i2 Reports Third Quarter 2008 Results

Dallas, TX -- November 14, 2008

i2 Technologies, Inc. (NASDAQ: ITWO) today announced results for the third quarter 2008.

A summary of third quarter results:

•Total revenue was $64.8 million
•Total costs and expenses were $54.2 million
•Net income applicable to common stockholders was $1.9 million
•Diluted earnings per share (GAAP) were $0.07
•Non-GAAP diluted earnings per share were $0.33 (excluding stock option expense, contract revenue and external expenses related to the proposed merger)
•Cash flow rom operations, including cash received from intellectual property settlement, was $78.5 million
•Total bookings of $46.5 million, including $5.1 million in software solutions bookings

 

External expenses related to the proposed merger

During the third quarter of 2008, the company announced a proposed merger with JDA Software Group, Inc.  As a result of the proposed merger, the company incurred $5.3 million in external expenses during the quarter related to a consent premium to the majority holder of the company's 5% senior convertible notes, legal fees, investment banking fees and cost-sharing fees with a party previously interested in a potential merger.  These expenses are included as non-operating expenses within the "Other expense, net" line on the company's income statement.

The following table details the effect of the proposed merger's external expenses on the company's financial results for the quarter ended September 30, 2008:

 

 

Third Quarter Results

Revenue Detail
Total revenue for the third quarter was $64.8 million as compared to $66.5 million in the third quarter of 2007, a decrease of $1.7 million or 3 percent.    

i2 had total third quarter software solutions revenue, which includes core license revenue, recurring license revenue as well as fees received to develop the licensed functionality, of $10.6 million. This compares to $10.5 million of software solutions revenue in the third quarter of 2007, an increase of 0.4 percent year-over-year. 

Services revenue in the third quarter was $33.3 million, essentially flat compared to the $33.4 million of services revenue in the third quarter of 2007.  Services revenue includes fees received from consulting and training services as well as arrangements to customize or enhance previously purchased licensed software. Services revenue also includes reimbursable expenses.

Third quarter maintenance revenue was $20.9 million, a decrease of 8 percent from $22.6 million in the comparable prior year quarter.

Costs and Expenses
Total costs and expenses for the third quarter of 2008 were $54.2 million, an 8 percent decrease compared to $58.9 million in the third quarter of 2007.  Costs and expenses in the third quarter included $2.8 million in stock-based compensation expense, which includes $1.7 million in expense related to stock options and $1.1 million in expense related to restricted stock units. 

Non-operating expense, net
Non-operating expense, net in the third quarter of 2008 was $6.3 million.  Included in this amount was $5.3 million in external expenses related to the company's proposed merger.

Net Income
The company reported third quarter 2008 net income applicable to common stockholders of $1.9 million, or $0.07 per diluted share.  This compares to $4.5 million, or $0.17 per diluted share, in net income applicable to common stockholders in the third quarter of 2007.

 

Nine Month Results

For the nine months ended September 30, 2008, total revenues were $192.1 million, a decrease of 3 percent as compared to $197.0 million for the same period in 2007.  Total revenue for the nine months ended 2007 included $2.5 million of contract revenue.  Excluding contract revenue, operating revenue declined 1 percent for the nine months ended September 30, 2008 compared to the same period in 2007.

Software solutions revenue decreased 2 percent to $34.8 million for the nine months ended September 30, 2008 compared to $35.4 million for the nine months ended September 30, 2007.  Services revenue was $92.7 million for the nine months ended September 30, 2008 compared to $93.6 million in the same period in 2007, a decrease of 1 percent.  Maintenance revenue decreased 2 percent to $64.6 million in the nine months ended September 30, 2008 compared to $65.6 million in the comparable period in 2007.

Costs and expenses, subtotal, excluding the intellectual property settlement, for the nine months ended September 30, 2008 decreased 5 percent to $172.0 million as compared to $180.2 million in the comparable period of 2007.  Costs and expenses for the nine months ended September 30, 2008 included $8.7 million in stock-based compensation expense, which includes $5.7 million in expense related to stock options and $3.0 million in expense related to restricted stock units.  Total costs and expenses for the nine months ended September 30, 2008 were $92.1 million and included a benefit of $79.9 million related to the company's intellectual property settlement.  The benefit amount reflects the $83.3 million gross amount of the settlement, net of $3.5 million in external patent litigation related expenses.

Non-operating expense, net for the nine months ended September 30, 2008 was $7.0 million.  Included in this amount was $5.3 million in external expenses related to the company's proposed merger.

The company reported net income applicable to common stockholders of $85.2 million or $3.21 per diluted share for the nine months ended September 30, 2008.  This compares to $9.6 million or $0.36 per diluted share in net income applicable to common stockholders in the comparable period in 2007.

 

Non-GAAP Diluted Earnings Per Share

The company provides non-GAAP financial measures to assist stockholders with the analysis of financial and business trends related to the company's operations. These calculations are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies.  

Non-GAAP diluted earnings per share applicable to common stockholders in the third quarter of 2008 were $0.33, compared to $0.24 per diluted share in the comparable period last year on a non-GAAP basis.  Non-GAAP diluted earnings per share applicable to common stockholders for the nine months ended September 30, 2008 were $0.54, compared to $0.56 per diluted share in the comparable period in 2007 on a non-GAAP basis.  Non-GAAP diluted earnings per share excludes stock option expense, the effect of the intellectual property settlement, net of the impact of taxes applicable to the settlement, external expenses related to the company's proposed merger agreement and the net effect of contract revenue and contract expense.  Contract revenue is the result of the recognition of certain revenue that was carried on i2's balance sheet as a portion of deferred revenue and was a result of the company's 2003 financial restatement.  As of March 31, 2007, the deferred contract revenue balance was zero.

A full reconciliation of GAAP to non-GAAP financial measures can be found in Schedule A included with this release.

 

Other Financial Information

On September 30, 2008, i2's total cash balance was $227.8 million (including restricted cash of $6.6 million), an increase of $78.1 million from June 30, 2008, which reflects the cash received in the third quarter from the intellectual property settlement. Total debt at the end of the third quarter was $86.3 million, which represents the face value of the company's 5% senior convertible notes.

The company generated cash flow from operations of $78.5 million in the third quarter of 2008, bringing the nine months ended September 30, 2008 cash flow from operations to $98.9 million.  The third quarter 2008 cash flow from operations amount includes $83.3 million in cash received from the company's intellectual property settlement, partially offset by $5.3 million in cash payments during the quarter related to the company's proposed merger.

About i2

Throughout its 20-year history of innovation and value delivery, i2 has dedicated itself to building successful customer partnerships. As a full-service supply chain company, i2 is uniquely positioned to help its clients achieve world-class business results through a combination of consulting, technology, and managed services. i2 solutions are pervasive in a wide cross-section of industries; 21 of the AMR Research Top 25 Global Supply Chains belong to i2 customers.  Learn more at www.i2.com.

i2 is a registered trademark of i2 Technologies US, Inc. and i2 Technologies, Inc.

 

i2 Cautionary Language
This press release contains forward-looking statements, including statements regarding our proposed transaction with JDA Software Group, Inc. These forward-looking statements are based on current expectations and involve risks and uncertainties that may cause actual results to differ from those projected, including, without limitation, the risk that the merger with JDA Software Group, Inc., as currently proposed, is not consummated.  For a discussion of factors which could impact i2's financial results and cause actual results to differ materially from those in forward-looking statements, please refer to i2's recent filings with the SEC, particularly the Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and the Annual Report on Form 10-K for the year ended December 31, 2007.  i2 expressly disclaims any current intention to update the forward-looking information contained in this news release.

For further information, please contact:

Tom Ward
i2 Investor Relations
469-357-3854
tom_ward@i2.com

Beth Elkin
i2 Corporate Communications
469-357-4225
beth_elkin@i2.com