 2001. Acquisitions
involve a number of special risks, including the inability to obtain, or meet
conditions imposed for governmental approvals for the acquisition, diversion of
management's attention to the assimilation of the operations and personnel of
acquired businesses, the predictability of costs related to the acquisition and
the integration of acquired businesses, products, technologies and employees
into our business and product offerings. Achieving the anticipated benefits of
any acquisition will depend, in part, upon whether integration of the acquired
business, products, technology, or employees is accomplished in an efficient and
effective manner, and there can be no assurance that this will occur. The
difficulties of such integration may be increased by the necessity of
coordinating geographically disparate organizations, the complexity of the
technologies being integrated, and the necessity of integrating personnel with
disparate business backgrounds and combining different corporate cultures. The
inability of management to successfully integrate any acquisition that we may
pursue, and any related diversion of management's attention, could have a
material adverse effect on our business, operating results and financial
condition. Moreover, there can be no assurance that any products acquired will
gain acceptance in our markets, that we will be able to penetrate new markets
successfully or that we will obtain the anticipated or desired benefits of such
acquisitions. Also, acquired products may contain defects of which we are
unaware. Any acquisition that we pursue or consummate could result in the
incurrence of debt and contingent liabilities, amortization of goodwill and
other intangibles, purchased research and development expense, other
acquisition-related expenses and the loss of key employees, any of which could
have a material adverse effect on our business, operating results and financial
condition.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks in the ordinary course of our
business. These risks result primarily from changes in foreign currency exchange
rates and interest rates. In addition, our international operations are subject
to risks related to differing economic conditions, changes in political climate,
differing tax structures, and other regulations and restrictions.
Foreign currency exchange rates. Our international operations expose us
to foreign currency exchange rate changes that could impact translations of
foreign denominated assets and liabilities into U.S. dollars and future earnings
and cash flows from transactions denominated in different currencies.
International revenues represented 43% of our total revenues in the three months
ended March 31, 2001, as compared with 51% in the three months ended March 31,
2000. In addition, the identifiable net assets of our foreign operations totaled
23% of consolidated assets at March 31, 2001 and 18% at December 31, 2000. Our
exposure to currency exchange rate changes is diversified due to the number of
different countries in which we conduct business. We operate outside the United
States primarily through wholly owned subsidiaries in Europe, Asia/Pacific,
Canada and Latin America. We have determined that the functional currency of
each of our foreign subsidiaries is the local currency and as such, foreign
currency translation adjustments are recorded as a separate component of
stockholders' equity. Changes in the currency exchange rates of our foreign
subsidiaries resulted in our reporting unrealized foreign currency exchange
losses of $3.4 million in the three months ended March 31, 2001, as compared
with $1.5 million and $557,000 in fiscal 2000 and 1999, respectively. We have
not engaged in foreign currency hedging transactions. Foreign currency gains and
losses will continue to result from fluctuations in the value of the currencies
in which we conduct operations as compared to the U.S. Dollar, and future
operating results will be affected to some extent by gains and losses from
foreign currency exposure. We prepared sensitivity analyses of our exposures
from foreign net assets as of March 31, 2001, to assess the impact of
hypothetical changes in foreign currency rates. Based upon the results of these
analyses, a 10% adverse change in all foreign currency rates from the March 31,
2001 rates would result in a currency translation loss of $2.3 million before
tax.
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Interest rates. We invest our cash in a variety of financial
instruments, including bank time deposits, and variable and fixed rate
obligations of the U.S. Government and its agencies, states, municipalities,
commercial paper and corporate bonds. These investments are denominated in U.S.
dollars. We classify all of our investments as available-for-sale in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Cash balances in foreign
currencies overseas are operating balances and are invested in short-term
deposits of the local operating bank. Interest income earned on our investments
is reflected in our financial statements under the caption "Other income, net."
Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due to these factors, our future investment income may fall short of
expectations due to changes in interest rates, or we may suffer losses in
principal if forced to sell securities which have seen a decline in market value
due to a change in interest rates. We hold our investment securities for
purposes other than trading. The fair value of securities held at March 31, 2001
was $6.1 million, which is approximately the same as amortized cost, with
interest rates generally ranging between 4% and 6%.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: See Exhibit Index
(b) Reports on Form 8-K:
We filed a Form 8-K dated February 5, 2001 with the Securities and
Exchange Commission on February 20, 2001 to announce the acquisition of certain
assets of Zapotec Software, Inc. ("Zapotec") for $1.2 million in cash, and the
assumption of certain trade and other liabilities, and specific acquisition
related liabilities for consulting and maintenance obligations under assumed
contracts. Zapotec's primary product, ProMax, is an integrated software solution
that enables retailers, suppliers and distributors to manage their trade
allowance and promotional programs by automating the contract fulfillment, claim
generation and accounts receivable process. In addition to ProMax, we acquired
Zapotec's Ad Plan application. Currently in development, Ad Plan is designed to
be a vertical Web portal that will integrate advertising and promotional
planning and enable collaborative budgeting, secondary research, media buying,
merchandise content and trade allowance tracking, within a community of
resellers, suppliers, advertising agencies and media companies. The acquisition
was accounted for as a purchase, and accordingly, the operating results of
Zapotec have been included in our consolidated financial statements from the
date of acquisition.
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JDA SOFTWARE GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JDA SOFTWARE GROUP, INC.
Dated: May 8, 2001 By: /s/ Kristen L. Magnuson
-----------------------------------------
Kristen L. Magnuson
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
Exhibit # DESCRIPTION OF DOCUMENT
2.1** -- Asset Purchase Agreement dated as of June 4, 1998, by
and among JDA Software Group, Inc., JDA Software,
Inc. and Comshare, Incorporated.
2.2## -- Asset Purchase Agreement dated as of February 24,
2000, by and among JDA Software Group, Inc., Pricer
AB, and Intactix International, Inc.
3.1*** -- Second Restated Certificate of Incorporation of the
Company together with Certificate of Amendment dated
June 12, 1998.
3.2*** -- First Amended and Restated Bylaws.
4.1* -- Specimen Common Stock certificate.
4.2*(1) -- Stock Redemption Agreement among the Company, James
D. Armstrong and Frederick M. Pakis dated March 30,
1995.
10.1*(1) -- Form of Indemnification Agreement.
10.2*(1) -- 1995 Stock Option Plan, as amended, and form of
agreement thereunder.
10.3***(1) -- 1996 Stock Option Plan, as amended. (1)
10.4*(1) -- 1996 Outside Directors Stock Option Plan and forms of
agreement thereunder.
10.5***(1) -- Employment Agreement between James D. Armstrong and
JDA Software, Inc. dated January 1, 1998.
10.8#(1) -- 1998 Nonstatutory Stock Option Plan.
10.9#(1) -- 1998 Employee Stock Purchase Plan.
10.10+ -- 1999 Employee Stock Purchase Plan.
10.11*** -- Lease Agreement between Opus West Corporation and JDA
Software Group, Inc. dated April 30, 1998, together
with First Amendment dated June 30, 1998.
10.12** -- Software License Agreement dated as of June 4, 1998
by and between Comshare, Incorporated and JDA
Software, Inc.
10.14**(2) -- Value-Added Reseller License Agreement for Uniface
Software between Compuware Corporation and JDA
Software Group, Inc. dated April 1, 2000.
10.15*(1) -- JDA Software, Inc. 401(k) Profit Sharing Plan,
adopted as amended effective January 1, 1995.
10.17***(1) -- Form of Amendment of Stock Option Agreement between
JDA Software Group, Inc and Kristen L. Magnuson,
amending certain stock options granted to Ms.
Magnuson pursuant to the JDA Software Group, Inc.
1996 Stock Option Plan on September 11, 1997 and
January 27, 1998.
10.18++(1) -- Form of Rights Agreement between the Company and
ChaseMellon Shareholder Services, as Rights Agent
(including as Exhibit A the Form of Certificate of
Designation, Preferences and Rights of the Terms of
the Series A Preferred Stock, as Exhibit B the From
of Right Certificate, and as Exhibit C the Summary of
Terms and Rights Agreement).
10.19+++(1) -- Form of Incentive Stock Option Agreement between JDA
Software Group, Inc. and Kristen L. Magnuson to be
used in connection with stock option grants to Ms.
Magnuson pursuant to the JDA Software Group, Inc.
1996 Stock Option Plan.
10.20*(1)(3) -- Form of Incentive Stock Option Agreement between JDA
Software Group, Inc. and certain Senior Executive
Officers to be used in connection with stock options
granted pursuant to the JDA Software Group, Inc. 1996
Stock Option Plan.
10.21*(1)(3) -- Form of Nonstatutory Stock Option Agreement between
JDA Software (1)(3) Group, Inc. and certain Senior
Executive Officers to be used in connection with
stock options granted pursuant to the JDA Software
Group, Inc. 1996 Stock Option Plan.
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10.22* -- Form of Amendment of Stock Option Agreement between
JDA Software (1) (4) Group, Inc and certain Senior
Executive Officers, amending certain stock options
granted pursuant to the JDA Software Group, Inc. 1995
Stock Option Plan
10.23* -- Form of Amendment of Stock Option Agreement between
JDA Software (1)(5) Group, Inc and certain Senior
Executive Officers, amending certain stock options
granted pursuant to the JDA Software Group, Inc. 1996
Stock Option Plan
10.24* -- Form of Incentive Stock Option Agreement between JDA
Software Group, (1)(6) Inc. and certain Senior
Executive Officers to be used in connection with
stock options granted pursuant to the JDA Software
Group, Inc. 1996 Stock Option Plan
- ----------
* Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-748), declared effective on March 14, 1996.
** Incorporated by reference to the Company's Current Report on Form 8-K
dated June 4, 1998, as filed on June 19, 1998.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1998, as filed on August
14, 1998.
+ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999, as filed on August
19, 1999.
++ Incorporated by reference to the Company's Current Report on Form 8-K
dated October 2, 1998, as filed on October 28, 1998.
+++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1998, as filed on
November 13, 1998.
# Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, as filed on March 31, 1998.
## Incorporated by reference to the Company's Current Report on Form 8-K
dated February 24, 2000, as filed on March 1, 2000.
* Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999, as filed on March 16, 2000.
** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2000, as filed on August
14, 2000.
*** Incorporated by reference to the Company's Annual Report of Form 10-K
for the year ended December 31, 2000, as filed on April 2, 2001.
(1) Management contracts or compensatory plans or arrangements covering
executive officers or directors of the Company.
(2) Confidential treatment has been granted as to part of this exhibit.
(3) Applies to James D. Armstrong.
(4) Applies to Hamish N. Brewer and Gregory L. Morrison.
(5) Applies to Hamish N. Brewer, Peter J. Charness, Scott D. Hines, Gregory
L. Morrison and David J. Tidmarsh.
(6) Applies to Senior Executive Officers with the exception of James D.
Armstrong and Kristen L. Magnuson.
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