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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-28030
i2 TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-2294945
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
909 E. LAS COLINAS BLVD., 16TH FLOOR,
IRVING, TEXAS 75039
(Address of principal executive offices) (Zip code)
(214) 860-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days.
Yes __X__ No _____
As of August 6, 1998, the Registrant had outstanding 70,114,982 shares of
Common Stock, $.00025 par value.
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i2 TECHNOLOGIES, INC.
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
December 31, 1997 and June 30, 1998 3
Condensed Consolidated Statements of Operations for
the Three and Six Months Ended June 30, 1997 and 1998 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 2. Changes in Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 27
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $127,433 $132,599
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . 14,538 37,023
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . 75,037 81,596
Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . 3,836 4,848
Income tax receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 1,097 --
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 3,823 6,562
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 225,764 262,628
Furniture and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . 20,895 22,694
Deferred income taxes and other assets. . . . . . . . . . . . . . . . . . . 3,604 7,242
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,263 $292,564
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,712 $ 8,337
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 26,411 35,968
Revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . 657 --
Current portion of deferred revenue. . . . . . . . . . . . . . . . . . . 29,195 40,123
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,204
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 230 --
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . 64,205 85,632
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518 307
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,780 438
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 66,503 86,377
-------- --------
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, 67,810,274 and 69,965,756 shares issued
and outstanding, respectively. . . . . . . . . . . . . . . . . . . . . 17 17
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 167,852 185,919
Deferred compensation. . . . . . . . . . . . . . . . . . . . . . . . . . (1,125) (794)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,016 21,045
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 183,760 206,187
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . $250,263 $292,564
-------- --------
-------- --------
</TABLE>
See accompanying notes.
3
<PAGE>
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1998 1997 1998
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Software licenses. . . . . . . . . . . . . . . . . . $ 34,300 $ 52,686 $ 57,817 $ 97,631
Services . . . . . . . . . . . . . . . . . . . . . . 12,305 21,491 23,266 40,252
Maintenance. . . . . . . . . . . . . . . . . . . . . 4,372 9,394 8,392 17,136
--------- --------- --------- ---------
Total revenues . . . . . . . . . . . . . . . . . 50,977 83,571 89,475 155,019
--------- --------- --------- ---------
Costs and expenses:
Cost of software licenses. . . . . . . . . . . . . . 1,218 2,002 2,522 4,148
Cost of services and maintenance . . . . . . . . . . 10,874 16,719 19,927 31,981
Sales and marketing. . . . . . . . . . . . . . . . . 17,743 28,452 31,926 53,269
Research and development . . . . . . . . . . . . . . 12,638 19,290 21,821 37,651
General and administrative . . . . . . . . . . . . . 5,796 7,592 10,079 14,266
In-process research and development and
acquisition costs. . . . . . . . . . . . . . . . . 5,649 6,484 5,649 6,484
--------- --------- --------- ---------
Total costs and expenses . . . . . . . . . . . . 53,918 80,539 91,924 147,799
--------- --------- --------- ---------
Operating income (loss) . . . . . . . . . . . . . . . . (2,941) 3,032 (2,449) 7,220
Other income, net . . . . . . . . . . . . . . . . . . . 702 1,947 1,454 3,389
--------- --------- --------- ---------
Income (loss) before income taxes . . . . . . . . . . . (2,239) 4,979 (995) 10,609
Provision (benefit) for income taxes. . . . . . . . . . (919) 4,413 (433) 6,580
--------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . . . $ (1,320) $ 566 $ (562) $ 4,029
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss) per share . . . . . . . . . . . . . . $ (0.02) $ 0.01 $ (0.01) $ 0.06
Net income (loss) per share, assuming dilution. . . . . $ (0.02) $ 0.01 $ (0.01) $ 0.05
Weighted average common shares outstanding. . . . . . . 61,678 69,484 61,464 69,024
Weighted average common shares outstanding,
assuming dilution . . . . . . . . . . . . . . . . . . 61,678 76,534 61,464 76,484
</TABLE>
See accompanying notes.
4
<PAGE>
i2 TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
Six Months Ended June 30,
-------------------------
1997 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . $ (562) $ 4,029
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Write-off of in-process research and development . . . . . . . . 907 3,819
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 2,515 5,929
Amortization of deferred compensation. . . . . . . . . . . . . . 370 331
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 210 (7,086)
Tax benefit of stock options . . . . . . . . . . . . . . . . . . 2,967 10,069
Changes in operating assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . (12,553) (6,559)
Income tax receivable/payable. . . . . . . . . . . . . . . . . (4,517) 2,301
Prepaid and other assets . . . . . . . . . . . . . . . . . . . (1,849) (764)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 3,055 625
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . 9,137 9,157
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . 4,372 10,717
---------- ----------
Net cash provided by operating activities. . . . . . . . . 4,052 32,568
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of acquired cash . . . . . . . . . . . . (1,000) (1,822)
Purchases of furniture and equipment . . . . . . . . . . . . . . . (9,582) (7,728)
Purchases of short-term investments. . . . . . . . . . . . . . . . (20,812) (864,095)
Proceeds from maturities of short-term investments . . . . . . . . 15,500 841,610
---------- ----------
Net cash used in investing activities. . . . . . . . . . . (15,894) (32,035)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving line of credit . . . . . . . . . . . . . -- (657)
Proceeds from sale of common stock and
exercise of stock options. . . . . . . . . . . . . . . . . . . . 636 5,290
---------- ----------
Net cash provided by financing activities. . . . . . . . . 636 4,633
---------- ----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . (11,206) 5,166
Cash and cash equivalents at beginning of period . . . . . . . . . . 41,390 127,433
---------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 30,184 $ 132,599
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
5
<PAGE>
i2 TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of i2 Technologies, Inc. and its wholly owned subsidiaries
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
In April 1998, the Company acquired InterTrans Logistics Solutions
("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. See Note 3
for further discussion of business acquisitions.
The accompanying unaudited interim condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring
entries, except as discussed in Note 3) which, in the opinion of the
Company's management, are necessary for a fair presentation of the results
for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission's rules and regulations.
These financial statements should be read in conjunction with the audited
supplemental financial statements and notes thereto for the three-year period
ended December 31, 1997, included in the Company's Current Report on Form 8-K
dated June 19, 1998.
The results of operations for the three and six months ended June 30, 1998
are not necessarily indicative of results that may be expected for any other
interim period or for the full year.
Certain prior year financial statement items have been reclassified to
conform to the current year's format.
2. NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) per share in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Net income (loss) 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 (loss) per share, assuming dilution, includes the effect of dilutive
potential common stock from the exercise of stock options using the treasury
stock method, except in loss periods where the effect would be antidilutive.
Share amounts for all prior periods presented have been restated to reflect
the two-for-one stock split on June 2, 1998 (See Note 4). In addition, all
net income (loss) per share computations give retroactive effect to the
exchange of shares in connection with the ITLS acquisition (see Note 3).
Reconciliations of the net income (loss) per share and net income (loss) per
share, assuming dilution, computations for the three and six months ended
June 30, 1997 and 1998 are as follows (amounts in thousands, except per share
amounts):
6
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<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
1997 1998 1997 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) PER SHARE:
Weighted-average common shares outstanding. . . . . . . . . 61,678 69,484 61,464 69,024
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $(1,320) $ 566 $ (562) $ 4,029
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share . . . . . . . . . . . . . . . . $ (0.02) $ 0.01 $ (0.01) $0.06
------- ------- ------- -------
------- ------- ------- -------
NET INCOME (LOSS) PER SHARE, ASSUMING DILUTION:
Weighted-average common shares outstanding. . . . . . . . . 61,678 69,484 61,464 69,024
Common shares issuable on exercise of stock options,
net of shares assumed to be repurchased (A) (B). . . . . . -- 7,050 -- 7,460
------- ------- ------- -------
Weighted-average common shares outstanding, assuming
dilution . . . . . . . . . . . . . . . . . . . . . . . . . 61,678 76,534 61,464 76,484
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $(1,320) $566 $ (562) $ 4,029
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share, assuming dilution. . . . . . . $ (0.02) $ 0.01 $ (0.01) $ 0.05
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
_____________________
(A) 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.
(B) For the three and six months ended June 30, 1997, approximately 10.6
million options to purchase the Company's common stock were not included in
the computation of net income (loss) per share, assuming dilution because
of their antidilutive effect.
3. BUSINESS COMBINATIONS
In April 1998, the Company completed the acquisition of ITLS. Under the
terms of the agreement, the Company has agreed to issue approximately 3.3
million shares of its common stock for all of the outstanding capital stock and
all unexpired and unexercised options of ITLS. The ITLS acquisition was
accounted for as a pooling of interests, and accordingly, the accompanying
condensed consolidated financial statements give retroactive effect to the
combination and include the combined operations of the Company and ITLS for all
periods presented.
7
<PAGE>
In connection with the ITLS acquisition, the Company incurred expenses
which included, among other things, investment banking, legal and accounting
fees and expenses. Also in the second quarter of 1998, the Company completed
an acquisition, accounted for using the purchase method, for a total purchase
price of $5.0 million, which included approximately 77,000 shares of the
Company's common stock, cash and acquisition costs. A substantial portion of
the purchase price represented the value of in-process research and
development and was expensed by the Company in the second quarter of 1998.
For the three and six months ended June 30, 1998, the total of all
acquisition-related expenses resulted in a one-time charge to the Company's
operating results of $6.5 million, or $0.08 per share, assuming dilution.
In May 1997, the Company acquired Think Systems Corporation ("Think")
and Optimax Systems Corporation ("Optimax"). Under the terms of these
agreements, the Company issued 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. These acquisitions were both accounted for as a pooling of
interests. The Think product offerings broadened the Company's suite of
decision support products by providing premium demand chain solutions,
including an integrated line of flexible, client/server-based software
applications, for sales, marketing and logistics departments representing a
variety of industries including consumer packaged goods, high technology,
pharmaceutical, apparel, automotive and other product driven specializations.
Optimax provided supply chain sequencing software using unique genetic
algorithms for customer-driven, make-to-order manufacturing, further
expanding the Company's suite of decision support products.
For the three and six months ended June 30, 1997, the Company incurred
approximately $5.6 million in certain acquisition-related expenses in
connection with the Think, Optimax and other business combinations that were
consummated in the second quarter of 1997. These costs included, among other
things, investment banking, legal and accounting fees and expenses and the
write-off of in-process research and development. In total, these expenses
resulted in a one-time charge to the Company's operating results and reduced
net income by $3.1 million, or $0.05 per share, assuming dilution for the
three and six months ended June 30, 1997.
4. STOCK SPLIT
On April 22, 1998, the Company's Board of Directors authorized a
two-for-one stock split of the Company's Common Stock, effected in the form of a
100% stock dividend, which was paid on June 2, 1998 to holders of record of
8
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outstanding shares of Common Stock at the close of business on May 26, 1998.
All share and per share amounts included in this report have been restated to
reflect the stock split.
9
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5. RECENT ACCOUNTING PRONOUNCEMENTS
In the second quarter of 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which requires derivatives be marked-to-market on an ongoing
basis along with the underlying hedged items. This standard becomes effective
in 2000. The effect on the Company, if any, has yet to be determined.
Accounting standard SOP 98-1 was issued in the first quarter of 1998 and is
effective in 1999. It requires capitalization of costs incurred to acquire or
develop software to be used internally. The Company expects to adopt the
standard in the first quarter of 1999 for qualifying costs in that quarter and
thereafter. The effect on the Company is not expected to be material.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS REPORT 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 CONCERNING: GROWTH AND FUTURE OPERATING RESULTS; DEVELOPMENTS IN
THE COMPANY'S MARKETS AND STRATEGIC FOCUS; NEW PRODUCTS AND PRODUCT
ENHANCEMENTS; POTENTIAL ACQUISITIONS AND THE INTEGRATION OF ACQUIRED
BUSINESSES, PRODUCTS AND TECHNOLOGIES; STRATEGIC RELATIONSHIPS; AND FUTURE
ECONOMIC, BUSINESS AND REGULATORY CONDITIONS. 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. THESE
FORWARD-LOOKING STATEMENTS AND OTHER STATEMENTS MADE ELSEWHERE IN THIS REPORT
ARE MADE IN RELIANCE ON THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
THE SECTION BELOW ENTITLED "FACTORS THAT MAY AFFECT FUTURE RESULTS" SETS
FORTH AND INCORPORATES BY REFERENCE CERTAIN FACTORS THAT COULD CAUSE ACTUAL
FUTURE RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THESE STATEMENTS.
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.
In April 1998, the Company completed the acquisition of InterTrans
Logistics Solutions ("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. Under the terms of the acquisition agreement, the Company has agreed
to issue approximately 3.3 million shares of its common stock for all of the
outstanding capital stock and all unexpired and unexercised options of ITLS,
the majority of which was issued in the second quarter of 1998. The ITLS
acquisition was accounted for as a pooling of interests, and accordingly, the
Condensed Consolidated Financial Statements included elsewhere herein 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 Condensed Consolidated
Financial Statements. Also in the second quarter of 1998, the Company
completed an acquisition, accounted for using the purchase method, for a
purchase price of $5.0 million, of which a substantial portion of the
purchase price was recorded as in-process research and development and
expensed in the second quarter of 1998 along with other acquisition-related
expenses in connection with the ITLS acquisition.
11
<PAGE>
In May 1997, the Company acquired Think Systems Corporation ("Think")
and Optimax Systems Corporation ("Optimax"). Under the terms of these
agreements, the Company issued 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. The Think and Optimax acquisitions were each accounted for as
a pooling of interests, and accordingly, the Condensed Consolidated Financial
Statements included elsewhere herein give retroactive effect to the
combination and include the combined operations of the Company and Think and
Optimax for all periods presented. Also in the second quarter of 1997, the
Company completed an acquisition, accounted for using the purchase method,
for a cash purchase price of $1.0 million, of which a substantial portion of
the purchase price was recorded as in-process research and development and
expensed in the second quarter of 1997 along with other acquisition-related
expenses in connection with the Think and Optimax acquisitions.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages that selected items in the unaudited Condensed Consolidated
Statements of Operations bear to total revenues. The period to period
comparisons of financial results are not necessarily indicative of future
results.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Software licenses . . . . . . . . . . . . . . 67.3% 63.1% 64.6% 63.0%
Services. . . . . . . . . . . . . . . . . . . 24.1 25.7 26.0 26.0
Maintenance . . . . . . . . . . . . . . . . . 8.6 11.2 9.4 11.0
----- ----- ----- -----
Total revenues . . . . . . . . . . . . . 100.0 100.0 100.0 100.0
----- ----- ----- -----
Costs and expenses:
Cost of software licenses . . . . . . . . . . 2.4 2.4 2.8 2.7
Cost of services and maintenance. . . . . . . 21.3 20.0 22.2 20.6
Sales and marketing . . . . . . . . . . . . . 34.8 34.0 35.7 34.3
Research and development. . . . . . . . . . . 24.8 23.1 24.4 24.3
General and administrative. . . . . . . . . . 11.4 9.1 11.3 9.2
In-process research and development and
acquisition costs. . . . . . . . . . . . . 11.1 7.8 6.3 4.2
----- ----- ----- -----
Total costs and expenses . . . . . . . . 105.8 96.4 102.7 95.3
----- ----- ----- -----
Operating income (loss). . . . . . . . . . . . . . (5.8) 3.6 (2.7) 4.7
Other income, net. . . . . . . . . . . . . . . . . 1.4 2.4 1.6 2.1
----- ----- ----- -----
Income (loss) before income taxes. . . . . . . . . (4.4) 6.0 (1.1) 6.8
Provision (benefit) for income taxes . . . . . . . (1.8) 5.3 (0.5) 4.2
----- ----- ----- -----
Net income (loss). . . . . . . . . . . . . . . . . (2.6)% 0.7% (0.6)% 2.6%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
REVENUES
The Company's revenues consist of software license revenues, service
revenues and maintenance revenues. Software license revenues consist of sales
of software licenses which, for periods subsequent to December 31, 1997, are
recognized in accordance with the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 97-2, "Software Revenue
Recognition." Under SOP 97-2, software license revenues are 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. For periods prior to December 31, 1997, software
license revenues were recognized in accordance with SOP 91-1, "Software
Revenue Recognition." Under SOP 91-1, software license revenues were
recognized upon execution of a contract and shipment of the software,
provided that no significant vendor obligations remained outstanding, amounts
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were due within one year and collection was considered probable by
management. The application of SOP 97-2 did not have a material impact on
the Company's consolidated financial statements for the three or six month
periods ended June 30, 1998. 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 in the future, which could be material to the Company's
consolidated financial statements. 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.
Total revenues increased 63.9% to $83.6 million in the quarter ended
June 30, 1998 from $51.0 million in the quarter ended June 30, 1997. In the
first six months of 1998, total revenues increased 73.3% to $155.0 million
from $89.5 million in the first six months of 1997. The Company currently
derives substantially all of its revenues from licenses associated with its
RHYTHM suite of decision support products which includes demand planning,
factory planning, supply chain planning, distribution planning,
transportation planning and other supply chain management related
applications as well as related services and maintenance. The Company
expects that revenues from the RHYTHM suite of products 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 the RHYTHM suite of products 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 53.6% to
$52.7 million in the quarter ended June 30, 1998 from $34.3 million in the
quarter ended June 30, 1997. In the first six months of 1998, revenues from
software licenses increased 68.9% to $97.6 million from $57.8 million in the
first six months of 1997. 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 and continued expansion into new geographic and
vertical markets. To date, sales of software licenses have been derived
principally 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 74.7% to $21.5 million in
the quarter ended June 30, 1998 from $12.3 million in the quarter ended June
30, 1997. In the first six months of 1998, revenues from services increased
73.0% to $40.3 million from $23.3 million in the first six months of 1997.
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, consulting and training services.
MAINTENANCE. Revenues from maintenance increased 114.9% to $9.4 million
in the quarter ended June 30, 1998 from $4.4 million in the quarter ended
June 30, 1997. In the first six months of 1998, revenues from maintenance
increased 104.2% to $17.1 million from $8.4 million in the first six months
of 1997. 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 levels achieved in the three and six
months ended June 30, 1998.
CONCENTRATION OF REVENUES. 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 the second quarter of 1998 and in
each quarter of 1997, one or more customers each accounted for at least 15%
of total software license revenues. While the Company believes that the loss
of any of these particular customers would not have a material adverse effect
upon the Company's business, operating results or financial condition, an
inability to consummate
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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.
INTERNATIONAL REVENUES. The Company's international revenues, primarily
generated from customers located in Europe, Asia and Canada, in the three and
six months ended June 30, 1998, were approximately 17% and 19% of total
revenues, respectively and were approximately 32% of total revenues in both
the three and six months ended June 30, 1997. The decreases in international
revenues were primarily due to execution issues related to the previous
international management team and the resulting international management
reorganization in 1998. The Company believes that continued growth and
profitability will require expansion of its sales in international markets.
In order to successfully increase the level of international sales, the
Company has utilized and will continue to utilize substantial resources to
expand existing international operations, establish additional international
operations and hire additional personnel.
COSTS AND EXPENSES
COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily
of (i) 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 $2.0 million and $1.2 million in the quarters
ended June 30, 1998 and 1997, representing 3.8% and 3.6% of software license
revenues, respectively. Cost of software licenses was $4.1 million and $2.5
million in the first six months of 1998 and 1997, representing 4.2% and 4.4%
of software license revenues, respectively. The increases in the dollar
amount of the cost of software licenses were primarily due to an increase in
commissions paid to third-parties in connection with joint marketing and
other related agreements.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance
consists primarily of costs associated with implementation, consulting and
training services. Cost of services and maintenance also includes the cost
of providing software maintenance to customers such as hotline telephone
support 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 $16.7 million and $10.9 million
in the quarters ended June 30, 1998 and 1997, representing 54.1% and 65.2% of
total services and maintenance revenues, respectively. Cost of services and
maintenance was $32.0 million and $19.9 million in the first six months of
1998 and 1997, representing 55.7% and 62.9% of total services and maintenance
revenues, respectively. The increases in the dollar amount of cost of
services and maintenance 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. The decreases in
cost of services and maintenance as a percentage of total services and
maintenance revenues were primarily due to the Company's ability to leverage
its growing base of consultants, product support and training staff to serve
its growing customer base. 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 $28.5 million
and $17.7 million in the quarters ended June 30, 1998 and 1997, representing
34.0% and 34.8% of total revenues, respectively. These same expenses were
$53.3 million and $31.9 million in the first six months of 1998 and 1997,
representing 34.3% and 35.7% 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 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
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amount of sales and marketing expenses will continue to increase while sales
and marketing expenses as a percentage of total revenues should not vary
significantly from the levels attained in the three and six month periods
ended June 30, 1998.
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RESEARCH AND DEVELOPMENT. Research and development expenses were $19.3
million and $12.6 million in the quarters ended June 30, 1998 and 1997,
representing 23.1% and 24.8% of total revenues, respectively. These same
expenses were $37.7 million and $21.8 million in the first six months of 1998
and 1997, representing 24.3% and 24.4% 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, but research and development expenses as a percentage
of total revenues will decrease from levels attained in the three and six
months ended June 30, 1998.
In accordance with Statement of Financial Accounting Standards 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 include
the personnel and other costs of the finance, human resources, information
systems, administrative and executive departments of the Company and the fees
and expenses associated with legal, accounting and other requirements.
General and administrative expenses were $7.6 million and $5.8 million in the
quarters ended June 30, 1998 and 1997 representing 9.1% and 11.4% of total
revenues, respectively. These same expenses were $14.3 million and $10.1
million in the first six months of 1998 and 1997, representing 9.2% and 11.3%
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. The decreases in general and administrative expenses as a
percentage of total revenues were primarily due to the substantial increase
in total revenues and the Company's ability to leverage its base of resources
to support a larger organization. The Company expects that the dollar amount
of general and administrative expenses will continue to increase in the
foreseeable future.
IN-PROCESS RESEARCH AND DEVELOPMENT AND ACQUISITION COSTS. In April
1998, the Company completed the acquisition of ITLS, which was accounted for
as a pooling of interests. In May 1998, the Company completed the acquisition
of another software vendor for a total purchase price of $5.0 million. This
acquisition was accounted for using the purchase method, and a substantial
portion of the purchase price was recorded as in-process research and
development. The Company incurred approximately $6.5 million in certain
acquisition-related expenses in connection with these business combinations,
which were recorded in the second quarter of 1998. These costs included,
among other things, investment banking, legal and accounting fees and
expenses and the write-off of in-process research and development. See Note
3 of the Notes to Condensed Consolidated Financial Statements for further
discussion.
In April 1997, the Company completed an acquisition for a cash purchase
price of $1.0 million. The acquisition was accounted for using the purchase
method, and a substantial portion of the purchase price was recorded as
in-process research and development. In May 1997, the Company completed the
acquisition of Think and Optimax in transactions each accounted for as a
pooling of interests. The Company incurred approximately $5.6 million in
certain acquisition-related expenses in connection with these business
combinations, which were recorded in the second quarter of 1997. These costs
included, among other things, investment banking, legal and accounting fees
and expenses and the write-off of in-process research and development. See
Note 3 of the Notes to Condensed Consolidated Financial Statements for
further discussion.
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OTHER INCOME, NET
Other income, net consists primarily of interest income on short-term
investments and overnight repurchase agreements partially offset by interest
expense on the Company's debt. Other income, net was $1.9 million and
$702,000 in the quarters ended June 30, 1998 and 1997, representing 2.4% and
1.4% of total revenues, respectively. Other income, net was $3.4 million and
$1.5 million in the first six months of 1998 and 1997, representing 2.1% and
1.6% of total revenues, respectively. The increases in other income, net
were primarily due to interest earned on higher balances of cash, cash
equivalents and short-term investments resulting from net proceeds of the
public offering of the Company's common stock which was completed in
December 1997.
PROVISION (BENEFIT) FOR INCOME TAXES
The Company's effective tax rate for the three and six months ended June
30, 1998 was 89% and 62%, respectively, compared to 41% and 44%,
respectively, for the three and six months ended June 30, 1997. The
effective tax rates for the three and six months ended June 30, 1998 and 1997
significantly varied from the U.S. statutory rate due primarily to the
non-deductibility of certain acquisition-related expenses. Without these
expenses, the Company's effective tax rate for the three and six months ended
June 30, 1998 would have been 38.5%.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily financed its operations
and met its capital expenditure requirements through cash flows from
operations, long-term borrowings and sales of equity securities. The Company
maintained a strong liquidity and financial position with $177.0 million of
working capital as of June 30, 1998 as compared to $161.6 million as of
December 31, 1997. The increase in working capital was primarily related to
an increase in cash, cash equivalents and short-term investments to $169.6
million at June 30, 1998 from $142.0 million at December 31, 1997. Cash
flows from operations were $32.6 million and $4.1 million for the six months
ended June 30, 1998 and 1997, respectively. Operating cash flows increased
primarily due to increases in net income, accrued liabilities, deferred
revenue and the tax benefit from stock option activity offset somewhat by an
increase in accounts receivable. Accrued liabilities have increased
primarily as a result of increased 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 $81.6 million at June 30, 1998 from $75.0 million at December 31, 1997.
However, quarter-end days' sales outstanding decreased to 89 days at June 30,
1998 from 103 days at December 31, 1997. This decrease was primarily due to
the collection of several large trade receivable balances outstanding at
December 31, 1997. Accounts receivable and days' sales outstanding can
fluctuate for a variety of reasons including (i) the amount and timing of
revenues earned; (ii) the Company's collection experience; (iii) the amount
of receivables generated from international customers which generally have
longer payment terms compared to customers in the United States and (iv) the
number of large sales for which some amounts may not be due upon execution of
the contract. The Company believes that the allowance for doubtful accounts
at June 30, 1998 is adequate to cover any collection difficulties with
respect to accounts receivable. However, a significant portion of the
Company's accounts receivable are derived from sales of large licenses, often
to new customers with whom the Company does not have a payment history.
Accordingly, there can be no assurance that the allowance will be adequate to
cover any receivables, which are later determined to be uncollectible,
particularly if one or more large receivables become uncollectible.
Cash used in investing activities was $32.0 million for the six months
ended June 30, 1998 as compared to $15.9 million for the six months ended
June 30, 1997. The increase in cash used in investing activities was
primarily due to the continued investment in financial instruments classified
as short-term investments as a result of improved operating cash flows. At
June 30, 1998, the Company did not have any material commitments for capital
expenditures.
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Cash provided by financing activities was $4.6 million for the six
months ended June 30, 1998 as compared to $636,000 for the six months ended
June 30, 1997. The increase in cash provided by financing activities was due
to an increase in net proceeds received by the Company upon the exercise of
stock options by its employees offset by the payment of the remaining balance
on the Company's revolving line of credit.
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.
The Company utilizes third-party vendor equipment, telecommunication
products and software products that 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
Numerous factors may affect the Company's business and future results of
operations. These factors include, but are not limited to, the potential for
significant fluctuations in quarterly results; dependence on significant
individual sales; competition; management of growth; product concentration;
dependence on product line expansion; integration of recent acquisitions;
potential future acquisitions; international operations and currency
fluctuations; risks associated with strategic relationships; dependence upon
key personnel; intellectual property and proprietary rights; use of licensed
technology; complexity of software products; rapid technological change and
new products; dependence on technical and implementation personnel; Year 2000
compliance issues; product liability claims; and volatility of stock price.
The discussion below addresses some of these factors. For a more thorough
discussion of these and other factors that may affect the Company's business
and future results, see the discussion under the caption "Factors That May
Affect Future Results" in Exhibit 99.2 to the Company's Current Report on
Form 8-K dated June 19, 1998.
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.
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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
the second quarter of 1998 and in each quarter of 1997, one or more customers
each accounted for at least 15% of total software license revenues. While
the Company believes that the loss of any of these particular customers would
not have a material adverse effect on the Company's business, operating
results or financial condition, 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 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 AG ("SAP"), PeopleSoft, Inc., Oracle Corporation 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, in 1997, the
Company and SAP terminated a license and distribution agreement, and SAP has
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
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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.
INTEGRATION OF RECENT ACQUISITIONS; POTENTIAL FUTURE ACQUISITIONS
In the second quarter of 1998, the Company completed the acquisitions of
ITLS and another software vendor. The success of these and all of the
Company's 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 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 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 related to
international operations.
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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.
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, 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.
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
21
<PAGE>
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
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 Year 2000 issues may affect the purchasing
patterns of customers and potential customers 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.
The Company utilizes third-party vendor equipment, telecommunication
products and software products that 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.
22
<PAGE>
i2 TECHNOLOGIES, INC.
PART II
ITEM 2. CHANGES IN SECURITIES.
From April 1 through June 30, 1998, the Company issued approximately 1.0
million shares of its common stock to employees pursuant to exercises of
stock options (with exercise prices ranging from $0.01 to $6.06 per share)
under the Company's stock plans. These issuances were deemed exempt from
registration under Section 5 of the Securities Act of 1933 in reliance upon
Rule 701 thereunder. In addition, the recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to, or for sale in connection with, any
distribution thereof and appropriate restrictive transfer legends were
affixed to the share certificates issued in each such transaction.
In the second quarter of 1998, the Company issued (i) approximately 3.2
million shares of its common stock to the shareholders of InterTrans
Logistics Solutions ("ITLS") as a condition to the acquisition (the "ITLS
Acquisition") of ITLS and (ii) approximately 77,000 shares of its common
stock to the shareholders of another software vendor as a condition to the
acquisition of this vendor. These issuances were deemed exempt from
registration under Section 5 of the Securities Act of 1933 in reliance upon
Section 4(2) thereof. In addition, the recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to, or for sale in connection with, any
distribution thereof and appropriate restrictive transfer legends were
affixed to the share certificates issued in each such transaction.
In the second quarter of 1998, the Company issued approximately 7,000
shares of its common stock pursuant to the exercise of ITLS stock options
(with exercise prices of $9.74 per share) assumed by the Company as a
condition to the ITLS Acquisition. These issuances were deemed exempt from
registration under Section 5 of the Securities Act of 1933 in reliance upon
Section 4(2) thereof.
23
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting of Stockholders held on May 26, 1998 in
Dallas, Texas, the Company's stockholders voted on the following matters
(share amounts reflect the two-for-one stock split effected as a stock
dividend paid on June 2, 1998):
1. The election of a Class I Director to hold office until the 2001 Annual
Meeting of Stockholders. The nominee of the Board of Directors was elected.
<TABLE>
Name of Nominee Number of Votes For Number of Votes Withheld Number of Abstentions
--------------- ------------------- ------------------------ ---------------------
<S> <C> <C> <C>
Thomas J. Meredith 53,114,026 26,376 12,570,372
</TABLE>
The term of office of the Class II Directors (Harvey B. Cash and Sandeep
R. Tungare) continues until the 1999 Annual Meeting of Stockholders and the
term of office of the Class III Directors (Sanjiv S. Sidhu and Kanna N.
Sharma) continues until the 2000 Annual Meeting of Stockholders.
2. Approval of an amendment to the Company's 1995 Stock Option/Stock
Issuance Plan (the "1995 Plan") to (i) increase the number of shares of
Common Stock authorized to be issued under the 1995 Plan by 7,000,000 shares;
(ii) allow members of the Compensation Committee which administers the 1995
Plan to receive discretionary grants and stock issuances under the
Discretionary Option Grant and Stock Issuance Programs of the 1995 Plan; (iii)
allow the shares issued under the 1995 Plan which are subsequently reacquired
by the Company pursuant to the Company's exercise of its repurchase rights to
be added back to the share reserve available for future issuance under the
1995 Plan; (iv) require stockholder approval of future amendments to the 1995
Plan only to the extent necessary to satisfy applicable laws or regulations;
(v) provide that either the Board of Directors or the Compensation Committee
may administer the 1995 Plan with respect to directors and officers subject to
the "short-swing" profit liabilities under Section 16 of the Securities
Exchange Act of 1934; (vi) allow non-statutory options granted under the 1995
Plan to be transferred to family members or trusts established for family
members in connection with the optionee's estate planning; (vii) eliminate the
six-month holding period requirement for the exercise of limited stock
appreciation rights in connection with a hostile take-over and (viii) remove
the six-month limitation on the frequency with which amendments may be made to
the Automatic Option Grant Program of the 1995 Plan. The amendment was
approved.
<TABLE>
<S> <C>
Number of Votes For 42,415,406
Number of Votes Against 7,520,492
Number of Votes Withheld 162,376
Number of Broker Non-Votes 3,042,128
Number of Abstentions 12,570,372
</TABLE>
3. Approval of an amendment of the Company's Certificate of Incorporation of
the Company to increase the number of authorized shares of Common Stock of the
Company from 50,000,000 to 200,000,000. The amendment was approved.
<TABLE>
<S> <C>
Number of Votes For 47,049,200
Number of Votes Against 6,020,752
Number of Votes Withheld 70,450
Number of Abstentions 12,570,372
</TABLE>
4. Approval of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998.
The appointment was approved.
<TABLE>
<S> <C>
Number of Votes For 53,068,084
Number of Votes Against 5,122
Number of Votes Withheld 67,196
Number of Abstentions 12,570,372
</TABLE>
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Index
-------------
<TABLE>
Number Exhibit Description
------ -----------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation, as amended
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
-------------------
During the three month period ended June 30, 1998, the Company filed
the following Current Reports on Form 8-K:
1. The Company filed a Form 8-K dated May 5, 1998 (Items 5 and 7) in
order to report that the Company had completed its acquisition of
InterTrans Logistics Solution ("ITLS") of Markham, Ontario.
2. The Company filed a Form 8-K dated June 19, 1998 (Items 5 and 7) in
order to provide supplemental consolidated financial statements giving
retroactive effect to the acquisition of ITLS and including the
combined operations of the Company and ITLS. The following financial
statements were filed with the Form 8-K dated June 19, 1998:
Supplemental Consolidated Balance Sheets as of December 31, 1996
and 1997
Supplemental Consolidated Statements of Income for the Years
Ended December 31, 1995, 1996 and 1997
Supplemental Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1995, 1996 and 1997
Supplemental Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1996 and 1997
Notes to Supplemental Consolidated Financial Statements
25
<PAGE>
3. The Company filed a Form 8-K dated June 22, 1998 (Items 5 and 7) in
order to provide supplemental condensed consolidated financial
statements giving retroactive effect to the acquisition of ITLS and
including the combined operations of the Company and ITLS. The
following financial statements were filed with the Form 8-K dated
June 22, 1998:
Supplemental Condensed Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1998
Supplemental Condensed Consolidated Statements of Income for
the Three Months Ended March 31, 1997 and 1998
Supplemental Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1997 and 1998
Notes to Supplemental Condensed Consolidated Financial Statements
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
i2 TECHNOLOGIES, INC.
---------------------------------------
August 13, 1998 /s/ Sanjiv S. Sidhu
--------------- ---------------------------------------
(Date) Sanjiv S. Sidhu
Chairman of the Board and Chief
Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
August 13, 1998 /s/ David F. Cary
--------------- ---------------------------------------
(Date) David F. Cary
Vice President and Chief Financial Officer
(PRINCIPAL FINANCE AND ACCOUNTING OFFICER)
27
<PAGE>
Index to Exhibits
<TABLE>
Number Exhibit Description
- ------ -------------------
<S> <C>
3.1 Certificate of Incorporation, as amended
27.1 Financial Data Schedule
</TABLE>
28
<PAGE>
CERTIFICATE OF INCORPORATION
OF
INTELLECTION, INC.
FIRST: The name of the Corporation is Intellection, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, Delaware 19801.
The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: A. The total number of shares which the Corporation shall
have authority to issue is 20,000,000 shares of capital stock.
B. Of such authorized shares, Fifteen Million (15,000,000)
shares shall be designated "Common Stock", and have a par value
of $.001.
C. Of such authorized shares, Five Million (5,000,000)
shares shall be designated "Preferred Stock", and have a par
value of $.001. The Preferred Stock may be issued from time
to time in one or more series. The Board of Directors of the
Corporation is authorized to determine or alter the powers,
preferences and rights and the qualifications, limitations or
restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the
Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not
below the number of shares of any such series then
outstanding) the number of shares of any such series
subsequent to the issuance of shares of that series, to
determine the designation of any series, and to fix the number
of shares of any series. In case the number or shares of any
series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of
shares of such series.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Steven E. Bochner Wilson, Sonsini, Goodrich & Rosati
Two Palo Alto Square
Suite 900
Palo Alto, CA 94306
<PAGE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and
before voting begins.
EIGHTH: A. At each annual meeting of stockholders, directors of
the Corporation shall be elected to hold office until the
expiration of the term for which they are elected, and until
their successors have been duly elected and qualified; except
that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in
accordance with the Delaware General Corporation Law. At the
annual meeting of stockholders (the "First Public Company Annual
Meeting") following the closing of a public offering of the
Corporation's Capital Stock pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended (a
"Public Offering"), the directors of the Corporation shall be
divided into three classes as nearly equal in size as is
practicable, hereby designated Class I, Class II and Class III.
The term of office of the initial Class I directors shall expire
at the next succeeding annual meeting of stockholders, the term
of office of the initial Class II directors shall expire at the
second succeeding annual meeting of stockholders and the term of
office of the initial Class III directors shall expire at the
third succeeding annual meeting of the stockholders. For the
purposes hereof, the initial Class I, Class II and Class III
directors shall be those directors so designated and elected at
the First Public Company Annual Meeting. At each annual meeting
after the First Public Company Annual Meeting, directors to
replace those of a Class whose terms expire at such annual
meeting shall be elected to hold office until the third
succeeding annual meeting and until their respective successors
shall have been duly elected and qualified. If the number of
directors is hereafter changed, any newly created directorships
or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is
practicable.
B. Vacancies occurring on the Board of Directors for any
reason may be filled by vote of a majority of the remaining
members of the Board or Directors, although less than a quorum,
at a meeting of the Board of Directors. A person so elected by
the Board of Directors to fill a vacancy shall hold office until
the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly
elected and qualified.
NINTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of
the Corporation.
2
<PAGE>
TENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
ELEVENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as it may hereafter be
amended, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article, would
accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
TWELFTH: At the election of directors of the Corporation, each holder of
stock of any class of series shall be entitled to as many votes
as shall equal the number of votes which (except for such
provision as to cumulative voting) he would be entitled to cast
for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him, and
he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or for any two
or more of them as he may see fit, so long as the name of the
candidate for director shall have been placed in nomination prior
to the voting and the stockholder, or any other holder of the
same class or series of stock, has given notice at the meeting
prior to the voting of the intention to cumulate votes; provided
that, notwithstanding the above and any provision contained in
this Certificate of Incorporation to the contrary, effective upon
a Public Offering, the holders of stock of any class or series
shall no longer be entitled to such cumulative voting rights.
THIRTEENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the statutes) outside of the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
FOURTEENTH: Effective upon the closing of a Public Offering, stockholders of
the Corporation may not take action by written consent in lieu of
a meeting but must take any actions at a duly called annual or
special meeting.
FIFTEENTH: Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of the capital stock required by
law or this Certificate of Incorporation, the affirmative vote of
the holders of at least two-thirds (2/3) of the combined voting
power of all of the then-outstanding shares of the Corporation
entitled to vote shall be
3
<PAGE>
required to alter, amend or repeal Articles EIGHTH, TWELFTH,
FOURTEENTH or FIFTEENTH or any provision thereof, unless such
amendment shall be approved by a majority of the directors of
the Corporation not affiliated or associated with any person
or entity holding (or which has announced an intention to
obtain) 26% or more of the voting power of the Corporation's
outstanding capital stock.
SIXTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly, has hereunto set his hand this 8th day of January, 1992.
/s/ Steven E. Bochner
---------------------
Steven E. Bochner
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
- --------------------------------------------------------------------------------
Intellection, Inc. a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of Intellection, Inc.
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaration said amendment to
be advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "First" so that, as
amended, said Article shall be and read as follows: The name of the
Corporation is I2 Technologies, Inc. (the "Corporation").
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, said Intellection, Inc. has caused this certificate to be
signed by Sanjiv Sidhu, its President and Sanjiv Sidhu, its Secretary this 14th
day of February, 1994.
By: /s/ Sanjiv Sidhu
--------------------
President
Attest: /s/ Sanjiv Sidhu
----------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
i2 TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
- --------------------------------------------------------------------------------
i2 Technologies, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: The name of the Corporation is i2 Technologies, Inc. and the
Corporation was originally incorporated on January 9, 1992 pursuant to the
General Corporation Law of the State of Delaware; and
SECOND: The following resolutions amending the Corporation's
Certificate of Incorporation were approved by the Board of Directors of the
Corporation at a special meeting of the Board of Directors of The Corporation
held April 8, 1995, and were duly adopted by the sole stockholder of the
Corporation in accordance with the provisions of Section 242 of the General
Corporation Law at a Special Meeting of Stockholder held on April 8, 1995.
RESOLVED, that the Certificate of Incorporation of the Corporation is hereby
amended by changing the Article thereof numbered "FIRST" so that, as amended,
said Article shall read in full as follows:
FIRST: The name of this Corporation is i2 Technologies, Inc.
(the "Corporation")
RESOLVED, that the Certificate of Incorporation of the Corporation is hereby
amended by changing paragraph B. of the Article thereof numbered "FOURTH" so
that, as amended, said paragraph of said Article shall read in full as follows:
B. Of such authorized shares, Fifteen Million
(15,000,000) shares shall be designated "Common Stock", and
have a par value of $.0005 per share. Effective upon filing
of this Certificate of Amendment of Certificate of
Incorporation of the Corporation with the Secretary of State
of the State of Delaware, each outstanding share of the
Corporation's previously authorized common Stock, par value
$.001 per share, shall be split into two (2) shares of the
Corporation's Common Stock authorized hereunder.
* * *
<PAGE>
IN WITNESS WHEREOF, i2 Technologies, Inc. has caused this Certificate of
Amendment to be signed by its President and attested to by its Secretary this
10th day of April, 1995.
i2 Technologies, Inc.
By: /s/ Sanjiv Sidhu
------------------
Sanjiv Sidhu
President
ATTEST:
/s/ Ken Sharma
- --------------
Ken Sharma
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
i2 TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
- --------------------------------------------------------------------------------
i2 Technologies, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: The name of the Corporation is i2 Technologies, Inc. and
the Corporation was originally incorporated on January 9, 1992 pursuant to
the General Corporation Law of the State of Delaware; and
SECOND: The following resolution amending the Corporation's
Certificate of Incorporation was approved by an Action by Unanimous Written
Consent of the Board of Directors of the Corporation dated June 26, 1995, and
was duly adopted, in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware, by the sole stockholder of
the Corporation pursuant to a Written Consent of the Sole Stockholder of the
Corporation dated June 26, 1995:
RESOLVED, that the Certificate of Incorporation of the Corporation is hereby
amended by amending paragraphs A. and B. of the Article thereof numbered
"FOURTH" so that, as amended, said paragraphs of said Article shall read in full
as follows:
"A. The total number of shares which the Corporation shall have
authority to issue is Thirty Million (30,000,000) shares of capital
stock.
B. Of such authorized shares, Twenty Five Million (25,000,000)
shares shall be designated "Common Stock," and have a par value of
$.0005 per share."
* * *
IN WITNESS WHEREOF, i2 Technologies, Inc. has caused this Certificate of
Amendment to be signed by its President and attested to by its Secretary this
27th day of June, 1995.
i2 Technologies, Inc.
By: /s/ Sanjiv Sidhu
---------------------------
Sanjiv Sidhu, President
ATTEST:
/s/ Ken Sharma
- ---------------------
Ken Sharma, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
i2 TECHNOLOGIES, INC.,
A DELAWARE CORPORATION
- --------------------------------------------------------------------------------
i2 Technologies, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: The name of the Corporation is i2 Technologies, Inc. and
the Corporation was originally incorporated on January 6, 1992 pursuant to
the General Corporation Law of the State of Delaware; and
SECOND: The following resolution amending the Corporation's
Certificate of Incorporation was approved by an Action by Unanimous Written
Consent of the Board of Directors of the Corporation dated December 14, 1995,
and was duly adopted, in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware, by the sole stockholder of
the Corporation pursuant to a Written Consent of the Sole Stockholder of the
Corporation dated December 14, 1995:
RESOLVED, that the Certificate of Incorporation of the Corporation is hereby
amended by appending the following sentence to paragraph B. of the Article
thereof numbered "FOURTH":
"Effective upon filing of this Certificate of Amendment of
Certificate of Incorporation of the Corporation with the Secretary
of State of the State of Delaware, each outstanding share of the
Corporation's authorized Common Stock as of the date of such filing
shall be split into two (2) shares of the Corporation's Common
Stock authorized under the Certificate of Incorporation."
* * *
IN WITNESS WHEREOF, i2 Technologies, Inc. has caused this Certificate
of Amendment to be signed by its President and attested to by its Secretary this
14th day of December, 1995.
i2 Technologies, Inc.
By: /s/ Sanjiv Sidhu
-----------------------
Sanjiv Sidhu, President
ATTEST:
/s/ Ken Sharma
- ---------------------
Ken Sharma, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
i2 TECHNOLOGIES, INC.
i2 TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES:
FIRST: That in lieu of a meeting and vote of the directors of the
Corporation, by unanimous written consent filed with the Corporation in
accordance with the provisions of Section 141(f) of the General Corporation
Law of the State of Delaware, the directors of the Corporation adopted
resolutions approving and declaring advisable the following amendment to the
Corporation's Certificate of Incorporation:
BE IT RESOLVED, that, subject to the approval of the Corporation's
stockholders, the Certificate of Incorporation of the Corporation be amended
by amending paragraphs A and B of the Article thereof numbered "FOURTH" so
that, as amended, said paragraphs shall read in full as follows:
"A. The total number of shares which the Corporation shall have
authority to issue is TWO HUNDRED AND FIVE MILLION (205,000,000) shares of
capital stock.
B. Of such authorized shares, TWO HUNDRED MILLION (200,000,000) shares
shall be designated "Common Stock," and have a par value of $.00025."
SECOND: That at a meeting of the stockholders of the Corporation called
and held upon notice in accordance with the provisions of Section 222 of the
General Corporation Law of the State of Delaware, the required percentage of
shares of stock of the Corporation voted in favor of said amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned officer of i2 Technologies, Inc. has
hereunto set his hand this 26th day of May 1998.
i2 TECHNOLOGIES, INC.
By: /s/ DAVID F. CARY
------------------------------------------
David F. Cary
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
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