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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[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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i2 TECHNOLOGIES, INC.
TABLE OF CONTENTS
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1996 and
June 30, 1997 3
Condensed Consolidated Statements of Income for the Three Months
and Six Months Ended June 30, 1996 and June 30, 1997 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 and June 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II OTHER INFORMATION
Item 2. Changes in Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 20
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
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December 31, June 30,
1996 1997
------------ ------------
(unaudited)
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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
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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
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Total liabilities 32,485 47,422
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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
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Total stockholders' equity 68,648 73,722
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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)
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Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1996 1997 1996 1997
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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) $ 0.0 $ 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)
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Six Months Ended June 30,
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1996 1997
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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
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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)
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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
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Net cash provided by financing activities 43,506 636
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Net increase (decrease) in cash and cash equivalents 18,480 (9,498)
Cash and cash equivalents at beginning of period 7,383 36,078
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Cash and cash equivalents at end of period $ 25,863 $ 26,580
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</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):
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Think Pooling
i2 Technologies Think Optimax India Adjustments Combined
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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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company develops, markets and sells client/server-based decision
support software products for supply chain management and related applications.
The Company also provides services such as consulting, training and maintenance
related to these products. Supply chain management encompasses the planning and
scheduling of manufacturing and related logistics, from demand forecasting to
raw materials procurement, work-in-process, distribution and transportation to
customer delivery. The Company's supply chain management software solution,
Rhythm(R), enables customers to model complex, multi-site supply chains and
rapidly generate integrated solutions to supply chain problems such as demand
forecasting, production bottlenecks, supply interruptions and customer order
changes. Rhythm utilizes a unique, constraint-based methodology which
simultaneously considers a broad range of constraints -- from machine
capabilities to individual customer commitments to changing revenue forecasts
- -- to optimize all aspects of the supply chain including manufacturing and
logistics.
This report contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements and other statements made
elsewhere in this report are made in reliance on the Private Securities
Litigation Reform Act of 1995. The section below entitled "Factors That May
Affect Future Results" sets forth and incorporates by reference certain factors
that could cause actual future results of the Company to differ materially from
these statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages that selected items in the unaudited Condensed Consolidated
Statements of Income bear to total revenues. The period to period comparisons
of financial results are not necessarily indicative of future results.
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Three Months Ended Six Months Ended
June 30, June 30,
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1996 1997 1996 1997
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Revenues:
Software licenses 64.7% 69.3% 68.2% 66.7%
Services 25.1 22.1 22.0 23.8
Maintenance 10.2 8.6 9.8 9.5
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Total revenues 100.0 100.0 100.0 100.0
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Costs and expenses:
Cost of software licenses 0.2 2.5 0.1 3.0
Cost of services and maintenance 22.7 20.5 19.7 21.5
Sales and marketing 42.8 35.4 40.5 36.5
Research and development 19.2 21.7 19.6 21.5
General and administrative 11.9 10.2 11.5 10.0
In-process research and development and acquisition costs -- 11.8 -- 6.7
-------- -------- -------- --------
Total costs and expenses 96.8 102.1 91.4 99.2
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Operating income (loss) 3.2 (2.1) 8.6 0.8
Other income 2.6 1.3 1.8 1.6
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Income (loss) before income taxes 5.8 (0.8) 10.4 2.4
Provision (benefit) for income taxes 2.2 -- 3.9 1.1
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Net income (loss) 3.6% (0.8)% 6.5% 1.3%
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REVENUES
The Company's revenues consist of software license revenues, service
revenues and maintenance revenues. Software license revenues consist of sales
of software licenses which are recognized upon execution of a contract and
shipment of the software, provided that no significant vendor obligations
remain outstanding, amounts are due within one year and collection is
considered probable by management. Service revenues are derived from fees for
implementation, consulting and training services and are recognized as the
services are performed. Maintenance revenues are derived from customer support
agreements generally entered into in connection with initial license sales and
subsequent renewals. Maintenance revenues are recognized ratably over the term
of the maintenance period. Payments for maintenance fees are generally made in
advance.
Total revenues increased 169.8% to $48.0 million in the quarter ended
June 30, 1997 from $17.8 million in the quarter ended June 30, 1996. In the
first six months of 1997, total revenues increased 152.4% to $83.8 million from
$33.2 million in the first six months of 1996. The Company currently derives
substantially all of its revenues from Rhythm licenses and related services and
maintenance. The Company expects that Rhythm related revenues will continue to
account for substantially all of the Company's revenues in the foreseeable
future. As a result of the Company's dependence on the continued market
acceptance of Rhythm and enhancements thereto, there can be no assurance that
total revenues will continue to increase at the rates experienced in prior
periods, if at all.
SOFTWARE LICENSES. Revenues from software licenses increased 189.1% to
$33.3 million in the quarter ended June 30, 1997 from $11.5 million in the
quarter ended June 30, 1996. In the first six months of 1997, revenues from
software licenses increased 146.7% to $55.9 million from $22.7 million in the
first six months of 1996. The significant increases in software license
revenues were primarily due to an increased awareness of the benefits of supply
chain management, growing market acceptance of the Company's software products,
a substantial investment in the Company's infrastructure and continued
expansion into new geographic and vertical markets. To date, sales of software
licenses have principally been derived from direct sales to customers. Although
the Company believes that direct sales will continue to account for a majority
of software license revenues, the Company's strategy is to increase the level
of indirect sales activities. The Company expects that sales of its software
products through sales alliances, distributors, resellers and other indirect
channels will increase as a percentage of software license revenues. However,
there can be no assurance that the Company's efforts to expand indirect sales
will be successful.
SERVICES. Revenues from services increased 137.8% to $10.6 million in
the quarter ended June 30, 1997 from $4.5 million in the quarter ended June 30,
1996. In the first six months of 1997, revenues from services increased 173.3%
to $20.0 million from $7.3 million in the first six months of 1996. The
significant increases in the dollar amount of service revenues were primarily
due to the significant increase in the number of Rhythm licenses sold and a
significant investment in the Company's consulting organization as a result of
the increased demand for the Company's products. These increases were also due
to an increase in the use of third party consultants to provide implementation
services to the Company's customers which has allowed the Company to more
rapidly penetrate international markets. Service revenues as a percentage of
total revenues have fluctuated, and are expected to continue to fluctuate on a
period-to-period basis based upon the demand for implementation, consulting and
training services.
MAINTENANCE. Revenues from maintenance increased 126.2% to $4.1
million in the quarter ended June 30, 1997 from $1.8 million in the quarter
ended June 30, 1996. In the first six months of 1997, revenues from maintenance
increased 145.4% to $7.9 million from $3.2 million in the first six months of
1996. The significant increases in the dollar amount of maintenance revenues
were primarily due to the continued increase in the number of Rhythm licenses
sold and a high percentage of maintenance agreement renewals. The Company
expects that the dollar amount of maintenance revenues will continue to
increase, but maintenance revenues as a percentage of total revenues may
decrease from the level experienced in the six months ended June 30, 1997.
INTERNATIONAL REVENUES. The Company's international revenues,
primarily generated from customers located in Asia, Canada and Europe, were
approximately 33% of total revenues in the three months and six months ended
June 30, 1997 and were approximately 17% of total revenues in the three months
and six months ended June 30, 1996. The significant increases in international
revenues as a percentage of total revenues were primarily due to the continued
international expansion of the Company's sales and consulting operations as
well as software
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localization efforts. The Company believes that continued growth and
profitability will require expansion of its sales in international markets. In
order to successfully increase international sales, the Company has utilized
and will continue to utilize substantial resources to expand existing
international operations, establish additional international operations and
hire additional personnel.
COSTS AND EXPENSES
COST OF SOFTWARE LICENSES. Cost of software licenses consists
primarily of (i) the cost of reproduction and delivery of the software, (ii)
the cost of user documentation, (iii) royalty fees associated with third-party
software included with the sales of Rhythm and (iv) commissions paid to
third-parties in connection with joint marketing and other related agreements.
Cost of software licenses was $1.2 million and $28,000 in the quarters ended
June 30, 1997 and 1996, representing 3.7% and 0.2% of software license
revenues, respectively. Cost of software licenses was $2.5 million and $43,000
in the first six months of 1997 and 1996, representing 4.5% and 0.2% of
software license revenues, respectively. The increases in cost of software
licenses both in dollar amount and as a percentage of software license revenues
were primarily due to an increase in commissions paid to third-parties in
connection with joint marketing and other related agreements.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance
consists primarily of costs associated with implementation, consulting and
training services. Cost of services and maintenance also includes the cost of
providing software maintenance to customers such as hotline telephone support,
new releases of software and updated user documentation, none of which costs
have been significant to date. Cost of services and maintenance was $9.8
million and $4.0 million in the quarters ended June 30, 1997 and 1996,
representing 66.8% and 64.3% of total services and maintenance revenues,
respectively. Cost of services and maintenance was $18.0 million and $6.5
million in the first six months of 1997 and 1996, representing 64.5% and 61.9%
of total services and maintenance revenues, respectively. The increases in cost
of services and maintenance both in dollar amount and as a percentage of total
services and maintenance revenues were primarily due to the increase in the
number of consultants, product support and training staff and the increased use
of third party consultants to provide implementation services. In addition,
consulting and support centers were established and expanded in Canada, Europe
and Japan in the last six months of 1996 and the first six months of 1997. The
Company expects to continue to increase the number of its consulting, product
support and training personnel in the foreseeable future as a means to expand
into different geographic and vertical markets. To the extent that the
Company's license sales do not increase at anticipated rates, the hiring of
additional personnel could adversely affect the Company's gross margins.
SALES AND MARKETING. Sales and marketing expenses include personnel
costs, commissions, office facilities, travel, promotional events such as trade
shows, seminars and technical conferences, advertising and public relations
programs. Sales and marketing expenses were $17.0 million and $7.6 million in
the quarters ended June 30, 1997 and 1996, representing 35.4% and 42.8% of
total revenues, respectively. These same expenses were $30.6 million and $13.4
million in the first six months of 1997 and 1996, representing 36.5% and 40.5%
of total revenues, respectively. The increases in the dollar amount of sales
and marketing expenses were primarily due to (i) increased staffing as the
Company established new domestic and international sales offices and expanded
its existing direct sales force, (ii) increased sales commissions as a result
of significantly higher revenues and (iii) increased marketing and promotional
activities. The decreases in sales and marketing expenses as a percentage of
total revenues were primarily due to the Company's ability to leverage its
growing base of sales and marketing resources to significantly increase
revenues. The Company expects to continue to increase its sales and marketing
activities in order to expand its international sales operations and to enter
into new vertical markets. The Company believes that the dollar amount of sales
and marketing expenses will continue to increase, but should not vary
significantly as a percentage of total revenues from the level experienced in
the six months ended June 30, 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses were $10.4
million and $3.4 million in the quarters ended June 30, 1997 and 1996,
representing 21.7% and 19.2% of total revenues, respectively. These same
expenses were $18.0 million and $6.5 million in the first six months of 1997
and 1996, representing 21.5% and 19.6% of total revenues, respectively. The
increases in research and development expenses both in dollar amount and as a
percentage of total revenues were primarily due to the hiring of additional
research and development personnel and other related costs incurred in
connection with expanding the Company's research and development centers,
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particularly its international development facilities. The Company expects that
the dollar amount of research and development expenses will continue to
increase as the Company continues to invest in developing new products,
applications and product enhancements for new vertical markets.
In accordance with Statement of Financial Accounting Standards No. 86,
software development costs are expensed as incurred until technological
feasibility has been established, at which time such costs are capitalized
until the product is available for general release to customers. To date, the
establishment of technological feasibility of the Company's products and
general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
include the personnel and other costs of the finance, human resources,
information systems, administrative and executive departments of the Company
and the fees and expenses associated with legal, accounting and other
requirements. General and administrative expenses were $4.9 million and $2.1
million in the quarters ended June 30, 1997 and 1996, representing 10.2% and
11.9% of total revenues, respectively. These same expenses were $8.4 million
and $3.8 million in the first six months of 1997 and 1996, representing 10.0%
and 11.5% of total revenues, respectively. The increases in the dollar amount
of general and administrative expenses were primarily the result of increased
staffing and related costs associated with the growth of the Company's business
during 1996 and the first six months of 1997. The decreases in general and
administrative expenses as a percentage of total revenues were primarily due to
the substantial increase in total revenues and the Company's ability to
leverage its base of resources to support a larger organization. The Company
expects that the dollar amount of general and administrative expenses will
continue to increase in the foreseeable future.
IN-PROCESS RESEARCH AND DEVELOPMENT AND ACQUISITION COSTS. In April
1997, the Company completed the acquisition of the Operations Planning Group
("OPG"), a business activity of Computer Sciences Corporation, for a cash
purchase price of $1.0 million. 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. 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. The acquisitions of Think, Optimax and Think India have been accounted
for as a pooling of interests. 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 which were recorded
in the second quarter of 1997. These costs included, among other things,
investment banking, legal and accounting fees and expenses and the write-off of
in-process research and development. As a result of these costs, the Company
experienced an operating loss of $1.0 million for the quarter ended June 30,
1997. See Note 3 of the Notes to Condensed Consolidated Financial Statements.
OTHER INCOME
Other income consists primarily of interest income on short-term
investments and overnight repurchase agreements partially offset by interest
expense on the Company's debt. Other income was $627,000 and $463,000 in the
quarters ended June 30, 1997 and 1996, representing 1.3% and 2.6% of total
revenues, respectively. Other income was $1.4 million and $596,000 in the first
six months of 1997 and 1996, representing 1.6% and 1.8% of total revenues,
respectively. The increases in the dollar amount of other income were primarily
due to interest earned on higher balances of cash, cash equivalents and
short-term investments resulting from net proceeds of the initial public
offering of the Company's common stock which was completed in May 1996 and a
decrease in interest expense due to the repayment of a majority of the
Company's debt in June 1996.
PROVISION FOR INCOME TAXES
The Company recorded income tax expense of $938,000 and $1.3 million
in the first six months of 1997 and 1996, respectively. The Company's effective
income tax rate was 46.0% in the first six months of 1997 as compared to 37.2%
in the first six months of 1996. The Company's effective income tax rate was
higher in the first six months of
11
<PAGE> 12
1997 primarily due to the non-deductibility of certain of the
acquisition-related expenses and a higher expected federal income tax rate in
1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily financed its operations
and met its capital expenditure requirements through cash flows from
operations, long-term borrowings and sales of equity securities. The Company's
operating activities provided cash of $3.8 million for the six months ended
June 30, 1997 as compared to $7.4 million for the six months ended June 30,
1996. Operating cash flows have decreased primarily due to an increase in
accounts receivable, partially offset by an increase in accrued liabilities.
Accrued liabilities have increased primarily as a result of increased accrued
compensation and related expenses.
Accounts receivable, net of allowance for doubtful accounts, increased
to $46.6 million at June 30, 1997 from $33.6 million at December 31, 1996,
primarily due to the continued significant increases in revenues. Based upon
the nature of the Company's customers and its past collection experience, the
Company does not expect to encounter collection difficulties with respect to
such accounts that would have a material effect on the Company's financial
position or results of operations.
Average days' sales outstanding was 74 days for the quarter ended June
30, 1997 as compared to 76 days for the year ended December 31, 1996. Average
days' sales outstanding can fluctuate for a variety of reasons including the
timing and billing of receivables for which the related revenues may not yet be
recognizable.
Cash used in investing activities was $13.9 million for the six months
ended June 30, 1997 as compared to $32.4 million in the six months ended June
30, 1996. The decrease in cash used in investing activities was primarily due
to the initial investment of proceeds from the Company's initial public
offering in May 1996. At June 30, 1997, the Company did not have any material
commitments for capital expenditures.
As of June 30, 1997, the Company had $57.4 million of working capital,
including $26.6 million in cash and cash equivalents and $23.3 million in
short-term investments as compared to $58.8 million of working capital as of
December 31, 1996, including $36.1 million in cash and cash equivalents and
$18.0 million in short-term investments.
The Company has a revolving credit agreement with NationsBank of
Texas, N.A. (the "Lender") which expires in June 1998, is unsecured and
contains customary restrictive covenants, including covenants requiring the
Company to maintain certain financial ratios. The revolving credit agreement is
not subject to a borrowing base limitation and the borrowings thereunder bear
interest at the Lender's prime lending rate (8.50% at June 30, 1997). At June
30, 1997, the Company had $100,000 of borrowings outstanding under the
revolving credit agreement, which was repaid in July 1997.
The Company continues to review acquisition and joint venture
candidates with leading-edge products and technologies that could enhance the
Company's product offering. The technologies associated with the products of
the acquired businesses would be incorporated into the Company's existing
internally developed products or would be used in developing new client/server,
open systems products. Any material acquisition or joint venture could result
in a decrease to the Company's working capital depending on the amount, timing
and nature of the consideration to be paid.
The Company believes that existing cash and cash equivalent balances,
short-term investment balances, available borrowings under the revolving credit
agreement and potential cash flow from operations will satisfy the Company's
working capital and capital expenditure requirements for at least the next 12
months. However, any material acquisitions of complementary businesses,
products or technologies could require the Company to obtain additional sources
of financing.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Numerous factors may affect the Company's business and results of
operations. These factors include, but are not limited to, the potential for
significant fluctuations in quarterly results; the reliance on Rhythm and
related products
12
<PAGE> 13
and services for substantially all of the Company's revenues; the level and
intensity of competition in the supply chain management market; the Company's
ability to continue to improve its infrastructure (including personnel and
systems) to manage the substantial growth of the Company; the integration of
recent acquisitions and the potential impact of future acquisitions; dependence
upon key personnel; the timing of the release and market acceptance of new or
enhanced versions of the Company's software products; intellectual property
rights; the international expansion of the Company's operations; the complexity
of the Company's existing software products and new products expected to be
developed; and general economic and business conditions. The discussion below
addresses some of these factors. For a more thorough discussion of these and
other factors that may affect the Company's future results, see the discussion
under the caption "Risk Factors" in the Company's Prospectus dated July 29,
1997 related to the sale of Common Stock by the stockholders named therein.
MARKET ACCEPTANCE
The Company's future operating results are dependent upon continued
market acceptance of Rhythm and enhancements thereto. A decline in demand for,
or market acceptance of, Rhythm as a result of competition, technological
change or other factors would have a material adverse effect on the Company's
business, operating results and financial condition.
POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS; OPERATING
LEVERAGE
The Company's quarterly revenues, expenses and operating results have
varied significantly in the past and are likely to vary significantly from
quarter to quarter in the future. Because the purchase of a supply chain
management software solution generally involves a significant commitment of
capital, the sales cycle associated with the purchase of the Company's products
is typically six to nine months and subject to a number of significant risks,
including customers' budgetary constraints, timing of budget cycles and
concerns about the introduction of new products by the Company or its
competitors, factors over which the Company has little or no control.
Furthermore, purchases of the Company's products may be deferred or canceled in
the event of a downturn in any potential customer's business or the economy in
general. As a result, the timing of significant orders is unpredictable and,
like many other software companies, the Company typically realizes a
significant portion of its software license revenues in the last month of a
quarter. In addition, the amount of revenues associated with particular
licenses can vary significantly based upon the number of software modules
purchased and the number of sites and users involved in the installation. The
Company has experienced and may continue to experience from time to time very
large, individual license sales which can cause significant variations in
quarterly license revenues. Moreover, small delays in customer orders can cause
significant variability in the Company's license revenues and results of
operations for any particular period.
The Company's expense levels are based, in part, on its expected
future revenues. If revenues are below expectations, operating results and net
income are likely to be adversely and disproportionately affected because a
significant portion of the Company's expenses do not vary with revenues. The
Company may also choose to reduce prices, invest significant resources in
research and development efforts or pursue new market opportunities in response
to competition. There can be no assurance that revenues will grow in future
periods, that they will grow at historical rates, or that the Company will
maintain positive operating margins in future quarters.
INTEGRATION OF RECENT ACQUISITIONS; POTENTIAL FUTURE ACQUISITIONS
In April 1997, the Company completed the acquisition of the Operations
Planning Group ("OPG"), a business activity of Computer Sciences Corporation.
In May 1997, the Company acquired Think Systems Corporation, a New Jersey
corporation ("Think"); acquired Optimax Systems Corporation, a Delaware
corporation ("Optimax"); and entered into an agreement to acquire Think Systems
Private Limited, an Indian corporation. The acquisitions involve the
integration of companies that have previously operated independently. Among the
factors considered by the Company's Board of Directors in connection with its
approval of each acquisition was the opportunity for the Company to broaden its
product offering and provide a more comprehensive solution by incorporating the
OPG, Think and Optimax software solutions into Rhythm. However, no assurance
can be given that the Company will not encounter difficulties in integrating
the respective operations of the Company, OPG, Think and Optimax or that the
benefits
13
<PAGE> 14
expected from such integration will be realized. In addition, there can be no
assurance that the Company will not experience the loss of key OPG, Think and
Optimax personnel. Failure to successfully integrate OPG's, Think's and
Optimax's respective operations into the Company's operations could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company may in the future pursue additional acquisitions of
businesses, products and technologies that could complement or expand the
Company's business. The negotiation of potential acquisitions as well as the
integration of an acquired business, product or technology could cause
diversion of management's time and resources. Future acquisitions by the
Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization expenses.
Further, no assurances can be given that any acquired business will be
successfully integrated with the Company's operations. If any such acquisition
were to occur, there can be no assurance that, whether or not consummated, any
such acquisition would not have a material adverse effect on the Company's
business, operating results and financial condition.
COMPLEXITY OF SOFTWARE PRODUCTS; RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
Rhythm is a client/server solution which can operate on platforms from
Digital Equipment, Hewlett-Packard, IBM, Sun Microsystems, Solaris and
Microsoft and can access data from most widely used SQL (structured query
language) databases, including Informix, Oracle and Sybase. Based upon demand
in the marketplace, the Company may identify additional platforms on which to
port its software products; however, such platforms may not be architecturally
compatible with Rhythm's software product design. Therefore, no assurance can
be given concerning the continued successful porting of the Company's software
products on these or additional platforms, the timing of completion of any such
ports or the acceptance of the Company's applications in the marketplace.
The market for the Company's software products is characterized by
rapid technological advances, evolving industry standards in computer hardware
and software technology, changes in customer requirements and frequent new
product introductions and enhancements. The Company's future success will
depend upon its ability to continue to enhance its current product line and to
develop and introduce new products that keep pace with technological
developments, satisfy increasingly sophisticated customer requirements and
achieve market acceptance. There can be no assurance that the Company will be
successful in developing and marketing, on a timely and cost-effective basis,
fully functional product enhancements or new products that respond to
technological advances by others, or that its new products will achieve market
acceptance. The Company's failure to successfully develop and market product
enhancements or new products could have a material adverse effect on the
Company's business, operating results and financial condition.
As a result of the complexities inherent in client/server computing
environments and the broad functionality and performance demanded by customers
for supply chain management products, major new products and product
enhancements can require long development and testing periods. In addition,
software programs as complex as those offered by the Company may contain
undetected errors or "bugs" when first introduced or as new versions are
released that, despite testing by the Company, are discovered only after a
product has been installed and used by customers. While the Company has on
occasion experienced delays in the scheduled introduction of new and enhanced
products and products containing bugs, to date the Company's business has not
been materially adversely affected by delays or the release of products
containing errors. There can be no assurance, however, that errors will not be
found in future releases of the Company's software, or that such errors will
not impair the market acceptance of these products and adversely affect the
Company's business, operating results and financial condition.
While the Company generally takes steps to avoid interruptions of
sales often associated with the pending availability of new products, customers
may delay their purchasing decisions in anticipation of the general
availability of new or enhanced Rhythm products, which could have a material
adverse effect on the Company's business and operating results. Moreover,
significant delays in the general availability of such new releases,
significant problems in the installation or implementation of such new
releases, or customer dissatisfaction with such new releases, could have a
material adverse effect on the Company's business, operating results and
financial condition.
14
<PAGE> 15
INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS
The Company has utilized, and intends to continue to utilize
substantial resources to expand existing international operations, establish
additional international operations and hire additional personnel.
International expansion of the Company's operations has required, and will
continue to require the Company to translate its software and manuals into
foreign languages. To date, the Company has translated its software into Asian,
European and Latin American languages. To the extent the Company is unable to
expand its international operations or translate its software and manuals into
foreign languages in a timely manner, it is likely to adversely impact the
Company's operating results. In addition, even if international operations are
successfully expanded, there can be no assurance that the Company will be able
to maintain or increase international market demand for its products.
The Company's international operations are subject to risks inherent
in international business activities, including, in particular, management of
an organization spread over various countries, longer accounts receivable
payment cycles in certain countries, compliance with a variety of foreign laws
and regulations, unexpected changes in regulatory requirements, overlap of
different tax structures, foreign currency exchange rate fluctuations and
general economic conditions. To date, the Company's revenues from international
operations have primarily been denominated in United States dollars. However,
to the extent significant sales have been in the past or are in the future
denominated in foreign currencies, the Company has implemented and intends in
the future to implement hedging programs to mitigate its exposure to foreign
currency fluctuations. As a result of the continued expansion of the Company's
international operations, the fluctuations in the value of foreign currencies
in which the Company conducts its business have caused and will continue to
cause currency transaction gains and losses. To date, currency transaction
gains and losses have not been material. However, due to the number of foreign
currencies involved, the constantly changing currency exposures and volatility
of currency exchange rates, the Company cannot predict the effect of exchange
rate fluctuations upon future operating results. Other risks associated with
international operations include import and export licensing requirements,
trade restrictions and changes in tariff rates.
15
<PAGE> 16
i2 TECHNOLOGIES, INC.
PART II
ITEM 2. CHANGES IN SECURITIES.
From April 1 through June 30, 1997, the Company issued an aggregate
357,110 shares of its common stock to employees pursuant to exercises of stock
options (with exercise prices ranging from $0.0175 to $12.11 per share) under
the Company's 1992 Stock Plan and 1995 Stock Option/Stock Issuance Plan. These
issuances were deemed exempt from registration under Section 5 of the
Securities Act of 1933 in reliance upon Rule 701 thereunder. In addition, the
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to, or for
sale in connection with, any distribution thereof and appropriate legends were
affixed to the share certificates issued in each such transaction.
In May 1997, the Company issued (i) an aggregate 2,973,001 shares of
its common stock to the shareholders of Think Systems Corporation ("Think") as
a condition to the merger (the "Think Merger") of a wholly owned subsidiary of
the Company with and into Think and (ii) an aggregate 1,265,916 shares of its
common stock to the shareholders of Optimax Systems Corporation ("Optimax") as
a condition to the merger of a wholly owned subsidiary of the Company with and
into Optimax. These issuances were deemed exempt from registration under
Section 5 of the Securities Act of 1933 in reliance upon Section 4(2) thereof.
In addition, the recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to, or for sale in connection with, any distribution thereof and
appropriate legends were affixed to the share certificates issued in each such
transaction.
In June 1997, the Company issued an aggregate 12,322 shares of its
common stock pursuant to the exercise of Think stock options (with exercise
prices ranging from $1.75 to $2.20 per share) assumed by the Company as a
condition to the Think Merger. These issuances were deemed exempt from
registration under Section 5 of the Securities Act of 1933 in reliance upon
Section 4(2) thereof.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting of Stockholders held on April 30, 1997
in Dallas, Texas, the Company's stockholders voted on the following matters:
1. The election of directors. All directors proposed by management were
elected.
<TABLE>
<CAPTION>
Name of Nominee Number of Votes For Number of Votes Withheld
--------------- ------------------- ------------------------
<S> <C> <C>
Harvey B. Cash 23,111,144 52,400
Thomas J. Meredith 23,111,144 52,400
Kanna N. Sharma 23,111,144 52,400
Sanjiv S. Sidhu 23,111,144 52,400
</TABLE>
2. Approval of an amendment to the 1995 Stock Option/Stock Incentive Plan
(the "1995 Plan") to (i) increase the number of shares of Common Stock
available for issuance under the 1995 Plan from 10,000,000 to 12,000,000
shares and (ii) establish a limit on the number of shares of Common Stock
for which any one person may be granted options, separately exercisable
stock appreciation rights and direct stock issuances under the 1995 Plan
per calendar year. The amendment was approved.
Number of Votes For 21,400,520
Number of Votes Against 685,036
Number of Votes Withheld 450
16
<PAGE> 17
3. Approval of the appointment of Ernst & Young LLP as independent auditors.
The appointment was approved.
Number of Votes For 23,163,027
Number of Votes Against 515
Number of Votes Withheld 2
ITEM 5. OTHER INFORMATION
As a condition to the merger between the Company and Think Systems
Corporation ("Think"), Sandeep R. Tungare, a former principal shareholder of
Think and Think's former President and Chief Executive Officer, was appointed
to the Company's Board of Directors in May 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Index
Number Exhibit Description
------ -------------------
2.1 Agreement and Plan of Merger, dated May 15, 1997, by and
among the Company, TSC Acquisition Corporation and Think
Systems Corporation (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
2.2 Agreement and Plan of Merger, dated May 15, 1997, by and
among the Company, OSC Acquisition Corporation and Optimax
Systems Corporation (filed as Exhibit 2.2 to the Company's
Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
11.1 Statement of Computation of Net Income (Loss) Per Share
27.1 Financial Data Schedule
99.1 Text of press release of the Company, dated May 15, 1997
(announcing the Think Merger) (filed as Exhibit 99.1 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
99.2 Text of press release of the Company, dated May 15, 1997
(announcing the Optimax Merger) (filed as Exhibit 99.2 to
the Company's Current Report on Form 8-K dated May 15, 1997
and incorporated herein by reference)
99.3 Registration Rights Agreement, dated May 15, 1997, by and
among the Company and each of the former shareholders of
Think Systems Corporation (filed as Exhibit 99.3 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
99.4 Registration Rights Agreement, dated May 15, 1997, by and
among the Company and each of the former shareholders of
Optimax Systems Corporation (filed as Exhibit 99.4 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
17
<PAGE> 18
(b) Reports on Form 8-K
During the quarter ended June 30, 1997, the Company filed the
following Current Reports on Form 8-K:
1. The Company filed a Form 8-K dated May 15, 1997 (Items 2 and 7)
in order to report that the Company had acquired Think Systems
Corporation, a New Jersey corporation ("Think") by statutory
merger; had acquired Optimax Systems Corporation, a Delaware
corporation ("Optimax") by statutory merger; and had entered
into an agreement to acquire Think Systems Private Limited, an
Indian corporation ("Think India").
2. The Company filed a Form 8-K dated June 12, 1997 (Items 5 and 7)
in order to provide supplemental consolidated financial
statements giving retroactive effect to the mergers with Think
and Optimax and including the combined operations of the
Company, Think, Optimax and Think India. The following financial
statements were filed with the Form 8-K dated June 12, 1997:
Supplemental Consolidated Balance Sheets as of December 31,
1995 and 1996
Supplemental Consolidated Statements of Income for the Years
Ended December 31, 1994, 1995 and 1996
Supplemental Consolidated Statements of Stockholders'
Equity for the Years Ended December 31, 1994, 1995 and 1996
Supplemental Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1995 and 1996
Notes to Supplemental Consolidated Financial Statements
After June 30, 1997, the Company filed the following Current
Reports on Form 8-K:
1. The Company filed a Form 8-K/A on July 1, 1997 (Item 7) in
order to amend its Form 8-K dated June 12, 1997 to provide
additional financial information related to the mergers with
Think and Optimax. The following financial statements* were
filed with the Form 8-K/A filed July 1, 1997:
Supplemental Consolidated Balance Sheets as of December 31,
1995 and 1996
Supplemental Consolidated Statements of Income for the Years
Ended December 31, 1994, 1995 and 1996
Supplemental Consolidated Statements of Stockholders'
Equity for the Years Ended December 31, 1994, 1995 and 1996
Supplemental Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1995 and 1996
Notes to Supplemental Consolidated Financial Statements
* Previously filed in their entirety in the Company's Form
8-K dated June 12, 1997 except for Note 13 of Notes to
Supplemental Consolidated Financial Statements. The
Supplemental Consolidated Financial Statements were refiled
for the sole purpose of including Note 13.
18
<PAGE> 19
2. The Company filed a Form 8-K dated July 1, 1997 (Items 5
and 7) in order to provide supplemental condensed
consolidated financial statements giving retroactive effect
to the mergers with Think and Optimax and including the
combined operations of the Company, Think, Optimax and
Think India. The following financial statements were filed
with the Form 8-K dated July 1, 1997:
Supplemental Condensed Consolidated Balance Sheets as of
December 31, 1996 and March 31, 1997
Supplemental Condensed Consolidated Statements of Income
for the Three Months Ended March 31, 1996 and 1997
Supplemental Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31, 1996 and 1997
Notes to Supplemental Condensed Consolidated Financial
Statements
19
<PAGE> 20
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 6, 1997 /s/ Sanjiv S. Sidhu
- -------------- ---------------------------------------
(Date) Sanjiv S. Sidhu
Chairman of the Board and Chief
Executive Officer
(Principal executive officer)
August 6, 1997 /s/ David F. Cary
- -------------- ---------------------------------------
(Date) David F. Cary
Vice President and Chief
Financial Officer
(Principal finance and
accounting officer)
20
<PAGE> 21
INDEX TO EXHIBITS
NUMBER EXHIBIT DESCRIPTION
------ -------------------
2.1 Agreement and Plan of Merger, dated May 15, 1997, by and among
the Company, TSC Acquisition Corporation and Think Systems
Corporation (filed as Exhibit 2.1 to the Company's Current
Report on Form 8-K dated May 15, 1997 and incorporated herein by
reference)
2.2 Agreement and Plan of Merger, dated May 15, 1997, by and among
the Company, OSC Acquisition Corporation and Optimax Systems
Corporation (filed as Exhibit 2.2 to the Company's Current
Report on Form 8-K dated May 15, 1997 and incorporated herein by
reference)
11.1 Statement of Computation of Net Income (Loss) Per Share
27.1 Financial Data Schedule
99.1 Text of press release of the Company, dated May 15, 1997
(announcing the Think Merger) (filed as Exhibit 99.1 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
99.2 Text of press release of the Company, dated May 15, 1997
(announcing the Optimax Merger) (filed as Exhibit 99.2 to
the Company's Current Report on Form 8-K dated May 15, 1997
and incorporated herein by reference)
99.3 Registration Rights Agreement, dated May 15, 1997, by and
among the Company and each of the former shareholders of
Think Systems Corporation (filed as Exhibit 99.3 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
99.4 Registration Rights Agreement, dated May 15, 1997, by and
among the Company and each of the former shareholders of
Optimax Systems Corporation (filed as Exhibit 99.4 to the
Company's Current Report on Form 8-K dated May 15, 1997 and
incorporated herein by reference)
<PAGE> 1
EXHIBIT 11.1
i2 TECHNOLOGIES, INC.
STATEMENT OF COMPUTATION OF NET INCOME (LOSS) PER SHARE (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>
PRIMARY NET INCOME (LOSS) PER SHARE (1):
Weighted average number of common shares outstanding 27,736 29,259 26,785 29,110
Common shares issuable on exercise of stock options,
net of shares assumed to be repurchased at the
average market price (2) 4,071 -- 3,900 4,352
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding 31,807 29,259 30,685 33,462
========== ========== ========== ==========
Net income (loss) $ 648 $ (390) $ 2,174 $ 1,101
========== ========== ========== ==========
Net income (loss) per share $ 0.02 $ (0.01) $ 0.07 $ 0.03
========== ========== ========== ==========
FULLY DILUTED NET INCOME (LOSS) PER SHARE:
Weighted average number of common shares outstanding 27,736 29,259 26,785 29,110
Common shares issuable on exercise of stock options,
net of shares assumed to be repurchased at the
period-end market price, if higher than the
average market price (2) 4,107 -- 4,017 4,352
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding 31,843 29,259 30,802 33,462
========== ========== ========== ==========
Net income (loss) $ 648 $ (390) $ 2,174 $ 1,101
========== ========== ========== ==========
Net income (loss) per share $ 0.02 $ (0.01) $ 0.07 $ 0.03
========== ========== ========== ==========
</TABLE>
(1) The Company reports primary net income per share as the effect of dilutive
securities is less than 3%.
(2) In computing these amounts, the funds used in applying the treasury stock
method include the compensation related to stock options which will be
charged to expense in the future.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 26,580
<SECURITIES> 23,343
<RECEIVABLES> 48,268
<ALLOWANCES> 1,677
<INVENTORY> 0
<CURRENT-ASSETS> 104,019
<PP&E> 21,646
<DEPRECIATION> 6,161
<TOTAL-ASSETS> 121,144
<CURRENT-LIABILITIES> 46,660
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 73,715
<TOTAL-LIABILITY-AND-EQUITY> 121,144
<SALES> 55,873
<TOTAL-REVENUES> 83,788
<CGS> 2,508
<TOTAL-COSTS> 83,130
<OTHER-EXPENSES> (1,381)
<LOSS-PROVISION> 1,187
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 2,039
<INCOME-TAX> 938
<INCOME-CONTINUING> 1,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,101
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
