<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 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: 0-23057
---------------------------------------------------
LOGILITY, INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2281338
- -------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
470 East Paces Ferry Road, N.E., Atlanta, Georgia 30305
- ------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(404) 261-9777
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 the past 90 days.
Yes X No
------- ------
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practicable date.
Class Outstanding at March 12, 1998
- --------------------------- -----------------------------
Common Stock, no par value 13,641,700 Shares
Page 1 of 21
<PAGE>
LOGILITY, INC.
Form 10-Q
Quarter Ended January 31, 1998
Index
Page
Number
------
Part I--Financial Information
Item 1. Financial Statements
Condensed Balance Sheets (Unaudited)
January 31, 1998 and April 30, 1997 3
Condensed Statements of Operations (Unaudited)
Three and Nine Months Ended January 31, 1998 and 1997 4
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 1998 and 1997 5
Notes to Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II--Other Information 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LOGILITY, INC.
Condensed Balance Sheets (Unaudited)
(in thousands except share data)
<TABLE>
<CAPTION>
January 31, April 30,
1998 1997
---------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $23,440 $ 732
Investments 9,724
Trade accounts receivable, less allowance for doubtful
accounts of $421 at January 31, 1998 and April 30, 1997:
Billed 7,673 3,843
Unbilled 2,580 2,737
Prepaid expenses and other current assets 421 147
---------- ---------
Total current assets 43,838 7,459
Furniture and equipment, less accumulated depreciation 1,424 876
Intangible assets, less accumulated amortization 6,916 7,732
Other assets, net 280 300
---------- ---------
$52,458 $16,367
========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 956 1,266
Accrued compensation and related costs 1,243 1,305
Deferred revenues 4,235 3,886
Other current liabilities 3,051 445
---------- ---------
Total current liabilities 9,485 6,902
Deferred income taxes 2,687 2,797
---------- ---------
Total liabilities 12,172 9,699
---------- ---------
Shareholders' equity:
Preferred stock: 2,000,000 shares authorized; no shares issued - -
Common stock, no par value; 20,000,000 shares authorized;
13,803,500 and 11,300,000 shares issued as of
January 31, 1998 and April 30, 1997, respectively - -
Additional paid-in capital 43,187 7,919
Treasury stock, at cost (282) -
Divisional equity - 1,871
Accumulated deficit (2,619) (3,122)
---------- ---------
Total shareholders' equity 40,286 6,668
Commitments and contingencies
---------- ---------
$52,458 $16,367
========== =========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
Item 1. Financial Statements (continued)
LOGILITY, INC.
Condensed Statements of Operations (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
----------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
License fees $ 5,026 $ 4,360 $14,733 $ 8,770
Maintenance 1,778 1,346 5,335 3,699
Services 1,647 946 5,132 2,864
------------ ------------ ------------ ------------
Total revenues 8,451 6,652 25,200 15,333
------------ ------------ ------------ ------------
Cost of revenues:
License fees 1,376 937 3,951 2,697
Maintenance 381 316 1,124 856
Services 918 417 2,494 1,342
------------ ------------ ------------ ------------
Total cost of revenues 2,675 1,670 7,569 4,895
------------ ------------ ------------ ------------
Gross margin 5,776 4,982 17,631 10,438
------------ ------------ ------------ ------------
Operating expenses:
Research and development 2,166 1,330 6,217 4,322
Less: capitalized development (848) (688) (2,276) (2,159)
Sales and marketing 3,541 3,160 10,213 8,036
General and administrative 846 716 2,284 1,816
------------ ------------ ------------ ------------
Total operating expenses 5,705 4,518 16,438 12,015
------------ ------------ ------------ ------------
Operating income (loss) 71 464 1,193 (1,577)
Other income, net 400 - 463 -
------------ ------------ ------------ ------------
Income (loss) before income taxes 471 464 1,656 (1,577)
Income taxes - - - -
------------ ------------ ------------ ------------
Net income (loss) $ 471 $ 464 $ 1,656 $(1,577)
============ ============ ============ ============
Basic and diluted net income (loss)
per common share $ 0.03 $ 0.04 $ 0.13 $ (0.14)
============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding 13,805 11,300 12,704 11,300
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
Item 1. Financial Statements (continued)
LOGILITY, INC.
Condensed Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
---------------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,656 $(1,577)
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation and amortization 3,403 2,126
(Increase) decrease in assets:
Accounts receivable (3,673) (510)
Other assets (255) 410
Increase (decrease) in liabilities:
Accounts payable, accrued costs and other 1,558 374
Deferred revenues 349 513
---------------- ---------------
Net cash provided by operating activities 3,038 1,336
---------------- ---------------
Cash flows from investing activities:
Additions to capitalized computer software development costs (2,276) (2,159)
Additions to purchased computer software costs (73) (49)
Purchases of investment (9,724) -
Purchases of furniture and equipment (786) (173)
---------------- ---------------
Net cash used in investing activities (12,859) (2,381)
---------------- ---------------
Cash flows from financing activities:
Deferred income taxes resulting from Tax Sharing Agreement (110) -
Contributions, net from American Software, Inc. - 1,137
Dividends paid to American Software, Inc. (231) -
Repurchases of common stock (282) -
Proceeds, net, from issuance of common stock 33,152 -
---------------- ---------------
Net cash provided by financing activities 32,529 1,137
---------------- ---------------
Net change in cash 22,708 92
Cash and cash equivalents at beginning of period 732 13
---------------- ---------------
Cash and cash equivalents at end of period $ 23,440 $ 105
================ ===============
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
Item 1. Financial Statements (continued)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. Basis of Presentation
The accompanying condensed financial statements are unaudited. 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 rules and
regulations of the Securities and Exchange Commission (SEC). The financial
information presented in the condensed financial statements reflects all
normal recurring adjustments, which are, in the opinion of management,
necessary for a fair presentation of the periods indicated. These financial
statements should be read in conjunction with the final prospectus, as filed
with the SEC on October 7, 1997 (Registration No. 33-33385), in conjunction
with the Company's initial public offering. The interim results reflected in
the condensed financial statements are not necessarily indicative of the
results to be expected for the full year.
The Company is approximately an 82% owned subsidiary of American Software,
Inc. (American Software), a publicly held applications software provider of
enterprise resource planning solutions (NASDAQ - AMSWA).
B. Completion of Initial Public Offering
On October 10, 1997, the Company successfully completed its initial public
offering of common stock. The Company sold 2.2 million shares of Common
Stock in the initial public offering for approximately $31.9 million less
issuance costs of $3.1 million.
On November 6, 1997, the Company sold 330,000 shares of Common Stock as part
of the underwriters' over-allotment from the initial public offering for $4.8
million less issuance costs of approximately $407,000.
C. Net Earnings (Loss) Per Share of Common Stock
On January 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("SFAS No. 128"), which prescribes the
calculation methodology and financial reporting requirements for basic and
diluted earnings per share. Basic earnings (loss) per common share available
to common shareholders are based on the weighted average number of common
shares outstanding. Diluted earnings (loss) per common share available to
common shareholders are based on the weighted average number of common shares
outstanding and dilutive potential common shares, such as dilutive stock
options. All prior period net earning (loss) data presented in these
condensed financial statements have been restated to conform to the
provisions of SFAS No. 128.
6
<PAGE>
LOGILITY, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
Logility, Inc. ("Logility" or the "Company") develops, markets and supports
software applications that optimize the operating efficiencies of manufacturers,
suppliers, distributors, retailers and other organizations along the "value
chain." The value chain refers to the complex network of relationships that
organizations maintain with trading partners to source, manufacture and deliver
products to the customer. The Company's solution, Logility Value Chain
Solutions, consists of an integrated client-server software suite that provides
advanced collaborative planning and integrated logistics capabilities that are
designed to reduce inventory costs, improve forecast accuracy, decrease order
cycle times, optimize production scheduling, streamline logistics operations,
reduce transportation costs and improve customer service. The Company markets
its solution worldwide, primarily to large enterprises that require a
comprehensive planning and execution solution. Sales are made through a
dedicated sales force and through relationships with third-party vendors
(including American Software) and service providers.
Until recently, the Company conducted its business and operations as three
separate business units of American Software: a supply chain planning software
group, a warehouse management software group and a transportation management
software group. Effective January 1997, American Software transferred
substantially all of the business, operations (including research and
development), assets and associated liabilities of its Supply Chain Planning
division to the Company. Effective August 1997, American Software transferred
to the Company the WarehousePRO software and substantially all associated
operations, assets and liabilities. Effective August 1997, American Software's
wholly owned subsidiary, Distribution Sciences, Inc., was merged into the
Company, transferring its business, operations, assets and liabilities,
including the Transportation Planning and Transportation Management software, to
the Company. The Company's condensed financial statements included herein
present the combined assets, liabilities and results of operations for the three
business units for all periods.
The Company's revenues are derived primarily from three sources: software
licenses, maintenance and services. Software licenses generally are based upon
the number of modules, servers, users and/or sites licensed. License fee
revenues are recognized at the time of product delivery, provided no significant
future obligation exists and collection is deemed probable. Maintenance
agreements typically are for a one- to three-year term and usually are entered
into at the time of the initial product license. Maintenance revenues are
recognized ratably over the term of the maintenance agreement. Services
revenues consist primarily of fees from software implementation, training,
consulting and customization services and are recognized as the services are
rendered.
7
<PAGE>
Item 2. Management's Discussion (continued)
The following table sets forth-certain revenue and expense items as a percentage
of total revenues and the percentage increases and decreases in those items for
the three months ended January 31, 1998 and 1997:
<TABLE>
<CAPTION>
Percentage of Pct. Change
Total Revenues In Dollars
----------------------------------- -----------------
1998 1997 1998 Vs 1997
--------------- --------------- -----------------
<S> <C> <C> <C>
Revenues:
License fees 60% 66% 15%
Maintenance 21 20 32
Services 19 14 74
--------------- --------------- -----------------
Total revenues 100 100 27
--------------- --------------- -----------------
Cost of revenues:
License fees 16 14 47
Maintenance 5 5 21
Services 11 6 120
--------------- --------------- -----------------
Total cost of revenues 32 25 60
--------------- --------------- -----------------
Gross margin 68 75 16
--------------- --------------- -----------------
Operating expenses:
Research and development 26 20 63
Less: capitalized development nm nm 23
Sales and marketing 42 47 12
General and administrative 10 11 18
--------------- --------------- -----------------
Total operating expenses 67 68 26
--------------- --------------- -----------------
Operating income 1 7 (85)
Other income, net 5 - nm
--------------- --------------- -----------------
Income before income taxes 6 7 2
Income taxes - - nm
--------------- --------------- -----------------
Net income 6% 7% 2%
=============== =============== =================
</TABLE>
nm - not meaningful
8
<PAGE>
Item 2. Management's Discussion (continued)
The following table sets forth-certain revenue and expense items as a percentage
of total revenues and the percentage increases in those items for the nine
months ended January 31, 1998 and 1997:
<TABLE>
<CAPTION>
Percentage of Pct. Change
Total Revenues In Dollars
----------------------------------- -----------------
1998 1997 1998 Vs 1997
--------------- --------------- -----------------
<S> <C> <C> <C>
Revenues:
License fees 59% 57% 68%
Maintenance 21 24 44
Services 20 19 79
--------------- --------------- -----------------
Total revenues 100 100 64
--------------- --------------- -----------------
Cost of revenues:
License fees 16 18 46
Maintenance 4 5 31
Services 10 9 86
--------------- --------------- -----------------
Total cost of revenues 30 32 55
--------------- --------------- -----------------
Gross margin 70 68 69
--------------- --------------- -----------------
Operating expenses:
Research and development 25 28 44
Less: capitalized development nm nm 5
Sales and marketing 41 52 27
General and administrative 9 12 26
--------------- --------------- -----------------
Total operating expenses 65 78 37
--------------- --------------- -----------------
Operating income (loss) 5 (10) nm
Other income, net 2 - nm
--------------- --------------- -----------------
Income (loss) before income taxes 7 (10) nm
Income taxes - - nm
--------------- --------------- -----------------
Net income (loss) 7% (10)% nm
=============== =============== =================
</TABLE>
nm - not meaningful
9
<PAGE>
Item 2. Management's Discussion (continued)
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997:
- ---------------------------------------------
REVENUES
The Company's total revenues increased 27% to $8.5 million from $6.7 million for
the comparable quarter a year ago. This increase was largely due to the rise in
the Company's product sales as well as a significant increase in implementation
and training services. International revenues represented approximately 25% of
total revenues in the quarter ended January 31, 1998 compared to 18% a year ago.
LICENSES. License fee revenues increased 15% to $5.0 million from a year ago,
primarily as a result of successful sales efforts by the Company's direct sales
force. The direct sales channel provided approximately 65% of the license fee
revenues for this quarter compared to approximately 70% in the prior quarter
ended October 31, 1997 and 56% in the comparable quarter a year ago. The
Company's indirect sales channel is principally through American Software.
MAINTENANCE. Maintenance revenues increased 32% to $1.8 million from a year
ago, due to an increase in the installed base of customers. Maintenance
revenues are directly related to license fee revenues, since new licenses are
the potential source of new maintenance customers.
SERVICES. Services revenues increased 74% to $1.6 million from a year ago as a
result of the increased utilization of the Company's implementation and training
services, which in turn resulted from the growth in the Company's customer base.
GROSS MARGIN:
Total gross margin in the quarter ended January 31, 1998 was 68% compared to 75%
a year ago. This decrease was largely due to the license fee and services
margins. The gross margin on license fee revenues decreased to 73% compared to
79% in the comparable quarter a year ago, principally due to an increase in
amortization expense, which rose to $1.1 million from approximately $681,000 a
year ago. This amortization, which is related to capitalized software
development, began to increase in the fourth quarter of 1997 as a result of the
completion of certain development projects. The gross margin on maintenance
revenues increased slightly to 79% compared to 77% a year ago. The gross margin
on services revenues decreased to 44% compared to 56% in the same period a year
ago due to a decrease, believed to be temporary, in the utilization rate of the
service staff in one portion of the Company's business. In addition,
implementation contract terms on one large customer limited the amount of
recognizable revenue for the quarter.
10
<PAGE>
Item 2. Management's Discussion (continued)
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT. Gross product development costs include all non-
capitalized and capitalized software development costs. A breakdown of the
research and development costs is as follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
January 31, Percent January 31,
1998 Change 1997
----------- ------- -----------
<S> <C> <C> <C>
Gross product development costs $2,166 63% $1,330
Percentage of total revenues 26% 20%
Less: capitalized development (848) 23% (688)
Percentage of gross prod. dev. costs 39% 52%
----------- ------- -----------
Product development expenses $1,318 105% $ 642
Percentage of total revenues 16% 10%
</TABLE>
Gross product development costs increased 63% in the quarter ended January 31,
1998 compared to a year ago as a result of the Company's continued investment in
new product development. Capitalized development increased as well, growing 23%
from a year ago, while the rate of capitalized development decreased to 39% from
52% a year ago. Product development expenses, as a percentage of total
revenues, increased to 16% from 10% a year ago, mainly due to the substantial
decrease in the percentage of capitalized gross product development costs.
SALES AND MARKETING. Sales and marketing expenses rose 12% from a year ago as a
result of increased license fees and an increased sales force. As a percentage
of total revenues, sales and marketing expenses were 42% for the quarter ended
January 31, 1998 compared to 47% for the quarter ended January 31, 1997. An
increase in the productivity of the Company's sales force, which was formed
approximately one year ago to focus exclusively on the Company's products, was
the primary cause of this decrease. Previously, the Company shared its sales
force with American Software.
The mix of revenues generated between the direct and indirect (mainly American
Software) sales channels also contributed to the decrease in the cost of sales
and marketing as a percentage of total revenues. For sales generated from the
direct sales force, the Company generally incurs sales commissions which are
substantially lower than those charged by the indirect channel. As a result,
when the Company increases its revenues generated from its direct sales force,
as it did in the quarter ended January 31, 1998, the Company achieves expense
leverage.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 18%
to approximately $846,000 from a year ago, mainly as a result of the Company's
growth in the number of employees and the resulting growth in administrative
costs. During the quarter ended January 31, 1998, the average number of
employees was 205, an increase of approximately 24% from a year ago.
11
<PAGE>
Item 2. Management's Discussion (continued)
OTHER INCOME
Other income is comprised of investment earnings from the net proceeds of the
Company's initial public offering. The Company's investments are generally short
term in nature. For the quarter ended January 31, 1998, these investments
generated a yield of approximately 5.5%.
INCOME TAXES
In accordance with FASB Statement No. 109 "Accounting for Income Taxes", the
Company was required to apply a separate company approach in calculating its
income tax provision. As a result, the Company was able to utilize net
operating loss carryforwards previously generated, thereby resulting in no
income tax expense. The Company's Tax Sharing Agreement with American Software
does not allow the Company to utilize its net operating loss carryforwards;
therefore, the Company recorded income taxes owed to American Software of
approximately $177,000 as a dividend in shareholders' equity for the three
months ended January 31, 1998.
NINE MONTHS ENDED JANUARY 31, 1998 AND 1997:
- --------------------------------------------
REVENUES
For the nine months ended January 31, 1998, the Company's total revenues
increased 64% to $25.2 million from $15.3 million in the same period of the
prior year. This increase was largely due to the significant rise in the
Company's product sales. International revenues represented approximately 12%
of total revenues for the nine months ended January 31, 1998, compared to 14% in
the prior year period. This decrease was largely due to the substantial growth
of domestic revenues as well as the relative immaturity of the Company's
international sales channel.
LICENSES. License fee revenues for the nine months ended January 31, 1998
increase 68% to $14.7 million from the prior year period, primarily as a result
of successful sales efforts by the Company's direct sales force. The direct
sales channel provided approximately 64% of the license fee revenues for the
nine months ended January 31, 1998, compared to approximately 46% in the same
period of the prior year. The Company's indirect sales channel is principally
through American Software.
MAINTENANCE. Maintenance revenues for the nine months ended January 31, 1998,
increased 44% to $5.3 million from the prior year period, due to an increase in
the installed base of customers. Maintenance revenues are directly related to
license fee revenues, since new licenses are the potential source of new
maintenance customers.
SERVICES. Services revenues for the nine months ended January 31, 1998,
increased 79% to $5.1 million from the prior year period, as a result of the
increased utilization of the Company's implementation and training services,
which in turn resulted from the growth in the Company's customer base.
12
<PAGE>
Item 2. Management's Discussion (continued)
GROSS MARGIN:
Total gross margin for the nine months ended January 31, 1998, was 70% compared
to 68% in the prior year period. This increase was largely due to the expanded
margin from license fee revenues, which grew to 73% from 69% a year ago in the
same period. The expanded margin was attributable to the significant rise in
license fee revenues which, because of a relatively high fixed license fees cost
component, resulted in a higher incremental gross margin. The gross margin on
maintenance revenues increased slightly to 79% compared to 77% in the prior year
period. The gross margin on services revenues decreased slightly to 51%
compared to 53% in the same period a year ago. This decrease was mainly due to
the results of the third quarter ended January 31, 1998.
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT. Gross product development costs include all non-
capitalized and capitalized software development costs. A breakdown of the
research and development costs is as follows:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------------------
January 31, Percent January 31,
1998 Change 1997
----------- ------- -----------
<S> <C> <C> <C>
Gross product development costs $ 6,217 44% $ 4,322
Percentage of total revenues 25% 28%
Less: capitalized development (2,276) 5% (2,159)
Percentage of gross prod. dev. costs 37% 50%
----------- ------- -----------
Product development expenses $ 3,941 82% $ 2,163
Percentage of total revenues 16% 14%
</TABLE>
Gross product development costs for the nine months ended January 31, 1998,
increased 44% from the prior year period as a result of the Company's continued
investment in new product development. Capitalized development increased 5% from
a year ago, while the rate of capitalized development decreased to 37% from 50%
in the same period a year ago. Product development expenses, as a percentage of
total revenues, increased to 16% from 14% a year ago, mainly due to the
substantial decrease in the percentage of capitalized gross product development
costs.
SALES AND MARKETING. For the nine months ended January 31, 1998, sales and
marketing expenses rose 27% from the same period of the prior year as a result
of increased license fees and an increased sales force. As a percentage of
total revenues, sales and marketing expenses were 41% compared to 52% for the
same period a year ago. An increase in the productivity of the Company's sales
force, which was formed approximately one year ago to focus exclusively on the
Company's products, was the primary cause of this decrease. Previously, the
Company shared its sales force with American Software.
13
<PAGE>
Item 2. Management's Discussion (continued)
The mix of revenues generated between the direct and indirect (mainly American
Software) sales channels also contributed to the decrease in the cost of sales
and marketing as a percentage of total revenues. For sales generated from the
direct sales force, the Company generally incurs sales commissions which are
substantially lower than those charged by the indirect channel. As a result,
when the Company increases its revenues generated from its direct sales force,
as it did for the nine months ended January 31, 1998, the Company achieves
expense leverage.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the nine
months ended January 31, 1998, increased 26% to approximately $2.3 million from
the same period a year ago, mainly as a result of the Company's growth in the
number of employees and the resulting growth in administrative costs. During
the nine months ended January 31, 1998, the average number of employees was 191,
an increase of 20% over the same period of the prior year.
OTHER INCOME
Other income is comprised of investment earnings from the net proceeds of the
Company's initial public offering. The Company's investments are generally short
term in nature. These investments for the nine months ended January 31, 1998,
generated an annualized yield of approximately 5.5%.
INCOME TAXES
In accordance with FASB Statement No. 109 "Accounting for Income Taxes", the
Company was required to apply a separate company approach in calculating its
income tax provision. As a result, the Company was able to utilize net
operating loss carryforwards previously generated, thereby resulting in no
income tax expense. The Company's Tax Sharing Agreement with American Software
does not allow the Company to utilize its net operating loss carryforwards;
therefore, the Company recorded income taxes owed to American Software of
approximately $676,000 as a dividend in shareholders' equity for the nine months
ended January 31, 1998.
14
<PAGE>
Item 2. Management's Discussion (continued)
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
On October 10, 1997, the Company completed its initial public offering, in which
the Company received net proceeds of approximately $28.8 million after deducting
underwriting discounts and offering expenses. On November 6, 1997, the Company
sold 330,000 shares of Common Stock as part of the underwriters' over-allotment
from the initial public offering for $4.8 million less issuance costs of
approximately $407,000. The balance of the net proceeds will be utilized for
research and development, sales and marketing, working capital and other general
corporate purposes and possible acquisitions.
The Company's operating activities provided cash of approximately $3.0 million
in the nine months ended January 31, 1998, compared to approximately $1.3
million in the same period of the prior year. The cash provided by operations
during the nine months ended January 31, 1998, was primarily attributable to net
income of $1.7 million, non-cash depreciation and amortization expense of $3.4
million, an increase in deferred revenues of approximately $349,000 and an
increase in accounts payable, accrued costs and other current liabilities of
$1.6 million, which were partially offset by an increase in accounts receivable
of $3.7 million and an increase in other assets of approximately $255,000. The
cash provided by operations during the same period of the prior year was
attributable to non-cash depreciation and amortization expense of $2.1 million,
a decrease in other assets of approximately $410,000, an increase in deferred
revenues of approximately $513,000 and an increase in accounts payable, accrued
costs and other current liabilities of approximately $374,000. This was
partially offset by a net loss from operations of $1.6 million and an increase
in accounts receivable of approximately $510,000.
Cash used in investing activities was approximately $12.9 million and $2.4
million for the nine months ended January 31, 1998 and 1997, respectively. The
majority of the cash was used for investments and computer software development
costs.
Cash provided by financing activities for the nine months ended January 31, 1998
was approximately $32.5 million, due primarily to the net proceeds received from
the issuance of common stock in the initial public offering.
Days sales outstanding in accounts receivable were 94 days as of January 31,
1998, compared to 98 days as of April 30, 1997.
The Company's current ratio on January 31, 1998, was 4.6 to 1 and the Company
has no long-term debt. The Company believes that its sources of liquidity and
capital resources will be sufficient to satisfy its cash requirements for at
least the next twelve months. To the extent that such amounts are insufficient
to finance the Company's capital requirements, the Company will be required to
raise additional funds through equity or debt financing. The Company does not
currently have a bank line of credit. No assurance can be given that bank lines
of credit or other financing will be available on terms acceptable to the
Company. If available, such financing may result in further dilution to the
Company's shareholders and higher interest expense.
On December 15, 1997, Logility, Inc.'s board of directors approved a resolution
authorizing the Company to repurchase up to 350,000 shares of the Company's
common stock. This repurchase will be through open market purchases at
prevailing market prices. The timing of any repurchases will depend on market
conditions, the market price of Logility's common stock and management's
assessment of the Company's liquidity and cash flow needs. During the quarter
ended January 31, 1998, pursuant to this resolution, the Company repurchased
26,500 shares of common stock at a cost of approximately $282,000.
15
<PAGE>
Item 2. Management's Discussion (continued)
RECENT ACCOUNTING PRONOUNCEMENT
In October 1997, the Accounting Standards Executive Committee issued Statement
of Position 97-2, Software Revenue Recognition ("SOP 97-2"). SOP 97-2 is
effective for financial statements for fiscal years beginning after December 15,
1997 (commencing May 1, 1998 for the Company). The Company does not expect that
adoption of SOP 97-2 will significantly affect its results of operations.
FORWARD-LOOKING STATEMENTS
It should be noted that this discussion contains forward-looking statements,
which are subject to substantial risks and uncertainties. There are a number of
factors, which could cause actual results to differ materially from those
anticipated by statements made herein. The timing of releases of the Company's
software products can be affected by client needs, marketplace demands and
technological advances. Development plans frequently change, and it is
difficult to predict with accuracy the release dates for products in
development. In addition, other factors include changes in general economic
conditions, the growth rate of the market for the Company's products and
services, the timely availability and market acceptance of these products and
services, the affect of competitive products and pricing, and the irregular
pattern of revenues, as well as a number of other risk factors which could
effect the future performance of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The Company is furnishing the following information with respect
to the use of proceeds from its initial public offering of
common stock, no par value per share.
(1) The effective date of the Registration Statement filed on
Form S-1 for the offering and the commission file number
were October 6, 1997 and 333-33385, respectively.
(2) The offering commenced on October 7, 1997.
(3) Not applicable
(4) (i) The offering terminated on November 6, 1997, after
all the shares, including the over-allotment shares,
were sold.
(ii) The managing underwriters for the offering were
NationsBanc Montgomery Securities, Inc., Cowen &
Company, Interstate/Johnson Lane Corporation and
Hampshire Securities Corporation.
(iii) The Company registered shares of the Company's
common stock, no par value per share, in the
offering.
(iv) All of the 2,530,000 shares of common stock
registered for the accounts of the Company were sold
in the offering. The aggregate-offering price of the
shares registered and sold for the account of the
Company was approximately $36,685,000.
17
<PAGE>
Part II Other Information (continued)
(v) From October 6, 1997 to November 6, 1997, the
approximate expenses incurred by the Company in
connection with the issuance and distribution of the
common stock were as follows:
Underwriting discount $2,568,000
SEC registration fee 10,000
NASD filing fee 4,000
Nasdaq National Market listing fee 49,000
Blue Sky fees and expenses 10,000
Transfer Agent and Registrar fees 5,000
Accounting fees and expenses 358,000
Legal fees and expenses 369,000
Printing and engraving expenses 129,000
Miscellaneous 30,000
----------
Total $3,532,000
==========
Payment of such expenses were to Persons other than
directors, officers, general partners of the Company
or their associates, Persons owning 10% or more of
the equity securities of the Company or affiliates
of the Company.
Approximately $964,000 of the above expenses
(excluding the underwriting discount) incurred will
be recorded as offering expenses netted against the
proceeds.
(vi) The net offering proceeds to the Company after
expenses was approximately $33,152,000.
(vii) From October 6, 1997 to January 31, 1998,
approximately $2,000,000 of the offering proceeds
were actually used for working capital purposes and
approximately $300,000 were used for financing
purposes. The balance of the offering proceeds,
approximately $30,852,000 were invested in
investments with an average maturity of 250 days.
Substantially all of such offering proceeds uses
consisted of payments to Persons other than
directors, officers, general partners of the Company
or their associates, persons owning 10% or more of
the equity securities of the Company or affiliates
of the Company.
(viii) Not applicable.
18
<PAGE>
Part II Other Information (continued)
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable
Item 5. Other Information
- ------- -----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibit 11 - Statement re: Computation of Per Share Earnings
(Loss).
(b) No report on Form 8-K was filed during the quarter ended January
31, 1998.
19
<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.
LOGILITY, INC.
DATE March 16, 1998 /s/J. Michael Edenfield
---------------------- --------------------------------------------
J. Michael Edenfield
President, Chief Executive Officer
DATE March 16, 1998 /s/James M. Modak
---------------------- --------------------------------------------
James M. Modak
Chief Financial Officer and Sr. VP
20
<PAGE>
Exhibit 11
LOGILITY, INC.
Statement re: Computation of Per Share Earnings (Loss)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------------------- ---------------------------------
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Common Stock:
Weighted average common 13,798 11,300 12,697 11,300
shares outstanding
Dilutive effect of outstanding
stock options 7 - 7 -
-------- -------- -------- ---------
Total 13,805 11,300 12,704 11,300
-------- -------- -------- ---------
Net earnings (loss) $ 471 $ 464 $ 1,656 $(1,577)
======== ======== ======== ========
Earnings (loss) per common
and common equivalent share $ 0.03 $ 0.04 $ 0.13 $ (0.14)
======== ======== ======== ========
</TABLE>
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LOGILITY AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 23,440
<SECURITIES> 9,724
<RECEIVABLES> 10,674
<ALLOWANCES> 421
<INVENTORY> 0
<CURRENT-ASSETS> 43,838
<PP&E> 2,079
<DEPRECIATION> 655
<TOTAL-ASSETS> 52,458
<CURRENT-LIABILITIES> 9,485
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,286
<TOTAL-LIABILITY-AND-EQUITY> 52,458
<SALES> 14,733
<TOTAL-REVENUES> 25,200
<CGS> 3,951
<TOTAL-COSTS> 7,569
<OTHER-EXPENSES> 16,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,656
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,656
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
