I2 TECHNOLOGIES INC, 8-K, 1998-06-23

I2 TECHNOLOGIES INC
8-K, 1998-06-23
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<PAGE> 1

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------------

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): JUNE 19, 1998

i2 TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)

<TABLE>
<S> <C> <C>
DELAWARE 0-28030 75-2294945
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

909 E. LAS COLINAS BLVD., 16TH FLOOR, 75039
IRVING, TEXAS (Zip Code)
(Address of principal executive
offices)
</TABLE>

Company's telephone number, including area code: (214) 860-6000

------------------------------------------------------------------
(Former name or former address, if changed since last report)

================================================================================
<PAGE> 2

ITEM 5. OTHER EVENTS.

In April 1998, i2 Technologies, Inc. (the "Registrant") acquired InterTrans
Logistics Solutions Limited ("ITLS") of Markham, Ontario.

The Registrant is currently undertaking to file a Form S-3 registration
statement under the Securities Act of 1933 to register the shares issued in
connection with the acquisition. Additional information regarding the
acquisition is presented in the Registrant's previously filed Current Reports on
Form 8-K, dated March 24, 1998 and May 5, 1998.

The acquisition was accounted for as a pooling of interests. In accordance
with Securities and Exchange Commission requirements, the Registrant is
providing supplemental selected financial data, supplemental management's
discussion and analysis of financial condition and results of operations and
supplemental consolidated financial statements which give retroactive effect to
the acquisition and include the combined operations of the Registrant and ITLS
for all periods presented. The supplemental consolidated financial statements
will become the historical financial statements of the Registrant after
financial statements that include the date of consummation of the acquisition
are issued.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Ernst & Young LLP.
27.1 Restated Financial Data Schedule for the Year Ended December
31, 1997.
27.2 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1997.
27.3 Restated Financial Data Schedule for the Six Months Ended
June 30, 1997.
27.4 Restated Financial Data Schedule for the Three Months Ended
March 31, 1997.
27.5 Restated Financial Data Schedule for the Year Ended December
31, 1996.
27.6 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1996.
27.7 Restated Financial Data Schedule for the Six Months Ended
June 30, 1996.
27.8 Restated Financial Data Schedule for the Three Months Ended
March 31, 1996.
27.9 Restated Financial Data Schedule for the Year Ended December
31, 1995.
99.1 Supplemental Selected Financial Data of the Registrant as of
and for the Years ended December 31, 1993, 1994, 1995, 1996
and 1997.
99.2 Supplemental Management's Discussion and Analysis of
Financial Condition and Results of Operations of the
Registrant for the Years ended December 31, 1995, 1996 and
1997.
</TABLE>

2
<PAGE> 3

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
99.3 The following Supplemental Consolidated Financial Statements
of the Registrant:
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Report of Independent Auditors........................... F-1
2. Supplemental Consolidated Balance Sheets as of December
31, 1996 and 1997........................................ F-2
3. Supplemental Consolidated Statements of Income for the
Years Ended December 31, 1995, 1996 and 1997............. F-3
4. Supplemental Consolidated Statements of Stockholders'
Equity for the Years Ended December 31, 1995, 1996 and
1997..................................................... F-4
5. Supplemental Consolidated Statements of Cash Flows for
the Years Ended December 31, 1995, 1996 and 1997......... F-5
6. Notes to Supplemental Consolidated Financial
Statements............................................... F-6

99.4 Supplemental Consolidated Financial Statement Schedules:

Schedule II -- Valuation and Qualifying Accounts

Schedules other than the one listed above are omitted as
the required information is inapplicable or the
information is presented in the supplemental
consolidated financial statements or related notes.

</TABLE>

3
<PAGE> 4

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 hereunto duly authorized.

i2 TECHNOLOGIES, INC.

By: /s/ DAVID F. CARY
----------------------------------
David F. Cary,
Vice President and
Chief Financial Officer

Dated: June 19, 1998

4
<PAGE> 5

EXHIBIT INDEX

Schedule II -- Valuation and Qualifying Accounts

Schedules other than the one listed above are omitted as the
required information is inapplicable or the information is
presented in the supplemental consolidated financial
statements or related notes.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
on Form S-8 (File Nos. 333-03703, 333-27009, 333-28147 and 333-53667) and on
Form S-3 (File Nos. 333-29339 and 333-29341) of i2 Technologies, Inc. of our
report dated June 19, 1998, with respect to the supplemental consolidated
financial statements of i2 Technologies, Inc. included in this Current Report on
Form 8-K dated June 19, 1998.

/s/ ERNST & YOUNG LLP

Dallas, Texas
June 19, 1998

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 127,433
<SECURITIES> 14,538
<RECEIVABLES> 75,037
<ALLOWANCES> 4,263
<INVENTORY> 0
<CURRENT-ASSETS> 225,764
<PP&E> 31,545
<DEPRECIATION> 10,650
<TOTAL-ASSETS> 250,263
<CURRENT-LIABILITIES> 64,205
<BONDS> 0
0
0
<COMMON> 17<F1>
<OTHER-SE> 183,743<F1>
<TOTAL-LIABILITY-AND-EQUITY> 250,263
<SALES> 139,798
<TOTAL-REVENUES> 213,692
<CGS> 2,744
<TOTAL-COSTS> 206,131
<OTHER-EXPENSES> (3,353)
<LOSS-PROVISION> 3,903
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 10,914
<INCOME-TAX> 6,916
<INCOME-CONTINUING> 3,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,998
<EPS-PRIMARY> 0.06<F1>
<EPS-DILUTED> 0.06<F1>
<FN>
<F1>INCLUDES THE EFFECT OF A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTIVE JUNE 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 38,770
<SECURITIES> 22,934
<RECEIVABLES> 54,686
<ALLOWANCES> 2,584
<INVENTORY> 0
<CURRENT-ASSETS> 123,113
<PP&E> 27,887
<DEPRECIATION> 8,733
<TOTAL-ASSETS> 146,748
<CURRENT-LIABILITIES> 59,529
<BONDS> 0
0
0
<COMMON> 16<F1>
<OTHER-SE> 85,670<F1>
<TOTAL-LIABILITY-AND-EQUITY> 146,748
<SALES> 96,024
<TOTAL-REVENUES> 147,571
<CGS> 2,604
<TOTAL-COSTS> 144,748
<OTHER-EXPENSES> (2,231)
<LOSS-PROVISION> 2,826
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 5,054
<INCOME-TAX> 2,349
<INCOME-CONTINUING> 2,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,705
<EPS-PRIMARY> 0.04<F1>
<EPS-DILUTED> 0.04<F1>
<FN>
<F1>INCLUDES THE EFFECT OF A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTIVE JUNE 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<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> 30,184
<SECURITIES> 23,343
<RECEIVABLES> 48,823
<ALLOWANCES> 1,822
<INVENTORY> 0
<CURRENT-ASSETS> 110,025
<PP&E> 24,598
<DEPRECIATION> 7,193
<TOTAL-ASSETS> 130,566
<CURRENT-LIABILITIES> 50,117
<BONDS> 0
0
0
<COMMON> 16<F1>
<OTHER-SE> 78,609<F1>
<TOTAL-LIABILITY-AND-EQUITY> 130,566
<SALES> 57,817
<TOTAL-REVENUES> 89,475
<CGS> 2,522
<TOTAL-COSTS> 91,924
<OTHER-EXPENSES> (1,454)
<LOSS-PROVISION> 1,257
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> (995)
<INCOME-TAX> (433)
<INCOME-CONTINUING> (562)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (562)
<EPS-PRIMARY> (0.01)<F1>
<EPS-DILUTED> (0.01)<F1>
<FN>
<F1>Includes the effect of a two-for-one stock split which was effective June 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 42,558
<SECURITIES> 24,794
<RECEIVABLES> 34,017
<ALLOWANCES> 1,294
<INVENTORY> 0
<CURRENT-ASSETS> 105,419
<PP&E> 18,411
<DEPRECIATION> 6,521
<TOTAL-ASSETS> 119,670
<CURRENT-LIABILITIES> 41,067
<BONDS> 0
0
0
<COMMON> 15<F1>
<OTHER-SE> 76,932<F1>
<TOTAL-LIABILITY-AND-EQUITY> 119,670
<SALES> 23,517
<TOTAL-REVENUES> 38,498
<CGS> 1,304
<TOTAL-COSTS> 38,006
<OTHER-EXPENSES> (752)
<LOSS-PROVISION> 772
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 1,244
<INCOME-TAX> 486
<INCOME-CONTINUING> 758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 758
<EPS-PRIMARY> 0.01<F1>
<EPS-DILUTED> 0.01<F1>
<FN>
<F1>INCLUDES THE EFFECT OF A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTIVE JUNE 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 41,390
<SECURITIES> 18,031
<RECEIVABLES> 36,270
<ALLOWANCES> 1,401
<INVENTORY> 0
<CURRENT-ASSETS> 99,050
<PP&E> 15,191
<DEPRECIATION> 4,853
<TOTAL-ASSETS> 111,789
<CURRENT-LIABILITIES> 35,022
<BONDS> 0
0
0
<COMMON> 15<F1>
<OTHER-SE> 75,199<F1>
<TOTAL-LIABILITY-AND-EQUITY> 111,789
<SALES> 61,073
<TOTAL-REVENUES> 100,469
<CGS> 260
<TOTAL-COSTS> 90,647
<OTHER-EXPENSES> (1,681)
<LOSS-PROVISION> 1,085
<INTEREST-EXPENSE> 261
<INCOME-PRETAX> 11,503
<INCOME-TAX> 4,705
<INCOME-CONTINUING> 6,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,798
<EPS-PRIMARY> 0.12<F1>
<EPS-DILUTED> 0.10<F1>
<FN>
<F1>INCLUDES THE EFFECT OF A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTIVE JUNE 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 32,867
<SECURITIES> 26,484
<RECEIVABLES> 28,090
<ALLOWANCES> 775
<INVENTORY> 0
<CURRENT-ASSETS> 90,690
<PP&E> 12,818
<DEPRECIATION> 4,548
<TOTAL-ASSETS> 100,407
<CURRENT-LIABILITIES> 34,259
<BONDS> 0
0
0
<COMMON> 15<F1>
<OTHER-SE> 64,614<F1>
<TOTAL-LIABILITY-AND-EQUITY> 100,407
<SALES> 41,098
<TOTAL-REVENUES> 66,292
<CGS> 199
<TOTAL-COSTS> 61,161
<OTHER-EXPENSES> (1,113)
<LOSS-PROVISION> 203
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 6,244
<INCOME-TAX> 2,747
<INCOME-CONTINUING> 3,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,497
<EPS-PRIMARY> 0.06<F1>
<EPS-DILUTED> 0.05<F1>
<FN>
<F1>INCLUDES THE EFFECT OF A TWO-FOR-ONE STOCK SPLIT WHICH WAS EFFECTIVE JUNE 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 27,167
<SECURITIES> 28,933
<RECEIVABLES> 18,045
<ALLOWANCES> 769
<INVENTORY> 0
<CURRENT-ASSETS> 77,384
<PP&E> 10,851
<DEPRECIATION> 3,773
<TOTAL-ASSETS> 85,822
<CURRENT-LIABILITIES> 25,200
<BONDS> 0
0
0
<COMMON> 15<F1>
<OTHER-SE> 58,389<F1>
<TOTAL-LIABILITY-AND-EQUITY> 85,822
<SALES> 24,291
<TOTAL-REVENUES> 39,122
<CGS> 150
<TOTAL-COSTS> 35,235
<OTHER-EXPENSES> (547)
<LOSS-PROVISION> 115
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 4,434
<INCOME-TAX> 1,652
<INCOME-CONTINUING> 2,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,782
<EPS-PRIMARY> 0.05<F1>
<EPS-DILUTED> 0.04<F1>
<FN>
<F1>Includes the effect of a two-for-one stock split which was effective June 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 13,182
<SECURITIES> 2,459
<RECEIVABLES> 11,791
<ALLOWANCES> 838
<INVENTORY> 0
<CURRENT-ASSETS> 29,281
<PP&E> 9,259
<DEPRECIATION> 3,231
<TOTAL-ASSETS> 36,447
<CURRENT-LIABILITIES> 21,786
<BONDS> 0
0
0
<COMMON> 14<F1>
<OTHER-SE> 12,261<F1>
<TOTAL-LIABILITY-AND-EQUITY> 36,447
<SALES> 11,786
<TOTAL-REVENUES> 17,869
<CGS> 20
<TOTAL-COSTS> 15,397
<OTHER-EXPENSES> (105)
<LOSS-PROVISION> 210
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 2,577
<INCOME-TAX> 960
<INCOME-CONTINUING> 1,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,617
<EPS-PRIMARY> 0.03<F1>
<EPS-DILUTED> 0.03<F1>
<FN>
<F1>Includes the effect of a two-for-one stock split which was effective June 2,
1998.
</FN>

</TABLE>

<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,122
<SECURITIES> 0
<RECEIVABLES> 12,654
<ALLOWANCES> 947
<INVENTORY> 0
<CURRENT-ASSETS> 22,914
<PP&E> 6,817
<DEPRECIATION> 2,405
<TOTAL-ASSETS> 28,251
<CURRENT-LIABILITIES> 15,506
<BONDS> 0
0
0
<COMMON> 13<F1>
<OTHER-SE> 10,365<F1>
<TOTAL-LIABILITY-AND-EQUITY> 28,251
<SALES> 24,162
<TOTAL-REVENUES> 38,461
<CGS> 390
<TOTAL-COSTS> 32,267
<OTHER-EXPENSES> 167
<LOSS-PROVISION> 508
<INTEREST-EXPENSE> 271
<INCOME-PRETAX> 6,027
<INCOME-TAX> 2,054
<INCOME-CONTINUING> 3,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,973
<EPS-PRIMARY> 0.09<F1>
<EPS-DILUTED> 0.07<F1>
<FN>
<F1>Includes the effect of a two-for-one stock split which was effective June 2,
1998.
</FN>

</TABLE>

<PAGE> 1

EXHIBIT 99.1

SUPPLEMENTAL SELECTED CONSOLIDATED FINANCIAL DATA

The following supplemental selected consolidated financial data should be
read in conjunction with the "Supplemental Management's Discussion and Analysis
of Financial Condition and Results of Operations" included as Exhibit 99.2 of
this Current Report on Form 8-K dated June 19, 1998. The statement of income
data for the years ended December 31, 1995, 1996 and 1997, and the balance sheet
data at December 31, 1996 and 1997 are derived from the Supplemental
Consolidated Financial Statements included in Exhibit 99.3 of this Current
Report on Form 8-K dated June 19, 1998 which have been audited by Ernst & Young
LLP, independent auditors. The statement of income data for the years ended
December 31, 1993 and 1994 and the balance sheet data at December 31, 1993, 1994
and 1995 are derived from unaudited financial statements.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Software licenses..................... $ 5,092 $11,178 $24,162 $ 61,073 $139,798
Services.............................. 2,773 5,013 10,837 30,515 53,437
Maintenance........................... 359 1,168 3,462 8,881 20,457
------- ------- ------- -------- --------
Total revenues................ 8,224 17,359 38,461 100,469 213,692
------- ------- ------- -------- --------
Costs and expenses:
Cost of software licenses............. 151 366 390 260 2,744
Cost of services and maintenance...... 1,995 3,196 7,601 21,761 46,004
Sales and marketing................... 1,791 4,780 10,487 35,182 73,526
Research and development.............. 1,689 3,644 8,503 21,886 52,741
General and administrative............ 1,325 2,188 5,286 10,425 21,810
In-process research and development
and acquisition costs(1)........... -- -- -- 1,133 9,306
------- ------- ------- -------- --------
Total costs and expenses...... 6,951 14,174 32,267 90,647 206,131
------- ------- ------- -------- --------
Operating income(1)..................... 1,273 3,185 6,194 9,822 7,561
Other income (expense), net............. (41) (127) (167) 1,681 3,353
------- ------- ------- -------- --------
Income before income taxes.............. 1,232 3,058 6,027 11,503 10,914
Provision for income taxes.............. 483 1,306 2,054 4,705 6,916
------- ------- ------- -------- --------
Net income.............................. $ 749 $ 1,752 $ 3,973 $ 6,798 $ 3,998
======= ======= ======= ======== ========
Net income per share(1)(2).............. $ 0.02 $ 0.04 $ 0.09 $ 0.12 $ 0.06
Net income per share, assuming
dilution(1)(2)........................ $ 0.02 $ 0.03 $ 0.07 $ 0.10 $ 0.06
Shares used in computing net income per
share(1)(2)........................... 40,866 41,940 43,538 58,000 62,652
Shares used in computing net income per
share, assuming dilution(1)(2)........ 48,938 53,178 58,752 65,974 70,932
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $ 139 $ 1,814 $ 7,408 $ 64,028 $161,559
Total assets............................ 4,687 11,366 28,251 111,789 250,263
Total stockholders' equity.............. 846 2,598 10,378 75,214 183,760
</TABLE>

1
<PAGE> 2

- ---------------

(1) InterTrans Logistics Solutions Limited ("ITLS") purchased a software
product from Strategic Decision Systems in 1996, and $1.1 million of the
purchase price was recorded as in-process research and development and
expensed during 1996.

During 1997, the Company incurred approximately $9.3 million in certain
acquisition-related expenses in connection with the business combinations
involving Optimax Systems Corporation, Think Systems Corporation, the
Operations Planning Group of Computer Sciences Corporation and M-Star
Systems Limited, of which $4.6 million represents the write-off of
in-process research and development. The remaining costs include, among
other things, investment banking, legal and accounting fees and expenses.
The acquisition-related expenses resulted in a one-time charge to the
Company's operating results.

(2) All references in this table to the number of shares and income per share
amounts have been adjusted on a retroactive basis to reflect the
two-for-one stock split declared by the Company's Board of Directors
effective June 2, 1998 and the Company's acquisition of ITLS.

<PAGE> 1

EXHIBIT 99.2

i2 TECHNOLOGIES, INC.

SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below contains forward-looking statements,
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, that involve risks and uncertainties,
such as statements of the plans, objectives, expectations and intentions of i2
Technologies, Inc. (the "Company"). Such forward-looking statements are
generally accompanied by words such as "plan," "estimate," "expect," "believe,"
"should," "would," "could," "anticipate," "may" or other words that convey
uncertainty of future events or outcomes. The forward-looking statements in this
discussion and analysis are made in reliance upon safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The section below entitled
"Factors That May Affect Future Results" sets forth certain factors that could
cause actual future results of the Company to differ materially from those
statements.

OVERVIEW

The Company is the leading provider of 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, including demand forecasting,
raw materials procurement, work-in-process, distribution and transportation
across multiple enterprises. i2's client/server software solution, RHYTHM, is
designed to provide customers with an end-to-end supply chain management
solution, enabling customers to model complex, multi-enterprise supply chains to
rapidly generate integrated solutions to supply chain challenges such as demand
volatility, production bottlenecks, supply interruptions and distribution
alternatives. RHYTHM utilizes a unique, constraint-based methodology which
simultaneously considers a broad range of factors -- from changing revenue
forecasts to machine capabilities to individual customer commitments -- to
optimize all aspects of the supply chain.

Since inception, the Company has significantly increased its investment in
sales and marketing, service and support, research and development and general
and administrative staff and accelerated such investment beginning in the last
quarter of 1995. As a result of the increased staffing and the costs and
expenses related to acquisitions, the Company has experienced decreases in
operating margins in 1996 and 1997. As a result of these investments, together
with the increasing awareness of the benefits of supply chain management in
general and increased market acceptance of the Company's products in particular,
the Company's revenues in 1996 and the 1997 were substantially higher than the
levels achieved in prior years. In order to capture additional market share, the
Company expects to continue to increase staffing levels and incur additional
associated costs in future periods through both direct efforts and potential
acquisitions. However, there can be no assurance that the Company's revenues
will grow in future periods or that the Company will maintain the substantial
growth rates in revenues it realized in 1996 and 1997.

The sales cycle for the Company's products is typically six to nine months,
and license fee revenues for a particular period are substantially dependent on
orders received and software functionality delivered in that period.
Furthermore, the Company has experienced, and expects to continue to experience,
significant variation in the size of individual sales. As a result of these and
other factors, the Company's results have varied significantly in the past and
are likely to be subject to significant fluctuations in the future. Accordingly,
the Company believes that period-to-period comparisons of its results of
operations are not necessarily indicative of the results to be expected for any
future period.

In May 1997, the Company acquired Think Systems Corporation ("Think").
Approximately 7.7 million shares of Common Stock have been issued or are
issuable to the former Think shareholders and optionholders in exchange for all
of the capital stock of Think and all unexpired and unexercised options to
acquire Think capital stock. Also in May 1997, the Company acquired Optimax
Systems Corporation ("Optimax"). Approximately 2.7 million shares of Common
Stock have been issued or are issuable to the former Optimax
1
<PAGE> 2

stockholders and optionholders in exchange for all of the capital stock of
Optimax and all unexpired and unexercised options to acquire Optimax capital
stock. For accounting purposes, the Think and Optimax acquisitions were each
treated as a pooling of interests. Accordingly, the Company's consolidated
financial statements give retroactive effect to the Think and Optimax
acquisitions and include the combined operations of the Company, Think and
Optimax for all periods presented.

In April 1997, the Company acquired the Operations Planning Group ("OPG"),
a business activity of Computer Sciences Corporation, for a cash purchase price
of $1.0 million. In November 1997, the Company acquired the remaining interest
in a minority owned subsidiary, M-Star Systems Limited ("M-Star"), for an
aggregate purchase price of $3.75 million. The acquisitions of OPG and M-Star
were accounted for under the purchase accounting method.

In the second quarter of 1997, the Company incurred approximately $5.6
million in certain expenses related to the Think, Optimax and OPG acquisitions.
In the fourth quarter of 1997, the Company incurred approximately $3.7 million
in certain expenses related to the acquisition of M-Star. Of these expenses,
$4.6 million represents the write-off of in-process research and development.
The remaining costs included, among other things, investment banking, legal and
accounting fees and expenses.

In April 1998, the Company acquired InterTrans Logistics Solutions Limited
("ITLS") of Markham, Ontario. ITLS provides software designed to manage both the
daily operations and the tactical and strategic planning aspects of
transportation and logistics activities across the supply chain. Approximately
3.3 million shares of Common Stock have been issued or are issuable to the
former ITLS shareholders and optionholders in exchange for all of the capital
stock and all unexpired and unexercised options to acquire ITLS capital stock.
The Company expects to incur approximately $3 million in expenses related to
this acquisition. These expenses include, among other things, investment
banking, legal and accounting fees and expenses. Such expenses will be recorded
in the second quarter of 1998.

For accounting purposes, the ITLS acquisition was treated as a pooling of
interests. Accordingly, the Supplemental Consolidated Financial Statements and
Supplemental Selected Financial Data included elsewhere as exhibits to this Form
8-K give retroactive effect to the acquisition and include the combined
operations of the Company and ITLS for all periods presented. The following
discussion and analysis should be read in conjunction with such Supplemental
Consolidated Financial Statements.

ITLS purchased a software product from Strategic Decision Systems in 1996,
and $1.1 million of the purchase price was recorded as in-process research and
development and expensed during 1996. This acquisition was accounted for under
the purchase accounting method.

In May 1998, the Company acquired a software vendor in exchange for
approximately 77,000 shares of the Company's common stock and $1.8 million in
cash. This acquisition will be accounted for under the purchase accounting
method, and a substantial portion of the purchase price is expected to be
recorded as in-process research and development and expensed during the second
quarter of 1998.

On April 22, 1998, the Company's Board of Directors approved a two-for-one
stock split of the Company's Common Stock. The stock split was paid as a stock
dividend on June 2, 1998 to stockholders of record on May 26, 1998. Share and
per share amounts included in this Form 8-K have been restated to reflect the
stock split.

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<PAGE> 3

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentages
of total revenues represented by certain items reflected in the Company's
supplemental consolidated statements of income:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues:
Software licenses......................................... 62.8% 60.8% 65.4%
Services.................................................. 28.2 30.4 25.0
Maintenance............................................... 9.0 8.8 9.6
----- ----- -----
Total revenues.................................... 100.0 100.0 100.0
Costs and expenses:
Cost of software licenses................................. 1.0 0.2 1.3
Cost of services and maintenance.......................... 19.8 21.7 21.5
Sales and marketing....................................... 27.3 35.0 34.4
Research and development.................................. 22.1 21.8 24.7
General and administrative................................ 13.7 10.4 10.2
In-process research and development and acquisition
costs.................................................. -- 1.1 4.4
----- ----- -----
Total costs and expenses.......................... 83.9 90.2 96.5
----- ----- -----
Operating income............................................ 16.1 9.8 3.5
Other income (expense), net................................. (0.4) 1.7 1.6
----- ----- -----
Income before income taxes.................................. 15.7 11.5 5.1
Provision for income taxes.................................. 5.4 4.7 3.2
----- ----- -----
Net income.................................................. 10.3% 6.8% 1.9%
===== ===== =====
</TABLE>

REVENUES

The Company's revenues consist of software license revenues, service
revenues and maintenance revenues. Software license revenues consisted of sales
of software licenses which were recognized upon execution of a contract and
shipment of the software, provided that no significant vendor obligations
remained outstanding, amounts were due within one year and collection was
considered probable by management. As discussed in the following paragraph,
software license revenue recognition for future periods has been revised.
Service revenues are primarily 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.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition," which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. Under SOP 97-2, software license
revenues will be recognized upon execution of a contract and delivery of
software, provided that the license fee is fixed and determinable, no
significant production, modification or customization of the software is
required and collection is considered probable by management. The provisions of
SOP 97-2 are effective for the Company for transactions entered into after
December 31, 1997. The Company does not currently believe that the application
of SOP 97-2 will have a material impact on its consolidated financial
statements. However, because SOP 97-2 does not give specific implementation
guidance and limited industry practice has been established regarding the
provisions of SOP 97-2, there can be no assurance that SOP 97-2 will not have a
material impact on the Company's revenue recognition practices, which could be
material to the Company's consolidated financial statements.

Total revenues increased 112.7% to $213.7 million in 1997 from $100.5
million in 1996, and increased 161.2% in 1996 from $38.5 million in 1995. The
Company currently derives substantially all of its revenues
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<PAGE> 4

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 128.9% to
$139.8 million in 1997 from $61.1 million in 1996, and increased 152.8% in 1996
from $24.2 million in 1995. Software license revenues constituted 65.4%, 60.8%
and 62.8% of total revenues in 1997, 1996 and 1995, respectively. The
significant increases in the dollar amount of 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 75.1% to $53.4 million in 1997
from $30.5 million in 1996, and increased 181.6% in 1996 from $10.8 million in
1995. Service revenues constituted 25.0%, 30.4% and 28.2% of total revenues in
1997, 1996 and 1995, respectively. 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. The 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, training and consulting services.

MAINTENANCE. Revenues from maintenance increased 130.3% to $20.5 million in
1997 from $8.9 million in 1996, and increased 156.5% in 1996 from $3.5 million
in 1995. Maintenance revenues constituted 9.6%, 8.8% and 9.0% of total revenues
in 1997, 1996 and 1995, respectively. 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 should not vary significantly from the percentage of total
revenues achieved in 1997.

CONCENTRATION OF REVENUES. During 1995 and 1997, no individual customer
accounted for more than 10% of total revenues. During 1996, one customer
accounted for approximately 11% of total revenues. The Company believes that the
loss of this customer would not have a material adverse effect upon the
Company's business, operating results or financial condition.

INTERNATIONAL REVENUES. The Company recognized $66.7 million, $21.8 million
and $3.4 million of revenues from international sources in 1997, 1996 and 1995,
representing approximately 31%, 22% and 9% of total revenues, respectively. The
Company's revenues from international sources were primarily generated from
customers located in Asia, Canada and Europe. In 1997 and 1996, revenues from
customers located in Europe accounted for approximately 16% and 11% of total
revenues, respectively. The significant increases in revenues from international
sources were primarily due to the continued expansion of the Company's
international sales and consulting operations as well as software 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.

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<PAGE> 5

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which requires that all items that are recognized under accounting
standards as components of comprehensive income be reported in the financial
statements. The provisions of SFAS No. 130 are effective for the Company
beginning in 1998. The Company anticipates that the adoption of SFAS No. 130
will not have a material effect on the Company's financial statement
presentation in the future.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
information about operating segments and for related disclosures about products
and services, geographic areas and major customers. The provisions of SFAS No.
131 are effective for the Company beginning in 1998. Although the Company
currently operates in only one industry segment, the Company is evaluating the
potential impact of SFAS No. 131 on its reporting requirements.

COSTS AND EXPENSES

COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily of
(i) commissions paid to third parties in connection with joint marketing and
other related agreements, (ii) royalty fees associated with third-party software
included with the sales of RHYTHM, (iii) the cost of user documentation and (iv)
the cost of reproduction and delivery of the software. Cost of software licenses
was $2.7 million, $260,000 and $390,000 in 1997, 1996 and 1995, representing
2.0%, 0.4% and 1.6% of software license revenues, respectively. The significant
increase in cost of software licenses in 1997, both in dollar amount and as a
percentage of software license revenues, was primarily due to an increase in
commissions paid to third parties in connection with joint marketing and other
related agreements. Cost of software licenses decreased significantly in the
second half of 1997 as compared to the first half of 1997 as a result of the
termination of the license and distribution agreement with SAP AG ("SAP")
pursuant to which the Company was required to pay SAP a commission on RHYTHM
products sold to SAP's customers. The Company expects cost of software licenses
to vary in the future depending upon the amount of commissions due to other
third parties in connection with joint marketing and other related agreements
and the amount of royalty fees associated with third-party software included
with the sales of RHYTHM.

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 and
packaging and shipping costs related to new releases of software and updated
user documentation, none of which costs have been significant to date. Cost of
services and maintenance was $46.0 million, $21.8 million and $7.6 million in
1997, 1996 and 1995, representing 62.3%, 55.2% and 53.2% 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 three months of 1996 and during 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 consist primarily of
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 $73.5 million, $35.2
million and $10.5 million in 1997, 1996 and 1995, representing 34.4%, 35.0% and
27.3% 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 Company expects to continue to increase its sales
5
<PAGE> 6

and marketing activities in order to expand its international sales operations
and to enter into new vertical markets. As a result, the Company believes that
the dollar amount of sales and marketing expenses will continue to increase.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of the personnel and related costs associated with the Company's
research and development activities. Research and development expenses were
$52.7 million, $21.9 million and $8.5 million in 1997, 1996 and 1995,
representing 24.7%, 21.8% and 22.1% of total revenues, respectively. The
increases in the dollar amount of research and development expenses 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, 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 SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed," 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 consist
primarily of 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 services.
General and administrative expenses were $21.8 million, $10.4 million and $5.3
million in 1997, 1996 and 1995, representing 10.2%, 10.4% and 13.7% 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 these
periods. 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. The Company
incurred approximately $9.3 million in certain acquisition-related expenses in
connection with the acquisitions of Think, Optimax and OPG which were recorded
in the second quarter of 1997 and in connection with the acquisition of M-Star
which was recorded in the fourth quarter of 1997. Of these expenses, $4.6
million represents the write-off of in-process research and development. The
remaining costs included, among other things, investment banking, legal and
accounting fees and expenses. ITLS purchased a software product from Strategic
Decision Systems in 1996, and $1.1 million of the purchase price was recorded as
in-process research and development and expensed during the third quarter of
1996.

OTHER INCOME (EXPENSE)

Other income (expense) consists primarily of interest income on short-term
investments and overnight repurchase agreements offset by interest expense on
the Company's debt. Other income (expense) was $3.4 million, $1.7 million and
($167,000) in 1997, 1996 and 1995, representing 1.6%, 1.7% and (0.4%) of total
revenues, respectively. The increases in the dollar amount of other income
(expense) were primarily due to interest earned on higher balances of cash, cash
equivalents and short-term investments resulting from net proceeds of the public
offerings of the Company's common stock which were completed in May 1996 and
December 1997.

6
<PAGE> 7

PROVISION FOR INCOME TAXES

The Company recorded income tax expense of $6.9 million, $4.7 million and
$2.1 million in 1997, 1996 and 1995, respectively. The Company's effective
income tax rates were 63.4%, 40.9% and 34.1% in 1997, 1996 and 1995,
respectively. The Company's effective income tax rate was higher in 1997 than in
1996 primarily due to the non-deductibility of certain of the
acquisition-related expenses. The Company's effective income tax rate was higher
in 1996 than in 1995 due to the non-deductibility of certain of the acquisition
expenses, the non-deductibility of the amortization of deferred compensation
expense and higher effective state income tax rates.

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. Cash flows from operations
were $3.0 million for 1997 as compared to $8.0 million for 1996. Operating cash
flows decreased in 1997 as compared to 1996 primarily due to an increase in
accounts receivable partially offset by increases in the tax benefit from stock
option activity, accrued liabilities and accrued compensation and related
expenses. The tax benefit from stock option activity is primarily the result of
disqualifying dispositions of stock acquired under the Company's stock plans.

Accounts receivable, net of allowance for doubtful accounts, increased to
$75.0 million at December 31, 1997 from $36.3 million at December 31, 1996,
primarily due to a continued significant increase 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 85 days for 1997 as compared to 78 days
for 1996. The increase in days' sales outstanding was primarily due to a
significant increase in receivables from international customers which tend to
have longer payment terms compared to customers located in the United States.
Additionally, the Company continues to experience larger sales for which some
amounts are not due upon execution of the contract. 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 $11.3 million for 1997 as compared to
$28.0 million for 1996. Cash used in investing activities was higher in 1996
than in 1997 primarily due to the initial investment of the net proceeds from
the initial public offering of the Company's common stock which was completed in
May 1996. Proceeds from the public offering of the Company's common stock which
was completed in December 1997 were invested primarily in financial instruments
classified as cash equivalents. At December 31, 1997, the Company did not have
any material commitments for capital expenditures.

Cash provided by financing activities was $94.3 million for 1997 as
compared to $53.3 million for 1996. Cash provided by financing activities for
1997 includes the Company's net proceeds of $89.4 million from its December 1997
public offering of common stock. Cash provided by financing activities for 1996
includes the Company's net proceeds of $43.7 million from its initial public
offering of common stock which was completed in May 1996.

As of December 31, 1997, the Company had $161.6 million of working capital,
including $127.4 million in cash and cash equivalents and $14.5 million in
short-term investments as compared to $64.0 million of working capital as of
December 31, 1996, including $41.4 million in cash and cash equivalents and
$18.0 million in short-term investments.

The Company may in the future pursue additional acquisitions of businesses,
products and technologies, or enter into joint venture arrangements, that could
complement or expand the Company's business. 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.

7
<PAGE> 8

ITLS has a revolving credit agreement (the "Agreement") with a lender which
is due on demand, is secured by the assets of ITLS and contains customary
restrictive covenants, including covenants requiring ITLS to maintain certain
financial ratios. Borrowings under the Agreement bear interest at the lender's
prime lending rate plus 1%. At December 31, 1997, ITLS had $657,000 of
borrowings outstanding under the Agreement.

The Company utilizes third-party vendor equipment, telecommunication
products and software products which may or may not be Year 2000 compliant.
Although the Company is currently taking steps to address the impact, if any, of
the Year 2000 compliance issue surrounding such third-party products, failure of
any critical technology components to be Year 2000 compliant may have an adverse
impact on business operations or require the Company to incur unanticipated
expenses to remedy any problems. Management has not yet determined the cost of
achieving Year 2000 compliance.

The Company believes that existing cash and cash equivalent balances,
short-term investment balances 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 equity or debt financing. There can be no assurance that such
financing will be available on acceptable terms, if at all.

FACTORS THAT MAY AFFECT FUTURE RESULTS

In addition to the other information in this Form 8-K, the following
factors should be considered in evaluating the Company and its business.

POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS; DEPENDENCE ON
SIGNIFICANT INDIVIDUAL SALES

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
varies substantially and is subject to a number of significant risks, including
customers' budgetary constraints, timing of budget cycles and concerns about the
pricing or introduction of new products by the Company or its competitors,
factors over which the Company has little or no control. Additional factors
include foreign currency exchange rate fluctuations, the mix of direct or
indirect sales, changes in joint-marketing relationships, and changes in the
Company's strategy. 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.

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 generally derives a
significant portion of its software license revenues in each quarter from a
small number of relatively large sales. For example, in each quarter of 1996 and
1997, one or more customers each accounted for at least 15% of total software
license revenues in such quarter. While the Company believes that the loss of
any of these particular customers would not have an adverse effect, an inability
to consummate one or more substantial license sales in any future period could
have a material adverse effect on the Company's operating results for that
period. Moreover, similar to many other software companies, the Company
typically realizes a significant portion of its software license revenues in the
last month or even the last week of a quarter. The Company also believes that
the tendency of customers to delay placing orders for software products until
near the end of a quarter has become more pronounced in recent periods. As a
result, small delays in customer orders can cause significant variability in the
Company's license revenues and results of operations for any particular period.
For all of the foregoing reasons, revenues are difficult to forecast.

The Company intends to continue to invest heavily in its sales and
marketing, consulting and research and development organizations, and sets
investment and expense levels based on 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 are not variable in the short term, and cannot be quickly reduced to
respond to decreases in revenues. In addition, the Company may reduce prices or
8
<PAGE> 9

accelerate its investment in research and development efforts in response to
competition or to pursue new market opportunities. Any one of these activities
may further limit the Company's ability to adjust spending in response to
fluctuations in revenue levels. 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.

The Company's quarterly results of operations are subject to certain
seasonal fluctuations. Historically, the Company's revenues have tended to be
strongest in the fourth quarter of the year and to increase only modestly in the
first quarter of the following year. The Company believes that this seasonality
is due to the calendar year budgeting cycles of many of its customers and to
compensation policies that tend to compensate sales personnel for achieving
annual revenue quotas. The Company expects that in future periods these seasonal
trends may cause first quarter revenues to remain consistent with, or decrease
from, the level achieved in the preceding quarter.

COMPETITION

The markets in which the Company operates are highly competitive. The
Company's competitors are diverse and offer a variety of solutions directed at
various segments of the supply chain as well as the enterprise as a whole.
Competitors include: (i) enterprise resource application software vendors such
as SAP, PeopleSoft, Inc., Oracle Corporation ("Oracle") and Baan Company N.V.,
each of which currently offers sophisticated ERP solutions that currently or may
in the future incorporate supply chain management modules or advanced planning
and scheduling software; (ii) other suppliers of supply chain software including
Manugistics Group, Inc. and Logility, Inc.; (iii) other business application
software vendors who may broaden their product offerings by internally
developing, or by acquiring or partnering with independent developers of,
advanced planning and scheduling software; (iv) internal development efforts by
corporate information technology departments; and (v) companies offering
standardized or customized products for mainframe and/or mid-range computer
systems.

In connection with specific customer solicitations, a number of ERP vendors
have from time to time jointly marketed the Company's products as a complement
to their own systems. The Company believes that as its market share increases,
and as the ranges of products offered by the Company and these ERP vendors
expand and increasingly overlap, relationships which were cooperative in the
past will become more competitive, thereby increasing the overall level of
competition the Company faces. Specifically, during 1997, the Company and SAP
terminated a license and distribution agreement, and SAP announced its intention
to develop a suite of advanced planning and scheduling products which are
expected to be directly competitive with RHYTHM. The Company believes that
additional ERP vendors are focusing significant resources on increasing the
functionality of their own planning and scheduling modules, and at least two ERP
vendors have recently acquired independent developers of advanced planning and
scheduling software which compete with RHYTHM.

Many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater name recognition, a broader range of products to offer and a larger
installed base of customers than the Company, each of which could provide them
with a significant competitive advantage over the Company. In addition, the
Company expects to experience increasing price competition as the Company and
its competitors compete for market share. There can be no assurance that the
Company will be able to compete successfully with existing or new competitors or
that competition will not have a material adverse effect on the Company's
business, operating results and financial condition.

MANAGEMENT OF GROWTH

The Company's business has grown rapidly in recent years, with revenues
increasing from $38.5 million in 1995 to $100.5 million in 1996 and to $213.7
million in 1997. The Company's recent expansion has resulted in substantial
growth in the number of its employees (from 330 at December 31, 1995 to 721 at
December 31, 1996 to 1,191 at December 31, 1997), the scope of its operating and
financial systems and the geographic distribution of its operations and
customers. This recent rapid growth has placed, and if continued will

9
<PAGE> 10

continue to place, a significant strain on the Company's management and
operations. Accordingly, the Company's future operating results will depend on
the ability of its officers and other key employees to continue to implement and
improve its operational, customer support and financial control systems, and to
effectively expand, train and manage its employee base. There can be no
assurance that the Company will be able to manage any future expansion
successfully, and any inability to do so would have a material adverse effect on
the Company's business, operating results and financial condition.

PRODUCT CONCENTRATION; DEPENDENCE ON PRODUCT LINE EXPANSION

The Company currently derives all of its revenues from RHYTHM licenses and
related services. The Company expects that RHYTHM-related revenues, including
maintenance and consulting contracts, will continue to account for substantially
all of the Company's revenues for the foreseeable future. As a result, the
Company's future operating results are dependent upon continued market
acceptance of RHYTHM and enhancements thereto. There can be no assurance that
RHYTHM will achieve continued market acceptance. 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.

As enterprises increasingly focus on decision support for supply chain
management challenges, they are requiring greater levels of functionality and
broader product offerings from their application software vendors. Moreover, the
market for the Company's software products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, and frequent 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.

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"), and Optimax Systems Corporation, a Delaware corporation
("Optimax"). In November 1997, the Company acquired the remaining interest in a
minority owned subsidiary, M-Star Systems Limited ("M-Star"). In April 1998, the
Company acquired InterTrans Logistics Solutions Limited ("ITLS") of Markham,
Ontario, and in May 1998, the Company acquired a software vendor. ITLS purchased
a software product from Strategic Decision Systems in 1996. The success of
acquisitions depends primarily on the Company's ability to (i) retain, motivate
and integrate the acquired personnel with the Company's operations, (ii)
integrate multiple information systems and (iii) integrate acquired software
with RHYTHM. No assurance can be given that the Company will not encounter
difficulties in integrating the respective operations and products of the
Company and the recently acquired companies, or that the benefits expected from
such integration will be realized. Failure to successfully integrate the
recently acquired companies' operations and products into the Company's
operations and products 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, or enter into joint venture arrangements, that could
complement or expand the Company's business. The negotiation of potential
acquisitions or joint ventures 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, amortization of goodwill and other intangibles, research and
development write-offs and other acquisition-related expenses. Further, no
assurances can be given that any acquired business will be
10
<PAGE> 11

successfully integrated with the Company's operations. If any such acquisition
were to occur, there can be no assurance that the Company will receive the
intended benefits of the acquisition. Future acquisitions, whether or not
consummated, could have a material adverse effect on the Company's business,
operating results and financial condition.

INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS

The Company derived approximately 9%, 22% and 31% of its total revenues
from customers located outside of the United States in 1995, 1996 and 1997,
respectively. The Company believes that continued growth and profitability will
require expansion of its sales in international markets. Further penetration of
international markets will require the Company to expand existing foreign
operations, to establish additional foreign operations and to translate its
software and manuals into additional foreign languages. This expansion may be
costly and time-consuming and may not generate returns for a significant period
of time, if at all. To the extent that the Company is unable to expand its
international operations or translate its software and manuals into foreign
languages in a timely manner, the Company's ability to further penetrate
international markets would be adversely affected, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.

The Company's international operations are subject to risks inherent in
international business activities, including: difficulty in staffing and
managing geographically disparate operations; 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; greater difficulty in safeguarding intellectual property; import
and export licensing requirements; trade restrictions; changes in tariff rates;
and general economic conditions in international markets. In particular,
countries in the Asia Pacific region have recently experienced weaknesses in
their currency, banking and equity markets. In the future, these weaknesses
could adversely affect the demand for the Company's products, the U.S. dollar
value of the Company's foreign currency denominated sales and ultimately the
Company's results of operations. There can be no assurance that the Company's
business, results of operations or financial condition will not be adversely
affected by these or other factors that may affect international operations.

To date, the Company's revenues from international operations have
primarily been denominated in United States dollars. As a result, the Company's
sales in international markets may be adversely affected by a strengthening
United States dollar. Certain sales and the majority of the expenses incurred by
the Company's international operations are denominated in currencies other than
the United States dollar. In addition, with the expansion of international
operations, the number of foreign currencies in which the Company must operate
will increase, resulting in increased exposure to exchange rate fluctuations.
The Company has implemented limited hedging programs to mitigate its exposure to
currency fluctuations. Notwithstanding these hedging programs, exchange rate
fluctuations have caused and will continue to cause currency transaction gains
and losses. While such currency transaction gains and losses have not been
material to date, there can be no assurance that currency transaction losses
will not have a material adverse effect on the Company's business, results of
operations or financial condition in future periods.

RISKS ASSOCIATED WITH STRATEGIC RELATIONSHIPS

The Company has from time to time established relationships with other
companies, including Oracle and System Software Associates, Inc., involving
collaboration in areas such as product development, marketing, distribution and
implementation. The maintenance of these relationships and the development of
other such relationships is a meaningful part of the Company's business
strategy. However, most of the Company's current and potential strategic
partners are either potential competitors of the Company or are currently
competitive with the Company to some degree. In addition, certain of the
Company's cooperative relationships have failed to meet expectations, such as
the Company's terminated license and distribution relationship with SAP. There
can be no assurance that the Company's current collaborative relationships will
be beneficial to the Company, that such relationships will be sustained, or that
the Company will be able to enter into successful new strategic relationships in
the future.

11
<PAGE> 12

DEPENDENCE UPON KEY PERSONNEL

The Company's future operating results depend in significant part upon the
continued service of a relatively small number of key technical and senior
management personnel, few of whom are bound by an employment agreement. The
Company's future success also depends on its continuing ability to attract,
train and retain other highly qualified technical and managerial personnel.
Competition for such personnel is intense, and the Company has at times in the
past experienced difficulty in recruiting qualified personnel. There can be no
assurance that the Company will retain its key technical and managerial
employees or that it will be successful in attracting, assimilating and
retaining other highly qualified technical and managerial personnel in the
future. Kanna (Ken) N. Sharma, the Company's Vice Chairman of the Board and
Executive Vice President, has been diagnosed with a brain tumor. While Mr.
Sharma is currently providing services to the Company, there can be no assurance
as to how long he will be able to continue to do so. The loss of any member of
the Company's key technical and senior management personnel or the inability to
attract and retain additional qualified personnel could have a material adverse
effect on the Company's business, operating results and financial condition.

PROPRIETARY RIGHTS AND LICENSES

The Company relies primarily on a combination of copyright, trademark and
trade secret laws, confidentiality procedures and contractual provisions to
protect its proprietary rights. In addition, the Company generally licenses
RHYTHM products to end users in object code (machine-readable) format, and the
Company's license agreements generally allow the use of RHYTHM products solely
by the customer for internal purposes without the right to sublicense or
transfer the RHYTHM products. However, the Company believes that the foregoing
measures afford only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use information that the Company
regards as proprietary. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exist, software piracy can be expected to be a
problem. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as the laws of the United
States. Furthermore, there can be no assurance that the Company's competitors
will not independently develop technology similar to that of the Company. The
Company may increasingly be subject to claims of intellectual property
infringement as the number of products and competitors in the Company's industry
segment grows and the functionality of products in different industry segments
overlaps. Although the Company is not aware that any of its products infringes
upon the proprietary rights of third parties, there can be no assurance that
third parties will not claim infringement by the Company with respect to current
or future products. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company, which could have a material adverse effect upon the Company's
business, operating results and financial condition.

The Company has in the past and may in the future resell certain software
which it licenses from third parties. There can be no assurance that these
third-party software licenses will continue to be available to the Company on
commercially reasonable terms. The loss of or inability to maintain or obtain
any of these software licenses could result in delays or reductions in product
shipments until equivalent software could be identified, licensed and
integrated, which could adversely affect 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 hardware platforms
from Digital Equipment, Hewlett-Packard, IBM and Sun Microsystems and operating
systems from Sun Microsystems and Microsoft, and can access data from most
widely used SQL (structured query language) databases, including Informix,
Oracle and Sybase. To the extent that additional hardware or software platforms
gain significant market acceptance, the Company may be required to port RHYTHM
to such platforms in order to remain competitive. Such platforms may not be
architecturally compatible with RHYTHM's software product design,
12
<PAGE> 13

and there can be no assurance that the Company will be able to port RHYTHM to
such additional platforms on a timely basis or at all. Any failure to maintain
compatibility with existing platforms or to port to new platforms that achieve
significant market acceptance would 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 any 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.

DEPENDENCE ON TECHNICAL AND IMPLEMENTATION PERSONNEL

The sales of RHYTHM typically involve the utilization of highly qualified
technical sales support personnel. A limitation on the number of qualified
technical sales support personnel could have a material adverse effect on the
Company's ability to expand sales and enter into new vertical markets. The
implementation of RHYTHM requires the services of highly trained implementation
personnel working directly for the Company or for independent consultants. A
shortage in the number of trained implementers, either within the Company or
with third-party consulting firms, could limit the Company's ability to
implement its software on a timely and effective basis. Delayed or ineffective
implementation of the Company's software may limit the Company's ability to
expand its revenues and may result in customer dissatisfaction and damage the
Company's reputation, each of which could have a material adverse effect on the
Company's business, operating results and financial condition.

YEAR 2000 COMPLIANCE

Many older computer systems and software products currently in use are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, in less than two years, computer systems
and/or software used by many companies may need to be upgraded to comply with
such "Year 2000" requirements. Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance. Based
on the Company's assessment, the Company believes that its current versions of
its software products are Year 2000 compliant. However, the Company believes
some customers are running earlier versions of the software products developed
by acquired companies that are not Year 2000 compliant, and the Company has been
encouraging such customers to migrate to current product versions. Moreover, the
Company's products are generally integrated into enterprise systems involving
complicated software products developed by other vendors. Year 2000 problems
inherent in a customer's transactional software programs might significantly
limit that customer's ability to realize the intended benefits offered by
RHYTHM. The Company may in the future be subject to claims based on Year 2000
problems in others' products, custom scripts created by third parties to
interface with the Company's products or issues arising from the integration of
multiple products within an overall system. Although the Company has not been a
party to any litigation or
13
<PAGE> 14

arbitration proceeding to date involving its products or services and related to
Year 2000 compliance issues, there can be no assurance that the Company will not
in the future be required to defend its products or services in such
proceedings, or to negotiate resolutions of claims based on Year 2000 issues.
The costs of defending and resolving Year 2000-related disputes, and any
liability of the Company for Year 2000-related damages, including consequential
damages, could have a material adverse effect on the Company's business,
operating results and financial condition.

The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current hardware and software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software products
such as those offered by the Company. Any of the foregoing could result in a
material adverse effect on the Company's business, operating results and
financial condition.

PRODUCT LIABILITY

While the Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitation of liability provisions
may not be effective under the laws of certain jurisdictions. Although the
Company has not experienced any product liability claims to date, there can be
no assurance that the Company will not be subject to such claims in the future.
A successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, operating results and
financial condition. Moreover, defending such a suit, regardless of its merits,
could entail substantial expense and require the time and attention of key
management personnel, either of which could have a material adverse effect on
the Company's business, operating results and financial condition.

VOLATILITY OF STOCK PRICE

The market price of the Common Stock has been volatile at times and in the
future can be expected to be significantly affected by factors such as quarterly
variations in the Company's results of operations, the announcement of new
products or product enhancements by the Company or its competitors,
technological innovations by the Company or its competitors, and general market
conditions or market conditions specific to particular industries. In
particular, the stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such fluctuations may
adversely affect the market price of the Common Stock.

CONTROL BY MANAGEMENT

As of May 31, 1998, the Company's executive officers beneficially owned
approximately 56.6% of the Company's outstanding Common Stock. Consequently, the
Company's executive officers are able to control the outcome of all matters
submitted for stockholder action, including the election of members to the
Company's Board of Directors and the approval of significant change in control
transactions, and effectively control the management and affairs of the Company,
which may have the effect of delaying or preventing a change in control of the
Company. In addition, Messrs. Sanjiv S. Sidhu, Chairman of the Board and Chief
Executive Officer, Kanna (Ken) N. Sharma, Vice Chairman of the Board, Executive
Vice President and Secretary and Sandeep (Sandy) R. Tungare, President, Demand
Management, constitute three of the five

14
<PAGE> 15

members of the Board of Directors and, therefore, have significant influence in
directing the actions of the Board of Directors.

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation, as amended (the "Charter"), and
Bylaws, as amended (the "Bylaws"), contain certain provisions that may have the
effect of discouraging, delaying or preventing a change in control of the
Company or unsolicited acquisition proposals that a stockholder might consider
favorable, including provisions: authorizing the issuance of "blank check"
preferred stock; providing for a Board of Directors with staggered, three-year
terms; requiring super-majority voting to effect certain amendments to the
Charter and Bylaws; limiting the persons who may call special meetings of
stockholders; prohibiting stockholder action by written consent; and
establishing advance notice requirements for nominations for election to the
Board of Directors or for proposing matters that can be acted upon at
stockholder meetings. Certain provisions of Delaware law and the Company's stock
incentive plans may also have the effect of discouraging, delaying or preventing
a change in control of the Company or unsolicited acquisition proposals.

<PAGE> 1

EXHIBIT 99.3

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
i2 Technologies, Inc.

We have audited the accompanying supplemental consolidated balance sheets
of i2 Technologies, Inc. (formed as a result of the merger of i2 Technologies,
Inc. and InterTrans Logistics Solutions Limited) as of December 31, 1996 and
1997, and the related supplemental consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. The supplemental consolidated financial statements give
retroactive effect to the merger of i2 Technologies, Inc. and InterTrans
Logistics Solutions Limited in April 1998, which has been accounted for using
the pooling of interests method as described in the notes to the supplemental
consolidated financial statements. These supplemental financial statements are
the responsibility of the management of i2 Technologies, Inc. Our responsibility
is to express an opinion on these supplemental consolidated financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of i2 Technologies, Inc. at December 31, 1996 and 1997, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, after giving retroactive effect to
the merger of i2 Technologies, Inc. and InterTrans Logistics Solutions Limited,
as described in the notes to the supplemental consolidated financial statements,
in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Dallas, Texas
June 19, 1998

F-1
<PAGE> 2

i2 TECHNOLOGIES, INC.

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 41,390 $127,433
Short-term investments.................................... 18,031 14,538
Accounts receivable, net of allowance for doubtful
accounts of $1,401 and $4,263, respectively............ 36,270 75,037
Notes receivable -- stockholders.......................... 1,000 --
Prepaid and other current assets.......................... 2,359 3,836
Income tax receivable..................................... -- 1,097
Deferred income taxes..................................... -- 3,823
-------- --------
Total current assets.............................. 99,050 225,764
Furniture and equipment, net................................ 10,338 20,895
Deferred income taxes and other assets...................... 2,401 3,604
-------- --------
Total assets...................................... $111,789 $250,263
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,958 $ 7,712
Accrued liabilities....................................... 5,637 11,054
Accrued compensation and related expenses................. 3,905 15,357
Revolving line of credit.................................. -- 657
Current portion of deferred revenue....................... 19,469 29,195
Income taxes payable...................................... 996 --
Deferred income taxes..................................... 57 230
-------- --------
Total current liabilities......................... 35,022 64,205
Long-term debt.............................................. 100 --
Deferred revenue............................................ 266 518
Deferred income taxes....................................... 1,187 1,780
-------- --------
Total liabilities................................. 36,575 66,503
-------- --------
Stockholders' equity:
Preferred Stock, $0.001 par value, 5,000,000 shares
authorized, none issued................................ -- --
Common Stock, $0.00025 par value, 200,000,000 shares
authorized, 60,925,986 and 67,810,274 shares issued and
outstanding, respectively.............................. 15 17
Additional paid-in capital................................ 64,046 167,852
Deferred compensation..................................... (1,865) (1,125)
Retained earnings......................................... 13,018 17,016
-------- --------
Total stockholders' equity........................ 75,214 183,760
-------- --------
Total liabilities and stockholders' equity........ $111,789 $250,263
======== ========
</TABLE>

See accompanying notes.

F-2
<PAGE> 3

i2 TECHNOLOGIES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Revenues:
Software licenses......................................... $24,162 $ 61,073 $139,798
Services.................................................. 10,837 30,515 53,437
Maintenance............................................... 3,462 8,881 20,457
------- -------- --------
Total revenues.................................... 38,461 100,469 213,692
------- -------- --------
Costs and expenses:
Cost of software licenses................................. 390 260 2,744
Cost of services and maintenance.......................... 7,601 21,761 46,004
Sales and marketing....................................... 10,487 35,182 73,526
Research and development.................................. 8,503 21,886 52,741
General and administrative................................ 5,286 10,425 21,810
In-process research and development and acquisition
costs.................................................. -- 1,133 9,306
------- -------- --------
Total costs and expenses.......................... 32,267 90,647 206,131
------- -------- --------
Operating income............................................ 6,194 9,822 7,561
Other income (expense), net................................. (167) 1,681 3,353
------- -------- --------
Income before income taxes.................................. 6,027 11,503 10,914
Provision for income taxes.................................. 2,054 4,705 6,916
------- -------- --------
Net income.................................................. $ 3,973 $ 6,798 $ 3,998
======= ======== ========
Net income per share........................................ $ 0.09 $ 0.12 $ 0.06
Net income per share, assuming dilution..................... $ 0.07 $ 0.10 $ 0.06
Weighted average common shares outstanding.................. 43,538 58,000 62,652
Weighted average common shares outstanding, assuming
dilution.................................................. 58,752 65,974 70,932
</TABLE>

See accompanying notes.

F-3
<PAGE> 4

i2 TECHNOLOGIES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN DEFERRED RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS EQUITY
------ ------ ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994............ 39,858 $10 $ 171 $ -- $ 2,417 $ 2,598
Exercise of stock options............. 11,406 3 321 -- -- 324
Deferred compensation related to stock
options............................ -- -- 1,810 (1,810) -- --
Amortization of deferred
compensation....................... -- -- -- 71 -- 71
Issuance of Think and Optimax
preferred stock which was exchanged
for i2 common stock in merger...... 1,304 -- 2,871 -- -- 2,871
Distributions to Think stockholders... -- -- -- -- (170) (170)
Issuance of ITLS common stock which
was exchanged for i2 common stock
in merger.......................... 1,200 -- 711 -- -- 711
Net income............................ -- -- -- -- 3,973 3,973
------ --- -------- ------- ------- --------
Balance at December 31, 1995............ 53,768 13 5,884 (1,739) 6,220 10,378
Exercise of stock options and issuance
under stock purchase plan.......... 1,038 -- 1,816 -- -- 1,816
Common stock issued, net of offering
costs of $4,288.................... 4,780 2 43,714 -- -- 43,716
Tax benefit of stock options.......... -- -- 1,353 -- -- 1,353
Deferred compensation related to stock
options............................ -- -- 910 (910) -- --
Amortization of deferred
compensation....................... -- -- -- 784 -- 784
Issuance of Think preferred stock
which was exchanged for i2 common
stock in merger.................... 554 -- 5,100 -- -- 5,100
Issuance of ITLS preferred stock which
was exchanged for i2 common stock
in merger.......................... 786 -- 5,269 -- -- 5,269
Net income............................ -- -- -- -- 6,798 6,798
------ --- -------- ------- ------- --------
Balance at December 31, 1996............ 60,926 15 64,046 (1,865) 13,018 75,214
Exercise of stock options and issuance
under stock purchase plan.......... 2,884 1 4,273 -- -- 4,274
Common stock issued, net of offering
costs of $3,573.................... 4,000 1 89,427 -- -- 89,428
Tax benefit of stock options.......... -- -- 10,106 -- -- 10,106
Amortization of deferred
compensation....................... -- -- -- 740 -- 740
Net income............................ -- -- -- -- 3,998 3,998
------ --- -------- ------- ------- --------
Balance at December 31, 1997............ 67,810 $17 $167,852 $(1,125) $17,016 $183,760
====== === ======== ======= ======= ========
</TABLE>

See accompanying notes.

F-4
<PAGE> 5

i2 TECHNOLOGIES, INC.

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,973 $ 6,798 $ 3,998
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,241 3,052 5,194
Provision for losses on receivables.................... 508 1,085 3,903
Amortization of deferred compensation.................. 71 784 740
Deferred income taxes.................................. (640) (348) (4,169)
Tax benefit of stock options........................... -- 1,353 10,106
Changes in operating assets and liabilities:
Accounts receivable.................................. (8,687) (24,701) (42,670)
Income tax receivable................................ (1,151) 1,151 (1,097)
Prepaid and other assets............................. (581) (1,397) (1,568)
Accounts payable..................................... 974 3,107 2,754
Accrued liabilities.................................. 610 3,967 5,417
Accrued compensation and related expenses............ 444 2,594 11,452
Income taxes payable................................. 799 99 (996)
Deferred revenue..................................... 5,812 10,470 9,978
------- -------- --------
Net cash provided by operating activities......... 3,373 8,014 3,042
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable -- stockholders.......................... -- (1,000) 1,000
Purchases of furniture and equipment...................... (3,706) (8,978) (15,751)
Purchases of short-term investments....................... -- (37,531) (27,007)
Proceeds from sale of short-term investments.............. -- 19,500 30,500
------- -------- --------
Net cash used in investing activities............. (3,706) (28,009) (11,258)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit.................... 500 -- 1,542
Payments on revolving line of credit...................... (850) -- (885)
Proceeds from long-term debt.............................. 3,110 400 --
Payments on long-term debt................................ (2,642) (1,653) (100)
Advances from stockholders, net........................... 535 (1,385) --
Distributions to stockholders............................. (170) -- --
Issuance of Think and Optimax preferred stock which was
exchanged for i2 common stock in merger................ 2,871 5,100 --
Issuance of ITLS common stock which was exchanged for i2
common stock in merger................................. 711 -- --
Issuance of ITLS preferred stock which was exchanged for
i2 common stock in merger.............................. -- 5,269 --
Net proceeds from sale of common stock and exercise of
stock options.......................................... 324 45,532 93,702
------- -------- --------
Net cash provided by financing activities......... 4,389 53,263 94,259
------- -------- --------
Net increase in cash and cash equivalents................... 4,056 33,268 86,043
Cash and cash equivalents at beginning of period............ 4,066 8,122 41,390
------- -------- --------
Cash and cash equivalents at end of period.................. $ 8,122 $ 41,390 $127,433
======= ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 6

i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

i2 Technologies, Inc. (the "Company"), incorporated in 1989, 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. The Company's products
and services are primarily provided to large and medium sized manufacturing and
distribution companies which operate in many industries located throughout the
world.

In May 1997, the Company acquired Think Systems Corporation ("Think"), a
demand planner software company and Optimax Systems Corporation ("Optimax"), a
scheduling and sequencing software company. In April 1998, the Company acquired
InterTrans Logistics Solutions Limited ("ITLS"), a transportation and logistics
software company. Each of these business combinations was accounted for as a
pooling of interests, and accordingly, the accompanying supplemental
consolidated financial statements give retroactive effect to the combinations
and include the combined operations of i2 Technologies, Think, Optimax and ITLS
for all periods presented (see Note 3).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION. The accompanying supplemental consolidated
financial statements include the accounts of the Company and its subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.

USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS. Cash equivalents are
highly liquid investments with insignificant interest rate risk and original
maturities of 90 days or less and are stated at amounts which approximate fair
value, based on quoted market prices. Cash equivalents consist principally of
overnight repurchase agreements and highly liquid debt securities of
corporations, municipalities and the U.S. Government.

The Company accounts for its cash equivalents and short-term investments
under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." Management determines
the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each subsequent balance sheet date. The
Company considers its debt securities as "available-for-sale" and, in accordance
with SFAS No. 115, would record its investments at fair value. However, as the
difference between cost and fair value was immaterial at December 31, 1997, no
adjustment has been made to the historical carrying value of the investments and
no unrealized gains or losses have been recorded as a separate component of
stockholders' equity. Realized gains and losses to date have not been material.
The cost of debt securities sold is based on the specific identification method.

The Company's debt securities include the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
<S> <C> <C>
U.S. Government............................................. $14,500 $ 11,500
State and Local Municipalities.............................. 16,700 55,000
Corporations................................................ 9,000 40,600
------- --------
$40,200 $107,100
======= ========
</TABLE>

F-6
<PAGE> 7
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Debt securities held at December 31, 1996 and 1997 all had maturity dates
within one year. At December 31, 1996 and 1997, $22.2 million and $92.6 million
of debt securities were included in cash equivalents, respectively. Interest
income earned in 1995, 1996 and 1997 was $182,000, $1.9 million and $3.1
million, respectively.

FINANCIAL INSTRUMENTS. Financial instruments which potentially subject the
Company to a concentration of credit risk principally consist of accounts
receivable. As of December 31, 1996, approximately 27% of accounts receivable
were concentrated with three customers. As of December 31, 1997, approximately
29% of accounts receivable were concentrated with one of these same customers
and two different customers. The Company generally does not require collateral
on accounts receivable as the Company's customers are generally large, well
established companies. The Company periodically performs credit evaluations of
its customers and maintains reserves for potential losses. The Company has used
in the past and expects to use in the future foreign exchange contracts to hedge
the risk that receivables denominated in foreign currencies may be adversely
affected by changes in foreign currency exchange rates. The Company's foreign
exchange contracts outstanding at December 31, 1997 are immaterial. Gains and
losses on foreign exchange contracts have not been material to date.

FURNITURE AND EQUIPMENT. Furniture and equipment are stated at cost.
Depreciation expense is calculated using the straight-line method over seven
years for office furniture and fixtures and three years for computer equipment.

REVENUE RECOGNITION. The Company's revenues consist of software license
revenues, service revenues and maintenance revenues. Software license revenues
consisted of sales of software licenses which were recognized upon execution of
a contract and shipment of the software, provided that no significant vendor
obligations remained outstanding, amounts were due within one year and
collection was considered probable by management. As discussed in the following
paragraph, software license revenue recognition for future periods has been
revised. Service revenues are primarily 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.

Customer payment terms vary. Amounts received in advance of satisfying
revenue recognition criteria are classified in current and long-term liabilities
as deferred revenue in the accompanying consolidated balance sheets.

The Company generally warrants that its products will function
substantially in accordance with documentation provided to customers for
approximately six to twelve months following initial shipment to the

F-7
<PAGE> 8
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

customer. As of December 31, 1997, the Company had not incurred any significant
expenses related to warranty claims.

SOFTWARE DEVELOPMENT COSTS. In accordance with SFAS No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,"
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.

NET INCOME PER SHARE. The Company computes net income per share in
accordance with the provisions of SFAS No. 128, "Earnings per Share." Net income
per share is based upon the weighted average number of common shares outstanding
and excludes the effect of dilutive potential common stock from the exercise of
stock options. Net income per share, assuming dilution, includes the effect of
dilutive potential common stock from the exercise of stock options using the
treasury stock method. In accordance with Securities and Exchange Commission
Staff Accounting Bulletins and Staff Policy, common shares and potential common
shares issued prior to the date of the initial filing of the Company's
Registration Statement on Form S-1 have been included in the net income per
share calculations for 1995 as if they were outstanding for the entire period.
Share and per share amounts for 1995 have been adjusted to reflect two stock
splits during 1995. Share and per share amounts for all periods presented have
also been adjusted to reflect a stock split during 1998 (see Note 7). The
computations give retroactive effect to the exchange of common shares in
connection with the Think, Optimax and ITLS acquisitions (see Note 3).
Reconciliations of the net income per share computations for the years ended
December 31, 1995, 1996 and 1997 are included in Note 7.

STOCK-BASED COMPENSATION PLANS. The Company has elected to continue to
account for its stock-based compensation plans utilizing the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," because, as discussed in Note 7, the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. However, SFAS No. 123 requires
disclosure of pro forma information regarding net income and net income per
share based on fair value accounting for stock-based compensation plans.

FOREIGN CURRENCY TRANSLATION. The Company has determined that the
functional currency of the majority of its foreign subsidiaries is the local
currency. The financial statements of its foreign subsidiaries are translated
into U.S. dollars using the current rate method in accordance with SFAS No. 52,
"Foreign Currency Translation." To date, translation adjustments and foreign
currency gains and losses have not been significant and accordingly, have not
been separately presented.

RECLASSIFICATIONS. Certain prior year financial statement items have been
reclassified to conform to the current year's format.

3. BUSINESS COMBINATIONS

In May 1997, the Company acquired Think and Optimax. Under the terms of
these agreements, the Company has agreed to issue up to approximately 7.7
million shares and approximately 2.7 million shares of its common stock for all
the outstanding capital stock and all unexpired and unexercised options of Think
and Optimax, respectively.

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

F-8
<PAGE> 9
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

driven specializations. Optimax develops, markets and implements supply chain
sequencing software using unique genetic algorithms for customer-driven,
make-to-order manufacturing.

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. 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, a substantial portion of which could be written off as
in-process research and development.

In November 1997, the Company acquired the remaining interest in a minority
owned subsidiary, M-Star Systems Limited ("M-Star"), for an aggregate purchase
price of $3.75 million. M-Star provides logistics software which can present a
global view of a company's supply network on a real-time basis by accessing the
company's existing data resources. The acquisition of M-Star 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 fourth quarter of 1997.

During 1997, the Company incurred approximately $9.3 million in certain
acquisition-related expenses in connection with the business combinations
involving Think, Optimax, OPG and M-Star, of which $4.6 million represents the
write-off of in-process research and development. The remaining costs included,
among other things, investment banking, legal and accounting fees and expenses.

In April 1998, the Company acquired ITLS. ITLS provides software designed
to manage both the daily operations and the tactical and strategic planning
aspects of transportation and logistics activities across the supply chain.
Under the terms of the agreement, the Company will issue up to 3.3 million
shares of its common stock for all of the outstanding capital stock and all
unexpired and unexercised options of ITLS.

F-9
<PAGE> 10
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The ITLS acquisition was accounted for as a pooling of interests, and
accordingly, the supplemental consolidated financial statements give retroactive
effect to the acquisition and include the combined operations of i2 Technologies
and ITLS for all periods presented. The following is a summary of the results of
operations of the separate entities for periods prior to the acquisition (in
thousands):

<TABLE>
<CAPTION>
i2 TECHNOLOGIES POOLING
(PRIOR TO ACQUISITION) ITLS ADJUSTMENTS COMBINED
---------------------- ------- ----------- --------
<S> <C> <C> <C> <C>
1997:
Revenues......................... $200,706 $13,691 $(705) $213,692
Net income (loss)................ 7,221 (3,223) -- 3,998
1996:
Revenues......................... $ 87,916 $12,553 $ -- $100,469
Net income (loss)................ 7,202 (404) -- 6,798
1995:
Revenues......................... $ 30,527 $ 7,934 $ -- $ 38,461
Net income....................... 3,065 908 -- 3,973
</TABLE>

Pooling adjustments have been recorded to eliminate revenues and expenses
associated with software license royalties resulting from transactions between
i2 Technologies and ITLS.

The Company expects to incur approximately $3 million in expenses related
to this acquisition. These expenses include, among other things, investment
banking, legal and accounting fees and expenses. Such expenses will be recorded
in the second quarter of 1998.

4. FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
<S> <C> <C>
Computer equipment.......................................... $12,062 $ 26,289
Furniture and fixtures...................................... 3,129 5,256
------- --------
15,191 31,545
Less accumulated depreciation............................... (4,853) (10,650)
------- --------
$10,338 $ 20,895
======= ========
</TABLE>

5. BORROWINGS

The Company had a revolving credit agreement with NationsBank of Texas,
N.A. (the "Lender") which expired in June 1998, was unsecured and contained
customary restrictive covenants, including covenants requiring the Company to
maintain certain financial ratios. The revolving credit agreement was not
subject to a borrowing base limitation and the borrowings thereunder bore
interest at the Lenders' prime lending rate. At December 31, 1996, the Company
had $100,000 in borrowings outstanding under the revolving credit agreement. At
December 31, 1997, the Company had no borrowings outstanding under the revolving
credit agreement.

F-10
<PAGE> 11
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash paid for interest in 1995, 1996 and 1997 was approximately $271,000,
$266,000 and $42,000, respectively.

6. COMMITMENTS

The Company leases its office facilities and certain office equipment under
operating leases which expire at various dates through 2003. The Company has
renewal options for most of its operating leases. Total rent expense incurred
during 1995, 1996 and 1997 was approximately $741,000, $2.4 million and $4.9
million, respectively.

Future minimum lease payments under all noncancellable operating leases as
of December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
1998........................................................ $ 6,751
1999........................................................ 6,159
2000........................................................ 4,268
2001........................................................ 2,232
2002........................................................ 1,955
Thereafter.................................................. 3,297
-------
Total minimum lease payments........................... $24,662
=======
</TABLE>

7. STOCKHOLDERS' EQUITY

PUBLIC OFFERINGS. In May 1996, the Company completed the initial public
offering of 5,060,000 shares of its common stock. A total of 4,780,800 of those
shares of common stock were sold by the Company resulting in net proceeds to the
Company of $43.7 million after deducting offering expenses and the underwriting
discount of $4.3 million. In December 1997, the Company completed a public
offering of 6,000,000 shares of its common stock. A total of 4,000,000 of those
shares of common stock were sold by the Company resulting in net proceeds to the
Company of $89.4 million after deducting offering expenses and the underwriting
discount of $3.6 million.

STOCK SPLITS. In April 1995 and again in December 1995, the Company's
common stock was split two-for-one. All share and per share amounts have been
adjusted to reflect both stock splits as though they had occurred at the
beginning of the initial period presented.

On April 22, 1998, the Company's Board of Directors approved a two-for-one
stock split of the Company's common stock. The stock split was paid as a stock
dividend on June 2, 1998 to stockholders of record on May 26, 1998. All share
and per share amounts included in this Form 8-K have been restated to reflect
the stock split as though it had occurred at the beginning of the initial period
presented.

F-11
<PAGE> 12
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INCOME PER SHARE. Reconciliations of the net income per share and net
income per share, assuming dilution, computations for the years ended December
31, 1995, 1996 and 1997 are as follows (amounts in thousands, except per share
amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
NET INCOME PER SHARE:
Weighted-average common shares outstanding............ 41,458 58,000 62,652
Common shares related to SAB No. 98(2)................ 2,080 -- --
------- ------- -------
Weighted-average common shares outstanding, adjusted
for common shares related to SAB No. 98............. 43,538 58,000 62,652
======= ======= =======
Net income............................................ $ 3,973 $ 6,798 $ 3,998
======= ======= =======
Net income per share.................................. $ 0.09 $ 0.12 $ 0.06
======= ======= =======
NET INCOME PER SHARE, ASSUMING DILUTION:
Weighted-average common shares outstanding............ 41,458 58,000 62,652
Common shares issuable on exercise of stock options,
net of shares assumed to be repurchased at the
average market price(1)............................. 15,214 7,974 8,280
Common shares related to SAB No. 98(2)................ 2,080 -- --
------- ------- -------
Weighted-average common shares outstanding, assuming
dilution............................................ 58,752 65,974 70,932
======= ======= =======
Net income............................................ $ 3,973 $ 6,798 $ 3,998
======= ======= =======
Net income per share, assuming dilution............... $ 0.07 $ 0.10 $ 0.06
======= ======= =======
</TABLE>

- ---------------

(1) 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 and the tax effects of nonqualified stock
options.

(2) Common shares and potential common shares issued prior to the initial filing
of the Company's Registration Statement on Form S-1 are included in this
line item for the year ended December 31, 1995. See Note 2.

EMPLOYEE STOCK PURCHASE PLAN. In March 1996, the Board adopted and the
stockholders approved an Employee Stock Purchase Plan. In November 1996, the
Board adopted an International Employee Stock Purchase Plan for employees of its
wholly-owned subsidiaries. The Employee Stock Purchase Plan and the
International Employee Stock Purchase Plan (collectively, the "Purchase Plans")
are designed to allow eligible employees of the Company to purchase shares of
Common Stock through periodic payroll deductions. The Company has reserved
1,000,000 shares of Common Stock for issuances under the Purchase Plans.

Payroll deductions may not exceed the lesser of 15% of a participant's base
salary or $25,000 per year, and employees may purchase a maximum of 2,000 shares
per purchase period under the Purchase Plans. The purchase price per share will
be 85% of the lesser of the fair market value of the Common Stock on the start
of the purchase period or the fair market value at the end of the purchase
period. Participation may be terminated at any time by the employee and
automatically ends upon termination of employment with the Company. Six-month
offering periods will commence on each November 1 and May 1, except for the
initial offering period which commenced on April 25, 1996 and ended on October
31, 1996. Under the Purchase Plans, 120,290; 65,996; and 87,924 shares were
issued in connection with the offering periods ended October 31, 1996, April 30,
1997 and October 31, 1997, respectively.

F-12
<PAGE> 13
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1992 STOCK PLAN. Under the Company's 1992 Stock Plan, the Company's Board
of Directors (the "Board") granted incentive stock options to employees of the
Company and nonqualified options to a consultant of the Company. The options
generally vest over a four-year period commencing on or before the date of
grant.

1995 STOCK OPTION/STOCK ISSUANCE PLAN. In September 1995, the stockholder
and the Board approved the 1995 Stock Option/Stock Issuance Plan (the "1995
Plan") which replaced the 1992 Stock Plan. All options outstanding under the
1992 Stock Plan were incorporated into the 1995 Plan. Under the 1995 Plan, the
amount of shares of Common Stock originally reserved for issuance was 20,000,000
shares which was subsequently increased to 24,000,000 shares in 1996. The amount
of shares of Common Stock reserved for issuance was again increased to
31,000,000 shares in 1997. The 1995 Plan is divided into the following three
equity programs: (i) the Discretionary Option Grant Program, (ii) the Stock
Issuance Program and (iii) the Automatic Option Grant Program.

The Discretionary Option Grant Program provides for the grant of incentive
stock options ("Incentive Options") to employees of the Company and for the
grant of nonqualified stock options to employees, directors and consultants of
the Company. Exercise prices may not be less than 100% and 85% of the fair
market value at the date of grant for Incentive Options and nonqualified
options, respectively. Options granted under the Discretionary Option Grant
Program generally vest in four equal annual increments and expire after ten
years. Some options granted under the Discretionary Option Grant Program are
immediately exercisable, subject to a right of repurchase by the Company at the
original exercise price for all unvested shares.

Under the Stock Issuance Program, the Board or a committee of the Board
(the "Plan Administrator") may grant shares of the Company's Common Stock to any
person at any time, at such price and on such terms as established by the Plan
Administrator. The purchase price per share cannot be less than 85% of the fair
market value of the Company's Common Stock on the issuance date.

Under the Automatic Option Grant Program, each person who is first elected
or appointed as a non-employee Board member shall automatically be granted a
nonqualified option to purchase 2,000 common shares of the Company at the fair
market value on the date of grant. On the date of each Annual Stockholders
Meeting each non-employee Board member shall automatically be granted an
additional option to purchase 2,000 shares of the Company's Common Stock,
subject to certain conditions.

THINK STOCK OPTION PLANS. Think's Board of Directors adopted and its
shareholders approved stock option plans for employees, directors and
consultants of Think (the "Think Plans"). Under the Think Plans, the Think Board
of Directors granted incentive and nonqualified stock options to employees,
directors and consultants at prices not less than the estimated fair market
value of Think's common stock at the date of grant. In connection with the
acquisition of Think, all of the options outstanding under the Think Plans were
assumed by the Company.

OPTIMAX STOCK OPTION PLAN. During 1996, Optimax's Board of Directors
adopted and its shareholders approved the Optimax Systems Corporation Stock
Option Plan (the "Optimax Stock Option Plan"). Under the Optimax Stock Option
Plan, the Optimax Board of Directors granted nonqualified stock options to
employees of Optimax at prices equal to the estimated fair market value of
Optimax's common stock on the date of grant. The options generally vest over a
five-year period commencing on or before the date of grant. In connection with
the acquisition of Optimax, all such options were assumed by the Company.

ITLS STOCK OPTION PLAN. During 1997, ITLS' Board of Directors adopted and
its shareholders approved the ITLS 1997 Stock Option Plan (the "ITLS Stock
Option Plan"). Under the ITLS Stock Option Plan, the ITLS Board of Directors
granted incentive and nonqualified stock options to employees of ITLS at prices
equal to the estimated fair market value of ITLS' common stock on the date of
grant. The options generally vest over a four-year period commencing on date of
grant. In connection with the acquisition of ITLS, all such options were assumed
by the Company.
F-13
<PAGE> 14
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Option activity under the Company's stock option plans, including the
Think, Optimax and ITLS plans, is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ------------------------------
AVAILABLE NUMBER WEIGHTED-AVERAGE
FOR GRANT OF SHARES EXERCISE PRICE
---------- ----------- ----------------
<S> <C> <C> <C>
Balance, December 31, 1994.................. 293,072 16,500,624 $ 0.02
Authorized................................ 3,206,304 -- --
Granted................................... (2,251,334) 2,251,334 0.31
Exercised................................. -- (11,406,484) 0.03
Canceled.................................. 46,600 (46,600) 0.03
---------- -----------
Balance, December 31, 1995.................. 1,294,642 7,298,874 0.09
Authorized................................ 5,366,250 -- --
Granted................................... (3,212,634) 3,212,634 4.86
Issued.................................... (1,230) -- 7.17
Exercised................................. -- (916,116) 0.83
Canceled.................................. 175,344 (175,344) 5.86
---------- -----------
Balance, December 31, 1996.................. 3,622,372 9,420,048 1.54
Authorized................................ 7,706,698 -- --
Granted................................... (6,241,990) 6,241,990 15.37
Exercised................................. -- (2,744,388) 0.62
Canceled.................................. 565,272 (565,272) 15.21
---------- -----------
Balance, December 31, 1997.................. 5,652,352 12,352,378 8.11
========== ===========
</TABLE>

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
----------------------------
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
December 31, 1995.......................................... 4,934,344 $0.08
=========
December 31, 1996.......................................... 6,104,824 0.54
=========
December 31, 1997.......................................... 6,061,520 0.89
=========
</TABLE>

Under the 1995 Plan, each outstanding option and unvested stock issuance
will be subject to accelerated vesting under certain circumstances upon an
acquisition of the Company in a merger or asset sale, except to the extent the
Company's repurchase rights with respect to the underlying shares are to be
assigned to the successor corporation. In addition, the Plan Administrator has
the discretion to accelerate vesting of outstanding options upon consummation of
any other transaction which results in a change in control of the Company.

All options outstanding at December 31, 1997 are Incentive Options except
for 2,891,814 options which are nonqualified options.

F-14
<PAGE> 15
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other information regarding options outstanding and options exercisable as
of December 31, 1997 is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ---------------------------
WEIGHTED
AVERAGE
REMAINING
WEIGHTED CONTRACTUAL WEIGHTED
RANGE OF NUMBER OF AVERAGE LIFE NUMBER OF AVERAGE
EXERCISE PRICES SHARES EXERCISE PRICE (YEARS) SHARES EXERCISE PRICE
--------------- ---------- -------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.01-$ 6.06................ 6,636,294 $ 0.67 6.10yrs. 5,950,998 $ 0.67
10.08- 17.88................ 3,663,896 14.60 9.33 108,522 12.84
18.00- 26.38................ 2,052,188 20.56 9.90 2,000 18.63
---------- ---------
Total.............. 12,352,378 8.11 7.69 6,061,520 0.89
========== =========
</TABLE>

The Company recorded deferred compensation expense of $1.8 million and
$910,000 in 1995 and in the first quarter of 1996, respectively, for the
difference between the grant price and the deemed fair market value of the
Company's Common Stock underlying certain options granted. These amounts are
being amortized over the vesting period of the individual options, generally
four years. The income tax benefits from disqualifying dispositions related to
employee stock transactions have been recorded as an increase in additional
paid-in capital. As a result of these disqualifying dispositions, the Company
has an income tax receivable balance of $1.1 million at December 31, 1997.

PRO FORMA NET INCOME AND NET INCOME PER SHARE. Pro forma information
regarding net income and net income per share has been determined as if the
Company had accounted for its employee stock options and shares issued under the
Purchase Plans using the fair value method of SFAS No. 123. The fair value for
the stock options issued under the 1995 Plan was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1995, 1996 and 1997, respectively: risk-free interest rates of
6.3%, 6.2% and 6.2%; volatility factors of the expected market price of the
Company's Common Stock of 0.46, 0.46 and 0.66; a weighted-average expected life
of the options of 4 years; and no dividend yields. The fair value of the stock
options issued under the Think Plans was estimated at the date of grant using
the minimum value method for non-public companies permitted by SFAS No. 123 with
the following assumptions for 1996 and 1997, respectively: weighted-average
risk-free interest rates of 6.5% and 6.2%; no dividends; and a weighted-average
expected life of the options of 7 years. The fair values of stock options issued
under the Optimax Stock Option Plan and the ITLS Stock Option Plan are not
presented as the impact is immaterial.

The fair value for the shares issued under the Purchase Plans was estimated
as of the initial day of the purchase period using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1996 and 1997,
respectively: risk free interest rates of 5.2% and 5.4%; volatility factors of
the expected market price of the Company's Common Stock of 0.46 and 0.66; a
weighted-average expected life of the purchase right of 0.5 years; and no
dividend yields. The weighted-average fair values of the purchase rights granted
under the Purchase Plans during 1996 and 1997 were $6.15 and $12.12,
respectively.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options and Purchase Plan
shares.

F-15
<PAGE> 16
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period and the
estimated fair value of the Purchase Plan shares is amortized to expense over
the purchase period.

The Company's pro forma information follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Pro forma net income (loss)............................... $3,991 $5,877 $(1,683)
Pro forma net income (loss) per share..................... 0.09 0.10 (0.03)
Pro forma net income (loss) per share, assuming
dilution................................................ 0.07 0.09 (0.03)
</TABLE>

The pro forma disclosures only include the effect of options granted
subsequent to January 1, 1995. Accordingly, the effects of applying SFAS No. 123
for the pro forma disclosures are not indicative of future effects of such
application.

Information regarding exercise prices and fair values of options granted is
as follows:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Number of options issued at fair market value of
stock............................................. 363,600 2,592,094 6,241,990
Weighted-average exercise price per share........... $0.07 $5.58 $15.37
Weighted-average fair value of options.............. 0.03 2.28 8.45
Number of options issued at less than fair market
value of stock.................................... 1,887,734 620,540 --
Weighted-average exercise price per share........... $0.36 $1.85 --
Weighted-average fair value of options.............. 1.05 2.11 --
</TABLE>

8. INCOME TAXES

The Company's provision for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Current:
Federal................................................. $1,730 $3,630 $ 9,702
State................................................... 455 390 1,224
Foreign................................................. 501 414 158
Deferred
Federal................................................. (477) 272 (1,629)
State................................................... (101) (79) (40)
Foreign................................................. (54) 78 (2,499)
------ ------ -------
Total........................................... $2,054 $4,705 $ 6,916
====== ====== =======
</TABLE>

F-16
<PAGE> 17
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's provision for income taxes reconciles to the amount computed
by applying the statutory U.S. federal rate of 34% for 1995 and 1996 and 35% for
1997 to income before income taxes as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Expense computed at statutory rate......................... $2,050 $3,911 $3,820
Non-deductible in-process research and development and
acquisition costs........................................ -- 385 3,164
State taxes, net of federal tax benefit.................... 139 266 770
Stock option compensation.................................. -- 215 200
Research and development tax credits....................... (126) (414) (584)
Other...................................................... (9) 342 (454)
------ ------ ------
Provision for income taxes....................... $2,054 $4,705 $6,916
====== ====== ======
</TABLE>

Deferred tax assets and liabilities at December 31, 1996 and December 31,
1997 are comprised of the following (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Foreign tax credits....................................... $ 612 $ 617
Deferred revenue.......................................... 848 578
Accrued liabilities....................................... 136 570
Bad debt allowance........................................ 229 1,349
Research and development tax credits...................... 348 868
Net operating losses...................................... 199 1,712
Other..................................................... 648 295
------- -------
Total deferred tax asset.......................... 3,020 5,989
------- -------
Deferred tax liabilities:
Depreciation.............................................. (127) (379)
State income taxes........................................ (28) --
Cash method of accounting, net............................ (1,212) --
Other..................................................... (875) (663)
------- -------
Total deferred tax liability...................... (2,242) (1,042)
------- -------
Net deferred tax asset............................ $ 778 $ 4,947
======= =======
</TABLE>

The Company considers the earnings of foreign subsidiaries to be
permanently reinvested outside the United States. Accordingly, no United States
income tax on these earnings has been provided. The Company believes that any
United States income taxes due upon the repatriation of such earnings would be
fully offset by foreign tax credits.

At December 31, 1997, certain subsidiaries of the Company had $2.4 million
of federal net operating loss carryforwards and $2.0 million of foreign net
operating loss carryforwards available to offset future taxable income of the
subsidiaries. The federal net operating loss carryforwards expire in the years
2010 through 2012 and are subject to certain annual limitations. Approximately
$1.4 million of the foreign net operating loss carryforwards expire in the years
2004 through 2013 while the remaining net operating loss carryforwards have no
expiration.

The Company paid income taxes of approximately $3.1 million, $2.0 million
and $2.8 million in 1995, 1996 and 1997, respectively.

F-17
<PAGE> 18
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. EMPLOYEE RETIREMENT PLAN

The Company has established 401(k) retirement plans (the "Retirement
Plans") that cover a majority of the Company's employees. Eligible employees may
contribute up to 18% of their compensation, subject to certain limitations, to
the Retirement Plans. The Company may make contributions to the Retirement Plans
at the discretion of the Board. As of December 31, 1997, no contributions had
been made by the Company.

10. SEGMENT INFORMATION AND INTERNATIONAL OPERATIONS

The Company operates in one industry segment, which is the development,
marketing, licensing and support of client/server-based decision support
software products for supply chain management and related applications. Revenues
from international sources were approximately $3.4 million, $21.8 million and
$66.7 million in 1995, 1996 and 1997, respectively. The Company's revenues from
international sources were primarily generated from customers located in Asia,
Canada and Europe. In 1996 and 1997, revenues from customers located in Europe
accounted for 11% and 16% of total revenues, respectively. Total assets from
international operations, composed primarily of accounts receivable, were $21.6
million or 19% of total assets as of December 31, 1996 and were $42.3 million or
17% of total assets as of December 31, 1997.

11. MAJOR CUSTOMERS

During 1995 and 1997, no individual customer accounted for more than 10% of
total revenues. During 1996, one customer accounted for approximately 11% of
total revenues.

12. RELATED PARTY TRANSACTIONS

As of December 31, 1996, the Company had $1.0 million of notes receivable
from certain of its common stockholders. These notes bore interest at 6.78% and
were repaid in May 1997.

F-18
<PAGE> 19
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. QUARTERLY INFORMATION (UNAUDITED)

Summarized quarterly supplemental consolidated financial information for
1996 and 1997 is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1996
Revenues:
Software licenses........................... $11,786 $12,505 $16,807 $19,975
Services.................................... 4,553 6,817 8,051 11,094
Maintenance................................. 1,530 1,931 2,312 3,108
------- ------- ------- -------
Total revenues......................... 17,869 21,253 27,170 34,177
------- ------- ------- -------
Costs and expenses:
Cost of software licenses................... 20 130 49 61
Cost of services and maintenance............ 3,135 4,665 6,377 7,584
Sales and marketing......................... 6,118 7,971 9,578 11,515
Research and development.................... 4,191 4,651 5,870 7,174
General and administrative.................. 1,933 2,421 2,919 3,152
In-process research and development and
acquisition costs......................... -- -- 1,133 --
------- ------- ------- -------
Total costs and expenses............... 15,397 19,838 25,926 29,486
------- ------- ------- -------
Operating income............................... 2,472 1,415 1,244 4,691
Other income................................... 105 442 566 568
------- ------- ------- -------
Income before income taxes..................... 2,577 1,857 1,810 5,259
Provision for income taxes..................... 960 692 1,095 1,958
------- ------- ------- -------
Net income..................................... $ 1,617 $ 1,165 $ 715 $ 3,301
======= ======= ======= =======
Net income per share........................... $ 0.03 $ 0.02 $ 0.01 $ 0.05
Net income per share, assuming dilution........ $ 0.03 $ 0.02 $ 0.01 $ 0.05
Weighted average common shares outstanding..... 53,970 57,846 59,292 60,674
Weighted average common shares outstanding,
assuming dilution........................... 61,050 65,894 67,616 69,118
</TABLE>

F-19
<PAGE> 20
i2 TECHNOLOGIES, INC.

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1997
Revenues:
Software licenses........................... $23,517 $34,300 $38,207 $43,774
Services.................................... 10,961 12,305 14,119 16,052
Maintenance................................. 4,020 4,372 5,770 6,295
------- ------- ------- -------
Total revenues......................... 38,498 50,977 58,096 66,121
------- ------- ------- -------
Costs and expenses:
Cost of software licenses................... 1,304 1,218 82 140
Cost of services and maintenance............ 9,053 10,874 12,819 13,258
Sales and marketing......................... 14,183 17,743 19,016 22,584
Research and development.................... 9,183 12,638 15,122 15,798
General and administrative.................. 4,283 5,796 5,785 5,946
In-process research and development and
acquisition costs......................... -- 5,649 -- 3,657
------- ------- ------- -------
Total costs and expenses............... 38,006 53,918 52,824 61,383
------- ------- ------- -------
Operating income (loss)........................ 492 (2,941) 5,272 4,738
Other income................................... 752 702 777 1,122
------- ------- ------- -------
Income (loss) before income taxes.............. 1,244 (2,239) 6,049 5,860
Provision (benefit) for income taxes........... 486 (919) 2,782 4,567
------- ------- ------- -------
Net income (loss).............................. $ 758 $(1,320) $ 3,267 $ 1,293
======= ======= ======= =======
Net income (loss) per share.................... $ 0.01 $ (0.02) $ 0.05 $ 0.02
Net income (loss) per share, assuming
dilution.................................... $ 0.01 $ (0.02) $ 0.05 $ 0.02
Weighted average common shares outstanding..... 61,174 61,678 62,724 64,824
Weighted average common shares outstanding,
assuming dilution........................... 69,848 61,678 71,028 72,596
</TABLE>

F-20

<PAGE> 1

EXHIBIT 99.4

i2 TECHNOLOGIES, INC.

SCHEDULE II TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1997..................... 1,401 3,903 (1,041) 4,263
Year Ended December 31, 1996..................... 947 1,085 (631) 1,401
Year Ended December 31, 1995..................... 449 508 (10) 947
</TABLE>

S-1