<PAGE>
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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 AUGUST 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 0-22154
MANUGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1469385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2115 EAST JEFFERSON STREET, ROCKVILLE, MARYLAND 20852
(Address of principal executive offices) (Zip code)
(301) 984-5000
(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 the past 90 days.
Yes ____X____ No _________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 26,512,568 million shares of
common stock, $.002 par value per share, as of October 12, 1998.
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<PAGE>
MANUGISTICS GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
August 31, 1998 (unaudited) and February 28, 1998 3
Condensed Consolidated Statements of Income -
Six months ended August 31, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Six months ended August 31, 1998 and 1997 (unaudited) 5
Notes to Condensed Consolidated Financial Statements -
August 31, 1998 (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 21
Item 4. Submission of Matters to a Vote of Security Holders. 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
August 31, February 28,
1998 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,202 $ 19,891
Marketable securities 40,610 62,246
Accounts receivable (net of allowance for uncollectible accounts -
August 31, 1998, $3,053; February 28, 1998, $2,099) 63,542 59,584
Other current assets 8,175 5,218
------------- ------------
Total current assets 118,529 146,939
PROPERTY AND EQUIPMENT - NET 26,868 21,142
NONCURRENT ASSETS:
Software development costs - net 22,213 22,986
Intangibles - net 12,017 14,660
Deferred tax asset 25,225 17,593
Other noncurrent assets 2,333 1,895
------------- ------------
TOTAL $ 207,185 $ 225,215
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,835 $ 8,918
Accrued compensation 5,582 12,419
Other accrued expenses 6,376 11,074
Deferred revenue 28,815 18,546
------------- ------------
Total current liabilities 44,608 50,957
LONG-TERM LIABILITIES 630 512
COMMITMENTS AND CONTINGENCIES (Note 3) - -
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock, $.002 par value; 100,000,000 shares authorized;
shares issued, 27,199,264 at August 31, 1998; 26,740,755 at
February 28, 1998; shares outstanding, 26,446,754 at August 31,
1998; 25,988,245 at February 28, 1998 54 53
Additional paid-in capital 175,484 171,075
Retained (deficit) earnings (11,777) 3,102
Treasury stock - 752,510 shares, at cost (717) (717)
Accumulated comprehensive income:
Translation adjustment (1,081) 365
Unrealized loss on marketable securities (16) (132)
------------- ------------
Total stockholders' equity 161,947 173,746
------------- ------------
TOTAL $ 207,185 $ 225,215
============= ============
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE>
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
License fees $ 25,771 $ 21,896 $ 43,252 $ 42,661
Services 27,169 17,167 50,811 32,115
------------ ------------ ------------ -----------
Total revenues 52,940 39,063 94,063 74,776
------------ ------------ ------------ -----------
OPERATING EXPENSES:
Cost of license fees 3,445 2,638 6,286 5,119
Cost of services 12,867 7,526 24,514 14,274
Sales and marketing 24,774 14,346 48,072 28,001
Product development 13,868 7,221 25,794 13,670
General and administrative 5,231 3,321 11,067 6,523
Acquisition-related expenses 3,095 - 3,095 -
------------ ------------ ------------ -----------
Total operating expenses 63,280 35,052 118,828 67,587
------------ ------------ ------------ -----------
(LOSS) INCOME FROM OPERATIONS (10,340) 4,011 (24,765) 7,189
OTHER INCOME - NET 640 384 1,731 713
------------ ------------ ------------ -----------
(LOSS) INCOME BEFORE INCOME TAXES (9,700) 4,395 (23,034) 7,902
(BENEFIT) PROVISION FOR INCOME TAXES (3,734) 1,670 (8,530) 2,989
------------ ------------ ------------ -----------
NET (LOSS) INCOME $ (5,966) $ 2,725 $ (14,504) $ 4,913
============ ============ ============ ===========
BASIC (LOSS) INCOME PER SHARE $ (0.23) $ 0.12 $ (0.55) $ 0.22
============ ============ ============ ===========
SHARES USED IN BASIC SHARE COMPUTATION 26,415 22,290 26,167 22,538
============ ============ ============ ===========
DILUTED (LOSS) INCOME PER SHARE $ (0.23) $ 0.11 $ (0.55) $ 0.20
============ ============ ============ ===========
SHARES USED IN DILUTED SHARE COMPUTATION 26,415 25,043 26,167 24,506
============ ============ ============ ===========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE>
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
August 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(14,504) $ 4,913
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization 11,449 6,717
Deferred taxes (8,387) --
Write-off of purchased R&D 1,300 --
Other 281 --
Changes in assets and liabilities:
Accounts receivable (4,843) (3,353)
Other current assets (895) (739)
Other noncurrent assets (741) (205)
Accounts payable and other accrued expenses (17,051) 679
Deferred revenue 10,326 (3,176)
Income taxes payable (1,205) (600)
-------- --------
Net cash (used in) provided by operating activities (24,270) 4,236
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions -- (4,529)
Purchase of property and equipment (11,230) (7,553)
Capitalization of software development costs (5,127) (4,573)
Purchase of software licenses for resale (388) (199)
Sale (purchase) of marketable securities - net 21,636 (50,027)
Net change in cash due to conforming year ends 446 --
-------- --------
Net cash provided by (used in) investing activities 5,337 (66,881)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit -- 6,400
Payments under line of credit -- (6,400)
Payments on long-term debt and capital lease obligations 518 78
Proceeds from issuance of common stock -- 62,378
Proceeds from employee stock purchase plan 1,352 756
Proceeds from exercise of stock options 3,085 2,264
-------- --------
Net cash provided by financing activities 4,955 65,476
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH BALANCES 289 (179)
-------- --------
NET (DECREASE) INCREASE IN CASH (13,689) 2,652
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,891 8,834
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,202 11,486
======== ========
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE>
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 31, 1998
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Manugistics
Group, Inc. ("the Company") have been prepared to give effect to the
acquisition of TYECIN Systems, Inc. ("TYECIN") on June 1, 1998, which has
been accounted for as a pooling of interests ("pooling"). Prior periods
have been restated to give retroactive effect to the pooling. The
accompanying unaudited condensed consolidated financial statements have
also been prepared in accordance with the instructions to the Quarterly
Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal, recurring
adjustments) which are necessary for a fair presentation of the unaudited
results for the interim periods presented have been included. The results
of operations for the periods presented herein are not necessarily
indicative of the results of operations for the entire fiscal year, which
ends on February 28, 1999.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition,"
effective for fiscal periods beginning after December 15, 1997. The
Company's current revenue recognition policies and practices are consistent
with SOP 97-2.
These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the fiscal
year ended February 28, 1998 included in the Annual Report on Form 10-K of
the Company for that year.
6
<PAGE>
2. NET (LOSS) INCOME PER SHARE
Basic (loss) income per share is computed using the weighted average number
of shares of common stock outstanding. Diluted (loss) income per share is
computed using the weighted average number of shares of common stock and,
when dilutive, common equivalent shares from options to purchase common
stock using the treasury stock method. Common equivalent shares from
options were excluded from the calculation of diluted loss per share for
the three and six-month periods ended August 31, 1998, as including them
would be antidilutive. The following table sets forth the computation of
basic and diluted (loss) income per share:
<TABLE>
<CAPTION>
Three months ended Aug. 31, Six months ended Aug. 31,
1998 1997 1998 1997
------- ------- -------- -------
(in thousands, (in thousands,
except per share amounts) except per share amounts)
------------------------- -------------------------
<S> <C> <C> <C> <C>
Weighted average common shares 26,415 22,290 26,167 22,538
Dilutive potential common shares - 2,753 - 1,968
------- ------- -------- -------
Shares used in diluted share computation 26,415 25,043 26,167 24,506
======= ======= ======== =======
Net (loss) income ($5,966) $2,725 ($14,504) $4,913
======= ======= ======== =======
Basic (loss) income per share ($0.23) $0.12 ($0.55) $0.22
======= ======= ======== =======
Diluted (loss) income per share ($0.23) $0.11 ($0.55) $0.20
======= ======= ======== =======
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company entered into an agreement with a third party under which the
Company has guaranteed certain revenue levels to the third party in the
aggregate amount of $16,500,000 over several years. In the event that the
activities performed by the Company do not meet the minimum amounts, the
Company may be obligated to pay the difference. As previously reported,
certain issues have arisen between the Company and IRI relating to the
satisfaction of these contingencies. The Company is currently attempting to
satisfactorily resolve these issues with IRI. However, at this time, there
can be no assurances that these issues will be resolved to the satisfaction
of the Company. The Company does not believe that the ultimate resolution
of this matter will have a material adverse impact on the Company's
financial position.
7
<PAGE>
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
A number of shareholder class action lawsuits were filed against the
Company and a number of its executive officers and directors commencing in
June 1998 alleging certain disclosure violations under the federal
securities laws. The ultimate outcome of these lawsuits, as with
litigation generally, is inherently uncertain, and it is possible that one
or more of these matters may be resolved adversely to the Company. The
adverse resolution of one or more of these lawsuits could have a material
adverse effect on the Company's business, operating results, financial
condition and cash flows. Management believes that the lawsuits are
without merit, and the Company and the other defendants intend to defend
against the lawsuits vigorously.
4. SUPPLEMENTAL INFORMATION OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Cash paid for income taxes amounted to approximately $1,028,000 and
$3,200,000 for the six months ended August 31, 1998 and 1997, respectively.
5. COMPREHENSIVE (LOSS) INCOME
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and the display of
comprehensive income and its components in the Company's financial
statements. The adoption of this statement had no impact on the Company's
results of operations or stockholders' equity. SFAS No. 130 requires
unrealized gains and losses on the Company's available-for-sale securities
and foreign currency translation adjustments to be included in other
comprehensive income. Total comprehensive (loss) income, net of tax, for
the three and six months ended August 31, 1998 and 1997 was:
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31, August 31, August 31,
1998 1997 1998 1997
------------ ------------ ----------- ------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net (loss) income $ (5,966) $ 2,725 $ (14,504) $ 4,913
Other comprehensive (loss) (691) (128) (818) (105)
------------ ------------ ----------- ------------
Total comprehensive (loss) $ (6,657) $ 2,597 $ (15,322) $ 4,808
============ ============ =========== ============
</TABLE>
8
<PAGE>
6. ACQUISITION
Effective June 1, 1998, the Company acquired TYECIN by merger and accounted
for the transaction as a pooling of interests. Accordingly, all financial
information included in these financial statements gives retroactive effect
to the combination for all periods presented. Under the terms of the
merger, the Company issued approximately 333,000 shares of common stock.
In addition, the Company assumed the outstanding TYECIN common stock
options and converted them to options to purchase approximately 25,000
shares of the Company's common stock. The Company also recorded a non-
recurring charge of approximately $3.1 million for certain expenses related
to this transaction, including, among other items, accounting, legal and
severance fees during the second quarter of fiscal 1999.
Previously, TYECIN's year end was December 31, 1997. Effective March 1,
1998, TYECIN's year end was changed to February 28. During the two month
period January and February 1998, TYECIN recorded revenues of approximately
$609,000 and expenses of approximately $857,000. The resulting net loss of
approximately $248,000 is directly reflected in retained earnings in the
condensed consolidated financial statements. The net effect on the cash
balances in the statement of cash flows of conforming year ends was an
increase in cash of $446,000. The TYECIN net cash flows during the two
month period ended February 28, 1998 were approximately $298,000,
($228,000) and $385,000 for operating, investing and financing activities,
respectively.
TYECIN assets for the period ended December 31, 1997 were approximately
$2,971,000. The separate results of the combined entities for periods prior
to the combination are:
<TABLE>
<CAPTION>
Manugistics TYECIN
Income Statement 1998 1997 1998 1997
----------- ----------- ------------ ------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Revenue:
Three months ended August 31, n/a $ 37,865 n/a $ 1,198
Six months ended August 31, $ 92,420 $ 72,324 $ 1,643 $ 2,452
Earnings:
Three months ended August 31, n/a $ 2,637 n/a $ 88
Six months ended August 31, $ (11,125) $ 4,677 $ (3,379) $ 236
</TABLE>
7. SUBSEQUENT EVENTS
In September 1998, the Company announced a restructuring of certain of its
business operations. The Company reduced its workforce by about 80
employees, or approximately six percent, as part of an overall expense
containment program. The Company expects to record a non-recurring charge
of approximately $1 million for the quarter ending November 30, 1998, to
cover costs related to the workforce reduction implemented during the
quarter.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Manugistics Group, Inc. (the "Company") develops, markets and supports supply
chain optimization software products and related services, which enable users to
plan their activities around the needs of their various customers. The Company's
customer-centric solutions assist companies to organize and fine-tune their
production and distribution activities to enhance the movements of products
throughout a supply chain. The Company's software assists companies with demand
forecasting, acquiring raw materials or components and planning production,
distribution and transportation to meet the requirements of different customers,
not only within a single enterprise, but also among an enterprise and its
trading partners.
RESULTS OF OPERATIONS
Effective as of June 1, 1998, the Company acquired TYECIN by merger and
accounted for the transaction as a pooling of interests. Accordingly, all
financial information included in this report gives retroactive effect to the
combination for all periods presented. Under the terms of the merger, the
Company issued approximately 333,000 shares of common stock. In addition, the
Company assumed the outstanding TYECIN common stock options and converted them
to options to purchase approximately 25,000 shares of the Company's common
stock.
REVENUES:
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 97-2, "Software Revenue Recognition," superceding
SOP 91-1. According to SOP 97-2 (effective for transactions in fiscal periods
beginning after December 15, 1997), software license revenues should be
recognized when:
. a software license agreement has been executed;
. the software product has been shipped and delivery does not require
significant production, modification, or customization of software;
. the license fee is fixed or determinable; and
. collectibility is deemed probable by management.
The Company believes, based upon management's interpretation of SOP 97-2, that
its current revenue recognition policies and practices are consistent with SOP
97-2. For fiscal periods prior to February 28, 1998, the Company recognized
software license revenues in accordance with SOP 91-1.
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------ ----------------------------------
August 31, Change August 31, August 31, Change August 31,
1998 1997 1998 1997
------------ ------ ------------ ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
(in thousands) (in thousands)
License fees $ 25,771 18% $ 21,896 $ 43,252 1% $ 42,661
Percentage of total revenues 48.7% 56.1% 46.0% 57.1%
Services $ 27,169 58% $ 17,167 $ 50,811 58% $ 32,115
Percentage of total revenues 51.3% 43.9% 54.0% 42.9%
------------ ------------ ------------ ----------
Total revenues $ 52,940 36% $ 39,063 $ 94,063 26% $ 74,776
Percentage of total revenues 100.0% 100.0% 100.0% 100.0%
</TABLE>
License fees. The Company's license fees consist primarily of software
license revenues from direct sales. The Company also earns license fees through
indirect channels, primarily through complementary software vendors,
distributors, and systems integrators.
The increase in license fees for the quarter and six months ended
August 31, 1998, can be attributed to an increased awareness and market
acceptance of supply chain products outside of the U.S.
While the Company has seen its average software deal size increase, the
Company has also experienced lengthening sales cycles which management believes
are caused by:
. lingering short-term sales force execution issues;
. deal sizes and complexities increasing as more companies realize the
strategic importance of supply chain management,
. clients and prospects allocating additional resources to Year 2000 compliance
issues; and
. uncertainties about global economic conditions.
As a result, license fees for the quarter and six months ended August 31, 1998,
have decreased as a percentage of total revenues. Although there has been
variation in license fees as a percentage of total revenues over the past few
quarters, the Company's management anticipates that license fees are likely to
represent approximately 40% to 50% of total revenues for fiscal 1999. See
"Forward Looking Statements."
The strategy of developing indirect channels, primarily through
complementary software vendors, distributors, and systems integrators is still
in its early stages and is, therefore, difficult to predict its effectiveness.
The number of license fee transactions involving indirect channels has been
relatively small and has fluctuated.
Services. Services revenues primarily consist of fees from software
implementations and the related training and are recognized as the services are
performed. Maintenance services are also included and are recognized ratably
over the maintenance contract. The software implementation process typically
requires three to twelve months to complete, depending on the complexity, scope
of the project and client resources available. The increase in services revenues
for the quarter and six months ended August 31, 1998, is primarily related to
the continuation of customer implementations from the license fee transactions
in the fourth quarter of fiscal 1998 and continuing with license fee
transactions for the quarter and six months ended August 31,
11
<PAGE>
1998. In addition, the increase in the installed customer base over time has led
to increased training and other consulting services revenues.
Maintenance revenues increased following the increase of customers that
have licensed the Company's software products and entered into annual
maintenance contracts. Maintenance revenues tend to track software products
sold in prior periods. In the past three fiscal years, approximately 97% of
customers with maintenance contracts have renewed these contracts.
OPERATING EXPENSES:
General. In fiscal 1999, the Company has incurred and anticipates that it
will continue to incur relatively high levels of expenditures for both sales and
marketing and product development as it pursues its strategies of:
. expanding its business into new geographic and vertical markets,
. expanding its distribution through alliances with complementary software
vendors, and
. rapidly developing and delivering new products as well as new features and
functions for existing products.
The Company's expense levels are set based on anticipated future revenues.
Since revenues were below those anticipated in the quarter ended May 31, 1998,
the Company commenced an effort to contain expense growth in the quarter ended
August 31, 1998, and intends to continue to do so for the forthcoming quarter.
<TABLE>
<CAPTION>
Three months ended Six months ended
-------------------------------- --------------------------------
August 31, August 31, August 31, August 31,
Operating expenses 1998 Change 1997 1998 Change 1997
-------- ------ -------- -------- ------ --------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cost of license fees $ 3,445 31% $ 2,638 $ 6,286 23% $ 5,119
Percentage of total revenues 6.5% 6.8% 6.7% 6.8%
Cost of services $ 12,867 71% $ 7,526 $ 24,514 72% $ 14,274
Percentage of total revenues 24.3% 19.3% 26.1% 19.1%
Sales and marketing $ 24,774 73% $ 14,346 $ 48,072 72% $ 28,001
Percentage of total revenues 46.8% 36.7% 51.1% 37.4%
Product development $ 13,868 92% $ 7,221 $ 25,794 89% $ 13,670
Percentage of total revenues 26.2% 18.5% 27.4% 18.3%
General and administrative $ 5,231 58% $ 3,321 $ 11,067 70% $ 6,523
Percentage of total revenues 9.9% 8.5% 11.8% 8.7%
Purchased R&D $ - N/M $ - $ - N/M $ -
Percentage of total revenues 0.0% 0.0% 0.0% 0.0%
Acquisition-related expenses $ 3,095 N/M $ - $ 3,095 N/M $ -
Percentage of total revenues 5.8% 0.0% 3.3% 0.0%
-------- -------- -------- --------
Total operating expenses $ 63,280 $ 35,052 $118,828 $ 67,587
Percentage of total revenues 119.5% 89.8% 126.4% 90.3%
</TABLE>
12
<PAGE>
Cost of license fees. Cost of license fees consists of 1) amortization of
capitalized software development costs, and 2) cost of goods and other, which
includes royalty fees associated with third-party software included with the
Company's licensed software, and amortization of goodwill associated with
certain recent acquisitions. The Company amortizes capitalized software
development costs over the product's estimated economic life, generally two
years (two to five years for purchased capitalized software), upon general
commercial release of the software to customers. Goodwill is amortized over five
years.
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------------------- -----------------------------------
August 31, August 31, August 31, August 31,
1998 Change 1997 1998 Change 1997
---------- ------ ---------- ---------- ------ ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Amortization of capitalized software $ 2,280 29% $ 1,771 $ 3,859 20% $ 3,224
Percentage of license fees 8.8% 8.1% 8.9% 7.6%
Cost of goods and other $ 1,165 34% $ 867 $ 2,427 28% $ 1,895
Percentage of license fees 4.5% 4.0% 5.6% 4.4%
-------- -------- -------- --------
Cost of license fees $ 3,445 31% $ 2,638 $ 6,286 23% $ 5,119
Percentage of license fees 13.3% 12.1% 14.5% 12.0%
</TABLE>
The increase in cost of license fees for the quarter and six months ended
August 31, 1998, is largely due to additional amortization expense of
capitalized software costs following the general commercial release of new
supply chain management software products. In addition, amortization of goodwill
associated with the acquisition of ProMIRA Software, Inc., in the fourth quarter
of fiscal 1998, has also increased the cost of license fees.
Cost of services. The increase in cost of services for the quarter and six
months ended August 31, 1998 primarily resulted from hiring additional
consultants, increasing product support and training personnel in both domestic
and foreign locations. As a percentage of total revenues, the cost of services
increased for the quarter and six months ended August 31, 1998, mainly because
of timing delays between the dates new employees began work and the dates they
first became productive after training.
Sales and marketing. Sales and marketing expenses consist primarily of
personnel costs, commissions, promotional events, and advertising. Sales and
marketing expenses increased for the quarter and six months ended August 31,
1998, primarily because the Company added new personnel in both its domestic and
foreign locations. The Company also incurred costs to establish new offices and
enhance its presence in foreign locations. As a result of the Company's efforts
to hire and train quality individuals, broaden its global presence, and promote
its products, sales and marketing expenses increased as a percentage of total
revenues for the quarter and six months ended August 31, 1998. See "Forward
Looking Statements."
Product development. The Company records product development expenses net
of capitalized software development costs for products which have reached
technological feasibility in accordance with Financial Accounting Standard No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed."
13
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------ ----------------------------------
August 31, August 31, August 31, August 31,
1998 Change 1997 1998 Change 1997
---------- ------ ---------- ---------- ------ ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Gross product development costs $ 16,636 74% $ 9,548 $ 30,921 69% $ 18,243
Percentage of total revenues 31.4% 24.4% 32.9% 24.4%
Less: Capitalized prod. dev. costs $ 2,768 19% $ 2,327 $ 5,127 12% $ 4,573
Percentage of gross prod. dev. costs 16.6% 24.4% 16.6% 25.1%
-------- -------- ---------- ---------
Product development expenses $ 13,868 92% $ 7,221 $ 25,794 89% $ 13,670
Percentage of total revenues 26.2% 18.5% 27.4% 18.3%
</TABLE>
Gross product development costs increased for the quarter and six months
ended August 31, 1998, primarily because the Company hired additional developers
of supply chain management software. The Company hired these individuals to
develop new software products, new versions of existing products, and to
incorporate new technologies into the Company's product offerings. As a
percentage of total revenues, net product development expenses increased for the
quarter and six months ended August 31, 1998, largely because the Company has
made and expects to continue to make significant product development
expenditures as it pursues its strategy of rapidly developing and delivering new
products and new capabilities as well as ongoing efforts to ensure integration
with software products of other vendors. See "Forward Looking Statements."
General and administrative. General and administrative expenses consist
primarily of personnel, infrastructure expenses, and the fees and expenses
associated with legal, accounting, and other services. As a percentage of total
revenues, general and administrative expenses increased for the quarter and six
months ended August 31, 1998, because their growth outpaced revenue growth.
Acquisition-related expenses. As stated above, the Company acquired TYECIN
in June 1998. The Company accounted for the acquisition as a pooling of
interests and recorded a non-recurring charge of approximately $3.1 million for
certain expenses related to this transaction, including, among other items,
accounting, legal and severance fees during the second quarter of fiscal 1999.
OTHER INCOME:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------ ----------------------------------
August 31, August 31, August 31, August 31,
1998 Change 1997 1998 Change 1997
---------- ------ ---------- ---------- ------ ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Other income $ 640 67% $ 384 $ 1,731 143% $ 713
Percentage of total revenues 1.2% 1.0% 1.8% 1.0%
</TABLE>
Other income includes income from short term investments, interest income
and expense, foreign currency exchange gains or losses, and other gains or
losses. Other income increased primarily due to greater interest income
generated from short-term investments following the investment of the net
proceeds of the public offering of the Company's common stock completed in
August 1997.
14
<PAGE>
PROVISION FOR INCOME TAXES:
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------ ----------------------------------
August 31, August 31, August 31, August 31,
1998 Change 1997 1998 Change 1997
---------- ------ ---------- ---------- ------ ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income taxes $ (3,734) NM $ 1,670 $ (8,530) NM $ 2,989
Percentage of income before taxes 38.5% 38.0% 37.0% 37.8%
Percentage of total revenues NM 4.3% NM 4.0%
</TABLE>
The effective tax rate represented by the Company's benefit for income
taxes for the second quarter was approximately 38.5%. Management of the Company
believes that, in fiscal 1999, the effective tax rate of the Company on a
consolidated basis is likely to be approximately 39%, excluding one-time charges
taken in connection with acquisitions or other transactions. This estimate is
based on current domestic and foreign tax law, which may change, and the actual
effective tax rate may differ.
NET (LOSS) INCOME AND (LOSS) INCOME PER SHARE:
<TABLE>
<CAPTION>
<CAPTION>
Three months ended Six months ended
------------------------------------ ----------------------------------
August 31, August 31, August 31, August 31,
1998 Change 1997 1998 Change 1997
---------- ------ ---------- ---------- ------ ----------
(in thousands except per share amounts) (in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net (loss) income $ (5,966) NM $ 2,725 $ (14,504) NM $ 4,913
Percentage of total revenues NM 7.0% NM 6.6%
========== ========== ========== ==========
Net (loss) income per share - basic ($0.23) NM $0.12 ($0.55) NM $0.22
========== ========== ========== ==========
Net (loss) income per share - diluted ($0.23) NM $0.11 ($0.55) NM $0.20
========== ========== ========== ==========
Shares used in basic share computation 26,415 22,990 26,167 22,538
========== ========== ========== ==========
Shares used in diluted share computation 26,415 25,043 26,167 24,506
========== ========== ========== ==========
</TABLE>
Net (loss) income is derived by taking total revenues less total operating
expenses, determining the effect of other income-net, taking the resulting
(loss) income before taxes and subtracting the income tax provision. The pro
forma net income for the quarter and six months ended August 31, 1998, excluding
the impact of a non-recurring charge of $3.1 million for certain acquisition-
related expenses in connection with the business combination involving TYECIN,
would have been ($4.1) million and ($12.7) million, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
<TABLE>
<CAPTION>
As of (in thousands)
-----------------------------
August 31, February 28,
1998 1997
----------- -------------
<S> <C> <C>
Working Capital $ 73,921 $ 95,982
Cash, cash equivalents,
and marketable securities $ 46,812 $ 82,137
</TABLE>
15
<PAGE>
The Company has historically financed its growth primarily through funds
generated from operations, through proceeds from offerings of capital stock, and
to a lesser extent, short-term borrowings under a revolving credit facility. The
decrease in working capital at August 31, 1998 from February 28, 1998 resulted
principally from decreases in cash, cash equivalents and marketable securities.
In addition, the increase in accounts receivable and decreases in accounts
payable and accrued expenses exceeded the increase in deferred revenue.
The Company's operating activities used cash of $24.3 million for the six
months ended August 31, 1998. Operating cash flows decreased largely because of
the net loss before non-cash expenses. Additionally, the decreases in accounts
payable and accrued expenses and increases in deferred taxes exceeded the
increase in depreciation and amortization and deferred revenues.
Investing activities provided cash of $5.3 million for the six months ended
August 31, 1998. The purchases of property and equipment and capitalization of
software development costs were more than offset by the sales of marketable
securities. Financing activities provided cash of $5.0 million for the six
months ended August 31, 1998, primarily from the exercise of employee stock
options and purchases of the Company's common stock under the Company's Employee
Stock Purchase Plan.
The Company has an unsecured committed revolving credit facility with a
commercial bank. Under the terms of the facility, the Company may request cash
advances, letters of credit or both in the aggregate amount of up to $10
million. The Company may make borrowings under the facility for short-term
working capital purposes or for acquisitions (acquisition-related borrowings are
limited to $7.5 million per acquisition). The facility contains certain
financial covenants that the Company believes are generally typical for a
facility of this nature and amount. This facility will expire in September
1999, unless renewed. There were no amounts outstanding under this facility at
August 31, 1998.
Restructuring. In September 1998, the Company announced a restructuring of
certain of its business operations. The Company reduced its workforce by about
80 employees, or approximately six percent, as part of an overall expense
containment program. The Company expects to report a non-recurring charge of
approximately $1 million for the quarter ending November 30, 1998, to cover
costs related to the workforce reduction implemented during the quarter.
Commitments and Contingencies. In March 1997, the Company entered into
agreements with Information Resources, Inc. ("IRI" and the "IRI Agreement")
relating to the development of a solution that will incorporate IRI's point-of-
sale scanner data into the Company's supply chain management software. Under
the IRI Agreement, the Company agreed to market IRI's point-of-sale data and
received 10-year, exclusive rights among supply chain software vendors in most
geographic markets to incorporate these data. The Company and IRI also agreed
to resell certain of each other's products, and the Company might acquire
certain additional assets of IRI (subject to the satisfaction of certain
contingencies).
16
<PAGE>
As part of these agreements, the Company committed that it will generate a
minimum of $16.5 million in revenues for IRI from specified products over
several years, beginning after the occurrence of certain events. This
commitment is subject to the satisfaction of significant contingencies specified
in the agreements. As previously reported, certain issues have arisen between
the Company and IRI relating to the satisfaction of these contingencies. The
Company is currently attempting to satisfactorily resolve these issues with IRI.
However, at this time, there can be no assurances that these issues will be
resolved to the satisfaction of the Company. If the Company is unable to
generate the minimum annual revenues, to the extent required under the IRI
Agreement, it will be obligated to pay to IRI from its own funds an amount equal
to the difference between the qualifying revenues generated and the required
minimum, which could result in a material decrease in working capital. See
"Forward Looking Statements."
Litigation. A number of shareholder class action lawsuits were filed
against the Company and a number of its executive officers and directors
commencing in June 1998 alleging certain disclosure violations under the federal
securities laws. The ultimate outcome of these lawsuits, as with litigation
generally, is inherently uncertain, and it is possible that one or more of these
matters may be resolved adversely to the Company. The adverse resolution of one
or more of these lawsuits could have a material adverse effect on the Company's
business, operating results, financial condition and cash flows. Management
believes that the lawsuits are without merit, and the Company and the other
defendants intend to defend against the lawsuits vigorously.
General. The Company investigates potential candidates for acquisition,
joint venture opportunities or other relationships from time to time. Depending
on certain factors, including the amount, nature, method and timing of the
consideration to be paid by the Company, any such acquisitions, transactions or
relationships might result in a decrease in working capital.
The Company believes that existing cash balances, marketable securities,
funds generated from operations and amounts available under the revolving credit
facility will be sufficient to meet its anticipated liquidity and working
capital requirements for the next 12 to 18 months. If the Company decides to
expand its operations more rapidly, to broaden or enhance its products more
rapidly, to acquire businesses or technologies, to make other significant
expenditures to respond to market opportunities or competitive pressures or is
unable to significantly improve its operating performance, then the Company may
need additional funds at an earlier time.
YEAR 2000 COMPLIANCE
General. Many older computer systems, software products and embedded chips
that are in use today were programmed to accept two digit entries in the date
code field (e.g., "98" for "1998"). These systems, software and embedded chips
need to be modified or upgraded to distinguish twenty-first century dates (e.g.,
"2002") from twentieth century dates (e.g., "1902"), in order to avoid the
possibility of erroneous results or systems failures.
The Company has established a vigorous, comprehensive effort under
executive leadership which continues to evaluate and update its formal program
to address any potential Year 2000 compliance issues relating to its 1) internal
operating systems, 2) vendors, facilities and other third parties and 3)
software products that it licenses to customers. The Company believes that it
has allocated adequate resources for this purpose and expects its Year 2000
compliance program to be completed on a timely basis. While the Company believes
that it has tested and modified the products it currently actively markets, the
Company does not intend to test or modify all prior versions of its software
products or certain software products that the Company plans to replace with
either new software products or Year 2000 compliant releases by the end of 1999.
17
<PAGE>
Corporate Infrastructure State of Readiness. The Company believes that its
identification of Year 2000 compliance issues is complete. The Company also
believes that it has completed its assessment of Year 2000 issues with respect
to the software products which it licenses to customers and the Company's
internal operating systems. The Company has determined the systems that are not
affected and determined which systems need replacement or modification. The
Company believes that all identified systems that are at risk will be fixed,
i.e., made Year 2000 compliant, or replaced before their potential "failure
date." The Company expects that its business critical systems that have date
sensitivity will be completely fixed, tested and in place before fiscal year
2000. The Company believes that it has communicated with all its vendors,
suppliers, landlords and other third parties regarding Year 2000 compliance of
embedded processors in the Company's computers and facilities, software and
other information technology, and other products and services which the Company
obtains from such third parties. The Company anticipates that embedded
processors in computers, which are not yet compliant, will be made compliant
before the end of the century. Most of the Company's landlords have provided
guarantees of compliance or descriptions of the work they are doing to achieve
compliance with their facilities and operations. Although the Company has
completed its assessment of the Year 2000 compliance issues with respect to many
of the products, facilities and services which it obtains from third parties,
the Company continues to assess Year 2000 issues relating to such products,
facilities and services.
The Company intends to test all business critical systems, whether
warranted compliant by the manufacturer or remediated to address Year 2000
issues. The testing environment has been established and test development is
ongoing. Test execution is expected to begin at the end of October 1998 and be
finished, for business critical systems, by the end of February 1999.
Contingency plans for the various business areas of the Company will be
developed in the first part of calendar year 1999. In addition, the Company has
recently engaged Information Technology Association of America ("ITAA") to
certify the Company's software development processes as part of the Company's
comprehensive effort to address the Year 2000 problem.
Costs. The Company has expensed approximately $300,000 as of August 31,
1998 in its Year 2000 compliance program. Approximately twenty percent (20%) of
the costs were for identification and assessment of the Year 2000 issue,
approximately fifty percent (50%) of the costs were for modification and
replacement, and thirty percent (30%) were for testing. The Company currently
estimates that it will cost an additional $1 million, budgeted under its
Information Technology and Engineering divisions, prior to January 1, 2000, to
modify its in-house information systems, other systems and internally developed
software products affected by the Year 2000 issue; the portion of this amount
attributable to fiscal 1999 constitutes approximately eight percent (8%) of the
information technology budget for fiscal 1999. The Company estimates that of the
remaining costs, forty percent (40%) will be for modification and replacement
and sixty percent (60%) will be for testing. See "Forward Looking Statements"
below.
18
<PAGE>
Risks. Software products as complex as those offered by the Company might
contain undetected errors or failures when first introduced or when new versions
are released, including products intended to be Year 2000 compliant. While the
Company believes that it has assessed, corrected and tested its products to
address the Year 2000 issue, there can be no assurances that the Company's
software products contain or will contain all necessary date code changes or
that errors will not be found in new products or product enhancements after
commercial release, resulting in loss of or delay in market acceptance. In
addition, the Company might experience difficulties that could delay or prevent
the continued successful development and release of products that are Year 2000
compliant or that meet the Year 2000 requirements of customers. If the Company
is unable or is delayed in its efforts to make the necessary date code changes,
there could be a material adverse effect upon the Company's business, operating
results, financial condition and cash flows.
There can be no assurances that the systems of other parties upon which the
Company relies will be made Year 2000 compliant on a timely basis. The Company
utilizes third party vendor equipment, telecommunications products, and software
products. The Company is currently taking steps to address the impact, if any,
of the Year 2000 issue surrounding such third party products. The Company has
been communicating with such third parties about their plans and progress in
addressing the Year 2000 problem; however, such third parties' Year 2000
compliance efforts are not within the control of the Company. The failure of any
critical technology components to operate properly may have a material impact on
business operations or require the Company to incur unanticipated expenses to
remedy any problems.
The most substantial operational risks continue to be those that are beyond
the Company's control, including the progress of government agencies at all
levels and compliance efforts of utility companies. It is possible that
interruptions in vital services in late calendar year 1999 and early calendar
year 2000 will interfere with normal business operations. Such failures could
materially and adversely effect the Company's results of operations.
Many companies might need to modify or upgrade their information systems to
address this Year 2000 issue. The effects of this issue and of the efforts by
companies to address it are unclear. The Company believes that Year 2000 issues
might affect the purchasing patterns of customers and prospective customers.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures might
result in reduced funds available to purchase software products and services
such as those offered by the Company. Additionally, Year 2000 problems inherent
in a customer's other software programs might significantly limit that
customer's ability to realize the intended benefits to be derived from the
Company's supply chain management software. Due to the general uncertainty
inherent in the Year 2000 problem resulting, in part from, the possible risks
described above, the Company is unable at this time to determine whether the
consequences of the Year 2000 failures will have a material impact on the
Company's operating results, financial conditions and cash flows.
Forward-looking statements contained in this Year 2000 Compliance should be
read in conjunction with the Company's disclosure under the heading of Forward
Looking Statements for the purposes of the Safe Harbor provisions of the Private
Securities Litigation Act of 1995.
FORWARD LOOKING STATEMENTS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of this Quarterly Report on Form 10-Q contains
certain forward looking statements that are subject to a number of risks and
uncertainties. In addition, the Company may publish forward looking statements
from time to time relating to such matters as anticipated financial performance,
business prospects and strategies, sales and marketing efforts, technological
developments, new products, research and development activities, consulting
services and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward looking statements in this Quarterly Report or elsewhere. The risks and
19
<PAGE>
uncertainties that may affect the business, operating results or financial
condition of the Company include those set forth in the Company's Annual Report
on Form 10-K for the year ended February 28, 1998, the Quarterly Report on Form
10-Q for the quarter ended May 31, 1998, the Current Report on Form 8-K dated
June 9, 1998 and the Company's Prospectus dated August 7, 1998.
Revenues for any period depend on the number, size and timing of license
agreements. The Company typically ships software products shortly after license
agreements are signed, and, therefore, does not maintain any material contract
backlog. The number, size and timing of license agreements depends in part on
the ability of the Company to hire and thereafter to train, integrate and deploy
its sales force effectively. The size and timing of license agreements is
difficult to forecast because software sales cycles are affected by the nature
of the transactions, including the breadth of the solution to be licensed and
the organizational and geographic scope of the licenses. In addition, the
number, size and timing of license agreements also may be affected by certain
external factors such as general domestic and international business or economic
conditions or competitors' actions. A small variation in the timing of software
licensing transactions, particularly near the end of any quarter or year, can
cause significant variations in software product license revenues in any period.
The Company believes that the market for supply chain management software
is expanding. However, if market demand for the Company's products does not grow
as rapidly as the Company expects, because of such factors as adverse changes in
domestic or international business and economic conditions or foreign currency
exchange rates, the timely availability and acceptance of the Company's
products, technological change or the effect of competitive products and
pricing, revenue growth, margins, or both could be adversely affected. If
competitors make acquisitions of other competitors or establish cooperative
relationships among themselves or with third parties to enhance the ability of
their products to address the supply chain management needs of prospects and
customers, or if ERP or other software vendors that have announced plans to
develop or incorporate functionality that could compete with the Company's
products successfully develop and market such functionality, revenue growth
could be adversely affected.
There can be no assurance that the Company will be able to attract
complementary software vendors, consulting firms or other organizations that
will be able to market the Company's products effectively or that will be
qualified to provide timely and cost-effective customer support and services. In
addition, there can be no assurance that any organization will continue its
involvement with the Company and its products, and the loss of relationships
with important organizations could materially adversely affect the Company's
results of operations.
Statements regarding the Company's or Management's beliefs or estimates as
to the adequacy and effectiveness of the Company's Year 2000 efforts when the
various phases or components of its Year 2000 efforts will be completed, and the
costs of such efforts, are based upon management's best estimates, which were
derived using certain assumptions, including the continued availability of
resources, adequacy and timeliness of third party modification or replacement
plans and other factors. Specific factors that might cause differences between
the estimates and actual results include, but are not limited to, the
availability and cost of personnel trained in these areas, the ability to locate
and correct all relevant computer code, timely responses to and corrections by
suppliers and other third parties, the ability to implement interfaces between
the new systems and the systems not being replaced and similar uncertainties.
Due to the general uncertainty inherent in the Year 2000 problem resulting from
the possible risks described in "Management's Discussion and Analysis - Year
2000 Compliance" above, there can be no assurance that the Company will be able
to timely and cost-effectively resolve problems associated with the Year 2000
issue that may affect its operations and business or expose it to third party
liability.
20
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sale of Unregistered Securities. As previously reported by the
Company, the Company acquired TYECIN, pursuant to a certain Agreement and Plan
of Merger dated as of June 1, 1998, by and among the Company, TYECIN, and
certain other persons (the "Merger Agreement"). The Merger Agreement was
privately negotiated among the parties thereto. In connections with the Merger,
which became effective as of June 1, 1998, the Company issued to the 39 holders
of TYECIN common stock (the "TYECIN Shareholders") an aggregate of approximately
333,000 shares of the Company's Common Stock (the "Shares"). In addition, the
Company assumed the then outstanding options to purchase common stock of TYECIN
held by a total of 47 persons, which were converted to options to purchase
approximately 24,500 Shares of the Company's Common Stock (the "Options").
The Shares and Options were not registered under the Securities Act of
1933, as amended (the "Securities Act"), in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act. The Merger
Agreement and related documents imposed certain restrictions on the resale or
other transfer of the Shares necessary for the availability of the Section 4 (2)
exemption. No underwriters were involved in connection with the issuance and
sale of the Shares under the Merger Agreement. In accordance with the terms of
the Merger Agreement, on July 1, 1998, the Company filed a registration
statement on Form S-3 under the Securities Act to register the Shares for resale
by the former TYECIN shareholders; the registration statement was declared
effective in August 1998. The Company also filed a registration statement on
Form S-8 under the Securities Act with respect to the shares of Common Stock
issuable upon exercise of the Options.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On July 24, 1998, the Company held its 1998 Annual Meeting of Shareholders
(the "Annual Meeting"). At the meeting, the shareholders elected as Class III
directors William M. Gibson (with 20,884,069 affirmative votes and 46,795 votes
withheld), and William G. Nelson (with 20,882,864 affirmative votes and 48,000
votes withheld).
In addition to the election of the Class III directors at the Annual
Meeting, the shareholders approved an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares of Common Stock authorized to be
issued by 500,000 shares (with 17,724,715 affirmative votes, 58,971 against,
64,403 abstentions, and 3,082,775 non-votes).
The shareholders also approved a proposal to adopt the 1998 Stock Option
Plan (with 12,788,526 affirmative votes, 4,978,752 against, 80,811 abstentions,
and 3,082,775 non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
*2 Agreement and Plan of Merger dated June 1, 1998, by and among
Manugistics Group, Inc., TYECIN Acquisition, Inc., TYECIN Systems, Inc.
and certain other persons.
27 Financial Data Schedule
- -----------------
* Incorporated by reference to Exhibit 2 to the Company's Current Report
on Form 8-K dated July 15, 1998.
(b) Reports on Form 8-K
1. On June 1, 1998, the Company filed a Current Report on Form 8-K following
its issuance of a press release on June 1, 1998 announcing that it had
entered into a definitive agreement to acquire Los Altos, California-based
TYECIN Systems, Inc.
2. On June 2, 1998, the Company filed a Current Report on Form 8-K following
its issuance of a press release on June 2, 1998 announcing that it had
completed the acquisition of Los Altos, California-based TYECIN Systems,
Inc.
3. On June 9, 1998, the Company filed a Current Report on Form 8-K following
its issuance of a press release on June 9, 1998 announcing its earnings
figures for its first fiscal quarter.
4. On June 18, 1998, the Company filed a Current Report on Form 8-K following
its issuance of a press release on June 18, 1998 announcing it had recently
learned that lawsuits were filed against the Company in the United States
District Court for the District of Minnesota and the District of Maryland,
Southern Division. Each of the complaints alleges certain disclosure
violations under the federal securities laws against the Company, its
Chairman and Chief Executive Officer, and its Chief Financial Officer.
5. On July 15, 1998, the Company filed a Current Report on Form 8-K stating
that effective June 1, 1998, the Company had acquired TYECIN Systems, Inc.
by merger and accounted for the transaction as a pooling of interests.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Manugistics Group, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MANUGISTICS GROUP, INC.
(Registrant)
Date: October 15, 1998 By: /s/ William M. Gibson
----------------------------------------------
William M. Gibson
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: October 15, 1998 By: /s/ Peter Q. Repetti
----------------------------------------------
Peter Q. Repetti
Senior Vice President, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT FOR THE PERIOD ENDED AUGUST 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> AUG-31-1998
<CASH> 6,202
<SECURITIES> 40,610
<RECEIVABLES> 66,595
<ALLOWANCES> 3,053
<INVENTORY> 270
<CURRENT-ASSETS> 118,529
<PP&E> 46,467
<DEPRECIATION> 19,599
<TOTAL-ASSETS> 207,185
<CURRENT-LIABILITIES> 44,608
<BONDS> 630
0
0
<COMMON> 54
<OTHER-SE> 161,893
<TOTAL-LIABILITY-AND-EQUITY> 207,185
<SALES> 43,252
<TOTAL-REVENUES> 94,063
<CGS> 6,286
<TOTAL-COSTS> 72,586
<OTHER-EXPENSES> 39,956
<LOSS-PROVISION> 1,471
<INTEREST-EXPENSE> (80)
<INCOME-PRETAX> (23,034)
<INCOME-TAX> (8,530)
<INCOME-CONTINUING> (14,504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,504)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
