<PAGE> 1
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
[Letterhead of Manugistics Group, Inc.]
October 30, 2000
VIA EDGAR
United States Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
Attn: Filing Desk
Re: Manugistics Group, Inc. (Comm. File No. 0-22154)
Acquisition of Talus Solutions, Inc.
Dear Sir/Madam:
Pursuant to Rules 165 and 425 promulgated under the Securities Act of 1933, as
amended (the "Act"), Manugistics Group, Inc. (the "Company") encloses herewith
for filing with the Commission the following materials relating to a proposed
merger (the "Merger") to be effected pursuant to a merger agreement dated
September 21, 2000 entered into between the Company and privately held Talus
Solutions, Inc. ("Talus"):
1. a press release dated September 21, 2000 announcing that the Company
had signed the merger agreement to acquire Talus (the press release
having been previously filed on September 22, 2000, on a Current
Report on Form 8-K);
2. excerpts relating to Talus or the Merger from the Company's second
quarter earnings call on September 21, 2000; and
3. an e-mail dated October 3, 2000, from the Company to Talus employees.
We note that we have also previously filed the following additional materials
relating to the Merger on Current Reports on Form 8-K/A, and that these
materials have not been otherwise disseminated:
1. risk factors relating to the Company and financial statements of each
of the Company and Talus, together with certain pro forma financial
statements (filed on October 10, 2000); and
<PAGE> 2
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
2. Agreement and Plan of Merger by and among Manugistics Group, Inc.,
Talus Solutions, Inc. and Manu Acquisition Corp. dated as of
September 21, 2000 (filed on October 11, 2000).
Sincerely yours,
/s/ Timothy T. Smith
TIMOTHY T. SMITH
Senior Vice President, General Counsel and
Secretary, Manugistics Group, Inc.
<PAGE> 3
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
Contacts: Deirdre Blackwood Tim Mullane
Corporate Communications Talus Solutions
301-255-3143 678-556-5225
Nate Wallace
Investor Relations
301-984-5059
Marc Chimes
Ogilvy Public Relations Worldwide
202-452-9482
FOR IMMEDIATE RELEASE
MANUGISTICS AGREES TO ACQUIRE TALUS SOLUTIONS
ACQUISITION REDEFINES SUPPLY-DEMAND CHAIN OPTIMIZATION --
CREATES 1st PROFIT-FOCUSED SOLUTION FOR TOTAL TRADING
NETWORK MANAGEMENT
ROCKVILLE, MD. AND ATLANTA, GA.-- SEPTEMBER 21, 2000 -- Manugistics Group,
Inc. (Nasdaq: MANU), a leading global provider of intelligent supply chain and
eBusiness solutions for enterprises and evolving trading networks, and Talus
Solutions, Inc., the world leader in Pricing and Revenue Optimization (PRO)
products and services, today announced Manugistics has signed an agreement to
acquire Talus in an approximately $366 million tax-free stock-for-stock
merger.
The acquisition of Talus Solutions, which reported approximately $40 million
in revenue for FY'99, brings Manugistics' leading supply chain optimization
and eCommerce infrastructure solutions together with Talus' premier
profitability optimization solutions. The combined company will be first to
market with an end-to-end solution that combines the traditional cost
reduction strengths of supply chain optimization with the pricing and revenue
enhancing optimization capabilities that will help maximize profits across the
supply-demand chain. Drawing upon the expertise of the two companies, the new
solutions will be well suited for both Manugistics' target markets and the
complex, dynamic pricing environment of eBusiness.
<PAGE> 4
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
"The company's combined capabilities can offer the market the next generation
solution that streamlines and maximizes business processes throughout the
supply-demand chain - promoting increased levels of profitability and
competitive value," said Manugistics CEO Greg Owens in announcing the
acquisition. "Price sensitivity and demand elasticity are key elements in the
business decision process. The expertise and products of Talus Solutions will
enable us to offer our customers the break-through innovation of a fully
optimized, eBusiness supply-demand network. And by optimizing supply, revenue
and margins across the value chain, enterprises and trading networks will have
the tools to sell the right products to the right customers at the right time
through the right channels at the right prices - for higher profits."
Talus Solutions CEO Tom Madison concurred, stating that, "Fundamentally, what
excites us is that we are redefining two spaces - supply chain and PRO - and
creating a technology blueprint for the future. By integrating our
complementary optimization technologies we will enable companies to focus not
just on optimizing supply and demand - OR - revenue and cost, but on
optimizing the supply-demand chain throughout the entire enterprise. This is
exactly what our clients are looking for."
Talus Solutions: Pricing and Revenue Optimization for Profitable Growth
"Talus Solutions' pricing and revenue optimization technology, broad solution
footprint, deep domain expertise, and an impressive client list were key
drivers behind our decision to acquire Talus," said Greg Owens. "This
strategic acquisition builds on our business strategy to aggressively invest
in new products and solutions, to differentiate ourselves in the market, and
to deliver results to our clients."
[X] BROADEST FOOTPRINT Talus Solutions has the broadest footprint and deepest
functionality in pricing and revenue optimization. Talus offers the
following solutions: Dynamic Pricing Optimization, Target Pricing
Optimization, and Promotions Pricing Optimization. The suite also
includes Revenue and Yield Management.
[X] IMPRESSIVE CUSTOMER BASE Talus Solutions has primarily a Fortune 500
customer base covering a broad range of markets including:
transportation, travel and hospitality, electronics and high technology,
and motor vehicle and parts.
- Talus' clients include 17 of the 25 largest airlines, 7 of the 10 biggest
hotel chains and 4 of the top 5 rental car companies. Clients include
United Airlines, Ford Motor Company, UPS and Tickets.com.
[X] DEEP DOMAIN EXPERTISE Talus Solutions has the largest base of expertise
in PRO technology. Talus has over 250 employees many of whom hold
doctoral degrees.
NEW OPPORTUNITIES FOR PRICING AND REVENUE OPTIMIZATION (PRO) IN THE SUPPLY
CHAIN
<PAGE> 5
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
Pricing and Revenue Management (PRM), the precursor to PRO, has been used
effectively by the travel, transportation and hospitality markets since the
mid-80's. PRM has enabled hotels and airlines to analyze historical sales
information and optimize revenue of seats or hotel rooms based on the mix of
time-sensitive, higher paying business travelers and other price sensitive
travelers.
Other industries, such as manufacturing or retail, share similar
characteristics with the airline and hotel industries - like perishable
resources, fixed capacity, advanced sales/bookings, uncertain demand or
seasonal demand - characteristics that companies can optimize to realize
significant benefits from the combined company's supply-demand chain pricing
and revenue optimization solutions.
Manufacturing capacity can be considered a fixed or constrained resource,
given process design and capacity equipment expansion costs. A nimble supply
and profitability optimization solution allows for fine-tuning of scheduling
and pricing of under-utilized or over-utilized processing time. The
fine-tuning through pricing is relatively inexpensive when compared to the
cost of acquiring and maintaining additional capacity or liquidating excess
capacity.
Supply-Demand Chain Optimization can help give companies the answers they need
to make the smart business decision by simultaneously evaluating all the
business considerations and exceptions - all in real time.
TERMS OF THE AGREEMENT
Under the agreement, Manugistics will acquire all outstanding stock and will
assume all of the stock options of Talus, a privately held company. For the
transaction, Manugistics will issue or reserve for issuance between 4.2 and
5.0 million shares of Manugistics common stock. The total value of the
transaction is approximately $366 million, based upon the closing price of
Manugistics common stock on September 20, 2000. The final value of the
transaction and number of shares to be issued will be based upon Manugistics
average price for the fifteen-day period prior to closing.
This transaction will be accounted for as a purchase transaction and will
result in the recording of an intangible asset. Manugistics expects this
acquisition to have a dilutive effect on earnings for the next three quarters,
and accretive thereafter, excluding the amortization of this intangible asset.
Going forward Manugistics intends in the future to report earnings net of the
amortization of this intangible asset.
ABOUT TALUS SOLUTIONS, INC.
Headquartered in Atlanta with offices in Silicon Valley and London, Talus
Solutions offers innovative software systems that have delivered billions of
dollars in incremental revenue and profits to its customers. More information
about Talus Solutions is available at www.TalusSolutions.com.
<PAGE> 6
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
ABOUT MANUGISTICS GROUP, INC.
Headquartered in Rockville, Md., Manugistics Group, Inc. is a leading global
provider of intelligent supply chain eBusiness solutions for enterprises and
evolving trading networks. With more than 900 clients, Manugistics helps power
intelligent decisions for profitable growth in leading companies such as
Amazon.com, Coca-Cola Bottling, Commerx, Compaq, DuPont, eConnections,
FreightWise, General Electric, Harley-Davidson, Hormel, Nestle, Timberland and
Unilever.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to
risks and uncertainties, and there are important factors that could cause
actual results to differ materially from those anticipated by such statements.
Certain of such statements may be identified by use of words or phrases such
as "anticipate," "believe," "estimate," "expect," "foresee," "future,"
"intend," "optimistic," "positioned," "well-positioned" or "will." A
discussion of these factors is set forth in the company's Annual Report on
Form 10-K for the year ended February 29, 2000 (under the caption "Factors
That May Affect Future Results," within the section titled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in the report) and other reports and documents filed with the
Securities and Exchange Commission which are publicly available. Copies of
these documents may also be obtained by contacting the company's Investor
Relations department at 301-984-5000. The company assumes no obligation to
update the information contained in this press release.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Manugistics Group, Inc. will be complying with the filing requirements of SEC
in connection with the acquisition. The filings will contain more complete
information about the acquisition. Investors and security holders are urged
to read SEC filings regarding this acquisition carefully when they are
available. These documents will contain important information about
Manugistics Group, Inc., Talus Solutions, Inc., the acquisition and related
matters. Investors and security holders will be able to obtain copies of these
documents through the website maintained by the U.S. Securities and Exchange
Commission at http://www.sec.gov. Copies of these documents may also be
obtained by request from Manugistics by mail to Manugistics, 2115 East
Jefferson Street, Rockville, MD 20852-4999 attention: Investor Relations,
telephone: (301) 984-5000.
You may read and copy any reports, statements or other information filed by
MANUGISTICS at the SEC public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at any of the Commission's other public reference
rooms in New York, New York and Chicago, Illinois. Please call the Commission
at 1-800-SEC-0330 for further information on the public reference rooms.
Manugistics' filings with the Commission are also available to the public from
commercial document-retrieval services and at the Web site maintained by the
Commission at http://www.sec.gov.
Manugistics is a registered trademark, and the Manugistics logo and the phrase
"Leveraged Intelligence" are trademarks, of Manugistics, Inc. All other
product or company names mentioned are used for identification purposes only,
and may be trademarks of their respective owners. Additional information about
Manugistics can be found at the company's site on the World Wide Web, at
http://www.manugistics.com
###
<PAGE> 7
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
MANUGISTICS
SECOND QUARTER, FISCAL 2001
EARNINGS CALL EXCERPTS
MODERATOR: GREG OWENS
SEPTEMBER 21, 2000
3:00 P.M. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to
the Manugistics second quarter financial results conference
call. At this time, all participants are in a listen-only
mode. Later, we will conduct a question-and-answer session.
At that time if you have a question, you will need to press
the one followed by the four on your pushbutton phone. As a
reminder, this conference is being recorded Thursday,
September 21st, 2000. I would now like to turn the
conference over to Nate Wallace, director of investor
relations, Manugistics. Please go ahead, Mr. Wallace.
Nate Wallace: Thank you, Embry, and welcome to our second quarter earnings
call.
I'll begin by noting that our discussions contain
forward-looking information that are subject to risks and
uncertainties and there are important factors which could
cause actual results to differ materially from those
anticipated by such statements. Certain of such statements
may be identified by the use of words such as "anticipate,"
"believe," "continue," "estimate," "execute," "expect,"
"foresee, "future," "intend," "optimistic,"
"well-positioned" or "will."
For further information, please refer to our annual report
on Form 10-K for the year ended February 29, 2000, our
quarterly report on Form 10-Q for the quarter ended May 31,
2000, as well as other reports and documents filed with the
Securities and Exchange Commission which are publicly
available. You may obtain copies by contacting our investor
relations department at 301-984-5409. They are also
available from the SEC's Internet Web site. We assume no
obligation to update the information provided on this
conference call.
This afternoon at approximately 4:00 p.m. we distributed our
press release announcing our second quarter performance as
well as the acquisition of Talus Solutions to those on our
earnings fax and e-mail lists. Our press releases have also
been made available on our Web site at www.manugistics.com.
We are conducting a live Webcast of this call this afternoon
which you may access at the following URL address -
www.manugistics.com/ir.
In addition, we will make available a recording of this
conference call for four days starting at 7:00 p.m. Eastern
time this evening and continuing through 7:00 p.m. Eastern
time on Monday, September 25th. To listen to the recording,
callers within North America may call 800-633-8284 during
this 48-hour period. Callers outside North America may call
858-812-6460. Callers to the recording will be required to
enter the access number for this call, which is 16300183.
<PAGE> 8
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
Now, Greg Owens, our CEO, will begin the call. Please go
ahead, Greg.
Greg Owens: ...Let me go into acquisitions. As a management team a
number of months back we set a strategy to differentiate
ourselves in the marketplace, to develop the products that
lead the market, to catch the significant wave and to be out
in front and to relentlessly execute for today. It was very
clear to us that you don't win the battle fighting on your
own turf, and there were a number of competitors trying to
come into our space. So we must differentiate. We have the
best supply chain products and solutions in the market and
we are beginning to show that through our sales execution.
Now, we must add to that stable of products, and we have
found a company that we believe will significantly enhance
our market position. This is company is Talus Solutions.
Talus Solutions is in pricing and revenue management
optimization. They have offices in Atlanta, Georgia, Silicon
Valley and in London. Talus has approximately 250 employees
with [trailing twelve months] revenues just over $41
million. This company has the strongest value proposition
that I have ever come across and with all my years at
Andersen Consulting I saw quite a number of strong value
propositions.
Let me explain a little bit what revenue management is. It
is about the application of the disciplined tactics of
predicting consumer behavior at a micro market level and
optimizing product availability and price to maximize
revenue growth. It is about maximizing revenue growth from
existing business. This is applying the same type of
decision support and management science that we have towards
the supply chain towards the revenue management area. It
will accurately assess future consumer behavior under
dynamic changing market conditions, determine the most
effective way to price and allocate inventory making
real-time adjustments as market conditions change with the
consumer in real-time mode.
The "Wall Street Journal" has recently identified revenue
management as the number one emerging business strategy and
they call revenue management a "practice poised to explode."
This value proposition can generate anywhere from 3 to 8
percent in additional revenue resulting in potential profit
increases of 50 to 100 percent. As you layer on the
additional profit and revenue on the existing structure,
much of that passes through to the bottom line.
Why is this so appealing to us? It compliments our
efficiency cost containment solutions. It is revenue
generation focused. They are the clear leader in this space
with over 150 clients and annual revenues in excess of $40
million. They already have three products and solutions -
dynamic pricing, target pricing and promotional pricing.
These products are applicable to different industry
verticals. Let me explain what these three different
products offer. First of all, in target pricing. Target
pricing solves the problem of determining optimal customized
price where the goal is to decide how much
discount/incentive to offer considering brand premium,
competitive positioning, customer profile and product mix.
They've used target pricing at companies such as UPS.
Dynamic pricing solves the problem of optimal price lists
for a company with the flexibility to dynamically adjust
prices and maximize contribution of profit considering
market conditions, competitive action, product life cycles
and product availability. Dynamic pricing would be used
where this industry started in, in areas like airlines where
you have an expendable seat that would be leaving the gate,
or where you have short life cycle perishable items such as
electronics and high tech where you measure the demand
versus the constrained capacity of manufacturing.
<PAGE> 9
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
We think there's tremendous opportunity in electronics and
high tech and the aerospace and industrial sectors in
dynamic pricing.
Promotional pricing solves the problem of allocating
promotions in incentive dollars and competitive product
market where the goal is to determine the impact that a
particular promotion or incentive will have on the business.
So this would be applicable to consumer products, goods,
retail and the e-tailers. All of the software is
optimization based and it is all proven. It is leveraged
intelligence under the current Manugistics tag line with
strong algorithms.
This software, as I've stated before, is applicable in all
industry verticals. They have strong traction and number of
complimentary verticals, which produce good synergies to our
existing business in Manugistics. Industry verticals where
they have a stronghold include travel and transportation
services, automotive, aerospace and high tech and
telecommunications. As I stated, this is a tremendous value
proposition and the strongest that I've seen in my career,
adding up to 8 percent increase on revenues. It has a proven
track record with proven results.
Let me review what some of their clients have said about
them. Under Ford Motor Company--"Talus Solutions target
pricing gives us the ability to consider all characteristics
of account and business environment in developing a
proposal. The first of five U.S. sales regions that tried
the new strategy in pricing and revenue management
collectively beat their profit targets by $1 billion while
the 13 that didn't missed their targets by $250 million."
Quite a statement and that was by Lloyd Hanson of Ford Motor
Company.
Swiss Cargo by Royal Shreijer, executive vice president. "In
order to address our expansion requirements, we needed to
optimize our day to day tactical and long term planning
decisions. By adopting Talus Solutions integration revenue
management approach, Swiss Cargo sales agents will be able
to immediately address client booking requirements in the
most cost effective and competitive manner. As a result, not
only will we seek to improve customer satisfaction but
increase profits and ultimately gain a larger market share."
Mr. Shreijer continued "Talus Solutions' unmatched
reputation in the pricing sector coupled with their
excellent mix of products, services and consultancy means
Swiss Cargo will take advantage of the complete revenue
management system, even extend it in order to manage
multi-carrier, multi-hub environment."
In the dot-com world under Tickets.com - Since the majority
of live entertainment events don't sell out completely, this
unique technology will enable event organizations to predict
specific event demand so the pricing may be adjusted
accordingly." Tom Gimpel, co-chairman and CEO of
Tickets.com.
Delta Airlines. "Technology is the critical success factor
in the airline industry and with the selection of this new
revenue management system Delta takes a major step towards
enhancing our competitive position. The Talus system will
position Delta as an industry leader. We expect to achieve
immediate benefits from the new technology realizing
additional revenues of $100 million to $200 million annually
within three years." Leo Mullin, president and CEO of Delta
Airlines.
And under Marriott - "Revenue management has contributed
millions to the bottom line of our company. When your people
focus on revenue management, the company will grow, and
growth is what it's really all about." J. Willard Marriott,
Jr., chairman and CEO of Marriott International.
<PAGE> 10
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
And one last quote - Talus is the clear leader in the
pricing field and has an opportunity to set the standard in
an area that most CEOs are struggling with." Bill Pay,
director of McKenzie and Company.
As you can see by these quotes, these are substantial value
propositions that we feel we can take into the market and
couple with our supply side, supply chain management
solution as well. In analyzing this acquisition we also
carefully assessed the following - our bandwidth; our
resources at Manugistics; our management team; along with
development costs; our overall focus and our ability to
market these solutions. We have already acquired additional
management and leadership to manage and grow this part of
the business and we have painstakingly calculated our risks
to minimize them. We are quite confident that this
acquisition will integrate/compliment the Manugistics suite
of products. As a matter of fact, we think that revenue
management will be linked to fulfillment in relatively short
order.
We will apply the same level of intensity to this as we did
to Manugistics when we first came here. We will continue to
invest in the products. We will drive this with a strong
sales organization. We will build this into our marketing
messages. We have already started to establish strong
consulting agreements to leverage this strategy-consulting
firms and we have additional management and salespeople that
are joining the team.
This will give us what we feel are the best supply side,
supply chain optimization products and solutions and demand
side revenue pricing optimization products and solutions
that will be coupled with our B2B e-commerce infrastructure
platforms, WebWORKS, ExchangeWORKS and Web connect. This
acquisition will enable us to offer and deliver the
solutions that our clients need to differentiate themselves
for today and tomorrow.
Why now? Why did we make the acquisition now? We're driving
approximately one third of our revenues off of products we
delivered in the last 12 months. And we must stay out in
front if we want to be a leader. We have broken into the
black from an operating profit standpoint. We have good
visibility into the next two quarters to continue our
performance and we believe that we can market-ready this set
of solutions and products for significant roll out while we
are executing on our current business. We believe the next
fiscal year for us which is just five months away now, the
Talus solutions will grow at even a greater percent than the
Manugistics solutions and as you can see, we are growing the
Manugistics solutions at an overall revenue of 49 percent
increase year to date.
Other positives for this include the product solution
extension. Market differentiation for some time to come -
nobody else in the industry has these products. There are no
other players that are even close to the size of Talus and
the ones that are focused on one product in one industry
such as retail or airlines. And these products have a very
lengthy development time. So we feel like our
differentiation is well out in front of others. This
supplements our development group with a stronger Silicon
Valley presence, which we will need as well. It also gives
us a stronger ASP model of recurring revenues in the future
as Talus has done some of their major deals on an ASP mode.
We deploy our productization and our market and our sales
channel people, and we feel like we can grow this
substantially. This strengthens our current management as
they have some excellent people and we are bringing in some
others. This gives us additional strength in value
propositions and breadth to offer into the marketplace and
it also strengthens some of our systems integration
alliances. Overall, this gets
<PAGE> 11
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
us to a greater critical mass which was one of the strong
reasons that they were interested in being acquired, knowing
that they could leverage off of our sales force and we could
grow this at a much faster rate. Along with it was very
compatible cultures between the two companies and most
importantly we believe and they believe that there is
tremendous up side in Manugistics and the combination of the
two will get there faster.
Let me leave you with one final comment around this
acquisition and this is from a "Wall Street Journal" article
a few months back with an interview talking about the future
with Andy Grove. Andy starts out by talking about price as a
perfect example. "The airlines worked for 15 years to get a
system that would give them yield management. That's
basically a proprietary closed system automated way of
adjusting price based on demand and capacity. Take that
example and consider it in a much simpler or maybe
complicated fashion. Think of every enterprise, whether it's
Intel or a hotel that is involved in adjusting capacity
demand pricing. Manufacturers don't really do it. The closer
you are to a commodity, you do it. Agriculture does it. The
stock market does it perfectly.
"Now, how do you get there? How do we codify what our sales
managers and production managers and production planners and
allocators and general managers do every day and program
computers to do that for them? Probably bits and pieces of
this exist in decision theory and operations research today.
But the pay off comes in terms of making the whole system
operate that much more efficiently. You have that much to
gain. I smell a huge potential." Those are direct quotes
from Andy Grove.
...
B. Austrian: OK. And then just briefly on Talus which is a very fine
company and a great space, can you give us a sense of what
portion of their revenues last year we should consider to
have been software or transactionally related versus say
services? And then just to check - did you mean to say that
you do believe that that company's revenue base, now that
it's in the fold and with all your initiatives, will grow in
excess of the 50 percent figure or 49 that you mentioned? Is
that basically how we should think about the growth rate of
that business?
G. Owens: That's correct. We do plan on it growing next fiscal year
greater than that 50 percent level. Their revenues - they
are on the percent completion basis and if you take their
contracts the way that they had them written it would have
looked at license revenue in the 20 to 25 percent range.
However based on the way that we will do this going forward
- so what that means is because of the percent completion
basis basically we have very strong visibility into their
next couple of quarters as well of what their revenue is
exactly, right? The - what we will do going forward though
is we'll place more emphasis in the license revenue area so
you will see that increase pretty dramatically as we move
forward with them.
B. Austrian: Great. Thanks and congratulations, particularly on Talus
which sounds terrific.
...
C. Moore: I wanted to ask-- have you worked with Talus in the past?
Have you been pleased?
G. Owens: I worked with them when it was the old Aeronomics when I was
at Andersen Consulting and I always saw a lot of opportunity
for yield management, particularly when you got into things
like oil and gas, chemicals, certainly in the travel and
<PAGE> 12
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
transportation industries. So I knew of them there. We
started this as a partnership and started kind of going down
the road of the potential possibilities and it just turned
into an acquisition.
As Raj stated in this, this has got about 2 1/2 quarters of
dilution but it does not change our overall plans of
profitability by quarter. It's just dilutive within certain
quarters. Raj, do you want to expand on that?
C. Moore Does this acquisition change any of your plans for being
break even or profitable for the rest of the year
Raj: Yeah. Catherine, we expect to be profitable in Q3, Q4 going
onward. As Greg said, somewhere - two to three quarters is
about the dilution that we expect depending on the closing
and when it happens. If it happens during this quarter
obviously it'll be dilutive slightly towards the end of the
quarter, but still profitability [unintelligible] bottom
line.
...
Laura Lederman: Once again, my congratulations on your quarter and also the
acquisition. Following up on the questions concerning Talus,
can you talk a little bit about the growth they've seen over
the last year? So are you anticipating the growth rate to
accelerate? And also what integration on the sales side?
Will it be kept as a separate sales team? How many sales
professionals do they have? Do you plan to wrap that up? And
then I'll follow up with some additional questions. Thanks.
G. Owens: OK. Let me start with the sale side first. The sales teams -
I expect one unified sales team that will approach the
market. We have sales training that was scheduled for the
first week in October with all of our salespeople globally.
We will roll out the Talus Solutions to them at that time as
well and we will approach the market as one sales team.
However, we will have solution teams and value proposition
teams that will focus exclusively on Manugistics products
and on Talus products exclusively. So those would be sales
support side of the organization.
Talus had a little different approach into what they've done
over the last few years. They saw the need to break out the
travel and transportation industries and started developing
the subsequent products out of just the traditional revenue
management, yield management. And that's why you've seen
this dynamic pricing, promotional pricing, target pricing.
So they've been very focused on product development and
their investments there. The revenues have been relatively
flat over the last couple of years. I view this very much as
a situation that I came into Manugistics with and with the
sales and marketing focus and certainly leveraging off the
team that we've built. That's why we're so confident that
we're going to be able to grow this very rapidly and at a
high percent.
L. Lederman: Can you also talk a little bit about the competition that
they face and how they differ. You mentioned briefly on the
call that the other ones are smaller and are in different
vertical markets. Can you talk a little bit more about the
competition in this space?
G. Owens: Yeah, there's a couple of very specialized companies like
Sabre or PROS that are in the airline industry only and
there's a couple of very small companies in the retail space
around the promotional area. And these guys like Zilliant,
which is like a two-year-old company - these guys, most of
them are less than $10 million in revenue. They've got one
product. They're at the very beginning of even getting that
<PAGE> 13
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
productized so, you know, this is an area that we have
products now that are significantly ahead of any of the
competition in the market and we feel like with the supply
side and the demand side on this and taking the sales into
the marketplace we're going to be able to pull a pretty good
size gap between us and any others.
...
D. Crook: OK. And Talus being dilutive - so the Street is at about 16
cents for fiscal '01. Does that get cut in half, do you
think, because of the dilution?
Raj: No, I don't think so.
D. Crook: Remember-- are you suggesting the dilution in the fiscal
second and third quarters is moderate? A couple of cents?
Raj: Again, fiscal '01 for us, really by the time we integrate
Talus and close on the transaction you're really talking
about somewhere around four months for the fiscal '01. And
if you go into fiscal '02, our fiscal '02, we expect it to
be accretive, again, obviously excluding the amortization of
intangibles.
D. Crook: Right. The - what will the amortization be on a quarterly
basis?
Raj: Well, the total intangibles will be approximately $350
million. We haven't done the evaluation analysis to break
out the amortization schedule but if you take a straight
five years it's $70 million a year. If you take seven years,
it's $50 million. But we'll be doing that and giving more
guidance in the next quarter.
...
C. Phillips: OK. Then just a couple questions on the acquisition. One,
that - how [unintelligible] do you think this will be? I
mean non - fixed pricing is pretty common in the airline
industry but other industries this is a new concept. So I'm
just kind of wondering on some of the sales outside of the
airline industry, how long did it take to kind of get the
customer up to speed on what's possible here? And then
secondly, just wanted to know - your existing customer base
- on one hand you're selling to a different audience with
this acquisition which good for [unintelligible]. But on the
other hand, it sounds like different people than you
normally sell to and kind of - is there any synergy that you
can get out of the install base for selling this product?
G. Owens: Yep. I tell you the one thing that I always found and, you
know, I'll bring in some of my Andersen Consulting days back
into this as well. When you take a strong value proposition
into a client, particularly when you start talking around a
value proposition such as this where you're increasing
revenues 3 to 8 percent and profitability could increase in
excess of 50 percent out there, it is not hard to get the
attention at the high levels and we've brought a number of
those people over that are used to selling at very high
levels.
I think that, you know, as we have very strong reputations
within our current installed bas, I think it's going to be
very easy to get an audience with those guys, and where
we've had proven results in the past, we've got a leg up on
being able to go back in with another solution that we can
get results on. So, you know, I think there's going to be a
lot of opportunity there. As far as your comment about
missionary, I think that - you know, I don't know a CEO in
the world that I meet with right now that tells me they do
pricing well. I suspect I could go to Morgan Stanley, and
they'd probably tell me they don't optimize pricing well
either.
<PAGE> 14
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
C. Phillips: It looks like you could, yes.
G. Owens: I think this has tremendous applicability and basically
we've got to get out and educate the marketplace, and I
think that's where some of the strategy firms are going to
come into play. They're looking for a solution to go in at
those board rooms sea level to offer this type of value
proposition. I think they can be a tremendous alliance for
us, and given that we're going to be the market leader in
this area, I think we're going to have a number of them that
are very interested in partnering.
C. Phillips: And just a question - [unintelligible] for the last couple
of years that [unintelligible]. Is the investment they've
made enough to [productize] pretty much ready to go and you
don't have a big investment ahead of you [unintelligible]?
G. Owens: That is correct. They have done a tremendous job. I actually
thought they had embarked upon the absolute right strategy
of productization around these three different areas and,
you know, it was the absolute right way to go. I think what
we are going to be able to help them with is to package it
up a little better in a very short order and then to help
get through our sales channel and marketing channel out into
the marketplace.
...
D. Duchene: OK. And then can you give us some idea on the cost structure
that you're assuming with Talus?
G. Owens: Elaborate a little bit.
D. Duchene: You're at a $40 million revenue number for '99. What were
their costs in '99?
Raj: OK. As I think we said, Talus has been doing a lot of
investments in the past two years or so. Their costs have
been approximately that or slightly higher in terms of
revenue because they had a bottom line loss on an operating
basis.
D. Duchene: Could you quantify that for us at the amount of loss?
Raj: Which specific year would you like to have - would you like
to have -
G. Owens: We'll give them last year.
Raj: Yeah. Let me go through the first two quarters. At an
operating income level they had a loss of about $3.2 million
against approximately about $23 million of sales. In the
first and second quarter - calendar quarter of this year.
G. Owens: We think by leveraging our sales force against them and the
combinations of some of the infrastructure that we're going
to be able to reduce those costs. Also the three offices
that they are in are exact overlaps of three locations for
us so we will either be using their facilities or using our
facilities to consolidate those as well. So, you know,
taking these products out to the market like we think we can
at their growth rate we think we're going to be able to
produce some very accretive obviously margins on these guys
that are going to be accretive for us next year.
D. Duchene: Great. And then how many salespeople are you guys bringing
on through this acquisition?
<PAGE> 15
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
G. Owens: They have about 12 to 14 salespeople that they will be
bringing in.
D. Duchene: All right. Thank you very much.
Operator: J. V. Kodali at Digital Century Capital, please go ahead
with your questions.
J.V. Kodali: Yeah. Following on the last question I was actually
wondering what is their - can you guys give us what the
current quota is for the Talus - 12 to 14 Talus salespeople?
And any other breakdown you can give with regard to the
uptick in the receivables line? You mentioned that some of
the services and the license - and has that license that has
come in I guess after the quarter has closed - can you tell
us how much of that is coming out now or has already come
out?
Raj: Let me answer the quota carrying salespeople in Talus are a
very similar type of quota to Manugistics. It's in the $2
million to $2.5 million. And the second question was how
much was collected.
J.V. Kodali: Yes, that's correct, of the license revenue from the uptick
from the 47 to 64.
Raj: Could you please expand on 47 to 64?
J.V. Kodali: The [accounts receivable].
Raj: Oh, you're talking about the total DSOs. I'm sorry. Total
receiveables.
J.V. Kodali: Yes.
<PAGE> 16
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
E-MAIL FROM THE COMPANY TO TALUS EMPLOYEES DATED OCTOBER 3, 2000
I want to echo the welcome of Greg Owens, President and CEO of Manugistics, to
all Talus employees worldwide. We are very excited about the combination of
our two companies. This combination will provide the marketplace with the
first ever Profit-based Supply Chain Planning and Optimization solution
driving enterprise and trading network profitability. This combination will
place our company in a unique and differentiated position as the only provider
of this solution. This is an exciting time to be in the marketplace, and an
exciting time to be at Manugistics, of which you are now a part.
Because you are now part of a public company, the immediate effect will be the
creation of liquidity to the ownership interest that you have built up in
Talus through your hard work, subject to securities laws and internal
Manugistics trading policies.
We are excited about the value that has been created for the Talus stock
option holders. Based on Manugistics' closing stock price on September 28th,
2000 of $105, the Talus stock and options are worth approximately $8 per
share. We believe that with all your hard work and efforts that there will be
substantial upside to the Manugistics stock value over the coming years.
The Manugistics Human Resources department will be in contact with each of you
over the next month to explain the Manugistics employee benefits package, and
obtain your signature on appropriate documentation. You will continue to be
eligible for all your current benefits under the Talus plan until December 31,
2000 and then we will transition you to the Manugistics benefits. Please be
assured that with your cooperation, we will have a smooth transition.
We are busy trying to complete the legal formalities to make the combination
effective as soon as possible. We have also started the work to fully
integrate the two companies. I hasten to add that the vast majority of the
people will be unaffected by this transition. However, due to the duplication
in the infrastructure corporate staff functions, some employees' positions may
become redundant. We will try and place those employees in other jobs within
the company, to the extent that similar jobs are available for which the
affected employee is qualified. If that is not possible,
<PAGE> 17
Manugistics Group, Inc.
Commission File Number 0-22154
Company to be Acquired: Talus Solutions, Inc.
we will offer a generous termination package, which will be tied to helping
the company through the transition. The high level details of the package are
as follows:
1. As soon as possible we will speak with those employees whose positions we
feel may become redundant in this transition
2. Those employees in redundant positions will be requested to continue in
their employment through at least January 31, 2001 or some other date by
mutual agreement
3. Those employees in redundant positions will be paid a severance amount
equal to three months base salary. In addition, those employees will be
eligible to receive the bonus or variable pay, for the calendar year
2000, for which such employee would otherwise have been eligible
4. During the remainder of their employment with Manugistics, those
employees in redundant positions will continue to vest in the stock
options that had been previously granted in accordance with the original
terms of that grant.
We strongly believe our future is a bright one, and together we can achieve
dramatic gains in the area that continues to drive shareholder value - the
bottom line. We look forward to a rewarding relationship. If you have any
questions please do not hesitate to call me, or Robin Hoesch, Director-Human
Resources (301- 984-5269) for Manugistics or Mike Cote.
Raj Rajaji
Executive Vice President - CFO
Manugistics
Email: [email protected]
Phone: 301-984-5087
Fax: 301-984-5223
