EX-99.1 2 g03842exv99w1.htm EX-99.1 PRESS RELEASE DATED OCTOBER 24, 2006 EX-99.1 PRESS RELEASE DATED OCTOBER 24, 2006
 

EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact:        Dennis Story
SVP and Chief Financial Officer
678.597.7116
dstory@manh.com
Manhattan Associates Reports Record Third Quarter Revenue and Earnings
Raises Outlook for Full-year Earnings Per Share
ATLANTA — October 24, 2006 — Leading supply chain solutions provider, Manhattan Associates, Inc. (NASDAQ: MANH), today reported third quarter GAAP diluted earnings per share of $0.19 on record third quarter software revenue of $15.2 million. On a non-GAAP basis, diluted earnings per share were $0.27, a 29% increase over the third quarter of 2005.
THIRD QUARTER FINANCIAL HIGHLIGHTS:
Summarized highlights of the 2006 third quarter performance, as compared to the 2005 third quarter, are:
•   Consolidated revenue increased 16% to a third quarter record $72.3 million;
  •   Software and hosting revenue was $15.2 million, an increase of 21%;
 
  •   Services revenue was $51.0 million, a 17% increase;
•   GAAP operating income was $8.4 million, up 16% on higher software and hosting revenue. On a non-GAAP basis, operating income was $11.6 million, a 25% increase;
•   GAAP diluted earnings per share were $0.19, increasing 12%. Adjusted earnings per share, on a non-GAAP basis, were $0.27, a 29% increase;
•   Cash flow from operations increased 16% to $9.9 million;
•   Cash and investments on hand at September 30, 2006, was $117.6 million;
•   The Company repurchased 333,511 common shares totaling $7.1 million at an average share price of $21.18 in the quarter. The Company has $42.9 million share repurchase authority remaining.
“We posted a solid third quarter,” said Pete Sinisgalli, president and chief executive officer of Manhattan Associates. “For the first three quarters of 2006 our license revenue increased 16%, total revenue 18% and adjusted earnings per share 21%. Given our success so far in 2006 and

 

 

our outlook for Q4, we are raising our expectation for full-year adjusted earnings per share to the range of $1.02 to $1.10,” he continued.
Other significant achievements during the quarter include:
•   Securing key new customers in the quarter including Aldes; Barnes Distribution; Bidvest Group Ltd.; Catering Engros; Central Grocers, Inc.; Fowler Welch Coolchain Ltd.; Gopher Sport; Hanesbrands, Inc.; Hot Springs Pty Ltd.; IFC Warehousing & Distribution Pty Ltd.; Inter-Fab, Inc.; IP Budin; Jack Link’s Beef Jerky; Kohl’s Departments Stores, Inc.; LLC Holiday; Meyer Group Ltd.; Nature’s Best, Inc. and StyleMark, Inc.;
•   Expanding partnerships with many existing customers including Alliance Boots; Associated Wholesale Grocers; AtomicBox, Inc.; Cornerstone Brands, Inc.; Croscill, Inc.; David’s Bridal; Exel Plc; Fitness Quest, Inc.; Genuine Parts Co.; Newark Electronics; Rocky Brands, Inc.; Servicios Empresariales Zimag S.A. de C.V.; Sunrise Technologies; Sysco Corporation and The Hillman Group;
•   Closing three large deals, each of which was $1 million or more in recognized license revenue.
2006 GUIDANCE
Manhattan Associates provided the following diluted earnings per share guidance for the fourth quarter and full year 2006. The 2006 GAAP diluted earnings per share includes the impact of adopting SFAS 123(R). A full reconciliation of GAAP to non-GAAP diluted earnings per share is included in the supplemental attachments to this release.
                         
    Range
GAAP
                        
Q4 2006 - diluted earnings per share
   $ 0.16       —     $ 0.24  
Full year 2006 - diluted earnings per share
   $ 0.70       —     $ 0.78  
 
                        
Adjusted — Non-GAAP
                        
Q4 2006 - adjusted earnings per share
   $ 0.24       —     $ 0.32  
Full year 2006 - adjusted earnings per share
   $ 1.02       —     $ 1.10  
Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. The statements regarding future

 

 

financial performance are based on current expectations, which include a modestly improving general economic and information technology spending environment over the course of the current year. These statements are forward looking. Actual results may differ materially, especially in the current uncertain economic environment. These statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of this release.
Manhattan Associates will make its earnings release and published expectations available on its Web site (www.manh.com). Beginning December 15, 2006, Manhattan Associates will observe a “Quiet Period” during which Manhattan Associates and its representatives will not comment concerning previously published financial expectations. Prior to the start of the Quiet Period, the public can continue to rely on the expectations published in this 2006 Guidance section as still being Manhattan Associates’ current expectation on matters covered, unless Manhattan Associates publishes a notice stating otherwise. The public should not rely on previously published expectations during the Quiet Period, and Manhattan Associates disclaims any obligation to update any previously published financial expectations during the Quiet Period. The Quiet Period will extend until the date when Manhattan Associates’ next quarterly earnings release is published, currently scheduled for the first week of February 2007.
GAAP VERSUS NON-GAAP PRESENTATION
The Company provides adjusted operating income, adjusted net income and adjusted earnings per share in this press release as additional information regarding the Company’s operating results. The measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP operating income, net income and non-GAAP earnings per share measures used by other companies. The Company believes that this presentation of adjusted operating income, adjusted net income and adjusted earnings per share provides useful information to investors regarding additional financial and business trends relating to the Company’s financial condition and results of operations. This release should be read in conjunction with our Form 8-K earnings release filing for this quarter ended September 30, 2006.
     The non-GAAP adjusted operating income, adjusted net income and adjusted earnings per share exclude the impact of acquisition related costs and the amortization thereof, the recapture of previously recognized sales tax expense, the severance and accounts receivable charge

 

 

recorded in the same period and stock option expense under SFAS 123(R). Third quarter 2006 results prepared in accordance with U.S. GAAP are reconciled with non-GAAP results excluding the impact of these adjustments. A full reconciliation of our GAAP financial measures to non-GAAP adjustments is included in the supplemental attachment to this release.
IMPAIRMENT CHARGE
In the quarter, the Company recorded an impairment charge of $0.3 million against a $2.0 million investment in a technology company. The Company made its original investment in 2003.
About Manhattan Associates, Inc.
Manhattan Associates® is a leading supply chain solutions provider. The company’s supply chain planning, supply chain execution, business intelligence and business process platform capabilities enable its more than 1200 customers worldwide to enhance profitability, performance and competitive advantage. For more information, please visit www.manh.com.
This press release may contain “forward-looking statements” relating to Manhattan Associates, Inc. Prospective investors are cautioned that any such 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. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are delays in product development, undetected software errors, competitive pressures, technical difficulties, market acceptance, availability of technical personnel, changes in customer requirements, risks of international operations and general economic conditions. Additional risk factors are set forth in Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.

 

 

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
                                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2006   2005   2006   2005
Revenue:
                                
Software and hosting
  $ 15,217     $ 12,531     $ 47,540     $ 40,978  
Services
     51,049       43,621       144,642       122,324  
Hardware and other
     6,046       6,155       20,816       16,681  
 
                                
Total Revenue
     72,312       62,307       212,998       179,983  
 
                                
Costs and Expenses:
                                
Cost of software and hosting
    1,400       1,022       4,410       3,582  
Cost of services
     24,231       19,952       69,908       55,905  
Cost of hardware and other
     5,356       5,078       18,328       14,180  
Research and development
     9,765       9,037       30,398       24,584  
Sales and marketing
     11,407       9,649       34,018       29,844  
General and administrative
     7,896       6,184       21,863       16,251  
Depreciation and amortization
     3,377       3,053       9,914       8,929  
Severance, accounts receivable, acquisition-related and impairment charges
     444       1,081       1,773       5,481  
 
                                
Total costs and expenses
     63,876       55,056       190,612       158,756  
 
                                
 
                                
Operating income
     8,436       7,251       22,386       21,227  
 
                                
Other income, net
     630       877       2,727       1,971  
 
                                
Income before income taxes
     9,066       8,128       25,113       23,198  
Income tax provision
     3,822       3,162       10,596       10,298  
 
                                
Net income
   $ 5,244     $ 4,966     $ 14,517     $ 12,900  
 
                                
 
                                
Basic earnings per share
   $ 0.19     $ 0.17     $ 0.53     $ 0.44  
Diluted earnings per share
   $ 0.19     $ 0.17     $ 0.52     $ 0.43  
 
                                
Weighted average number of shares:
                                
Basic
     26,969       28,392       27,151       29,060  
Diluted
     27,462       29,055       27,688       29,686  

 

 

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except per share amounts)
                                                 
    Three Months Ended
    September 30,
    2006           2006   2005           2005
    GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP
Revenue:
                                                
Software and hosting
  $ 15,217             $ 15,217     $ 12,531             $ 12,531  
Services
     51,049               51,049       43,621               43,621  
Hardware and other
     6,046               6,046       6,155               6,155  
         
Total Revenue
     72,312       —       72,312       62,307       —       62,307  
 
                                                
Costs and Expenses:
                                                
Cost of software and hosting
     1,400               1,400       1,022               1,022  
Cost of services
     24,231       (546) (a)     23,685       19,952               19,952  
Cost of hardware and other
     5,356               5,356       5,078               5,078  
Research and development
     9,765       (261) (a)     9,504       9,037               9,037  
Sales and marketing
     11,407       (405) (a)     11,002       9,649               9,649  
General and administrative
     7,896       (295) (a) (c)     7,601       6,184       240 (c)     6,424  
Depreciation and amortization
     3,377       (1,217) (b)     2,160       3,053       (1,161) (b)     1,892  
Asset impairment charge
     270       (270) (e)     —       —       —       —  
Acquisition-related charges
     174       (174) (d)     —       1,081       (1,081) (d)     —  
         
Total costs and expenses
     63,876       (3,168 )     60,708       55,056       (2,002 )     53,054  
         
 
                                                
Operating income
     8,436       3,168       11,604       7,251       2,002       9,253  
 
                                                
Other income, net
     630               630       877               877  
         
Income before income taxes
     9,066       3,168       12,234       8,128       2,002       10,130  
Income tax provision
     3,822       885 (f)     4,707       3,162       778 (f)     3,940  
         
Net income
   $ 5,244     $ 2,283     $ 7,527     $ 4,966     $ 1,224     $ 6,190  
         
 
                                                
Basic earnings per share
   $ 0.19             $ 0.28     $ 0.17             $ 0.22  
Diluted earnings per share
   $ 0.19             $ 0.27     $ 0.17             $ 0.21  
 
                                                
Weighted average number of shares:
                                                
Basic
     26,969               26,969       28,392               28,392  
Diluted
     27,462               27,462       29,055               29,055  
(a)   We adopted SFAS 123(R) on January 1, 2006 using the modified prospective method. SFAS 123(R) requires us to expense stock options issued to employees. Previously we did not record compensation expense for employee stock options. The 2006 adjustments to cost of services, research and development, and sales and marketing represent stock option compensation expense recorded during the period. The 2006 adjustment to general and administrative expense includes $619 of stock option compensation expense recorded during the three months ended September 30, 2006. Total stock option expense for the three months ended September 30, 2006 was $1.8 million pre-tax. Because stock option expense is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us. Thus, we have excluded the impact of this expense from adjusted non-GAAP results.
 
(b)   Adjustments represent purchase amortization from prior acquisitions. Such amortization is commonly excluded from GAAP net income by companies in our industry and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results to that of our competitors.
 
(c)   Adjustment includes recoveries of $324 and $240 for the three months ended September 30, 2006 and 2005 of previously expensed sales tax resulting primarily from the expiration of the sales tax audit statutes in certain states. Because we have recognized the full potential amount of the sales tax expense in prior periods, any recovery of that expense resulting from the expiration of the statutes or the collection of tax from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of anything occurring within our control during the current period. Thus, we have excluded these recoveries from adjusted non-GAAP results.
 
(d)   In conjunction with the Evant acquisition, we paid $2.8 million into escrow for employee retention bonuses to be paid upon completion of up to 12 months of service with us. During the quarter ended September 30, 2006, we completed the Evant retention bonus program and paid out the final bonuses. The 2006 and 2005 adjustments represent the current period expense associated with these retention bonuses. We have excluded these costs because they do not correlate to the expenses of our core operations.
 
(e)   During the quarter ended September 30, 2006, we recorded an impairment charge of $270 against a $2.0 million investment in a technology company. We made our original investment in 2003. Because the value of the investment is beyond our control and does not relate to our core operations, we have excluded the asset impairment from adjusted non-GAAP results.
 
(f)   Amount represents the impact of the above adjustments on the income tax provision. The GAAP effective tax rate for 2006 is higher than the adjusted non-GAAP rate primarily due to stock compensation expense recorded on incentive stock options that is not deductible for tax purposes.

 

 

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands, except per share amounts)
                                                 
    Nine Months Ended
    September 30,
    2006           2006   2005           2005
    GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP
Revenue:
                                                
Software and hosting
  $ 47,540             $ 47,540     $ 40,978             $ 40,978  
Services
     144,642               144,642       122,324               122,324  
Hardware and other
     20,816               20,816       16,681               16,681  
         
Total Revenue
     212,998       —       212,998       179,983       —       179,983  
 
                                                
Costs and Expenses:
                                                
Cost of software and hosting
    4,410               4,410       3,582               3,582  
Cost of services
     69,908       (1,609) (a)     68,299       55,905               55,905  
Cost of hardware and other
     18,328               18,328       14,180               14,180  
Research and development
     30,398       (737) (a)     29,661       24,584               24,584  
Sales and marketing
     34,018       (1,114) (a)     32,904       29,844               29,844  
General and administrative
     21,863       (935) (a) (c)     20,928       16,251       858 (c)     17,109  
Depreciation and amortization
     9,914       (3,651) (b)     6,263       8,929       (3,292) (b)     5,637  
Severance and accounts receivable charges
     —               —       3,876       (3,876) (e)     —  
Asset impairment charge
     270       (270) (f)     —       —               —  
Acquisition-related charges
     1,503       (1,503) (d)     —       1,605       (1,605) (d)     —  
         
Total costs and expenses
     190,612       (9,819 )     180,793       158,756       (7,915 )     150,841  
         
 
                                                
Operating income
     22,386       9,819       32,205       21,227       7,915       29,142  
 
                                                
Other income, net
     2,727               2,727       1,971               1,971  
         
Income before income taxes
     25,113       9,819       34,932       23,198       7,915       31,113  
Income tax provision
     10,596       2,853 (g)     13,449       10,298       1,804 (g)     12,102  
         
Net income
   $ 14,517     $ 6,966     $ 21,483     $ 12,900     $ 6,111     $ 19,011  
         
 
                                                
Basic earnings per share
   $ 0.53             $ 0.79     $ 0.44             $ 0.65  
Diluted earnings per share
   $ 0.52             $ 0.78     $ 0.43             $ 0.64  
 
                                                
Weighted average number of shares:
                                                
Basic
     27,151               27,151       29,060               29,060  
Diluted
     27,688               27,688       29,686               29,686  
(a)   We adopted SFAS 123(R) on January 1, 2006 using the modified prospective method. SFAS 123(R) requires us to expense stock options issued to employees. Previously we did not record compensation expense for employee stock options. The 2006 adjustments to cost of services, research and development, and sales and marketing represent stock option compensation expense recorded during the period. The 2006 adjustment to general and administrative expense includes $2.0 million of stock option compensation expense recorded during the nine months ended September 30, 2006. Total stock option expense for the nine months ended September 30, 2006 was $5.4 million pre-tax. Because stock option expense is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us. Thus, we have excluded the impact of this expense from adjusted non-GAAP results.
 
(b)   Adjustments represent purchase amortization from prior acquisitions. Such amortization is commonly excluded from GAAP net income by companies in our industry and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results to that of our competitors.
 
(c)   Adjustment includes recoveries of $1.1 million and $858 for the nine months ended September 30, 2006 and 2005 of previously expensed sales tax resulting primarily from the expiration of the sales tax audit statutes in certain states. Because we have recognized the full potential amount of the sales tax expense in prior periods, any recovery of that expense resulting from the expiration of the statutes or the collection of tax from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of anything occurring within our control during the current period. Thus, we have excluded these recoveries from adjusted non-GAAP results.
 
(d)   In conjunction with the Evant acquisition, we paid $2.8 million into escrow for employee retention bonuses to be paid upon completion of up to 12 months of service with us. During the quarter ended September 30, 2006, we completed the Evant retention bonus program and paid out the final bonuses. The 2006 and 2005 adjustments represent the current period expense associated with these retention bonuses. We have excluded these costs because they do not correlate to the expenses of our core operations. The 2005 adjustment includes $.5 million in expense related to an unsuccessful acquisition attempt. We have excluded these costs because they do not correlate to the expenses of our core operations.
 
(e)   Amount includes the write-off of a $2.8 million receivable from a German customer resulting from a legal dispute over the implementation of our software. We believe that the revenue and accounts receivable are justified; however, given the size of the customer and its geographic location in Germany, we believe the receivable to be uncollectible. The adjustment also includes severance and other costs of $1.1 million resulting from the consolidation of EMEA operations and the termination of 17 employees. We do not believe that these are common costs that result from normal operating activities.
 
(f)   During the quarter ended September 30, 2006, we recorded an impairment charge of $270 against a $2.0 million investment in a technology company. We made our original investment in 2003.
 
(g)   Because the value of the investment is beyond our control and does not relate to our core operations, we have excluded the asset impairment from adjusted non-GAAP results. Amount represents the impact of the above adjustments on the income tax provision. The GAAP effective tax rate for 2006 is higher than the adjusted non-GAAP rate primarily due to stock compensation expense recorded on incentive stock options that is not deductible for tax purposes.

 

 

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
                 
    September 30,   December 31,
    2006   2005
ASSETS
                
 
                
Current Assets:
                
Cash and cash equivalents
   $ 13,519     $ 19,419  
Short term investments
     79,412       36,091  
Accounts receivable, net of a $5,158 and $4,892 allowance for doubtful accounts in 2006 and 2005, respectively
     52,554       58,623  
Deferred income taxes
     6,222       6,377  
Refundable income taxes
     11       449  
Prepaid expenses and other current assets
     10,061       11,268  
 
                
Total current assets
     161,779       132,227  
 
                
Property and equipment, net
     15,620       14,240  
Long-term investments
     24,634       38,165  
Acquisition-related intangible assets, net
     16,068       19,213  
Goodwill, net
     69,848       54,607  
Deferred income taxes
     320       11,995  
Other assets
     4,967       2,951  
 
                
Total assets
   $ 293,236     $ 273,398  
 
                
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 5,546     $ 7,904  
Accrued compensation and benefits
     15,608       15,224  
Accrued and other liabilities
     15,524       13,971  
Deferred revenue
     30,686       27,204  
Income taxes payable
     6,037       2,535  
Current portion of capital lease obligations
     38       147  
 
                
Total current liabilities
     73,439       66,985  
 
                
Other non-current liabilities
     2,482       1,015  
 
                
Shareholders’ equity:
                
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2006 or 2005
     —       —  
Common stock, $.01 par value; 100,000,000 shares authorized, 26,978,973 shares issued and outstanding in 2006 and 27,207,260 shares issued and outstanding in 2005
     270       272  
Additional paid-in capital
     84,358       87,476  
Retained earnings
     131,507       116,990  
Accumulated other comprehensive income
     1,180       863  
Deferred compensation
     —       (203 )
 
                
Total shareholders’ equity
     217,315       205,398  
 
                
Total liabilities and shareholders’ equity
   $ 293,236     $ 273,398  
 
                

 

 

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                 
    Nine Months Ended
    September 30,
    2006   2005
Operating activities:
                
Net income
   $ 14,517     $ 12,900  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     9,914       8,929  
Stock compensation
     5,544       153  
Asset impairment charge
     270       —  
Gain on disposal of equipment
     (32 )     —  
Tax benefit of options exercised
     2,444       (47 )
Excess tax benefits from stock based compensation
     (1,792 )     —  
Deferred income taxes
     (790 )     373  
Unrealized foreign currency loss
     622       768  
Changes in operating assets and liabilities:
                
Accounts receivable, net
     5,510       (4,707 )
Other assets
     (2,055 )     (4,072 )
Prepaid retention bonus
     1,599       (2,303 )
Accounts payable, accrued and other liabilities
     (1,066 )     6,094  
Income taxes
     2,528       4,108  
Deferred revenue
     4,133       6,712  
 
                
Net cash provided by operating activities
     41,346       28,908  
 
                
 
                
Investing activities:
                
Purchase of property and equipment
     (7,529 )     (7,346 )
Net maturities (purchases) of investments
     (29,631 )     52,495  
Payments in connection with various acquisitions
     (126 )     (48,743 )
 
                
Net cash used in investing activities
     (37,286 )     (3,594 )
 
                
 
                
Financing activities:
                
Payment of capital lease obligations
     (72 )     (104 )
Purchase of common stock
     (16,029 )     (41,279 )
Excess tax benefits from stock based compensation
     1,792       —  
Proceeds from issuance of common stock from options exercised
     5,124       2,091  
 
                
Net cash used in financing activities
     (9,185 )     (39,292 )
 
                
 
                
 
                
Foreign currency impact on cash
     (775 )     (261 )
 
                
Net change in cash and cash equivalents
     (5,900 )     (14,239 )
Cash and cash equivalents at beginning of period
     19,419       37,429  
 
                
Cash and cash equivalents at end of period
   $ 13,519     $ 23,190  
 
                

 

 

MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION
1.   Revenues and operating income (loss) by reportable segment are as follows (in thousands):
                                                                 
    2005   2006
    1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr   2nd Qtr   3rd Qtr
Revenue:
                                                                
Americas
   $ 46,776     $ 49,573     $ 49,175     $ 55,398     $ 200,922     $ 51,143     $ 65,695     $ 60,799  
EMEA
     6,626       7,924       8,490       7,632       30,672       6,952       6,850       6,478  
Asia Pacific
     2,905       3,872       4,642       3,391       14,810       4,690       5,356       5,035  
 
                                                                
 
   $ 56,307     $ 61,369     $ 62,307     $ 66,421     $ 246,404     $ 62,785     $ 77,901     $ 72,312  
 
                                                                
GAAP Operating Income (Loss):
                                                                
Americas
   $ 9,107     $ 10,539     $ 6,085     $ 8,989     $ 34,720     $ 2,467     $ 10,095     $ 9,131  
EMEA
     (1,314 )     (4,655 )     690       926       (4,353 )     245       3       (839 )
Asia Pacific
     (126 )     425       476       (865 )     (90 )     401       739       144  
 
                                                                
 
   $ 7,667     $ 6,309     $ 7,251     $ 9,050     $ 30,277     $ 3,113     $ 10,837     $ 8,436  
 
                                                                
Adjustments (pre-tax):
                                                                
Americas:
                                                                
Amortization of intangibles
   $ 924     $ 1,207     $ 1,161     $ 1,200     $ 4,492     $ 1,217     $ 1,217     $ 1,217  
Stock based compensation
     —       —       —       —       —       1,558       1,819       1,700  
Sales tax recoveries
     (327 )     (291 )     (240 )     (370 )     (1,228 )     (267 )     (465 )     (324 )
Asset impairment charge
     —       —       —       —       —       —       —       270  
Acquisition related costs
     —       524       1,081       829       2,434       722       607       174  
 
                                                                
 
   $ 597     $ 1,440     $ 2,002     $ 1,659     $ 5,698     $ 3,230     $ 3,178     $ 3,037  
 
                                                                
EMEA:
                                                                
Stock based compensation
   $ —     $ —     $ —     $ —     $ —     $ 118     $ 125     $ 131  
Restructuring charge
     —       1,061       —       —       1,061       —       —       —  
Write off of receivable
     —       2,815       —       —       2,815       —       —       —  
 
     —       3,876       —       —       3,876       118       125       131  
 
                                                                
 
                                                                
Total Adjustments
   $ 597     $ 5,316     $ 2,002     $ 1,659     $ 9,574     $ 3,348     $ 3,303     $ 3,168  
 
                                                                
 
                                                                
Adjusted non-GAAP Operating Income (Loss):
                                                                
Americas
   $ 9,704     $ 11,979     $ 8,087     $ 10,648     $ 40,418     $ 5,697     $ 13,273     $ 12,168  
EMEA
     (1,314 )     (779 )     690       926       (477 )     363       128       (708 )
Asia Pacific
     (126 )     425       476       (865 )     (90 )     401       739       144  
 
                                                                
 
   $ 8,264     $ 11,625     $ 9,253     $ 10,709     $ 39,851     $ 6,461     $ 14,140     $ 11,604  
 
                                                                
2.   Capital expenditures are as follows (in thousands):
                                                                 
    2005   2006
    1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr   2nd Qtr   3rd Qtr
 
Capital expenditures
   $ 2,507     $ 2,141     $ 2,698     $ 1,142     $ 8,488     $ 2,195     $ 2,603     $ 2,731  
 
                                                                
3.   Adoption of Statement of Financial Accounting Standards 123(R), “Share-Based Payment”:
 
    The Company adopted SFAS 123(R) on January 1, 2006 using the modified prospective transition method. SFAS 123(R) requires the Company to expense stock options issued to employees. Previously, the Company did not record compensation expense for employee stock options. Actual stock option expense recorded for 2006, as well as proforma expense for 2005 as if the Company had previously adopted the new statement on January 1, 2005 is presented below. During the fourth quarter of 2005, the Board of Directors approved an Option Acceleration Agreement that accelerated the vesting of unvested stock options held by the Company’s employees with an exercise price of $22.09 or higher. Stock option expense for the fourth quarter of 2005 includes $37.2 million of stock option expense ($26.9 million after tax) equal to the unamortized fair value of the options.
                                                                 
    2005- Proforma   2006
    1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year   1st Qtr   2nd Qtr   3rd Qtr
Stock option expense (pre-tax)
   $ 5,694     $ 5,519     $ 5,392     $ 42,769     $ 59,374     $ 1,676     $ 1,944     $ 1,831  
Income tax benefit
     (1,144 )     (1,112 )     (1,083 )     (11,631 )     (14,970 )     (499 )     (303 )     (370 )
 
                                                                
Stock option expense, net of income tax
   $ 4,550     $ 4,407     $ 4,309     $ 31,138     $ 44,404     $ 1,177     $ 1,641     $ 1,461  
 
                                                                
 
                                                  
Diluted EPS impact
   $ 0.15     $ 0.15     $ 0.15     $ 1.13     $ 1.55     $ 0.04     $ 0.06     $ 0.05  
 
                                                                
    The Company estimates that the accounting required by SFAS 123(R) will reduce full year 2006 GAAP diluted earnings per share by approximately $0.20. This estimate is dependent upon a number of variables such as the number of options awarded, cancelled or exercised and fluctuations in share price during the year.
 
4.   Stock Repurchase Activity
 
    During the third quarter of 2006, we repurchased 0.3 million shares of common stock at a total cost of $7 million.
 
    During 2005, we repurchased 2.8 million shares of common stock at a total cost of $61 million.