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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0 - 28030
i2 TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2294945
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 E. LAS COLINAS BLVD., 16TH FLOOR,
IRVING, TEXAS 75039
(Address of principal executive offices) (Zip code)
(214) 860-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes [ X ] No [ ]
As of August 4, 1997, the Registrant had outstanding 29,703,337 shares of
Common Stock, $.00025 par value.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,078 $ 26,580
Short-term investments 18,031 23,343
Accounts receivable, net 33,615 46,591
Prepaid and other current assets 3,219 3,293
Income tax receivable -- 3,521
Deferred income taxes -- 691
------------ ------------
Total current assets 90,943 104,019
Furniture and equipment, net 8,934 15,485
Deferred income taxes and other assets 1,256 1,640
------------ ------------
Total assets $ 101,133 $ 121,144
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,583 $ 7,149
Accrued liabilities 8,184 16,544
Current portion of deferred revenue 18,932 22,967
Income taxes payable 363 --
Deferred income taxes 57 --
------------ ------------
Total current liabilities 32,119 46,660
Long-term debt 100 100
Deferred revenue 266 662
------------ ------------
Total liabilities 32,485 47,422
------------ ------------
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
none issued -- --
Common Stock, $.00025 par value, 50,000,000 shares
authorized, 28,883,410 and 29,609,036 shares issued
and outstanding, respectively 7 7
Additional paid-in capital 58,074 61,677
Deferred compensation (1,865) (1,495)
Retained earnings 12,432 13,533
------------ ------------
Total stockholders' equity 68,648 73,722
------------ ------------
Total liabilities and stockholders' equity $ 101,133 $ 121,144
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</TABLE>
See accompanying notes.
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i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 11,517 $ 33,290 $ 22,652 $ 55,873
Services 4,460 10,605 7,308 19,975
Maintenance 1,825 4,128 3,236 7,940
---------- ---------- ---------- ----------
Total revenues 17,802 48,023 33,196 83,788
---------- ---------- ---------- ----------
Costs and expenses:
Cost of software licenses 28 1,217 43 2,508
Cost of services and maintenance 4,043 9,838 6,530 17,996
Sales and marketing 7,615 17,005 13,424 30,612
Research and development 3,421 10,438 6,501 17,978
General and administrative 2,125 4,909 3,830 8,387
In-process research and development and
acquisition costs -- 5,649 -- 5,649
---------- ---------- ---------- ----------
Total costs and expenses 17,232 49,056 30,328 83,130
---------- ---------- ---------- ----------
Operating income (loss) 570 (1,033) 2,868 658
Other income 463 627 596 1,381
---------- ---------- ---------- ----------
Income (loss) before income taxes 1,033 (406) 3,464 2,039
Provision (benefit) for income taxes 385 (16) 1,290 938
---------- ---------- ---------- ----------
Net income (loss) $ 648 $ (390) $ 2,174 $ 1,101
========== ========== ========== ==========
Net income (loss) per share $ 0.02 $ (0.01) $ 0.07 $ 0.03
Weighted average common and common
equivalent shares outstanding 31,807 29,259 30,685 33,462
</TABLE>
See accompanying notes.
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i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1997
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,174 $ 1,101
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,148 2,033
Amortization of deferred compensation 414 370
Deferred income taxes 346 (462)
Tax benefit of stock options -- 2,967
Changes in operating assets and liabilities:
Accounts receivable, net (5,030) (12,976)
Income tax receivable (595) (3,521)
Prepaid and other assets (746) (744)
Accounts payable 952 2,566
Accrued liabilities 3,330 8,360
Income taxes payable (193) (363)
Deferred revenue 5,598 4,431
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Net cash provided by operating activities 7,398 3,762
-------- --------
Cash flows from investing activities:
Purchases of furniture and equipment (3,491) (8,584)
Purchases of short-term investments (28,933) (20,812)
Proceeds from maturities of short-term investments -- 15,500
-------- --------
Net cash used in investing activities (32,424) (13,896)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit 400 --
Payments on long-term debt (1,253) --
Advances from stockholders, net (471) --
Net proceeds from sale of common stock
and exercise of stock options 44,830 636
-------- --------
Net cash provided by financing activities 43,506 636
-------- --------
Net increase (decrease) in cash and cash equivalents 18,480 (9,498)
Cash and cash equivalents at beginning of period 7,383 36,078
-------- --------
Cash and cash equivalents at end of period $ 25,863 $ 26,580
======== ========
</TABLE>
See accompanying notes.
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i2 TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of i2 Technologies, Inc. and its wholly owned subsidiaries
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
In May 1997, the Company acquired Think Systems Corporation ("Think"),
a demand planner software company; acquired Optimax Systems Corporation
("Optimax"), a scheduling and sequencing software company; and entered into an
agreement to acquire Think Systems Private Limited ("Think India"), an offshore
software development house (see Note 3).
The accompanying unaudited interim condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring
entries) which, in the opinion of the Company's management, are necessary for a
fair presentation of the results for the interim periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the Securities and Exchange Commission's rules
and regulations. These financial statements should be read in conjunction with
the audited financial statements and notes thereto for the year ended December
31, 1996, included in the Company's Current Report on Form 8-K dated June 12,
1997, as amended.
The results of operations for the three and six month periods ended
June 30, 1997 are not necessarily indicative of results that may be expected
for any other interim period or for the full year.
Certain prior year financial statement items have been reclassified to
conform to the current year's format.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is computed based upon the weighted
average number of common shares outstanding and the effect of dilutive common
stock equivalents from the exercise of stock options using the treasury stock
method, except in loss periods when the effect would be antidilutive. Fully
diluted earnings per share is the same as, or not materially different from,
primary earnings per share and accordingly, is not presented. In February 1997,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share", which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements, the Company will be required to
present "basic" earnings per share which excludes the effect of common stock
equivalents. Basic earnings (loss) per share for the three months ended June
30, 1996 and 1997 was $0.02 and $(0.01), respectively. Basic earnings per share
for the six months ended June 30, 1996 and 1997 was $0.08 and $0.04,
respectively. The Company will also be required to present "diluted" earnings
per share which includes the effect of common stock equivalents. Diluted
earnings (loss) per share for the three months ended June 30, 1996 and 1997 was
$0.02 and $(0.01), respectively. Diluted earnings per share for the six months
ended June 30, 1996 and 1997 was $0.07 and $0.03, respectively. All net income
(loss) per share computations give retroactive effect to the exchange of common
shares in connection with the Think, Think India and Optimax acquisitions (see
Note 3).
3. BUSINESS COMBINATIONS
In May 1997, the Company acquired Think and Optimax and entered into
an agreement to acquire Think India. Under the terms of these agreements, the
Company has agreed to issue up to 3,823,337 shares, 1,372,618 shares and 35,663
shares of its common stock for all the outstanding capital stock and all
unexpired and unexercised options of Think, Optimax and Think India,
respectively. The acquisition of Think India is subject to a number of
conditions, including requisite Indian regulatory approval. The Company expects
to obtain the necessary regulatory approvals and consummate the Think India
acquisition by the end of 1997.
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Think provides premium demand chain solutions, including an integrated
line of flexible, client/server-based software applications, for sales,
marketing and logistics departments representing a variety of industries
including consumer packaged goods, high technology, pharmaceutical, apparel,
automotive and other product driven specializations. Think India is controlled
by the former principal shareholders of Think and is engaged primarily in
research and development services provided to Think. Optimax develops, markets
and implements supply chain sequencing software using unique genetic algorithms
for customer-driven, make-to-order manufacturing.
Each of these business combinations was accounted for as a pooling of
interests, and accordingly, the accompanying condensed consolidated financial
statements give retroactive effect to the combinations and include the combined
operations of i2 Technologies, Think, Optimax and Think India for all periods
presented. The following is a summary of the results of operations of the
separate entities for periods that have not previously been reported (in
thousands):
<TABLE>
<CAPTION>
Think Pooling
i2 Technologies Think Optimax India Adjustments Combined
--------------- -------- -------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
June 30, 1997:
Revenues $ 42,349 $ 4,574 $ 1,228 $ 474 $ (602) $ 48,023
Net income (loss) 423 (423) (347) (43) -- (390)
Six Months Ended
June 30, 1997:
Revenues $ 74,514 $ 7,956 $ 2,252 $ 925 $(1,859) $ 83,788
Net income (loss) 2,080 (1,009) (273) 143 160 1,101
</TABLE>
Pooling adjustments have been recorded to eliminate (i) revenues and
expenses associated with software license royalties, consulting services and
maintenance charges provided to i2 Technologies by Think, and (ii) revenues and
expenses associated with research and development services provided to Think by
Think India.
In April 1997, the Company completed the acquisition of the Operations
Planning Group ("OPG"), a business activity of Computer Sciences Corporation
("CSC"), for a cash purchase price of $1.0 million. OPG provides operation
planning environment ("OPE") optimization software for planning and scheduling
for customers in the consumer packaged goods industry. The Company assumed the
contractual obligations of the OPE customer base in return for $271,000
representing prepaid maintenance revenue. As part of the acquisition agreement,
all employees of OPG became employees of the Company. The acquisition was
accounted for under the purchase accounting method, and a substantial portion
of the purchase price was recorded as in-process research and development and
expensed during the second quarter of 1997. Additionally, the Company has
agreed to make available a certain amount of consulting revenue opportunities
to CSC within a three-year period from the date of the acquisition. If the
agreed upon consulting revenue opportunities are not made available to CSC, the
Company will be required to make an additional cash payment to CSC at the end
of the three-year period equal to the gross profit typically realized on such
consulting revenue. Such payment, if any, would be recorded as an increase in
the purchase price.
The Company incurred approximately $5.6 million in certain
acquisition-related expenses in connection with the business combinations
involving Think, Optimax, Think India and OPG. These costs include, among other
things, investment banking, legal and accounting fees and expenses and the
write-off of in-process research and development. The Company recorded these
expenses in the second quarter of 1997. Due to the non-deductibility of certain
of the acquisition-related expenses, the Company adjusted its estimated
effective income tax rate to 46.0% for the six months ended June 30, 1997. The
acquisition-related expenses resulted in a one-time charge to the Company's
operating results and reduced net income per share for the three months and six
months ended June 30, 1997 by $0.09 per share.
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SIGNATURES
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.
i2 TECHNOLOGIES, INC.
August 20, 1997 /s/ Sanjiv S. Sidhu
- --------------- ---------------------------------------
(Date) Sanjiv S. Sidhu
Chairman of the Board and Chief
Executive Officer
(Principal executive officer)
August 20, 1997 /s/ David F. Cary
- --------------- ---------------------------------------
(Date) David F. Cary
Vice President and Chief
Financial Officer
(Principal finance and
accounting officer)
8
