Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[Mark One]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
OR
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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: 0-23999
MANHATTAN ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Georgia
(State or Other Jurisdiction of Incorporation or Organization)
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58-2373424
(I.R.S. Employer Identification No.) |
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| 2300 Windy Ridge Parkway, Suite 1000 |
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| Atlanta, Georgia
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30339 |
| (Address of Principal Executive Offices)
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(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (770) 955-7070
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 þ No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The number of shares of the Registrant’s class of capital stock outstanding as of October 26,
2011, the latest practicable date, is as follows: 20,691,222 shares of common stock, $0.01 par
value per share.
MANHATTAN ASSOCIATES, INC.
FORM 10-Q
Quarter Ended September 30, 2011
TABLE OF CONTENTS
2
PART I
FINANCIAL INFORMATION
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| Item 1. |
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Financial Statements. |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
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September 30, |
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December 31, |
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2011 |
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2010 |
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(unaudited) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
94,153 |
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$ |
120,744 |
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Short term investments |
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6,650 |
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4,414 |
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Accounts receivable, net of allowance of $4,424 and $5,711 in 2011 and 2010,
respectively |
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56,745 |
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47,419 |
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Deferred income taxes |
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7,855 |
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7,214 |
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Income taxes receivable |
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— |
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2,446 |
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Prepaid expenses and other current assets |
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8,062 |
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6,743 |
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Total current assets |
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173,465 |
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188,980 |
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Property and equipment, net |
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13,508 |
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14,833 |
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Long-term investments |
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908 |
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1,711 |
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Goodwill, net |
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62,270 |
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62,265 |
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Acquisition-related intangible assets, net |
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15 |
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1,186 |
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Deferred income taxes |
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9,800 |
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8,816 |
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Other assets |
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2,765 |
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2,673 |
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Total assets |
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$ |
262,731 |
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$ |
280,464 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
8,296 |
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$ |
7,745 |
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Accrued compensation and benefits |
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16,037 |
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19,807 |
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Accrued and other liabilities |
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14,181 |
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13,856 |
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Deferred revenue |
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49,393 |
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44,974 |
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Income tax payable |
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4,554 |
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— |
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Total current liabilities |
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92,461 |
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86,382 |
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Other non-current liabilities |
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8,971 |
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10,282 |
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Shareholders’ equity: |
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Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or
outstanding in 2011 or 2010 |
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— |
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— |
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Common stock, $.01 par value; 100,000,000 shares authorized; 20,433,676 and 21,729,789
shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively |
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204 |
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217 |
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Additional paid-in capital |
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— |
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487 |
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Retained earnings |
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164,392 |
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184,152 |
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Accumulated other comprehensive loss |
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(3,297 |
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(1,056 |
) |
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Total shareholders’ equity |
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161,299 |
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183,800 |
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Total liabilities and shareholders’ equity |
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$ |
262,731 |
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$ |
280,464 |
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
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| Item 1. |
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Financial Statements (continued) |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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(unaudited) |
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Revenue: |
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Software license |
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$ |
13,565 |
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$ |
12,092 |
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$ |
37,674 |
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$ |
41,784 |
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Services |
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63,594 |
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53,486 |
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183,446 |
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161,727 |
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Hardware and other |
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8,443 |
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8,436 |
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24,594 |
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22,093 |
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Total revenue |
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85,602 |
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74,014 |
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245,714 |
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225,604 |
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Costs and expenses: |
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Cost of license |
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1,196 |
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1,471 |
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4,259 |
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4,631 |
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Cost of services |
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28,054 |
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24,661 |
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80,474 |
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73,631 |
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Cost of hardware and other |
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6,695 |
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7,092 |
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19,452 |
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18,366 |
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Research and development |
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10,877 |
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9,866 |
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31,936 |
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30,640 |
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Sales and marketing |
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10,865 |
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10,329 |
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33,774 |
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32,870 |
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General and administrative |
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9,342 |
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8,721 |
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27,256 |
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25,359 |
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Depreciation and amortization |
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1,698 |
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2,262 |
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5,922 |
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6,995 |
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Recovery of previously
impaired investment |
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(2,519 |
) |
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— |
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(2,519 |
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— |
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Total costs and expenses |
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66,208 |
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64,402 |
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200,554 |
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192,492 |
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Operating income |
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19,394 |
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9,612 |
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45,160 |
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33,112 |
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Other income (loss), net |
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862 |
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(188 |
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1,214 |
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(382 |
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Income before income taxes |
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20,256 |
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9,424 |
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46,374 |
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32,730 |
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Income tax provision |
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5,379 |
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3,192 |
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11,992 |
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11,114 |
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Net income |
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$ |
14,877 |
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$ |
6,232 |
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$ |
34,382 |
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$ |
21,616 |
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Basic earnings per share |
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$ |
0.74 |
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$ |
0.29 |
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$ |
1.67 |
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$ |
1.00 |
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Diluted earnings per share |
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$ |
0.70 |
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$ |
0.28 |
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$ |
1.59 |
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$ |
0.96 |
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Weighted average number of shares: |
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Basic |
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20,156 |
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21,248 |
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20,623 |
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21,638 |
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Diluted |
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21,125 |
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22,051 |
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21,656 |
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22,456 |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
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| Item 1. |
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Financial Statements (continued) |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Nine Months Ended September 30, |
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2011 |
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2010 |
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(unaudited) |
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Operating activities: |
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Net income |
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$ |
34,382 |
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$ |
21,616 |
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Adjustments to reconcile net income to net cash provided by operating
activities: |
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Depreciation and amortization |
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5,922 |
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6,995 |
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Recovery of previously impaired investment |
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(2,519 |
) |
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— |
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Stock-based compensation |
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7,317 |
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7,707 |
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Loss (gain) on disposal of equipment |
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22 |
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(2 |
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Tax benefit of stock awards exercised/vested |
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3,345 |
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1,277 |
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Excess tax benefits from stock based compensation |
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(1,416 |
) |
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(354 |
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Deferred income taxes |
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(1,821 |
) |
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(529 |
) |
Unrealized foreign currency (gain) loss |
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(513 |
) |
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343 |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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(9,370 |
) |
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(10,624 |
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Other assets |
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(1,546 |
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(2,236 |
) |
Accounts payable,
accrued and other
liabilities |
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(3,325 |
) |
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8,619 |
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Income taxes |
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6,250 |
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(748 |
) |
Deferred revenue |
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4,267 |
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3,297 |
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Net cash provided by operating activities |
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40,995 |
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35,361 |
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Investing activities: |
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Purchase of property and equipment |
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(3,672 |
) |
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(4,331 |
) |
Net maturities (purchases) of investments |
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465 |
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(8,439 |
) |
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Net cash used in investing activities |
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(3,207 |
) |
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(12,770 |
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Financing activities: |
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Purchase of common stock |
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(95,569 |
) |
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(56,562 |
) |
Proceeds from stock options exercised |
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30,265 |
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18,381 |
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Excess tax benefits from stock based compensation |
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1,416 |
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354 |
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Net cash used in financing activities |
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(63,888 |
) |
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(37,827 |
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Foreign currency impact on cash |
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(491 |
) |
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346 |
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Net change in cash and cash equivalents |
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(26,591 |
) |
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(14,890 |
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Cash and cash equivalents at beginning of period |
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120,744 |
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|
120,217 |
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Cash and cash equivalents at end of period |
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$ |
94,153 |
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$ |
105,327 |
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See accompanying Notes to Condensed Consolidated Financial Statements.
5
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2011
(Unaudited)
| 1. |
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Basis of Presentation and Principles of Consolidation |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Manhattan
Associates, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete financial statements. In the
opinion of management, these condensed consolidated financial statements contain all normal
recurring adjustments considered necessary for a fair presentation of the Company’s financial
position at September 30, 2011, the results of operations for the three and nine months ended
September 30, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010.
The results for the three and nine months ended September 30, 2011 are not necessarily indicative
of the results to be expected for the full year. These statements should be read in conjunction
with the Company’s audited consolidated financial statements and management’s discussion and
analysis included in the Company’s annual report on Form 10-K for the year ended December 31,
2010.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the Company’s accounts
and the accounts of its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
The Company’s revenue consists of revenues from the licensing and hosting of software, fees
from implementation and training services (collectively, “professional services”), plus customer
support and software enhancements, and sales of hardware and other revenues (other revenues
consists of reimbursements of out-of-pocket expenses incurred in connection with its professional
services). All revenue is recognized net of any related sales taxes.
The Company recognizes license revenue when the following criteria are met: (1) a signed
contract is obtained; (2) delivery of the product has occurred; (3) the license fee is fixed or
determinable; and (4) collection is probable. Revenue recognition for software with
multiple-element arrangements requires recognition of revenue using the “residual method” when (a)
there is vendor-specific objective evidence of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract accounting; (b)
vendor-specific objective evidence of fair value does not exist for one or more of the delivered
elements in the arrangement; and (c) all other applicable revenue-recognition criteria for
software revenue recognition, other than the requirement for vendor-specific objective evidence of
the fair value of each delivered element of the arrangement, are satisfied. For those contracts
that contain significant customization or modifications, license revenue is recognized using
contract accounting.
The Company allocates revenue to customer support and software enhancements and any other
undelivered elements of the arrangement based on vendor specific objective evidence, or VSOE, of
fair value of each element and such amounts are deferred until the applicable delivery criteria
and other revenue recognition criteria have been met. The balance of the revenue, net of any
discounts inherent in the arrangement, is recognized at the outset of the arrangement using the
residual method as the product licenses are delivered. If the Company cannot objectively determine
the fair value of each undelivered element based on the VSOE of fair value, the Company defers
revenue recognition until all elements are delivered, all services have been performed, or until
fair value can be objectively determined. The Company must apply judgment in determining all
elements of the arrangement and in determining the VSOE of fair value for each element,
considering the price charged for each product on a stand-alone basis or applicable renewal rates.
For arrangements that include future software functionality deliverables, the Company accounts
for these deliverables as a separate element of the arrangement. Because the Company does not
sell these deliverables on a standalone basis, the Company is not able to establish VSOE of fair
value of these deliverables. As a result, the Company defers all revenue under the arrangement
until the future functionality has been delivered to the customer.
6
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
Payment terms for the Company’s software licenses vary. Each contract is evaluated
individually to determine whether the fees in the contract are fixed and determinable and whether
collectibility is probable. Judgment is required in assessing the probability of collection,
which is generally based on evaluation of customer-specific information, historical collection
experience and economic market conditions. If market conditions decline, or if the financial
conditions of customers deteriorate, the Company may be unable to determine that collectibility is
probable, and the Company could be required to defer the recognition of revenue until the Company
receives customer payments. The Company has an established history of collecting under the terms
of its software license contracts without providing refunds or concessions to its customers.
Therefore, the Company has determined that the presence of payment terms which extend beyond
contract execution in a particular contract do not preclude the conclusion that the fees in the
contract are fixed and determinable. Although infrequent, when payment terms in a contract extend
beyond twelve months, the Company has determined that such fees are not fixed and determinable and
recognizes revenue as payments become due provided that all other conditions for revenue
recognition have been met.
The Company’s services revenue consists of fees generated from professional services and
customer support and software enhancements related to the Company’s software products. Fees from
professional services performed by the Company are generally billed on an hourly basis, and revenue
is recognized as the services are performed. In certain situations, professional services are
rendered under agreements in which billings are limited to contractual maximums or based upon a
fixed-fee for portions of or all of the engagement. Revenue related to fixed-fee based contracts
is recognized on a proportional performance basis based on the hours incurred on discrete projects
within an overall services arrangement. The Company has determined that output measures, or
services delivered, approximate the input measures associated with fixed-fee services arrangements.
Project losses are provided for in their entirety in the period in which they become known.
Revenue related to customer support services and software enhancement is generally paid in advance
and recognized ratably over the term of the agreement, typically twelve months.
Hardware and other revenue is generated from the resale of a variety of hardware products,
developed and manufactured by third parties, that are integrated with and complementary to the
Company’s software solutions. As part of a complete solution, the Company’s customers
periodically purchase hardware from the Company for use with the software licenses purchased from
the Company. These products include computer hardware, radio frequency terminal networks, radio
frequency identification (RFID) chip readers, bar code printers and scanners and other
peripherals. Hardware revenue is recognized upon shipment to the customer when title passes. The
Company generally purchases hardware from the Company’s vendors only after receiving an order from
a customer. As a result, the Company does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the
Financial Accounting Standards Board’s (FASB) Accounting Standards Codification, the Company
recognizes amounts associated with reimbursements from customers for out-of-pocket expenses as
revenue. Such amounts have been classified as hardware and other revenue. The total amount of
expense reimbursement recorded to revenue was $2.9 million and $2.7 million for the three months
ended September 30, 2011 and 2010, respectively, and $8.0 million and $6.8 million for the nine
months ended September 30, 2011 and 2010, respectively.
| 3. |
|
Fair Value Measurement |
The Company measures its investments based on a fair value hierarchy disclosure framework that
prioritizes and ranks the level of market price observability used in measuring assets and
liabilities at fair value. Market price observability is affected by a number of factors, including
the type of asset or liability and their characteristics. This hierarchy prioritizes the inputs
into three broad levels as follows:
| |
• |
|
Level 1—Quoted prices in active markets for identical instruments. |
| |
• |
|
Level 2—Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable in
active markets. |
| |
• |
|
Level 3—Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable. |
7
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
The Company’s investments are categorized as available-for-sale securities and recorded at
fair market value. Investments with maturities of 90 days or less from the date of purchase are
classified as cash equivalents; investments with maturities of greater than 90 days from the date
of purchase but less than one year are generally classified as short-term investments; and
investments with maturities of greater than one year from the date of purchase are generally
classified as long-term investments. Unrealized holding gains and losses are reflected as a net
amount in a separate component of
shareholders’ equity until realized. For the purposes of computing realized gains and losses,
cost is determined on a specific identification basis.
At September 30, 2011, the Company’s cash, cash equivalent and short-term investments balance
was $58.0 million, $36.2 million and $6.6 million, respectively. Cash equivalents and short-term
investments primarily consist of highly liquid money market funds and certificates of deposit.
Prior to 2008, the Company invested in auction rate securities of which certain auctions
failed during 2008 and the underlying securities were not redeemed by the issuer. During 2008, the
Company recorded an other-than-temporary impairment charge of $3.5 million for one of its
investments. The Company reduced the carrying value to zero due to credit downgrades of the
underlying issuer and the bond insurer as well as increasing publicly reported exposure to
bankruptcy risk by the issuer. However, during the quarter ended September 30, 2011, the Company
was able to sell the auction rate security and recovered 72%, or $2.5 million, of its original
investment. The $2.5 million recovery from the sale of the auction rate security is included in
the recovery of previously impaired investment line in the condensed consolidated statements of
income.
The Company currently has one remaining auction rate security investment with a par value of
$1.0 million. The auction rate security held by the Company at September 30, 2011 was issued by a
state educational loan authority, is collateralized by federally insured student loans and matures
in 2037. At September 30, 2011, the carrying value of this investment is $0.9 million as the
Company has recorded temporary impairment charges against this investment prior to 2011. This
investment has a high credit rating, and the Company intends and has the ability to hold this
security until maturity or until redeemed. In determining the fair value of the auction rate
security, the Company considered the credit worthiness of the counterparty, estimates of interest
rates, expected holding periods, and the timing and value of expected future cash flows. Changes
in the assumptions underlying the Company’s valuation could have a significant impact on the value
of this security, which may cause losses and potentially require the Company to record
other-than-temporary impairment charges on this investment in the future. The Company will
continue to evaluate the fair value of its auction rate security investment each reporting period
for a potential other-than-temporary impairment.
The Company’s auction rate security is classified in the fair value hierarchy as Level 3 as
its valuation technique includes significant unobservable inputs. The Company uses quoted prices
from active markets which are classified at Level 1 as a highest level observable input in the
disclosure hierarchy framework for all other available-for-sale securities. The Company has no
investments classified at Level 2.
The following table sets forth the assets carried at fair value measured on a recurring basis
at September 30, 2011 (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fair Value Measurements at September 30, 2011 Using |
|
|
|
|
| |
|
|
|
|
|
Significant Other |
|
|
Significant |
|
|
|
|
| |
|
Quoted Prices |
|
|
Observable Inputs |
|
|
Unobservable Inputs |
|
|
|
|
| |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
29,632 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
29,632 |
|
Auction rate security |
|
|
— |
|
|
|
— |
|
|
|
908 |
|
|
|
908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities |
|
$ |
29,632 |
|
|
$ |
— |
|
|
$ |
908 |
|
|
$ |
30,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first nine months of 2011, the Company’s valuation methodologies were
consistent with previous years, and there were no transfers into or out of Level 3 based on changes
in observable inputs.
8
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
| 4. |
|
Stock-Based Compensation |
In January 2010 the Compensation Committee of the Board of Directors approved certain changes
to the Company’s historical equity incentive grant practices, with the objective to optimize its
performance and retention strength while managing program share usage to improve long-term equity
overhang. The changes eliminated stock option awards in favor of 100% restricted stock grants,
which for the 2010 and 2011 awards contain vesting provisions that are 50% service-based and 50%
performance-based for employee awards and 100% service based for non-employee members of the
Board of Directors (“Outside Directors”). The equity compensation program change for
employees was effective January 2010 and for Outside Directors was effective May 2010. The
employee awards have a four year vesting period, with the performance portion tied to annual
revenue and earnings per share targets. The awards to Outside Directors have a one year vesting
period.
The Company recorded stock-based compensation related to stock options of $0.5 million and
$0.8 million during the three months ended September 30, 2011 and 2010, respectively, and $1.5
million and $2.9 million during the nine months ended September 30, 2011 and 2010, respectively.
During the nine months ended September 30, 2010 the Company granted options to purchase 17,500
shares of common stock. No stock options were granted during 2011 or during the three months
ended September 30, 2010.
A summary of changes in outstanding options for the nine months ended September 30, 2011 is
as follows:
| |
|
|
|
|
| |
|
Number of Options |
|
Outstanding at December 31, 2010 |
|
|
3,846,262 |
|
Exercised |
|
|
(1,252,520 |
) |
Forfeited and expired |
|
|
(99,048 |
) |
|
|
|
|
Outstanding at September 30, 2011 |
|
|
2,494,694 |
|
|
|
|
|
The Company granted 19,840 shares and 14,524 shares of restricted stock during the three
months ended September 30, 2011 and 2010, respectively. The Company recorded stock-based
compensation related to restricted stock of $2.0 million and $1.8 million during the three months
ended September 30, 2011 and 2010, respectively. During the nine months ended September 30, 2011
and 2010, the Company granted 356,232 shares and 431,952 shares of restricted stock, respectively.
The Company recorded stock-based compensation related to restricted stock of $5.8 million and
$4.8 million during the nine months ended September 30, 2011 and 2010, respectively.
A summary of changes in unvested shares of restricted stock for the nine months ended
September 30, 2011 is as follows:
| |
|
|
|
|
| |
|
Number of Shares |
|
Outstanding at December 31, 2010 |
|
|
658,146 |
|
Granted |
|
|
356,232 |
|
Vested |
|
|
(251,480 |
) |
Forfeited |
|
|
(81,645 |
) |
|
|
|
|
Outstanding at September 30, 2011 |
|
|
681,253 |
|
|
|
|
|
The Company’s effective tax rate was 26.6% and 33.9% for the quarters ended September 30, 2011
and 2010, respectively, and 25.9% and 34.0% for the nine months ended September 30, 2011 and 2010,
respectively. The effective rate for the three and nine months ended September 30, 2011 is
impacted by the $2.5 million recovery of a previously impaired investment discussed in Note 3. The
Company did not record a tax benefit on the original impairment charge because it did not have any
future capital gains to offset the loss and therefore does not have tax expense related to the
reversal of the charge. The effective tax rate for the quarter and year to date also include a tax
benefit from the disqualifying disposition of incentive stock options that were previously expensed
and the reduction of U.S. federal and state income tax reserves that resulted from the expiration
of tax audit statues for tax returns filed for 2007 and prior and the settlement of an IRS audit.
In addition to the third quarter tax adjustments, the effective tax rate in the nine months ended
September 30, 2011 includes a $2.0 million tax benefit recorded in the first quarter ending March
31, 2011, resulting from the reduction of a valuation allowance associated with tax credit
carryforwards and deferred tax assets in India. The benefit is attributable to the elimination of
the tax holiday for Indian companies under the STPI “Software Technology Park of India” tax plan,
based on the February 2011 budget approved by the India Finance Ministry, which will allow us to
utilize tax assets previously reserved.
9
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
The effective tax rate for the nine months of 2010 included a tax benefit from the
disqualifying disposition of incentive stock options that were previously expensed and the
reduction in U.S. federal income tax reserves that resulted from the expiration of tax audit
statues for tax returns filed for 2006 and prior, partially offset by the establishment of income
tax reserves for state audits.
The Company conducts business globally and, as a result, files income tax returns in the U.S.
federal jurisdiction and in many state and foreign jurisdictions. The Company is no longer subject
to income tax examinations for the years before 2008 in the U.S. federal, substantially all state
and local, and substantially all non-US jurisdictions. The Company experienced a net decrease in
unrecognized tax benefits of $0.5 million during the quarter ended September 30, 2011, due to the
expiration of statutes of limitations in multiple jurisdictions globally. The Internal Revenue
Service completed its examination of the Company’s 2008 tax return during the quarter ended
September 30, 2011 which resulted in an additional $0.2 million decrease in unrecognized tax
benefits. As of September 30, 2011, the Company’s unrecognized tax benefits totaled $1.8 million,
all of which, if recognized, would affect the effective tax rate. Further, the Company anticipates
it is reasonably possible that unrecognized tax benefits may decrease within twelve months by $0.2
million related primarily to the expiration of statutes of limitation.
The Company recognizes potential accrued interest and penalties to unrecognized tax benefits
within its global operations in income tax expense. The Company’s liability for the potential
payment of interest and penalties totaled $0.4 million at September 30, 2011.
Comprehensive income includes net income, foreign currency translation adjustments and
unrealized gains and losses on investments that are excluded from net income and reflected in
shareholders’ equity.
The following table sets forth the calculation of comprehensive income for the three and nine
months ended September 30, 2011 (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net income |
|
$ |
14,877 |
|
|
$ |
6,232 |
|
|
$ |
34,382 |
|
|
$ |
21,616 |
|
Other comprehensive (loss) income, net
of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(2,418 |
) |
|
|
1,219 |
|
|
|
(2,241 |
) |
|
|
1,124 |
|
Unrealized loss on investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income |
|
|
(2,418 |
) |
|
|
1,219 |
|
|
|
(2,241 |
) |
|
|
1,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
12,459 |
|
|
$ |
7,451 |
|
|
$ |
32,141 |
|
|
$ |
22,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
| 7. |
|
Net Earnings Per Share |
Basic net earnings per share is computed using net income divided by the weighted average
number of shares of common stock outstanding (“Weighted Shares”) for the period presented.
Diluted net earnings per share is computed using net income divided by the sum of Weighted Shares
and common equivalent shares (“CESs”) outstanding for each period presented using the treasury
stock method.
The following is a reconciliation of the net income and share amounts used in the computation
of basic and diluted net earnings per common share for the three and nine months ended September
30, 2011 and 2010 (in thousands, except per share data):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
14,877 |
|
|
$ |
6,232 |
|
|
$ |
34,382 |
|
|
$ |
21,616 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.74 |
|
|
$ |
0.29 |
|
|
$ |
1.67 |
|
|
$ |
1.00 |
|
Effect of CESs |
|
|
(0.04 |
) |
|
|
(0.01 |
) |
|
|
(0.08 |
) |
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.70 |
|
|
$ |
0.28 |
|
|
$ |
1.59 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
20,156 |
|
|
|
21,248 |
|
|
|
20,623 |
|
|
|
21,638 |
|
Effect of CESs |
|
|
969 |
|
|
|
803 |
|
|
|
1,033 |
|
|
|
818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
21,125 |
|
|
|
22,051 |
|
|
|
21,656 |
|
|
|
22,456 |
|
Weighted average shares issuable upon the exercise of stock options that were not
included in the calculation of diluted earnings per share were 2,000 shares and 2,031,924 shares
for the three months ended September 30, 2011 and 2010, respectively, and 17,000 shares and
2,060,724 shares for the nine months ended September 30, 2011 and 2010, respectively. Such shares
were not included because they were anti-dilutive.
From time to time, the Company may be involved in litigation relating to claims arising out
of its ordinary course of business. Many of the Company’s installations involve products that are
critical to the operations of its clients’ businesses. Any failure in a product could result in a
claim for substantial damages against the Company, regardless of its responsibility for such
failure. Although the Company attempts to limit contractually its liability for damages arising
from product failures or negligent acts or omissions, there can be no assurance that the
limitations of liability set forth in the Company’s contracts will be enforceable in all
instances. The Company is not presently involved in any material litigation. However, it is
involved in various legal proceedings. The Company believes that any liability that may arise as
a result of these proceedings will not have a material adverse effect on its financial condition,
results of operations or cash flows. The Company expenses legal costs associated with loss
contingencies as such legal costs are incurred.
The Company operates its business in three geographical segments: the Americas (North America
and Latin America), Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC). The
information for the periods presented below reflects these segments. All segments derive revenue
from the sale and implementation of the Company’s supply chain execution and planning solutions.
The individual products sold by the segments are similar in nature and are all designed to help
companies manage the effectiveness and efficiency of their supply chain. The Company uses the
same accounting policies for each operating segment. The Chief Executive Officer and Chief
Financial Officer evaluate performance based on revenue and operating results for each region.
11
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
The Americas segment charges royalty fees to the EMEA and APAC segments based on software
licenses sold by those operating segments. The royalties, which totaled approximately $0.5
million for each of the quarters ended September 30, 2011 and 2010 and $1.7 million and $1.9
million for the nine months ended September 30, 2011 and 2010, respectively, are included in cost
of revenue in EMEA and APAC with a corresponding reduction in the Americas cost of revenue. The
revenues represented below are from external customers only. The geographical-based costs consist
of costs of personnel, direct sales and marketing expenses, and general and administrative costs
to support the business. There are certain corporate expenses included in the Americas region
that are not charged to the other segments, including research and development, certain marketing
and general and administrative costs that support the global organization, and the amortization of
acquired developed technology. Included in the Americas costs are all research and development
costs including the costs associated with the Company’s India operations.
The following table presents the revenues, expenses and operating income by reporting segment
for the three and nine months ended September 30, 2011 and 2010 (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
| |
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
11,450 |
|
|
$ |
1,833 |
|
|
$ |
282 |
|
|
$ |
13,565 |
|
|
$ |
10,036 |
|
|
$ |
1,693 |
|
|
$ |
363 |
|
|
$ |
12,092 |
|
Services |
|
|
51,226 |
|
|
|
7,945 |
|
|
|
4,423 |
|
|
|
63,594 |
|
|
|
44,369 |
|
|
|
6,344 |
|
|
|
2,773 |
|
|
|
53,486 |
|
Hardware and other |
|
|
7,987 |
|
|
|
263 |
|
|
|
193 |
|
|
|
8,443 |
|
|
|
8,150 |
|
|
|
229 |
|
|
|
57 |
|
|
|
8,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
70,663 |
|
|
|
10,041 |
|
|
|
4,898 |
|
|
|
85,602 |
|
|
|
62,555 |
|
|
|
8,266 |
|
|
|
3,193 |
|
|
|
74,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
27,988 |
|
|
|
5,461 |
|
|
|
2,496 |
|
|
|
35,945 |
|
|
|
26,962 |
|
|
|
4,475 |
|
|
|
1,787 |
|
|
|
33,224 |
|
Operating expenses |
|
|
26,451 |
|
|
|
3,159 |
|
|
|
1,474 |
|
|
|
31,084 |
|
|
|
25,325 |
|
|
|
2,505 |
|
|
|
1,086 |
|
|
|
28,916 |
|
Depreciation and amortization |
|
|
1,560 |
|
|
|
87 |
|
|
|
51 |
|
|
|
1,698 |
|
|
|
2,147 |
|
|
|
72 |
|
|
|
43 |
|
|
|
2,262 |
|
Recovery of previously
impaired investment |
|
|
(2,519 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,519 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
53,480 |
|
|
|
8,707 |
|
|
|
4,021 |
|
|
|
66,208 |
|
|
|
54,434 |
|
|
|
7,052 |
|
|
|
2,916 |
|
|
|
64,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
17,183 |
|
|
$ |
1,334 |
|
|
$ |
877 |
|
|
$ |
19,394 |
|
|
$ |
8,121 |
|
|
$ |
1,214 |
|
|
$ |
277 |
|
|
$ |
9,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
| |
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
|
$ |
30,829 |
|
|
$ |
5,192 |
|
|
$ |
1,653 |
|
|
$ |
37,674 |
|
|
$ |
33,935 |
|
|
$ |
4,565 |
|
|
$ |
3,284 |
|
|
$ |
41,784 |
|
Services |
|
|
149,254 |
|
|
|
23,477 |
|
|
|
10,715 |
|
|
|
183,446 |
|
|
|
134,103 |
|
|
|
19,611 |
|
|
|
8,013 |
|
|
|
161,727 |
|
Hardware and other |
|
|
23,399 |
|
|
|
783 |
|
|
|
412 |
|
|
|
24,594 |
|
|
|
21,281 |
|
|
|
666 |
|
|
|
146 |
|
|
|
22,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
203,482 |
|
|
|
29,452 |
|
|
|
12,780 |
|
|
|
245,714 |
|
|
|
189,319 |
|
|
|
24,842 |
|
|
|
11,443 |
|
|
|
225,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
81,070 |
|
|
|
15,655 |
|
|
|
7,460 |
|
|
|
104,185 |
|
|
|
76,981 |
|
|
|
13,605 |
|
|
|
6,042 |
|
|
|
96,628 |
|
Operating expenses |
|
|
79,404 |
|
|
|
9,321 |
|
|
|
4,241 |
|
|
|
92,966 |
|
|
|
77,430 |
|
|
|
7,829 |
|
|
|
3,610 |
|
|
|
88,869 |
|
Depreciation and amortization |
|
|
5,508 |
|
|
|
270 |
|
|
|
144 |
|
|
|
5,922 |
|
|
|
6,618 |
|
|
|
246 |
|
|
|
131 |
|
|
|
6,995 |
|
Recovery of previously
impaired investment |
|
|
(2,519 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,519 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
163,463 |
|
|
|
25,246 |
|
|
|
11,845 |
|
|
|
200,554 |
|
|
|
161,029 |
|
|
|
21,680 |
|
|
|
9,783 |
|
|
|
192,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
40,019 |
|
|
$ |
4,206 |
|
|
$ |
935 |
|
|
$ |
45,160 |
|
|
$ |
28,290 |
|
|
$ |
3,162 |
|
|
$ |
1,660 |
|
|
$ |
33,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
September 30, 2011
(Unaudited)
The Company’s services revenues, which consist of fees generated from professional
services and customer support and software enhancements related to its software products, for the
three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Professional services |
|
$ |
41,403 |
|
|
$ |
33,349 |
|
|
$ |
118,737 |
|
|
$ |
101,658 |
|
Customer support and
software enhancements |
|
|
22,191 |
|
|
|
20,137 |
|
|
|
64,709 |
|
|
|
60,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total services revenue |
|
$ |
63,594 |
|
|
$ |
53,486 |
|
|
$ |
183,446 |
|
|
$ |
161,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenues related to the Company’s warehouse and non-warehouse product groups for
the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Warehouse |
|
$ |
7,002 |
|
|
$ |
7,020 |
|
|
$ |
22,462 |
|
|
$ |
22,375 |
|
Non-Warehouse |
|
|
6,563 |
|
|
|
5,072 |
|
|
|
15,212 |
|
|
|
19,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total software
license revenue |
|
$ |
13,565 |
|
|
$ |
12,092 |
|
|
$ |
37,674 |
|
|
$ |
41,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 10. |
|
New Accounting Pronouncements |
In September 2011, the FASB issued an Accounting Standards Update on testing goodwill for
impairment to simplify the goodwill impairment test. The standard update is intended to reduce cost
and complexity of the annual goodwill impairment test by permitting companies to first assess
qualitative factors to determine whether further impairment testing is necessary. Under this
standard update, a company is not required to calculate the fair value of a reporting unit unless
the company determines that it is more likely than not that its fair value is less than its
carrying amount. The more likely than not threshold is defined as having a likelihood of more than
50 percent. This guidance is effective for interim and annual goodwill impairment tests performed
for the fiscal years beginning after December 15, 2011. The Company does not expect the adoption
of this guidance to have a material impact on its financial statements.
In June 2011, the FASB issued an Accounting Standards Update on the presentation of
comprehensive income. This guidance requires the presentation of comprehensive income, the
components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. This
guidance also requires presentation of adjustments for items that are reclassified from other
comprehensive income to net income in the statement where the components of net income and the
components of other comprehensive income are presented. This guidance is effective for interim and
annual periods beginning after December 15, 2011. The adoption of this guidance will only impact
the presentation of the Company’s financial statements.
In May 2011, the FASB issued an Accounting Standards Update on fair value measurements that
clarifies the application of existing guidance and disclosure requirements, changes certain fair
value measurement principles and requires additional disclosures about fair value measurements.
This guidance is effective for interim and annual periods beginning after December 15, 2011. The
Company does not expect the adoption of this guidance to have a material impact on its financial
statements.
In January 2010, the FASB issued an Accounting Standard Update to improve disclosures about
fair value measurements. This guidance requires enhanced disclosures regarding transfers in and
out of the levels within the fair value hierarchy. Separate disclosures are required for
significant transfers in and out of Level 1 and 2 in the fair value hierarchy and the reasons for
the transfers. This guidance also requires disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (Level 3) investments. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009 except Level 3 reconciliation disclosures which
are effective for the fiscal years and interim periods beginning after December 15, 2010. The
Company adopted the enhanced disclosures for Level 1 and 2 in its first quarter of 2010 reporting,
which did not have a material impact on its financial statements. The Company also adopted the
enhanced disclosures for Level 3 reconciliation disclosures in its first quarter of 2011 reporting,
which also did not have a material impact on its financial statements.
13
|
|
|
| Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Forward-Looking Statements
Certain statements contained in this filing are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to
statements related to plans for future business development activities, anticipated costs of
revenues, product mix and service revenues, research and development and
selling, general and administrative activities, and liquidity and capital needs and resources.
When used in this report, the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,”
“estimate,” and similar expressions are generally intended to identify forward-looking statements.
You should not place undue reliance on these forward-looking statements, which reflect our opinions
only as of the date of this quarterly report. Such forward-looking statements are subject to
risks, uncertainties and other factors that could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements. For further information
about these and other factors that could affect our future results, please see “Risk Factors” in
Item 1A of our annual report on Form 10-K for the year ended December 31, 2010. Investors are
cautioned that any forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from those contemplated by
such forward-looking statements. The following discussion should be read in conjunction with the
condensed consolidated financial statements for the three and nine months ended September 30, 2011
and 2010, including the notes to those statements, included elsewhere in this quarterly report (the
“Condensed Consolidated Financial Statements”). We also recommend the following discussion be read
in conjunction with management’s discussion and analysis and consolidated financial statements
included in our annual report on Form 10-K for the year ended December 31, 2010.
References in this filing to the “Company,” “Manhattan,” “Manhattan Associates,” “we,” “our,”
and “us” refer to Manhattan Associates, Inc., our predecessors, and our wholly-owned and
consolidated subsidiaries.
Business Overview
We are a leading developer and implementer of supply chain software solutions that help
organizations optimize their supply chain operations from planning through execution. Our
platform-based supply chain software solution portfolios — Manhattan SCOPE® and
Manhattan SCALETM — are designed to deliver both business agility and total cost of
ownership advantages to customers. Manhattan SCOPE (Supply Chain Optimization, Planning through
Execution) leverages our Supply Chain Process Platform (SCPP) to unify the full breadth of the
supply chain, while Manhattan SCALE (Supply Chain Architected for Logistics Execution) leverages
Microsoft’s .NET® platform to unify logistics functions.
Early in the Company’s history, our offerings were heavily focused on warehouse management
solutions. As the Company grew in size and scope, our offerings expanded across the entire supply
chain. As a result of the Company’s historical beginnings however, we still enjoy significant
presence in, and a relatively strong concentration of revenues from, warehouse management
solutions, which are a component of our distribution management solution suite.
Our business model is singularly focused on the development and implementation of complex
supply chain software solutions that are designed to optimize supply chain effectiveness and
efficiency for our customers. We have three principal sources of revenue:
| |
• |
|
licenses of our supply chain software; |
| |
• |
|
professional services, including solutions planning and implementation,
related consulting, customer training, and customer support services and software
enhancements (collectively, “services”); and |
| |
• |
|
hardware sales and other sources. |
14
In the three and nine months ended September 30, 2011, we generated $85.6 million and $245.7
million in total revenue, respectively, with a revenue mix of: license revenue 16%; services
revenue 74%; and hardware and other revenue 10%, for the three months ended September 30, 2011, and
license revenue 15%; services revenue 75%; and hardware and other revenue 10%, for the nine months
ended September 30, 2011.
We manage our business based on three geographic regions: North America and Latin America
(Americas), Europe, Middle East and Africa (EMEA), and Asia Pacific (APAC). Geographic revenue is
based on the location of the sale. Our international revenue was approximately $24.1 million and
$68.8 million for the three and nine months ended September 30, 2011, respectively, which
represents approximately 30% of our total revenue for both periods. International revenue includes
all revenue derived from sales to customers outside the United States. At September 30, 2011, we
employed approximately 2,090 employees worldwide, of which approximately 1,020 employees are based
in the Americas, approximately 145 employees in EMEA, and approximately 925 employees in APAC and
India. We have offices in Australia, China, France, India, Japan, the Netherlands, Singapore and
the United Kingdom, as well as representatives in Mexico and reseller partnerships in Latin
America, Eastern Europe, the Middle East, South Africa and Asia.
Global Economic Trends and Industry Factors
Global macro economic trends, technology spending and supply chain management market growth
are important barometers for our business. In the first nine months of 2011, approximately 70% of
our total revenue was generated in the United States, 10% in EMEA and the balance in APAC, Canada
and Latin America. In addition, industry analysts project that approximately two-thirds of every
supply chain software solutions dollar invested is spent in the United States; consequently, the
health of the U.S. economy has a meaningful impact on our financial results.
We sell technology-based solutions with total pricing, including software and services, in
many cases exceeding $1.0 million. Our software often is a part of a much larger capital
commitment associated with facility expansions and business improvements. We believe that, given
the lingering uncertainty in the global macro environment, the current sales cycles for large
license deals of $1.0 million or greater in our target markets have been extended, particularly in
the retail sector. The current business climate within the United States and geographic regions in
which we operate continues to affect customers’ and prospects’ decisions regarding timing of
strategic capital expenditures. The timing of closing deals can have a material adverse impact on
our business, and is likely to further intensify competition in our already highly competitive
markets.
In September 2011, the International Monetary Fund (IMF) provided a World Economic Outlook
(WEO), which noted that global activity has weakened significantly as consumer confidence levels
have fallen sharply. The WEO indicated that “global growth will moderate to about 4 percent
through 2012, from over 5 percent in 2010.” The WEO also stated that “the handover from public to
private demand in the U.S. economy stalled, the euro area encountered major financial turbulence,
global markets suffered a major sell-off of risky assets, and there are growing signs of spillovers
to the real economy.” The WEO projected that advanced economies, which represent our primary
revenue markets, would expand sluggishly at about 11/2 percent in 2011 and 2 percent in 2012, while
the emerging and developing economies would grow at a solid pace of about 6 percent in 2012.
During 2010 and so far in 2011, the overall trend has been an increase in large license deals
for the Company, with recognized $1.0 million or larger software license deals totaling nine for
2010, up from 2009, and with eight of such deals through three quarters in 2011. However, the
large deal flow has been inconsistent from quarter to quarter, reflecting what we believe to be
ongoing macro-economic uncertainty in the United States and Western Europe. While we are
encouraged by our second and third quarter 2011 results in which we recognized seven $1.0 million
plus software licensing deals, and by current potential supply chain investment activity in our
target markets, we, along with many of our customers, still remain cautious regarding the pace of
global economic recovery. With global GDP growth continuing to be well below pre-2008 levels, we
believe global economic volatility likely will continue to shape customer and prospect buying
decisions, making it more difficult to forecast sales cycles for our products and the timing of
large software license deals.
Revenue
License revenue. License revenue, a leading indicator of our business, is primarily
derived from software license fees that customers pay for supply chain solutions. License revenue
totaled $13.6 million, or 16% of total revenue, with gross margins of 91.2% for the three months
ended September 30, 2011, and $37.7 million, or 15% of total revenue, with gross margins of 88.7%
for the nine months ended September 30, 2011. Our typical license revenue percentage mix of new to
existing customers historically has approximated 50/50. However, for the three months ended
September 30, 2011, the percentage mix was approximately 60/40 of new to existing customers. We
believe our current mix of new customer to existing customer license sales will fluctuate with
continuing global macro economic uncertainty and should return to historical norm levels if and as
the economic recovery strengthens.
15
License revenue sales and sales growth is influenced by the strength of general economic and
business conditions and the competitive position of our software products. Our license revenue
generally has long sales cycles and the timing of the closing of a few large license transactions
can have a material impact on our quarterly license revenues, operating profit and earnings per
share. For example, $1.0 million of license revenue in the third quarter of 2011 equates to
approximately $0.03 of diluted earnings per share impact.
Our software solutions are singularly focused on the supply chain planning and execution
markets, which are intensely competitive, rapidly consolidating and characterized by rapid
technological change. We are a market leader in the supply chain management software solutions
market as defined by industry analysts such as AMR, ARC and Gartner. Our goal is to extend our
position as a leading global supply chain solutions provider by growing our license revenues faster
than our competitors. We expect to continue to face increased competition from Enterprise
Resource Planning (ERP) and Supply Chain Management applications vendors and business application
software vendors that may broaden their solution offerings by internally developing or by acquiring
or partnering with independent developers of supply chain planning and
execution software. Increased competition could result in price reductions, fewer customer orders,
reduced gross margins and loss of market share.
Services revenue. Our services business consists of professional services (consulting and
training) and customer support services and software enhancements. Services revenue totaled $63.6
million, or 74% of total revenue, with gross margins of 55.9% and $183.4 million, or 75% of total
revenue, with gross margins of 56.1% for the three and nine months ended September 30, 2011,
respectively. Professional services accounted for approximately 65% of total services revenue and
approximately 50% of total revenue in the three and the nine months ended September 30, 2011. Our
operating margin profile may be lower than those of various other technology companies due to our
large services revenue mix as a percentage of total revenue. While we believe our services margins
are very strong, they do lower our overall operating margin as services margins are lower than
license revenue margins.
At September 30, 2011, our services business employed approximately 1,135 people, accounting
for approximately 55% of our total employees worldwide. Our professional services organization
provides our customers with expertise and assistance in planning and implementing our solutions.
To ensure a successful product implementation, consultants assist customers with the initial
installation of a system, the conversion and transfer of the customer’s historical data onto our
system, and training, education and system upgrades. We believe our professional services enable
customers to implement our software more rapidly than if they rely on internal or other third party
services, enable the customer to maximize value from our solution, strengthen our customer
relationships, and add to our industry-specific knowledge base for use in future implementations
and product innovations.
Although our professional services are optional, the majority of our customers use at least
some portion of these services for the planning, implementation or related needs. Professional
services are typically rendered under time and materials-based contracts with services typically
billed on an hourly basis. Professional services are sometimes rendered under fixed-fee based
contracts with payments due on specific dates or milestones.
Typically, our professional services lag license revenue by several quarters, as
implementation services and related consulting are performed after the purchase of the software.
Services revenue growth is contingent upon license revenue growth and customer upgrade cycles,
which is influenced by the strength of general economic and business conditions and the competitive
position of our software products. In addition, our business has competitive exposure to offshore
providers and other consulting companies. All of these factors potentially create the risk of
pricing pressure, fewer customer orders, reduced gross margins and loss of market share.
For customer support services and software enhancements (CSSE), we offer a comprehensive 24
hour per day, 365 days per year program that provides our customers with software upgrades, when
and if available, which include additional or improved functionality and technological advances
incorporating emerging supply chain and industry initiatives.
Our CSSE revenues totaled $22.2 million and $64.7 million in the three and nine months ended
September 30, 2011, respectively, representing approximately 35% of services revenue and
approximately 25% of total revenue in the three and nine months ended September 30, 2011. The
growth of CSSE revenues is influenced by: 1) new license revenue growth, 2) annual renewal of
support contracts, and 3) fluctuations in currency rates. Substantially all of our customers renew
their annual support contracts. Over the last three years, our annual revenue renewal rate of
customers subscribing to comprehensive support and enhancements has been greater than 90%. CSSE
fees generally are paid in advance and our CSSE revenue generally is recognized ratably over the
term of the agreement, typically twelve months. CSSE renewal revenue is not recognized unless
payment is received from the customer.
16
Hardware and other revenue. Our hardware and other revenue totaled $8.4 million and $24.6
million in the three and nine months ended September 30, 2011, respectively, representing 10% of
total revenue with gross margins of 20.7% and 10% of total revenue with gross margins of 20.9% in
the three and nine months ended September 30, 2011, respectively. In conjunction with the
licensing of our software, and as a convenience for our customers, we resell a variety of hardware
products developed and manufactured by third parties. These products include computer hardware,
radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and other
peripherals. We resell all third-party hardware products pursuant to agreements with manufacturers
or through distributor-authorized reseller agreements pursuant to which we are entitled to purchase
hardware products at discount prices and to receive technical support in connection with product
installations and any subsequent product malfunctions. We generally purchase hardware from our
vendors only after receiving an order from a customer. As a result, we do not maintain hardware
inventory.
Other revenue represents amounts associated with reimbursements from customers for
out-of-pocket expenses. The total amount of expense reimbursement recorded to hardware and other
revenue was $2.9 million and $8.0 million for the three and nine months ended September 30, 2011,
respectively.
Product Development
We continue to invest significantly in research and development (R&D), which
historically has averaged about $0.13 to $0.14 of every revenue dollar, to provide leading
solutions that help global manufacturers, wholesalers, distributors, retailers and logistics
providers successfully manage accelerating and fluctuating demands as well as the increasing
complexity and volatility of their local and global supply chains. Our research and development
expenses for the three and nine months ended September 30, 2011 were $10.9 million and $31.9
million, respectively. At September 30, 2011, our R&D organization employed approximately 640
people, located in the U.S. and India, representing nearly one-third of our total employees
worldwide.
We will continue to focus our R&D resources on the development and enhancement of supply chain
software solutions. We offer what we believe to be the broadest solution portfolio in the supply
chain solutions marketplace, to address all aspects of planning and forecasting, inventory
optimization, order lifecycle management, transportation lifecycle management and distribution
management. We also plan to continue to enhance our existing solutions and to introduce new
solutions to address evolving industry standards and market needs. We identify opportunities to
further enhance our solutions and to develop and provide new solutions through our customer support
organization, as well as through ongoing customer consulting engagements and implementations,
interactions with our user groups, association with leading industry analysts and market research
firms, and participation on industry standards and research committees. Our solutions address the
needs of customers in various vertical markets, including retail, consumer goods, food and grocery,
logistics service providers, industrial and wholesale, high technology and electronics, life
sciences and government.
Cash Flow and Financial Condition
For the three and nine months ended September 30, 2011, we generated cash flow from
operating activities of $16.9 million and $41.0 million, respectively. Our cash, cash equivalents
and investments at September 30, 2011 totaled $101.7 million, with no debt on our balance sheet.
We currently have no credit facilities. During the past three years, our primary uses of cash have
been funding investment in R&D and operations to drive earnings growth and repurchases of our
common stock.
During the first nine months of 2011, we repurchased approximately 2.8 million shares of
Manhattan Associates’ outstanding common stock under the repurchase program approved by our Board
of Directors. In October 2011, our Board of Directors approved raising the Company’s remaining
share repurchase authority to $50.0 million of Manhattan Associates’ outstanding common stock. For
the remainder of 2011, we anticipate that our priorities for the use of cash will be similar to
prior years, with our highest priorities being continued investment in product development and in
sales and services resources to drive and support profitable growth and to extend our market
leadership. We will continue to evaluate acquisition opportunities that are complementary to our
product footprint and technology direction. We will also continue to weigh our share repurchase
options against cash for acquisitions and investing in the business. We do not anticipate any
borrowing requirements in the fourth quarter of 2011 or in 2012 for general corporate purposes.
17
Results of Operations
The following table summarizes our consolidated results for the three and nine months ended
September 30, 2011 and 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
| |
|
(in thousands, except per share data) |
|
| |
Revenue |
|
$ |
85,602 |
|
|
$ |
74,014 |
|
|
$ |
245,714 |
|
|
$ |
225,604 |
|
Costs and expenses |
|
|
68,727 |
|
|
|
64,402 |
|
|
|
203,073 |
|
|
|
192,492 |
|
Recovery of previously impaired investment |
|
|
(2,519 |
) |
|
|
— |
|
|
|
(2,519 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
19,394 |
|
|
|
9,612 |
|
|
|
45,160 |
|
|
|
33,112 |
|
Other income (loss), net |
|
|
862 |
|
|
|
(188 |
) |
|
|
1,214 |
|
|
|
(382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
20,256 |
|
|
|
9,424 |
|
|
|
46,374 |
|
|
|
32,730 |
|
Net income |
|
$ |
14,877 |
|
|
$ |
6,232 |
|
|
$ |
34,382 |
|
|
$ |
21,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.70 |
|
|
$ |
0.28 |
|
|
$ |
1.59 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares |
|
|
21,125 |
|
|
|
22,051 |
|
|
|
21,656 |
|
|
|
22,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
We manage our business based on three geographic regions: the Americas, EMEA, and APAC.
Geographic revenue information is based on the location of sale. The revenues represented below are
from external customers only. The geographical-based expenses include costs of personnel, direct
sales and marketing expenses, and general and administrative costs to support the business. There
are certain corporate expenses included in the Americas region that are not charged to the other
segments including, research and development, certain marketing and general and administrative
costs that support the global organization, and the amortization of acquired developed technology.
Included in the Americas costs are all research and development costs including the costs
associated with the Company’s India operations. During the three and nine months ended September
30, 2011 and 2010, we derived the majority of our revenues from sales to customers within our
Americas region. The following table summarizes revenue and operating profit by region:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
|
% Change |
|
| |
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
11,450 |
|
|
$ |
10,036 |
|
|
|
14 |
% |
|
$ |
30,829 |
|
|
$ |
33,935 |
|
|
|
-9 |
% |
EMEA |
|
|
1,833 |
|
|
|
1,693 |
|
|
|
8 |
% |
|
|
5,192 |
|
|
|
4,565 |
|
|
|
14 |
% |
APAC |
|
|
282 |
|
|
|
363 |
|
|
|
-22 |
% |
|
|
1,653 |
|
|
|
3,284 |
|
|
|
-50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total software license |
|
$ |
13,565 |
|
|
$ |
12,092 |
|
|
|
|
|
|
$ |
37,674 |
|
|
$ |
41,784 |
|
|
|
-10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
51,226 |
|
|
$ |
44,369 |
|
|
|
15 |
% |
|
$ |
149,254 |
|
|
$ |
134,103 |
|
|
|
11 |
% |
EMEA |
|
|
7,945 |
|
|
|
6,344 |
|
|
|
25 |
% |
|
|
23,477 |
|
|
|
19,611 |
|
|
|
20 |
% |
APAC |
|
|
4,423 |
|
|
|
2,773 |
|
|
|
60 |
% |
|
|
10,715 |
|
|
|
8,013 |
|
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total services |
|
$ |
63,594 |
|
|
$ |
53,486 |
|
|
|
19 |
% |
|
$ |
183,446 |
|
|
$ |
161,727 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
7,987 |
|
|
$ |
8,150 |
|
|
|
-2 |
% |
|
$ |
23,399 |
|
|
$ |
21,281 |
|
|
|
10 |
% |
EMEA |
|
|
263 |
|
|
|
229 |
|
|
|
15 |
% |
|
|
783 |
|
|
|
666 |
|
|
|
18 |
% |
APAC |
|
|
193 |
|
|
|
57 |
|
|
|
239 |
% |
|
|
412 |
|
|
|
146 |
|
|
|
182 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total hardware and
other |
|
$ |
8,443 |
|
|
$ |
8,436 |
|
|
|
0 |
% |
|
$ |
24,594 |
|
|
$ |
22,093 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
70,663 |
|
|
$ |
62,555 |
|
|
|
13 |
% |
|
$ |
203,482 |
|
|
$ |
189,319 |
|
|
|
7 |
% |
EMEA |
|
|
10,041 |
|
|
|
8,266 |
|
|
|
21 |
% |
|
|
29,452 |
|
|
|
24,842 |
|
|
|
19 |
% |
APAC |
|
|
4,898 |
|
|
|
3,193 |
|
|
|
53 |
% |
|
|
12,780 |
|
|
|
11,443 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
85,602 |
|
|
$ |
74,014 |
|
|
|
16 |
% |
|
$ |
245,714 |
|
|
$ |
225,604 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
17,183 |
|
|
$ |
8,121 |
|
|
|
112 |
% |
|
$ |
40,019 |
|
|
$ |
28,290 |
|
|
|
41 |
% |
EMEA |
|
|
1,334 |
|
|
|
1,214 |
|
|
|
10 |
% |
|
|
4,206 |
|
|
|
3,162 |
|
|
|
33 |
% |
APAC |
|
|
877 |
|
|
|
277 |
|
|
|
217 |
% |
|
|
935 |
|
|
|
1,660 |
|
|
|
-44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
$ |
19,394 |
|
|
$ |
9,612 |
|
|
|
102 |
% |
|
$ |
45,160 |
|
|
$ |
33,112 |
|
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Summary of Third Quarter 2011 Condensed Consolidated Financial Results
| |
• |
|
Diluted earnings per share was $0.70 in the third quarter of 2011, compared to $0.28 in
the third quarter of 2010. Results for the quarter ended September 30, 2011 include a
positive impact of $0.12 per share for the recovery of an auction rate security investment
which had been impaired in a prior period. |
| |
• |
|
Consolidated revenue in the third quarter of 2011 was $85.6 million, compared to $74.0
million in the third quarter of 2010. License revenue was $13.6 million in the third
quarter of 2011, compared to $12.1 million in the third quarter of 2010. |
| |
• |
|
Operating income in the third quarter of 2011 was $19.4 million, which includes a $2.5
million recovery of an auction rate security investment referred to above, compared to $9.6
million in the third quarter of 2010. |
| |
• |
|
Cash flow from operations was $16.9 million in the third quarter of 2011, compared to
$11.5 million in the third quarter of 2010. Days Sales Outstanding were 61 days at
September 30, 2011, compared to 55 days at June 30, 2011. |
| |
• |
|
Cash and investments on-hand at September 30, 2011 was $101.7 million, compared to
$126.9 million at December 31, 2010. |
| |
• |
|
We repurchased approximately 0.8 million common shares under the share repurchase
program authorized by the Board of Directors, totaling $29.4 million in the third quarter
of 2011. In October 2011, the Board of Directors approved raising the Company’s remaining
share repurchase authority to an aggregate $50.0 million of Manhattan Associates
outstanding common stock. |
19
The results of our operations for the third quarter of 2011 and 2010 are discussed below.
Revenue
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Revenue |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
| |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
|
$ |
13,565 |
|
|
$ |
12,092 |
|
|
|
12 |
% |
|
|
16 |
% |
|
|
16 |
% |
Services |
|
|
63,594 |
|
|
|
53,486 |
|
|
|
19 |
% |
|
|
74 |
% |
|
|
72 |
% |
Hardware and other |
|
|
8,443 |
|
|
|
8,436 |
|
|
|
0 |
% |
|
|
10 |
% |
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
85,602 |
|
|
$ |
74,014 |
|
|
|
16 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our revenue consists of fees generated from the licensing and hosting of software; fees
from professional services, customer support services and software enhancements; hardware sales of
complementary radio frequency and computer equipment; and other revenue representing amounts
associated with reimbursements from customers for out-of-pocket expenses.
License revenue. License revenue increased $1.5 million, or 12%, in the quarter ended
September 30, 2011 over the same period in the prior year. Despite sluggish economic recovery in
the advanced economies such as the United States and the other geographic regions in which we
operate, we completed three large software license deals greater than $1.0 million in the third
quarter of 2011. The license sales percentage mix across our product suite in the quarter ended
September 30, 2011 was approximately 50/50 of warehouse management solutions to non-warehouse
management solutions, respectively.
Services revenue. Services revenue increased $10.1 million, or 19%, in the third quarter of
2011 compared to the same quarter in the prior year due to an $8.1 million increase in professional
services revenue and a $2.0 million increase in customer support and software enhancements. The
increase in services revenue is primarily due to customer-specific initiatives in conjunction with
customer upgrade activity and large license deals signed. Services revenue for the Americas, EMEA
and APAC segments increased $6.9 million, $1.6 million and $1.6 million, respectively, in the third
quarter of 2011 compared to the third quarter of 2010.
Hardware and other. Hardware sales slightly decreased by $0.2 million, or 3%, to $5.6 million
in the third quarter of 2011 compared to $5.8 million for the third quarter of 2010. Sales of
hardware are largely dependent upon customer-specific desires, which fluctuate from quarter to
quarter. Reimbursements for out-of-pocket expenses are required to be classified as revenue and are
included in hardware and other revenue. Reimbursements by customers for out-of-pocket expenses
were approximately $2.9 million and $2.7 million for the quarters ended September 30, 2011 and
2010, respectively.
Cost of Revenue
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
| |
|
(in thousands) |
|
|
|
|
Cost of license |
|
$ |
1,196 |
|
|
$ |
1,471 |
|
|
|
-19 |
% |
Cost of services |
|
|
28,054 |
|
|
|
24,661 |
|
|
|
14 |
% |
Cost of hardware and other |
|
|
6,695 |
|
|
|
7,092 |
|
|
|
-6 |
% |
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
$ |
35,945 |
|
|
$ |
33,224 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
20
Cost of license. Cost of license consists of the costs associated with software
reproduction; hosting services; media, packaging and delivery, documentation and other related
costs; and royalties on third-party software sold with or as part of our products. Cost of license
decreased by $0.3 million in the third quarter of 2011 compared to the same quarter of 2010.
Cost of services. Cost of services consists primarily of salaries and other personnel-related
expenses of employees dedicated to professional and technical services and customer support
services. The $3.4 million, or 14%, increase in cost of services in the quarter ended September
30, 2011 compared to the same quarter in the prior year was principally due to an increase of $2.8
million in compensation and other personnel-related expenses resulting from increased headcount in
our services organization and an increase of $0.5 million in performance-based bonus expenses.
Cost of hardware and other. Cost of hardware decreased by $0.5 million to $3.9 million in the
third quarter of 2011 compared to $4.4 million in the same quarter of 2010. Cost of hardware and
other includes out-of-pocket expenses to be reimbursed by customers of approximately $2.8 million
and $2.7 million for the quarters ended September 30, 2011 and 2010, respectively.
Operating Expenses
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
| |
|
(in thousands) |
|
|
|
|
Research and development |
|
$ |
10,877 |
|
|
$ |
9,866 |
|
|
|
10 |
% |
Sales and marketing |
|
|
10,865 |
|
|
|
10,329 |
|
|
|
5 |
% |
General and administrative |
|
|
9,342 |
|
|
|
8,721 |
|
|
|
7 |
% |
Depreciation and amortization |
|
|
1,698 |
|
|
|
2,262 |
|
|
|
-25 |
% |
Recovery of previously
impaired investment |
|
|
(2,519 |
) |
|
|
— |
|
|
|
-100 |
% |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
$ |
30,263 |
|
|
$ |
31,178 |
|
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
Research and development. Research and development expenses primarily consist of
salaries and other personnel-related costs for personnel involved in our research and development
activities. Research and development expenses for the quarter ended September 30, 2011 increased
by $1.0 million, or 10%, as compared to the quarter ended September 30, 2010. This increase was
primarily attributable to an increase in compensation and employee-related expenses of $0.7
million.
Our principal research and development activities have focused on the expansion and
integration of products acquired and new product releases and the expansion of the product
footprint of our supply chain optimization solutions called Supply Chain Optimization from Planning
through Execution (SCOPE). The Manhattan SCOPE Platform provides not only a sophisticated
service-oriented architecture-based application framework, but a platform that facilitates
integration with ERP and other supply chain solutions. For the quarters ended September 30, 2011
and 2010, we did not capitalize any research and development costs.
Sales and marketing. Sales and marketing expenses include salaries, commissions, travel and
other personnel-related costs and the costs of our marketing and alliance programs and related
activities. Sales and marketing expenses slightly increased by $0.5 million, or 5%, in the third
quarter of 2011 compared to the same quarter of the prior year primarily attributable to an
increase in compensation and employee-related expenses of $0.6 million and an increase in marketing
programs of $0.4 million. These increases were partially offset by a decrease in performance-based
compensation expense and equity compensation expense of $0.3 million.
General and administrative. General and administrative expenses consist primarily of salaries
and other personnel-related costs of executive, financial, human resources, information technology
and administrative personnel, as well as facilities, legal, insurance, accounting and other
administrative expenses. General and administrative expenses increased $0.6 million, or 7%, during
the quarter ended September 30, 2011 compared to the same quarter in the prior year. The increase
was primarily attributable to an increase of $0.3 million in compensation and employee-related
expenses and a $0.3 million increase in professional fees including temporary contracted personnel.
21
Depreciation and amortization. Depreciation expense amounted to $1.4 million and $1.7 million
for the quarters ended September 30, 2011 and 2010, respectively. Amortization of intangibles
associated with various acquisitions totaled $0.3 million and $0.6 million for the quarters ended
September 30, 2011 and 2010, respectively.
Recovery of previously impaired investment. During the quarter ended September 30, 2008, we
recorded an impairment charge of $3.5 million on an investment in an auction rate security. We
reduced the carrying value to zero due to credit downgrades of the underlying issuer and the bond
insurer as well as increasing publicly reported exposure to bankruptcy risk by the issuer.
However, during the quarter ended September 30, 2011, we were able to sell the auction rate
security recovering 72%, or $2.5 million, of our original investment.
Operating Income
Operating income for the third quarter of 2011 was $19.4 million, which includes a $2.5
million recovery of an auction rate security investment which had been impaired in a prior
period, compared to $9.6 million in the third quarter of 2010. Operating margins were
22.7% for the third quarter of 2011 versus 13.0% for the third quarter of 2010. Operating income
and margins increased primarily due to strong revenue and expense management in the current
quarter.
Other Income (Loss) and Taxes
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Other income (loss), net |
|
$ |
862 |
|
|
$ |
(188 |
) |
|
|
559 |
% |
Income tax provision |
|
|
5,379 |
|
|
|
3,192 |
|
|
|
69 |
% |
Other income (loss), net. Other income (loss), net principally includes interest income,
foreign currency gains and losses and other non-operating expenses. Other income, net increased
$1.0 million in the third quarter of 2011 compared to the third quarter of 2010 primarily due to a
$1.0 million increase in foreign currency gains related to the
fluctuation of the U.S. dollar relative to foreign currencies, principally the Indian Rupee
and the Singapore Dollar. We recorded a net foreign currency gain of approximately $0.6 million
and a net foreign currency loss of $0.4 million during the third quarter of 2011 and 2010,
respectively.
Income tax provision. Our effective income tax rate was 26.6% and 33.9% for the quarters
ended September 30, 2011 and 2010, respectively. The effective rate for the three months ended
September 30, 2011 is impacted by the $2.5 million recovery of the previously impaired investment
discussed above. We did not record a tax benefit on the original impairment charge because we did
not have any future capital gains to offset the loss and therefore do not have tax expense related
to the reversal of the charge. In addition, the effective tax rate in the third quarter of 2011
included a tax benefit from disqualifying dispositions of incentive stock options that were
previously expensed and a reduction of U.S. federal and state income tax reserves that resulted
from the expiration of tax audit statues for tax returns filed for 2007 and prior and the
settlement of an IRS audit. The effective tax rate in the third quarter of 2010 included the
reduction in U.S. federal income tax reserves that resulted from the expiration of tax audit
statues for tax returns filed for 2006 and prior, partially offset by the establishment of income
tax reserves for state audits.
Financial Summary for the First Nine Months of 2011 Condensed Consolidated Financial Results
| |
• |
|
Diluted earnings per share for the nine months ended September 30, 2011 was $1.59,
compared to $0.96 for the nine months ended September 30, 2010. Results for the nine
months ended September 30, 2011 include a positive impact of $0.12 per share for the
recovery of an auction rate security investment which had been impaired in a prior period.
The prior year’s results include $0.04 per share of recoveries of previously expensed sales
tax associated with expiring sales tax audit statutes. |
| |
• |
|
Consolidated revenue for the nine months ended September 30, 2011 was $245.7 million,
compared to $225.6 million for the nine months ended September 30, 2010. License revenue
was $37.7 million for the nine months ended September 30, 2011, compared to $41.8 million
in the nine months ended September 30, 2010. |
| |
• |
|
Operating income was $45.2 million for the nine months ended September 30, 2011,
compared to $33.1 million for the nine months ended September 30, 2010. Results for the
nine months ended September 30, 2011 include a $2.5 million recovery of an auction rate
security investment referred to above. The prior year’s results include $1.2 million of
recoveries of previously expensed sales tax associated with expiring sales tax audit
statutes. |
22
| |
• |
|
Income tax expense for the nine months ended September 30, 2011 includes a $2.0 million
tax benefit resulting from the release of a valuation allowance associated with a change in
India tax law. The change eliminates the tax holiday for India companies under the STPI
“Software Technology Park of India” tax plan. |
| |
• |
|
For the nine months ended September 30, 2011, we repurchased approximately 2.8 million
common shares under the share repurchase program authorized by the Board of Directors for a
total investment of $93.3 million. |
The results of our operations for the nine months ended September 30, 2011 and 2010 are
discussed below.
Revenue
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Revenue |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
|
2011 |
|
|
2010 |
|
| |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
|
$ |
37,674 |
|
|
$ |
41,784 |
|
|
|
-10 |
% |
|
|
15 |
% |
|
|
18 |
% |
Services |
|
|
183,446 |
|
|
|
161,727 |
|
|
|
13 |
% |
|
|
75 |
% |
|
|
72 |
% |
Hardware and other |
|
|
24,594 |
|
|
|
22,093 |
|
|
|
11 |
% |
|
|
10 |
% |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
245,714 |
|
|
$ |
225,604 |
|
|
|
9 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenue. License revenue decreased $4.1 million, or 10%, in the nine months
ended September 30, 2011 over the same period in the prior year due to the sluggish economic
recovery in the United States and other geographic regions in which we operate. We also believe
that license revenue decreased due to the extension of current sales cycles for large deals greater
than $1.0 million during first quarter of 2011. However, we completed four large deals greater
than $1.0 million during the second quarter of 2011 and three large deals greater than $1.0 million
during the third quarter of 2011, which is comparable to our more historic norm of three to four
large deals per quarter. Our license revenue performance depends heavily on the number and
relative value of large deals we close in the quarter, and the sales cycle on these deals remains
somewhat less predictable than in prior years.
The license sales percentage mix across our product suite in the nine months ended September
30, 2011 was approximately 60/40 of warehouse management solutions to non-warehouse management
solutions, respectively.
Services revenue. Services revenue increased $21.7 million, or 13%, in the nine months ended
September 30, 2011 compared to the same period in the prior year due to a $17.1 million increase in
professional services revenue and a $4.6 million increase in customer support and software
enhancements. The increase in services revenue is primarily due to customer-specific initiatives
in conjunction with customer upgrade activity and large license deals signed. Services revenue for
the Americas, EMEA and APAC segments increased $15.1 million, $3.9 million and $2.7 million,
respectively, in the nine months ended September 30, 2011 compared to the same period in the prior
year.
Hardware and other. Hardware sales increased by $1.3 million, or 9%, to $16.6 million in the
nine months ended September 30, 2011 compared to $15.3 million for the same period in the prior
year. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate from
quarter to quarter. Reimbursements for out-of-pocket expenses are required to be classified as
revenue and are included in hardware and other revenue. Reimbursements by customers for
out-of-pocket expenses were approximately $8.0 million and $6.8 million for the nine months ended
September 30, 2011 and 2010, respectively.
23
Cost of Revenue
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
| |
|
(in thousands) |
|
|
|
|
Cost of license |
|
$ |
4,259 |
|
|
$ |
4,631 |
|
|
|
-8 |
% |
Cost of services |
|
|
80,474 |
|
|
|
73,631 |
|
|
|
9 |
% |
Cost of hardware and other |
|
|
19,452 |
|
|
|
18,366 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
Total cost of revenue |
|
$ |
104,185 |
|
|
$ |
96,628 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
Cost of license. Cost of license consists of the costs associated with software
reproduction; hosting services; media, packaging and delivery, documentation and other related
costs; and royalties on third-party software sold with or as part of our products. Cost of license
decreased slightly by $0.4 million, or 8%, in the first nine months of 2011 compared to the same
period of 2010 principally due to the decrease in license revenue.
Cost of services. Cost of services consists primarily of salaries and other personnel-related
expenses of employees dedicated to professional and technical services and customer support
services. The $6.8 million, or 9%, increase in cost of services in the nine months ended September
30, 2011 compared to the same period in the prior year was
principally due to a $9.0 million increase in compensation and other personnel-related
expenses resulting from increased headcount in our services organization, partially offset by a
$2.2 million decrease in performance-based bonus expense.
Cost of hardware and other. Cost of hardware decreased slightly by $0.1 million to
approximately $11.6 million in the nine months ended September 30, 2011 compared to the same period
of 2010. Cost of hardware and other includes out-of-pocket expenses to be reimbursed by customers
of approximately $7.9 million and $6.7 million for the nine months ended September 30, 2011 and
2010, respectively.
Operating Expenses
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
| |
|
(in thousands) |
|
|
|
|
Research and development |
|
$ |
31,936 |
|
|
$ |
30,640 |
|
|
|
4 |
% |
Sales and marketing |
|
|
33,774 |
|
|
|
32,870 |
|
|
|
3 |
% |
General and administrative |
|
|
27,256 |
|
|
|
25,359 |
|
|
|
7 |
% |
Depreciation and amortization |
|
|
5,922 |
|
|
|
6,995 |
|
|
|
-15 |
% |
Recovery of previously
impaired investment |
|
|
(2,519 |
) |
|
|
— |
|
|
|
-100 |
% |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
$ |
96,369 |
|
|
$ |
95,864 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
Research and development. Research and development expenses primarily consist of
salaries and other personnel-related costs for personnel involved in our research and development
activities. Research and development expenses for the nine months ended September 30, 2011
increased by $1.3 million compared to the same period in 2010. This increase was primarily
attributable to an increase in compensation and employee-related expenses of $1.7 million and an
increase in professional fees and travel expenses of $0.3 million, partially offset by a decrease
in performance-based compensation expense of $0.8 million.
Sales and marketing. Sales and marketing expenses include salaries, commissions, travel and
other personnel-related costs and the costs of our marketing and alliance programs and related
activities. Sales and marketing expenses slightly increased by $0.9 million, or 3%, in the first
nine months of 2011 compared to the same period of the prior year. This increase was mainly
attributable to the increase in marketing programs of $1.2 million and an increase in compensation
and employee-related expenses of $1.1 million partially offset by a decrease in performance-based
compensation expense of $0.6 million and a decrease in equity-based compensation expense of $0.4
million.
24
General and administrative. General and administrative expenses consist primarily of salaries
and other personnel-related costs of executive, financial, human resources, information technology
and administrative personnel, as well as facilities, legal, insurance, accounting and other
administrative expenses. General and administrative expenses increased $1.9 million, or 7%, during
the nine months ended September 30, 2011 compared to the same period in the prior year. The
increase was primarily attributable to an increase in compensation, employee-related expenses, and
temporary contracted personnel of $1.3 million and a $1.2 million recovery of previously recorded
state sales tax in 2010, partially offset by a $0.8 million decrease in performance-based
compensation expense.
Depreciation and amortization. Depreciation expense amounted to $4.7 million and $5.1 million
for the nine months ended September 30, 2011 and 2010, respectively. Amortization of intangibles
associated with various acquisitions totaled $1.2 million and $1.8 million for the nine months
ended September 30, 2011 and 2010, respectively.
Recovery of previously impaired investment. During the quarter ended September 30, 2008, we
recorded an impairment charge of $3.5 million on an investment in an auction rate security. We
reduced the carrying value to zero due to credit downgrades of the underlying issuer and the bond
insurer as well as increasing publicly reported exposure to bankruptcy risk by the issuer.
However, during the quarter ended September 30, 2011, we were able to sell the auction rate
security recovering 72%, or $2.5 million, of our original investment.
Operating Income
Operating income for the nine months ended September 30, 2011 was $45.2 million, which
includes a $2.5 million recovery of an auction rate security investment which had been impaired in
a prior period, compared to $33.1 million for the nine months ended September 30, 2010.
Operating margins were 18.4% for the first nine months of 2011 versus 14.7% for the first nine
months of 2010. Operating income and margins increased due to strong services revenue and expense
management.
Other Income (Loss) and Taxes
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, |
|
| |
|
2011 |
|
|
2010 |
|
|
% Change |
|
Other income (loss), net |
|
$ |
1,214 |
|
|
$ |
(382 |
) |
|
|
418 |
% |
Income tax provision |
|
|
11,992 |
|
|
|
11,114 |
|
|
|
8 |
% |
Other income (loss), net. Other income (loss), net principally includes interest income,
foreign currency gains and losses and other non-operating expenses. Other income (loss), net
increased $1.6 million in the nine months ended September 30, 2011 compared to the same period in
2010 primarily related to foreign currency fluctuations of the U.S. dollar relative to foreign
currencies. We recorded a net foreign currency gain of $0.4 million and a net foreign currency
loss of $0.7 million during the nine months ended September 30, 2011 and 2010, respectively.
Additionally, interest income increased $0.4 million.
Income tax provision. Our effective income tax rate was 25.9% and 34.0% for the nine months
ended September 30, 2011 and 2010, respectively. The effective rate for the nine months ended
September 30, 2011 is impacted by the $2.5 million recovery of the previously impaired investment
discussed above. We did not record a tax benefit on the original impairment charge because we did
not have any future capital gains to offset the loss and therefore do not have tax expense related
to the reversal of the charge. Also, the effective tax rate for the nine months ended September
30, 2011 included a $2.0 million tax benefit resulting from the reduction of a valuation allowance
associated with tax credit carryforwards and deferred tax assets in India. The benefit is
attributable to the elimination of the tax holiday for Indian companies under the STPI “Software
Technology Park of India” tax plan, based on the February 2011 budget approved by the India Finance
Ministry, which will allow us to utilize tax assets previously reserved. In addition, the
effective tax rate for the nine months ended September 30, 2011 included a tax benefit from the
disqualifying disposition of incentive stock options that were previously expensed and the
reduction of U.S. federal and state income tax reserves that resulted from the expiration of tax
audit statues for tax returns filed for 2007 and prior and the settlement of an IRS audit. The
effective tax rate for the first nine months of 2010 included a tax benefit from the disqualifying
disposition of incentive stock options that were previously expensed and the reduction of U.S.
federal income tax reserves that resulted from the expiration of tax audit statues for tax returns
filed for 2006 and prior, partially offset by the establishment of income tax reserves for state
audits.
25
Liquidity and Capital Resources
As of September 30, 2011, we had approximately $101.7 million in cash, cash equivalents and
investments, as compared to $126.9 million at December 31, 2010. Our main source of operating cash
flow is cash collections from our customers, which we use to fund our operations. Our priorities
for the use of cash will be similar to prior years, with our highest priorities being continued
investment in product development and in sales and services resources to drive and support
profitable growth and to extend our market leadership. We will continue to evaluate acquisition
opportunities that are complementary to our product footprint and technology direction. We will
also continue to weigh our share repurchase options against cash for acquisitions and investing in
the business. We do not anticipate any borrowing requirements in the fourth quarter of 2011 or in
2012 for general corporate purposes.
Our operating activities generated cash flow of approximately $41.0 million and $35.4 million
for the nine months ended September 30, 2011 and 2010, respectively. The increase in cash flow
from operations was primarily attributable to higher revenue and net earnings. Days sales
outstanding were 61 days at September 30, 2011 and 60 days at September 30, 2010.
Our investing activities used cash of approximately $3.2 million and $12.8 million for the
nine months ended September 30, 2011 and 2010, respectively. The primary use of cash for investing
activities for the nine months ended
September 30, 2011 was $3.7 million in capital expenditures partially offset by the net
maturities of $0.5 million in investments. The primary use of cash for investing activities for
the nine months ended September 30, 2010 was the net purchase of $8.4 million in short-term
investments and $4.3 million in capital expenditures.
Our financing activities used cash of approximately $63.9 million and $37.8 million for the
nine months ended September 30, 2011 and 2010, respectively. The principal use of cash for
financing activities for the nine months ended September 30, 2011 was to purchase approximately
$95.6 million of our common stock, including $2.3 million for shares withheld for taxes due upon
vesting of restricted stock, partially offset by proceeds generated from options exercised of
$30.3 million and a $1.4 million excess tax benefit related to the exercise of stock options and
vesting of restricted stock awards. The principal use of cash for financing activities for the
nine months ended September 30, 2010 was to purchase approximately $56.6 million of our common
stock, including $1.2 million for shares withheld for taxes due upon vesting of restricted stock,
partially offset by proceeds generated from options exercised of $18.4 million.
Periodically, opportunities may arise to grow our business through the acquisition of
complementary and synergistic companies, products and technologies. Any material acquisition
could result in a decrease to our working capital depending on the amount, timing and nature of
the consideration to be paid. We believe that existing balances of cash and investments will be
sufficient to meet our working capital and capital expenditure needs at least for the next twelve
months, although there can be no assurance that this will be the case.
Critical Accounting Policies and Estimates
In the first nine months of 2011, there were no significant changes to our critical
accounting policies and estimates from those disclosed in the section “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for
the year ended December 31, 2010.
|
|
|
| Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk. |
There were no material changes to the Quantitative and Qualitative Disclosures About Market
Risk previously disclosed in our annual report on Form 10-K for the year ended December 31, 2010.
|
|
|
| Item 4. |
|
Controls and Procedures. |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that
information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
26
As of the end of the period covered by this report, our management evaluated, with the
participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our
disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures are effective to provide reasonable assurance that the
objectives of disclosure controls and procedures are met.
Changes in Internal Control over Financial Reporting
During the nine months ended September 30, 2011, there were no changes in our internal control
over financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting, including any corrective actions with regard
to material weaknesses.
PART II
OTHER INFORMATION
|
|
|
| Item 1. |
|
Legal Proceedings. |
From time to time, we are party to various legal proceedings arising in the ordinary course of
business. The Company is not currently a party to any other legal proceeding the result of which it
believes could have a material adverse impact upon its business, financial position or results of
operations.
Many of our installations involve products that are critical to the operations of our clients’
businesses. Any failure in our products could result in a claim for substantial damages against
us, regardless of our responsibility for such failure. Although we attempt to limit contractually
our liability for damages arising from product failures or negligent acts or omissions, there can
be no assurance the limitations of liability set forth in our contracts will be enforceable in all
instances.
In addition to the other information set forth in this report, you should carefully consider
the risk factors disclosed in Item 1A, “Risk Factors”, of the Company’s annual report on Form 10-K
for the year ended December 31, 2010.
|
|
|
| Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds. |
The following table provides information regarding our common stock repurchases under our
publicly-announced repurchase program and shares withheld for taxes due upon vesting of restricted
stock for the quarter ended September 30, 2011. All repurchases related to the repurchase program
were made on the open market.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Number (or |
|
| |
|
Total |
|
|
Average |
|
|
Shares Purchased |
|
|
Approximate Dollar |
|
| |
|
Number of |
|
|
Price |
|
|
as Part of Publicly |
|
|
Value) of Shares that May |
|
| |
|
Shares |
|
|
Paid per |
|
|
Announced Plans or |
|
|
Yet Be Purchased Under |
|
| Period |
|
Purchased(a) |
|
|
Share(b) |
|
|
Programs |
|
|
the Plans or Programs |
|
July 1 – July 30, 2011 |
|
|
56,314 |
|
|
$ |
37.62 |
|
|
|
52,800 |
|
|
$ |
48,006,815 |
|
August 1 – August 31, 2011 |
|
|
480,895 |
|
|
|
34.45 |
|
|
|
480,895 |
|
|
|
31,438,239 |
|
September 1 – September
30, 2011 |
|
|
312,753 |
|
|
|
34.81 |
|
|
|
311,815 |
|
|
|
20,585,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
849,962 |
|
|
$ |
34.79 |
|
|
|
845,510 |
|
|
$ |
20,585,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| (a) |
|
Includes 3,514 shares and 938 shares withheld for taxes due upon vesting of
restricted stock during July and September, respectively. |
| |
| (b) |
|
The average price paid per share for shares withheld for taxes due upon vesting
of restricted stock was $35.64 and $35.35 in July and September, respectively. |
In October 2011, our Board of Directors approved raising our remaining repurchase
authority for the Company’s common stock to a total of $50.0 million.
27
|
|
|
| Item 3. |
|
Defaults Upon Senior Securities. |
No events occurred during the quarter covered by the report that would require a response to
this item.
|
|
|
| Item 5. |
|
Other Information. |
No events occurred during the quarter covered by the report that would require a response to
this item.
| |
|
|
|
| |
|
|
| Exhibit 31.1
|
|
Certification of Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| Exhibit 31.2
|
|
Certification of Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
| Exhibit 32*
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
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| Exhibit 101**
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Financial statements from the quarterly report on Form 10-Q of the Company for
the quarter ended September 30, 2011, filed on October 28, 2011, formatted in
eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance
Sheets as of September 30, 2011 and December 31, 2010, (ii) Condensed Consolidated
Statements of Operations for the three and nine months ended September 30, 2011 and
September 30, 2010, (iii) Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2011 and September 30, 2010 and (iv) Notes to Condensed
Consolidated Financial Statements tagged as blocks of text. |
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| * |
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In accordance with Item 601(b)(32)(ii) of the SEC’s Regulation S-K, this
Exhibit is hereby furnished to the SEC as an accompanying document and is
not deemed “filed” for purposes of Section 18 of the Securities Exchange Act
of 1934 or otherwise subject to the liabilities of that Section, nor shall
it be deemed incorporated by reference into any filing under the Securities
Act of 1933. |
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| ** |
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In accordance with Rule 406T of Regulation S-T, the XBRL related
information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not
be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or
otherwise subject to the liability of that section, and shall not be
incorporated by reference into any registration statement or other document
filed under the Securities Act of 1933, as amended, or the Exchange Act,
except as shall be expressly set forth by specific reference in such filing. |
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MANHATTAN ASSOCIATES, INC. |
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Date: October 28, 2011
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/s/ Peter F. Sinisgalli
Peter F. Sinisgalli
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Chief Executive Officer, President and Director |
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(Principal Executive Officer) |
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Date: October 28, 2011
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/s/ Dennis B. Story
Dennis B. Story
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Executive Vice President, Chief Financial Officer and Treasurer |
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(Principal Financial and Accounting Officer) |
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29
EXHIBIT INDEX
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| Exhibit 31.1
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Certification of Principal Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
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| Exhibit 31.2
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Certification of Principal Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
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| Exhibit 32
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Certification of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
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| Exhibit 101
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|
Financial statements from the quarterly report on Form
10-Q of the Company for the quarter ended September 30,
2011, filed on October 28, 2011, formatted in eXtensible
Business Reporting Language (XBRL): (i) Condensed
Consolidated Balance Sheets as of September 30, 2011 and
December 31, 2010, (ii) Condensed Consolidated
Statements of Operations for the three and nine months
ended September 30, 2011 and September 30, 2010, (iii)
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2011 and September 30,
2010 and (iv) Notes to Condensed Consolidated Financial
Statements tagged as blocks of text. |
30