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Quarter features 7 percent year-over-year increase in total revenue, continued profitability and strong year-over-year growth in software solutions bookings

DALLAS - October 31, 2006 - i2 Technologies, Inc. (NASDAQ: ITWO) today announced results for the third quarter 2006.

A summary of third quarter results:Total revenue was $71.4 million Total costs and expenses were $64.7 million Net income applicable to common stockholders was $3.8 million Diluted earnings per share (GAAP) were $0.15 Non-GAAP diluted earnings per share were $0.28 (excluding stock option expense and contract revenue and contract expense) Cash flow from operations was a negative $3.3 million "We reported solid performance in the third quarter with approximately 9 percent operating revenue growth versus third quarter last year, accompanied by our sixth consecutive quarter of profitability," stated i2 Chief Executive Officer Michael McGrath. "In particular, we are pleased with the continued momentum from our new-generation solutions as our software solutions bookings increased more than 60 percent over the third quarter of last year and more than 45 percent year-to-date, and our services revenue continued to grow sequentially. Our bookings performance so far this year indicates our customers' increasing acceptance of service-oriented architecture technology and our new-generation solutions in the supply chain management market."
Third Quarter Results
Revenue Detail
Total revenue for the third quarter was $71.4 million, an increase of 7 percent from $66.5 million in the third quarter of 2005. Total revenue in the third quarter of 2005 included contract revenue of $0.9 million. Total revenue in the third quarter increased $6.7 million, or 10 percent, from the second quarter 2006.
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 $20.6 million. Software solutions revenue grew 14 percent compared to $18.0 million in the year-ago quarter and grew 34 percent compared to $15.4 million in the second quarter of 2006. Recurring license revenue in the third quarter 2006 includes approximately $5.2 million related to platform technology bookings recorded in the second quarter of 2006.
Services revenue in the third quarter was $27.0 million, an increase of 16 percent from the $23.3 million of services revenue in the third quarter of 2005 and an increase of 3 percent from the $26.1 million in the second quarter of 2006. Services revenue includes fees received from arrangements to customize or enhance previously purchased licensed software. Services revenue also includes reimbursable expenses.
Third quarter maintenance revenue was $23.7 million, a decrease of 2 percent from $24.3 million in the year-ago quarter and an increase of 3 percent from the $23.1 million in the second quarter of 2006.
Costs and Expenses
Total costs and expenses for the third quarter of 2006 were $64.7 million, including $4.3 million in non-operating legal expenses (those legal fees associated with our indemnification obligations related to various ongoing legal proceedings against certain individuals) and $3.5 million in stock option expense. Total costs and expenses increased 16 percent compared to $55.7 million in the third quarter of 2005 and increased 8 percent compared to $60.1 million in the second quarter of 2006.
Net Income
The company reported third quarter 2006 net income applicable to common stockholders of $3.8 million or $0.15 per diluted share. This compares to $4.7 million or $0.18 per diluted share in income from continuing operations, including preferred stock dividend and accretion of discount, in the third quarter of 2005 and $2.0 million or $0.08 per diluted share in the second quarter of 2006.
Nine Months Results
For the nine months ended September 30, 2006, total revenues were $200.1 million, a decrease of 17 percent compared to $240.3 million for the same period in 2005. Total revenue for the nine months ended in 2005 included contract revenue of $19.3 million.
Software solutions revenue decreased 21 percent to $52.9 million for the nine months ended 2006 compared to $66.9 million in the nine months ended in 2005. Services revenue was $77.0 million in the nine months ended of 2006 compared to $78.4 million in the same period in 2005, a decrease of 2 percent. Maintenance revenue decreased 7 percent to $70.1 million in the nine months ended in 2006 compared to $75.6 million in the comparable period in 2005.
Total costs and expenses for the nine months ended September 30, 2006 declined 17 percent to $185.2 million as compared to $224.2 million in the comparable period of 2005. During the nine months ended in 2006, the company incurred approximately $10.0 million in non-operating legal expenses.
The company reported net income applicable to common stockholders of $7.0 million or $0.27 per diluted share for the nine months ended September 30, 2006. This compares to $6.2 million or $0.26 per diluted share in income from continuing operations, including preferred stock dividend and accretion of discount, in the comparable period in 2005.
Non-GAAP 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, but are used as a tool by management to measure the effectiveness of i2's business.
Non-GAAP diluted earnings per share in the third quarter of 2006 were $0.28, compared to $0.15 per diluted share from continuing operations, including preferred stock dividend and accretion of discount, in the comparable period last year on a non-GAAP basis. Non-GAAP diluted earnings per share for the nine months ended September 30, 2006 were $0.74, compared to a loss of ($0.48) per diluted share from continuing operations, including preferred stock dividend and accretion of discount, in the year-ago period. Non-GAAP diluted earnings per share excludes stock option expense and the net effect of contract revenue and contract expense.
Contract revenue is the result of the recognition of certain revenue carried on i2's balance sheet as a portion of deferred revenue and is a result of the company's 2003 financial restatement. The timing of the recognition of deferred contract revenue is difficult to predict and is not typically associated with current business or cash collections. The company did not recognize a material amount of contract revenue or expense during the third quarter of 2006 and recognized only $0.1 million during the nine months ended September 30, 2006. The remaining deferred contract revenue balance as of September 30, 2006 was $7.5 million.

Other Financial Information
On September 30, 2006, i2's total cash (including restricted cash) was $130.1 million. Total debt at the end of the third quarter was $105.5 million, which included $83.7 million of long-term debt (which represents the $86.3 million face value of the company's 5 percent senior convertible notes less the unamortized discount on the notes) and $21.8 million of short-term debt.
The company experienced negative cash flow from operations of $3.3 million in the third quarter of 2006. Included in the third quarter operating cash outflows was the cash payment of semi-annual employee bonuses of approximately $8 million.
Year-to-date through the third quarter, the company has generated cash flow from operations of $8.8 million.
During the fourth quarter, the company expects to pay approximately $22.4 million to retire its 5.25 percent convertible subordinated notes that mature on December 15, 2006, consisting of $21.8 million in principal and $0.6 million in interest.
Full Year 2006 Outlook
Entering the fourth quarter, the company is adjusting its previously provided full year outlook for 2006. The company currently expects that fourth quarter 2006 financial results will be reasonably comparable to its third quarter 2006 results. Therefore, for full year 2006, operating revenue (total revenue less contract revenue) is expected to be in the range of $268 million to $272 million. Non-GAAP earnings per share for full year 2006 (excluding stock option expense and the net effect of contract revenue and contract expense) are expected to be in the range of $0.95 to $1.05 per diluted share. This earnings per share range reflects continued investment in the company's sales and services organizations as well as slightly higher than previously expected non-operating legal expenses. Based upon the trend to date, the total non-operating legal expense for 2006 is expected to represent approximately $0.50 in diluted earnings per share.
The company's statements regarding future financial performance are based on current expectations for bookings, cash collections, revenue and expense. The company's statements regarding future financial performance are forward-looking. Actual results may differ materially. See "i2 Cautionary Language" below.
Earnings Conference Call and Webcast Information
The i2 management team will host a live conference call with investors today, October 31 at 10 a.m. ET to discuss the third quarter 2006 financial results. Investors and other interested parties may access the call and accompanying slide presentation via webcast through the company's Web site at.http://www.i2.com/investor.
An audio replay of the conference call will be available for approximately 24 hours following the call. To access the replay, dial (800) 475-6701 (USA) or (320) 365-3844 (International) and enter access code 844517. The webcast will also be archived via the company's Web site at http://www.i2.com/investor.
About i2
i2 helps business leaders make better supply chain decisions. i2's flexible new-generation solutions are designed to synchronize demand and supply across ever-changing global business networks. i2's innovative supply chain management tools and services are pervasive in a wide cross-section of industries; 20 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 that involve risks and uncertainties, including forward-looking statements regarding i2's outlook for 2006 operating revenue and non-GAAP earnings per share, as well as the company's investment in revenue generating areas of its business. These forward-looking statements involve risks and uncertainties that may cause actual results to differ from those projected. 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 filed August 14, 2006 and the Annual Report on Form 10-K filed March 15, 2006. i2 assumes no obligation to update the forward-looking information contained in this news release.

CONTACT:
Lucy Turpin Communications
Nina Wenske und Miriam Hansel
Tel.: (089) 417761-13 / -18
Email: » i2@lucyturpin.com

i2 Technologies
Mette Krogh
Tel.: +45 8613 8257
Email: » mette_krogh@i2.com


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