2
www.manh.comcommerce-ready The commerce revolution has forever changed the way we shop,
work, collaborate and compete. Total ecommerce in the U.S.
jumped 24% to $46 billion over Thanksgiving, Black Friday and
Cyber Monday in 2013.1
At Manhattan Associates, we believe the
commerce game has changed and that
the supply chain is the new star player.
Suddenly, everyday consumers have
your supply chain at their fingertips.
They’re driving what, when and how you
meet their demands that can change
from week to week, day to day, hour to
hour—even in real time.
To win, companies have to be ready for anything—any channel, any
product, anywhere, any time. Because delivering on expectations—
or not—makes or breaks the promise of a company’s brand.
Our business at Manhattan Associates is
to deliver the market’s most innovative supply
chain technologies to help our customers
around the world prepare for this new
commerce landscape—and to always be
commerce-ready
1 The Results So Far From Holiday Shopping Point To Huge Gains For Mobile Commerce This Year, Business Insider, December 18, 2013
global offices
partner locations
Atlanta, GA (HQ), US
Colombia
South Africa
Spain
Sweden
Thailand
South Korea
United Arab Emirates
Venezuela get commerce-ready.
Bangalore, India
Iceland
Bracknell, UK
Indonesia
Carmel, IN, US
Malaysia
Melbourne, Australia
Nieuwegein, The Netherlands
Mexico
Poland
Paris, France
Romania
Shanghai, China
Russia
Singapore
Sydney, Australia
Tokyo, Japan
4
www.manh.comcommerce-ready get commerce-ready.
start here.
7 Letter to Shareholders
12 The Commerce-Ready Supply Chain
15
16 Customer Impact
n Americas
n EMEA
Innovation and Leadership
n APAC
21 Financial Highlights
22 Executive Team and
Board of Directors
5
Manhattan Associatescommerce-ready
Our performance and
customer demand in 2013
validated our belief that
the omni-channel revolution
is accelerating, forever
changing the way supply
chains operate and presenting
a remarkable opportunity for
Manhattan Associates.
Eddie Capel, President and
Chief Executive Officer
6
www.manh.comcommerce-ready ManhaT Tan aSSOC iaT ES, inC.
LETTER TO S ha RE h OLDERS
To Our Shareholders,
Overall, 2013 was a very successful year for your Company, our Customers and our Employees. We
delivered record results across all key financial metrics including total revenue, operating profit,
earnings per share and cash flow from operations in a sluggish macroeconomic environment.
Our competitive position improved considerably, customer satisfaction increased, we continue
to innovate at a rapid pace and extend our distribution management and omni-channel market
leadership, positioning us well for 2014 and beyond.
apparent in the retail sector, it extends into many
other market segments, such as manufacturing and
wholesale distribution, expanding the reach of our
solutions to attract new customers and introduce new
innovative solutions to our
existing customer base.
I believe our growth has as
much to do with this market
transformation as it does with
our unique positioning. In
many ways, the transformation
in our markets is similar to the
transformation in retail banking
over the past decade. Not so
many years ago, the branch
was the dominant channel of
access to a financial institution’s
In last year’s letter to you, I noted that we were
witnessing the emergence of a revolution in omni-
channel commerce, and that by executing on our
long-term strategy, we were well positioned to
capitalize. Our performance
and customer demand in 2013
validated our belief that the omni-
channel revolution is accelerating,
forever changing the way supply
chains operate and presenting
a remarkable opportunity for
Manhattan Associates.
The Omni-Channel Commerce
Revolution
Ecommerce sales grew 18% to
nearly $1.3 trillion in 2013 and
are currently projected to grow
17% compounded annually over the next several
years. With overall retail growing at about 4%, digital
commerce continues to fuel fundamental changes
in the relationships and interactions between buyers
and brands, driving the most significant commerce
revolution in a generation, most commonly referred
to as “Omni-Channel.” While this shift is most
With overall retail growing at
about 4%, digital commerce
continues to fuel fundamental
changes in the relationships and
interactions between buyers
and brands, driving the most
significant commerce revolution
in a generation, most commonly
referred to as “Omni-Channel.”
services. Then came ATMs, online banking, new
payment types and mobile banking. Similar to the
way the digital revolution forced retail banks to
question the value and role of the brick-and-mortar
branch, Amazon and online commerce are forcing
many of today’s retail apparel and consumer goods
companies to evaluate the future of the store.
7
Manhattan Associatescommerce-ready Fast forward to today, and we see how many of the
most successful banks have radically transformed
their business models by segmenting customers,
redesigning processes and upgrading technology—
all while keeping the customer at the center of the
equation. We see a similar transformation in the
markets we serve. Retailers, wholesalers and consumer
products companies around the world are reimagining
their businesses to meet the omni-channel revolution
using supply chain commerce solutions as a primary
lever to lift their business to the next level.
The intersection between the consumer and the supply
chain has evolved dramatically with the evolution of
digital commerce. While our competition has focused
on acquiring legacy supply chain technology with
little investment in innovation, Manhattan continues
to focus on being the leading pure-play technology
innovator in the Supply Chain
Commerce market. By leveraging
our platform strategy and
investments in research and
development (R&D), we are
activating Supply Chain
Commerce for our customers
and industry leaders in the new
omni-channel world.
Our distinctive positioning had a
meaningful impact on our growth
in 2013, as license revenue for
our solutions supporting customer-led omni-channel
initiatives was our fastest-growing, nearly doubling over
2012. We were not the only company to see the market
revolution; however, we were one of the few to make
bold organic investments in innovation to capitalize on
the omni-channel growth era in front of us.
Business Model and Performance Overview
As you know, Manhattan Associates develops and
deploys comprehensive software solutions that solve
the market’s most complex and impactful supply
chain challenges. Our solutions cover a broad range
of business capabilities, connecting the supply chain
(distribution operations, transportation management,
inventory optimization, labor management and
capacity utilization) with the commerce chain (order
management, store operations and planning). We are
in the business of building better supply chains.
8
We currently have over 1,200 customers worldwide. In
2013, our team of expert services professionals supported
more than 300 “go-lives” across the globe. Many of
these implementations incorporate the most up-to-date
technology, including cloud computing technologies
provisioned in both public and private environments.
We also continue to develop innovative software
delivery models for our customers that provide the
lowest possible cost of ownership. Mobility is one
of the key drivers in supply chain innovation—and
we’re in the vanguard of that trend. Our strategy is
to provide customers with mobile tools that enable
anywhere, always on, untethered access to supply
chain information and functionality.
Commerce-Ready and Flexible Fulfillment
Supply Chains
While our competition has
focused on acquiring legacy
supply chain technology with
little investment in innovation,
Manhattan continues to
focus on being the leading
pure-play technology
innovator in the Supply Chain
Commerce market.
We believe Supply Chain
Commerce is the emerging
model for growth and profit
in today’s omni-channel,
consumer-centered landscape.
For companies to create
this balance, they need a
wealth of new capabilities
and technologies. The Q4
2013 holiday season certainly
put the spotlight on retailers.
The increased importance of
customer service created new
levels of stress across their supply chains. While parcel
delays may have made the late season headlines, it
certainly wasn’t the only story.
The number of fulfillment paths that orders can take
to consumers has exploded, creating overwhelming
complexity for companies trying to satisfy customers
who used to buy mainly in local stores. Now consumers
buy online, in stores or in some combination—such
as buy online, pickup in store. And the way they
bought yesterday may not be how they buy tomorrow.
Consequently, retailers are under tremendous pressure
to manage these dynamic fulfillment paths efficiently.
To respond to this shift from walk-in commerce
to ecommerce, today’s supply chains need to be
“Commerce-Ready.” A Commerce-Ready supply chain
can anticipate and respond to variations in demand
across channels. In fact, that flexibility is the key to
creating return customers.
www.manh.comcommerce-ready We continue to invest in innovation to deliver the
products our customers need to be Commerce-
Ready. An example of this innovation is Flexible
Fulfillment, Manhattan Associates’ approach to
solving the most complex supply chain problems and
delivering the greatest value for our customers.
For our Shareholders:
Through focused execution against our business
strategy, we had the most financially successful year in
our Company’s history, delivering record performance in
total revenue, operating profit, earnings per share and
cash flow from operations.
n Total revenue was $415 million for the year, up 10%
from last year. Regionally, total revenue grew 10%
in the Americas, 7% in EMEA and 20% in APAC.
Full-year, license revenue totaled $62 million,
up slightly from $61 million in 2012. Despite a
sluggish global macro economy, we continue to
experience solid activity in our target markets, the
demand environment remains quite positive, and
our competitive win rates remain strong. Further, we
continue to acquire large, world-class brands with
new customers representing seven of the 14 million-
plus dollar license deals closed
With our singular focus
and solid execution, we believe
we have the right products at the
right time to capitalize on and
extend our market leadership
for years to come for your
Company.
in 2013. Consulting revenue
for full-year 2013 totaled $211
million, up 14% from 2012.
n Solid revenue growth,
exceptional professional
services productivity and
operating expense control led
to record full-year adjusted
operating income of $109
million. We finished 2013 with
full-year operating income
growth of 23% over 2012 and an
In 2013 we launched a key element for executing a
Flexible Fulfillment strategy with our Store Inventory
& Fulfillment (SI&F) solution—with 2,770 store
deployments to date. SI&F provides a complete
solution for transforming a brick-and-mortar store into
an omni-channel enabled center of excellence.
Our Distributed Order Management (DOM) system
supports Flexible Fulfillment in ways that no other
Supply Chain Commerce platform can. As marketing
and consumer engagement strategies change season
by season throughout the year,
DOM helps retail supply
chains respond—whether that
is to minimize costs, manage
distressed inventory or meet
peak demand.
With a Commerce-Ready
supply chain, retailers can focus
appropriate technologies on
business goals. They know when
and why to ship from stores,
while leveraging suppliers, hubs,
3PLs and other partners across the network. They can
expand the supply chain’s capacity as needed and
shrink it when demand subsides.
At Manhattan, we believe the combination of
delivering superior solutions through innovation
and strong customer relationships is the essence of
competitive differentiation in Supply Chain Commerce.
With our singular focus and solid execution, we
believe we have the right products at the right time
to capitalize on and extend our market leadership for
years to come for your Company.
Turning to and measuring our accomplishments
for the year, we reflect on them from three primary
perspectives—our shareholders, our customers and
our employees.
operating income margin of 26.2%.
n We delivered full-year 2013 adjusted earnings per
share of $0.92. This represents a 31% increase over
our 2012 full-year performance of $0.71 per share.
n Cash flow from operations was $89 million, up 19%
from 2012. Our cash and investments totaled $133
million on December 31, 2013 and we had no debt.
While self-funding our investments in innovation
and people, we continued to leverage our strong
cash generation returning $59 million to you in
2013 through our share repurchase program.
n Our total shareholder return expanded by 95%
in 2013, adding $1.1 billion to our market
capitalization.
9
Manhattan Associatescommerce-ready
Where We Go From Here
The omni-channel revolution reminds me of what
meteorologists and mathematicians call the butterfly
effect. The notion that a butterfly fluttering its wings
in China could ultimately cause a hurricane in the
Caribbean is farfetched, but the underlying idea
is sound: Seemingly small events can have large,
unpredictable effects. A single consumer’s action may
have little impact on the supply chain—but when
millions of consumers are finding new ways to “flap
their wings,” so to speak, that indeed has the impact
of a hurricane on the supply chain and on retail stores.
Without question, the retail landscape and formats
are changing. Today we are at the start of something
new, where nimbleness often trumps size. The most
successful companies manage lean supply chain
operations that have network-
wide inventory visibility and can
We remain the only
solutions provider singularly
focused on a platform-based
approach to developing
Commerce-Ready solutions for
supply chain leaders.
fulfill orders from anywhere at
any time.
Manhattan Associates will
continue to be the technology
arsenal for these retailers. We
remain the only solutions provider
singularly focused on a platform-
based approach to developing
Commerce-Ready solutions for
supply chain leaders.
In 2014, we plan to execute specific strategies to
maintain and build upon our competitive edge. First,
we intend to continue to do many of the same things
that drove our success in 2013, only better! We remain
committed to our organic growth strategy and plan
to invest about $50 million in R&D. Our Professional
Services organization will continue to expand as needed
to serve our customers. Manhattan Associates is a highly-
regarded industry leader, with a reputation for executing
and delivering on our promises. I am committed to
making that leadership position stronger every day.
Also, we will expand our retail product footprint deeper
into the store. We expect to accomplish that by:
n Building integrated workflow solutions for grocery,
apparel and other verticals.
For our customers:
n Our central focus continues to be on investing
in innovation. In 2013, we invested $45 million
in R&D, bringing our cumulative investment to $345
million since 2006.
n Our investment in the industry’s only Supply Chain
Process Platform™ continues to positively impact
customers through new revenue opportunity,
improved efficiencies, reduced operating costs and
lower total cost of ownership.
n In the new omni-channel world of Supply Chain
Commerce, we have made substantial investments
in our products to deliver innovation that meets
the demands of this emerging market and extends
our leadership role. Overall, we introduced 26 new
releases in 2013 including new products on our
platform, such as Enterprise Order Management,
Store Inventory & Fulfillment,
Distributed Selling and Omni-
channel Customer Service.
These solutions are key to our
customers’ future Supply Chain
Commerce infrastructures.
n Once again in 2013, we
hosted our customers at
Momentum®, our annual user
conference, where nearly 1,100
supply chain professionals
came together to share
experiences and participate in
our growth as a Company.
For our employees:
n Manhattan’s leadership in the supply chain domain
continues to be a key factor for attracting
and retaining the absolute best supply chain
professionals in the market.
n At the end of 2013, we had approximately 2,530
employees across 11 offices around the world. We
grew our workforce 5% adding approximately 130
employees during the year, led by strong demand
for our professional services. We continue to make
substantial investments in training programs,
great career path development, technology and
infrastructure to support our growth and leadership
position within the industry.
10
www.manh.comcommerce-ready
n Developing innovative capabilities allowing retailers
greater flexibility in taking orders, managing
inventory and fulfilling from store locations.
n Helping customers reach new levels of sophistication
with Enterprise Order Management, a central
repository providing a complete view of customers’
transaction histories, shopping patterns and
preferences across every channel.
n Continuing to expand our extensive suite of mobile
solutions to provide untethered access to supply
chain information from the store floor, the warehouse
or anywhere else.
In addition, Manhattan Associates will expand
support for cloud-based deployments. We
understand that cloud-based deployment is an
important IT strategy, and is still very dependent on
the process, solution and company size. As such,
we will continue to offer—as appropriate and as the
market dictates—our solutions deployed in the cloud,
either public or private.
In summary, I believe Manhattan Associates is well
positioned for another year of strong financial
performance, industry leadership and attainment of
product development milestones. We are cautious
regarding the macro economy yet confident in our
market position and the markets we serve. We have
planned for a global economy in 2014 similar to that
experienced in 2013. Industry analysts forecast the
supply chain market to grow around 5% to 7% in 2014.
We expect to post revenue growth of about 1.5 times
the market growth rate while generating earnings
growth through operating margin expansion. We will
continue to benefit from our leadership position in
the core warehouse management, order management
and transportation markets. We also plan to continue
to substantially invest in innovative solutions that
capitalize on the emerging market trends and in our
people to serve our customers, extend our competitive
advantage, and increase customer satisfaction. I’m
proud to be a part of the Manhattan Associates team
and look forward to the opportunities ahead. Thank
you for your continued confidence and support in
Manhattan Associates.
Sincerely,
Eddie Capel
President and Chief Executive Officer
11
Manhattan Associatescommerce-ready
commerce
READY
Ensuring a Commerce-Ready supply chain
Helping companies across all industries meet the demands
of a new commerce landscape
Traditionally, supply chain management was focused primarily on operational efficiency and cost
control. Today, the commerce revolution is forcing companies to reimagine their supply chain as a
primary value lever in the entire business. Companies must anticipate needs and deliver on customer
choices—whenever, wherever and however they choose. This power shift between buyers and
brands is transforming supply chains around the globe. And every industry feels the impact—retailers,
manufacturers, wholesalers and 3PLs alike.
As today’s empowered buyers continue to shape the future of commerce, all companies must evolve their
supply chains to meet the challenge—and to do so profitably.
Retailers
must provide a
consistent consumer
experience
across channels,
respond quickly
to fluctuations
in demand and
strategically fulfill
orders from the
optimal source.
Wholesalers
must compete
with leaders like
Amazon Supply by
leveraging their
people, domain
knowledge and
service capabilities
to thrive in the new
marketplace.
Manufacturers
must continue to
innovate new ways
to get closer to
customers, drive
down costs and
increase speed to
market.
3PLs have to
support a number of
industries, managing
distribution processes
efficiently while
helping their clients
meet the growing
demands of their end
customers.
12
www.manh.comcommerce-ready Manhattan’s platform-based approach to Supply Chain Commerce
Solutions to help companies get Commerce-Ready
Manhattan SCOPE® leverages the investments we’ve made in our Supply Chain
Process Platform™ to deliver both the traditional bottom-line benefits associated
with supply chain improvements and the top-line
revenue gains created by commerce initiatives. SCOPE
provides Supply Chain Solutions to optimize efficiency
and performance and Commerce Chain Solutions to
seize opportunities for revenue growth, complemented by Visibility and Insight
applications to support functional capabilities across the platform.
Manhattan SCALE™ is an ideal blend of features, functionality and technology
for organizations looking for a high-performing, affordable and low-risk supply
chain solution. Leveraging the Microsoft .NET platform,
SCALE integrates logistics functions to create an
optimized solution suite that offers end-to-end visibility
and control. “Scaled to fit and ready to run,” SCALE helps
companies maximize their supply chain execution speed-to-value by reducing IT
complexity and deployment costs.
Manhattan MORE®
Manhattan delivers value through
more than software. Surrounding our
software is Manhattan MORE®, a full
suite of services that optimizes the
supply chain at every touch-point to
maximize customer value. Backed
by a dedicated team of Manhattan
experts and a worldwide network
of partners, MORE delivers on our
commitment to help our customers
achieve and maintain business
advantage through supply chain
excellence.
13
Manhattan Associatescommerce-ready commerce
READY
Manhattan’s Flexible Fulfillment
approach enables our customers to
respond to the challenges of a new
commerce landscape—and to be
Commerce-Ready. We provide the
agility needed to respond quickly
to fluctuations in demand and the
ability to strategically fulfill customer
orders from the optimal source—
which may vary by time of year.
Flexible Fulfillment Tools
Distributed Order Management uses
advanced business rules and sophisticated
algorithms to govern the availability of inventory
and the optimal fulfillment path of orders,
adjusting algorithms to serve changing priorities.
Store Fulfillment enables store associates
to execute ship-from-store and pickup in-store
operations quickly and efficiently, while still
providing a high quality in-store experience for
the customer.
Supplier Enablement gives retailers the
ability to enable their suppliers with tools to
become seamless extensions of their fulfillment
network, allowing them to offer more products
to their customers while carrying less inventory.
Warehouse Management optimizes
ecommerce fulfillment activities throughout
the distribution center network, lowering the
cost and improving the velocity of customer
order fulfillment.
Operational Insight gives store managers
and executives the visibility and insight needed
to quickly scale up and scale down support for
network-wide fulfillment activities.
How flexible is flexible enough?
A supply chain that is able to dynamically expand and not turn
away or disappoint customers, while still being able to contract
when demand subsides. Our Flexible Fulfillment approach
enables companies to meter the flow of orders to different
nodes in the fulfillment network.
Fulfillment Cost
Inventory Depth
Seasonality
Network Capacity
14
www.manh.comcommerce-ready innovation
LEADERSHIP
At Manhattan Associates, we continue to
focus on being the leading technology
innovator in Supply Chain Commerce,
leveraging our platform strategy and
investments in R&D to distinguish us in
the market.
Year over year, we invest
more in supply chain research
and development than any of
our competitors—$45 million
in 2013 and $345 million
since 2006.
And our commitment hasn’t wavered. We
have dedicated significant R&D resources
to scientific, mathematical, architectural
and process innovations that facilitate
highly efficient Supply Chain Commerce
operations, enabling leading companies
worldwide to get closer to their customers
and drive top-line growth.
Our global R&D team continues to lead
innovation in all product areas with 26
new releases in 2013 alone. This team,
comprised of over 650 of the best
and brightest minds in the industry, is
dedicated to developing leading-edge
technology solutions to ensure our
customers are Commerce-Ready.
PEO PLE PASSIO N SPI RI T
“Focus on the customer,
seize every opportunity,
never settle.” That’s the spirit of Manhattan and our
2,530 associates around the world. It’s the spirit that drives us to
complete more than 300 software deployments globally in a single
year, to deliver consistently high customer satisfaction ratings, to
garner recognition in the industry for our technology innovation,
and to win the trust of leading brands worldwide. It’s this spirit that
differentiates us in the market and has earned us the reputation of
“a company that gets things done.”
At Manhattan Associates, our number one goal is to focus on the
customer. From our sales teams to product managers, application
designers and engineers, professional services experts, customer
service representatives and trainers—we all work together to meet
customer needs, integrate with their business processes and help
them achieve sustainable success.
By working collaboratively across departments, across products and
across borders, we’re able to function more effectively as teams,
leverage new technologies, take advantage of market trends and
seize every opportunity presented to us.
We drive excellence in everything we do, which means
we never settle. Every day, we strive to do more, to work smarter,
and to innovate faster than we did yesterday.
We work hard to make today better than
yesterday and tomorrow better than today.
15
Manhattan Associatescommerce-ready
americas
CU S TO M ER IM PA CT
Manhattan customers across the Americas get Commerce-Ready
Manhattan’s Americas operations are based out of our headquarters in Atlanta, Georgia, and supported by
Manhattan Value Partners™ and GeoPartners.™ The Americas sales team had a very productive 2013, with
an impressive win rate against both best-of-breed and ERP competitors. Across the Americas—Canada, Latin
America and the U.S.—Manhattan customers are getting Commerce-Ready by leveraging our platform-based
approach to Supply Chain Commerce.
Papa John’s manages a Commerce-Ready foodservice fleet
to deliver ‘better pizza’
15.7% reduction in inventory, 66% reduction in outside storage
costs, 83% lower inventory write-offs
“We were able to achieve
our goal of a 10-15%
reduction in freight spend
after just six months of live
runtime on the system.”
“Manhattan Associates was the best fit for us from two
areas: a technology standpoint, but also a culture and
partnership standpoint. We needed someone to really
understand the complexities of our business, but also
understand how our teams operate.” 1
— Eric Hartman, Senior Director, Logistics
1 SupplyChainBrain Interviews Papa Johns’ and Manhattan Associates about benefits
of Transportation Modeling, December 26, 2013
Lennox International’s supply chain redesign boosts visibility, productivity and
customer service, while slashing costs
“Visibility at the warehouse level was minimal to none.
Today we’re allowed to see the weight, where they’re
going, how they’re going, and it allows us to plan better
than we ever had before…The productivity improvement
we’ve seen from the Manhattan TMS/WMS integrated
system was well over 50%.”
— Tom Wainwright, S.E. Regional Operations Manager
Productivity improved
well over 50% using
TMS/WMS integrated
systems
16
www.manh.comcommerce-ready
“The improved accuracy along with the productivity
gains paid for the system.”
— Keith Nash, Vice President of Supply Chain Logistics, Lennox
Macy’s dramatically improves inventory management
“We used to check inventory once a year. Now we are checking
15 to 20 times a year. That’s a game changer.”3
— Brian Leinbach, Senior Vice President of Systems Development and Field Services
3 Macy’s Takes the Lead in Tech-Enhanced Shopping, RIS News, May 15, 2012
Belk speeds merchandise flow and accuracy
Moves merchandise 25% faster
“By operating at this level of
efficiency, Belk has been able
to close its existing distribution
facilities and store receiving centers. In addition,
we now move merchandise up to 65% faster with
increased accuracy.”
— Jim Harvey, Senior Vice President, Operations/Logistics
Lilly Pulitzer builds brand loyalty
Reduced the in-store fulfillment process from
25 minutes to just 2.5 minutes4
“With our growing
business, the omni-
channel capabilities
Manhattan’s solutions provide will afford us the
ability to expand our market reach, drive online
traffic to our new stores, and create a seamless
experience for our customers… It’s important we
uphold the promise of the Lilly Pulitzer brand and
retain the loyalty of our customers; Manhattan’s
solutions enable our channels to operate together
in making this happen.”5
— Keary McNew, Chief Information Officer
4 Consumer Goods Technology, July 16, 2013
5 On the Omnichannel Journey, Just as Many Questions as Answers, Apparel Magazine,
December 18, 2013
17
Manhattan Associatescommerce-ready emea
CU S TO M ER IM PA CT
Getting Commerce-Ready across EMEA
Manhattan’s Europe, Middle East and Africa (EMEA) operations are based out of our
Centers of Expertise in France, the Netherlands and the UK. The operation is supported
by Manhattan Value Partners™ and GeoPartners™ operating across Central and Eastern
Europe, the Commonwealth of Independent States (CIS) and Russia, Iberia, the Nordics,
the Middle East and Africa. Across the EMEA region, our customers are embracing
Manhattan’s Supply Chain Commerce Solutions™ to take advantage of the growth
opportunities that exist in omni-channel commerce.
Arcadia Group ensures customers worldwide get the
products they want, however they choose to shop
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(cid:88)(cid:73)(cid:71)(cid:74)(cid:79)(cid:71)(cid:3)(cid:45)(cid:88)(cid:85)(cid:91)(cid:86)
“Manhattan’s solutions will
help our team manage the growing supply chain
complexity associated with running a multi-brand,
multi-channel, international retail operation. They
will help ensure our brands’ products continue to be
readily available to our customers throughout the
world, no matter how they choose to shop with us—
in store and online.”
— Sir Philip Green, owner of Arcadia Group
Heineken Subsidiary aims to grow market share and
strengthen brand loyalty
Lacoste to give customers control of when, where and how
they receive goods
“We are faced with several critical
challenges every day including how
we fulfill orders in a way which meets
customers’ service expectations. We
needed a reliable and robust supply
chain solution that could manage
volume fluctuations, enable operational efficiency
improvements and give us improved visibility across
our supply chain.” — Gaël Prigent, Head of Supply Chain
“Manhattan’s technology will
provide our Customer Service
Representatives with a single
view of customer transactions
and network-wide inventory, whilst giving customers
control of when, where and how they receive goods.
Its Enterprise Order Management solution will
become the heartbeat of our omni-channel operation
and will drive conversions across every point of
commerce and improve customer lifetime value.”
— Francis Pierrel, President and Chief Executive Officer
18
www.manh.comcommerce-ready apac
CU S TO MER IMPAC T
APAC customers prepare for the commerce revolution
Manhattan’s Asia-Pacific (APAC) operations are based out of Centers of Expertise
in Australia, China, Japan, Singapore and our Strategic Research & Development
Centre in Bangalore. The business unit’s operations are also supported by Manhattan
Value Partners™ and GeoPartners™ across the region. Manhattan is the solutions
provider of choice for supply chain leaders across APAC—from omni-channel retailers,
to consumer goods and pharmaceutical companies, to logistics services providers.
Luolai Home Textile and Manhattan—an award-winning
partnership
“We are delighted with the
improvements we’ve achieved
with Manhattan’s Warehouse
Management solution. We’ve
increased our average daily shipping volume by
67%. We’ve optimized our warehouse slotting,
we have inventory accuracy levels hitting 100%
and we’ve delivered productivity improvements
throughout our operation.”
Semir implements agile supply chain to support
omni-channel business
Picking efficiency improved by 60%, labor costs reduced by
40%, space utilization improved by 30%
“Manhattan’s technology
has provided us with a
platform that allows us to
be agile and enables us to provide a reliable and
consistent service across the multiple channels
that we operate.”
— Anhong Yang, Logistics Director
— Zhang Zhenlin, Logistics Director
Super Retail Group supports omni-channel
approach with strategic distribution
network
Inventory levels reduced, higher order
accuracy achieved, ROI targets exceeded
“We invested
in Manhattan’s
product offerings for three crucial
reasons: the credibility and scalability
of its solutions; the ongoing strategic
support the company offers; and the
extensibility of its solutions portfolio.”
— Graham Chad, General Manager, Group Logistics
19
Manhattan Associatescommerce-ready Solid execution on our
business strategy in 2013 led
to our most successful year
financially in the Company’s
history. The Company
delivered record performance
in total revenue, operating
profit, earnings per share and
cash flow from operations.
Dennis Story, Executive Vice President,
Chief Financial Officer and Treasurer
20
www.manh.comcommerce-ready Financial Highlights
Year Ended December 31,
2009
2010
2011
2012
2013
(in thousands except per share data)
Statement of Income Data (annual):
License revenue
Total revenue
net income
$ 34,686
246,667
16,562
adjusted net income
(1)
23,885
GAAP diluted earnings per share
(2)
Adjusted diluted earnings per share
(1) (2)
0.18
0.26
$ 54,450
$ 54,241
297,117
28,061
35,360
0.31
0.39
329,253
44,907
49,770
0.52
0.58
$ 61,494
376,248
51,853
57,167
0.64
0.71
$ 62,416
414,518
67,296
72,023
0.86
0.92
Balance Sheet Data (at December 31):
Cash, cash equivalents and investments
Total assets
Debt
Shareholders’ equity
$ 123,014
264,711
—
$ 126,869
280,464
—
$ 99,114
259,600
—
$ 103,047
$ 132,956
261,813
297,828
—
—
183,365
183,800
162,080
161,509
181,586
License Revenue
(in millions)
Total Revenue
(in millions)
net income
(in millions)
adjusted net income (1)
(in millions)
$415
$376
$329
$297
$67
$52
$45
$72
$57
$50
$28
$35
$61
$62
$54
$54
$35
$247
$17
$24
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
Operating Highlights
n In 2013, total revenue of $414.5 million grew 10% over 2012.
n In 2013, we delivered $108.6 million in adjusted operating income.(1)
n In 2013, we achieved record GAAP and adjusted diluted earnings per share of $0.86 and $0.92, respectively. (1), (2)
n We generated operating cash flow of $89.4 million for the year ended December 31, 2013.
Over the past three years, we generated $220.5 million in cash flow from operations.
n Our balance sheet is strong, with $133.0 million in cash, cash equivalents and investments and no debt, providing
the capacity to invest.
n Of our approximately 2,530 employees, over 90% are focused on extending customer value.
(1) The non-GAAP financial measures adjusted operating income, adjusted net income, and adjusted diluted earnings per share exclude amortization of
acquisition-related intangibles, equity-based compensation, unusual items such as restructuring charges, recovery of previously impaired investment, and sales
tax recoveries, net of tax effects and unusual tax adjustments. a reconciliation of GaaP to adjusted results can be found in the investor Relations section of our
website at www.manh.com. Non-GAAP financial measures should not be used as a substitute for, or considered superior to, measures of financial performance
prepared in accordance with GaaP.
(2) On December 19, 2013, our Board of Directors approved a four-for-one stock split of the Company’s Common Stock, effected in the form of a stock dividend.
All references made to shares or per share amounts have been restated to reflect the effect of this four-for-one stock split for all periods presented.
21
Manhattan Associatescommerce-ready
Executive Team
Eddie Capel
President and Chief Executive Officer*
Terry Geraghty
Senior Vice President,
Chief Human Resources Officer
Dennis Story
Executive Vice President,
Chief Financial Officer and
Treasurer*
Jeff Cashman
Senior Vice President,
Business Development
Jonathan Colehower
Senior Vice President,
Chief Marketing Officer
Board of Directors
Bob Howell
Senior Vice President,
Americas*
Bruce Richards
Senior Vice President, Chief Legal Officer
and Secretary*
Steve Smith
Senior Vice President,
EMEA and APAC*
* Executive Officers
John J. Huntz, Jr.
Chairman of the Board of Directors
Thomas E. Noonan
Director
Consultant, Venture Capital,
Arcapita, Inc.
General Manager, EnergyWise,
Cisco Systems
Brian J. Cassidy
Director
Formerly Co-founder and Vice
Chairman, Webforia, Inc.
Dan J. Lautenbach
Director
Formerly Chairman,
Witness Systems, Inc.
Deepak Raghavan, Ph.D.
Director
Co-founder, Manhattan Associates, Inc.
Adjunct Professor, Physics & Astronomy
Georgia State University
Peter F. Sinisgalli
Director
Formerly President and Chief Executive
Officer, Manhattan Associates, Inc.
Eddie Capel
Director
President and Chief Executive Officer,
Manhattan Associates, Inc.
Manhattan at a Glance
Founded: 1990
Nasdaq: MANH
Global Customers:
more than 1,200
Deployments:
Over 300 go-lives in 2013
Supply Chain Focused
R&D Investment:
$45 million in 2013;
$345 million since 2006
Employees Worldwide:
~ 2,530 (December 2013)
Core Markets:
Retail
Food/Grocery
Consumer Goods
Logistics Service Providers
Life Sciences
Industrial/Wholesale
High Tech/Electronics
Transportation Providers
Government
22
www.manh.comcommerce-ready
10-K
2013
23
Manhattan Associatescommerce-ready UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(cid:1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
(cid:3)
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: 000-23999
Manhattan Associates, Inc.
(Exact name of registrant as specified in its charter)
Georgia
(State or other jurisdiction of
incorporation or organization )
2300 Windy Ridge Parkway, Tenth Floor
Atlanta, Georgia
( Address of principal executive offices )
58-2373424
(I.R.S. Employer Identification No.)
30339
( Zip Code )
Registrant’s telephone number, including area code: (770) 955-7070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value per share
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:3)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:3) No (cid:1)
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act from their obligations under those Sections.
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 (cid:1) No (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation 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 (cid:1) No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (cid:3)
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. (Check one):
Large accelerated filer (cid:1) Accelerated filer (cid:3) Non-accelerated filer (cid:3) Smaller reporting company (cid:3)
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:1)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2013
was $1,489,871,715, which was calculated based upon a closing sales price of $19.29 per share of the Common Stock as reported by
the Nasdaq Global Select Market on the same day. As of January 31, 2014, the Registrant had outstanding 76,446,136 shares of
Common Stock.
The Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 15, 2014 is incorporated
DOCUMENTS INCORPORATED BY REFERENCE
by reference in Part III of this Form 10-K to the extent stated herein.
MANHATTAN ASSOCIATES, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2013
Table of Contents
Item Number
Item Description
Page Number
PART I
Business ...................................................................................................................................................................................... 3
Item 1
Item 1A Risk Factors .............................................................................................................................................................................. 14
Item 1B Unresolved Staff Comments .................................................................................................................................................... 22
Properties ................................................................................................................................................................................. 22
Item 2
Legal Proceedings .................................................................................................................................................................... 22
Item 3
Mine Safety Disclosures .......................................................................................................................................................... 23
Item 4
PART II
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities .............. 23
Item 5
Selected Financial Data ............................................................................................................................................................ 24
Item 6
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations .................................................. 25
Item 7A Quantitative and Qualitative Disclosures About Market Risk ................................................................................................. 41
Financial Statements and Supplementary Data ........................................................................................................................ 42
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................................. 69
Item 9
Item 9A Controls and Procedures ........................................................................................................................................................... 69
Item 9B Other Information .................................................................................................................................................................... 69
PART III
Item 10 Directors, Executive Officers and Corporate Governance ....................................................................................................... 69
Item 11 Executive Compensation ......................................................................................................................................................... 69
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ................................ 70
Item 13 Certain Relationships and Related Transactions, and Director Independence ......................................................................... 70
Item 14 Principal Accountant Fees and Services .................................................................................................................................. 70
PART IV
Item 15 Exhibits, Financial Statement Schedules ................................................................................................................................. 70
Signatures ............................................................................................................................................................................................... 72
Exhibit Index ........................................................................................................................................................................................... 73
Exhibit 21.1 List of Subsidiaries
Exhibit 23.1 Consent of Ernst & Young LLP
Exhibit 31.1 Section 302 Certification of Principal Executive Officer
Exhibit 31.2 Section 302 Certification of Principal Financial Officer
Exhibit 32 Section 906 Certification of CEO and CFO
Exhibit 101
Forward-Looking Statements
2
In addition to historical information, this Annual Report may contain “forward-looking statements” relating to Manhattan
Associates, Inc. Investor and 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, technical difficulties, availability of
technical personnel, changes in customer requirements, competitive pressures, market acceptance, the impact of acquisitions, and
general economic conditions. Additional factors are set forth in the “Risk Factors” in Part I, Item 1A of this Annual Report. We
undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes in future operating results.
PART I
Item 1. Business
Overview
We were founded in 1990 in Manhattan Beach, California and incorporated in Georgia in 1998. 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. Our principal executive offices are located at 2300 Windy Ridge Parkway, Tenth
Floor, Atlanta, Georgia 30339, and our telephone number is 770-955-7070.
We develop, sell, deploy, service, and maintain supply chain commerce software solutions for retailers, wholesalers,
manufacturers, governments, and other organizations. Our customers include many of the world’s largest and most profitable brands.
Manhattan Associates’ Supply Chain Commerce Solutions™ are at the leading edge of the omni-channel commerce revolution, as
they are positioned to deliver critical business capabilities that seamlessly connect every order and delivery channel across the
customer’s entire enterprise. Key benefits of implementing our solutions include:
• Solving the complexity of operating profitably in an omni-channel world (stores, websites, mobile devices, catalogs, call
centers) by forecasting demand, controlling inventory, enabling “buy everywhere, deliver anywhere” shipping, and managing
bottom line costs through inventory, labor, and asset optimization;
• Opening new revenue opportunities by “saving the sale” on the store floor through network-wide inventory visibility and
capturing greater gross margins by optimizing demand fulfillment and total cost of ownership;
• Coordinating workflows and communications with the participants in the supply chain ecosystem, including suppliers,
manufacturers, distributors, customers, and transportation providers;
• Balancing transportation and inventory costs with desired service levels across all channels;
•
Increasing productivity and asset utilization in distribution centers, transportation networks, and delivery channels, including
retail stores, to capture more customer revenue and improve return on supply chain investments, including storage, labor,
inventory, and transportation investments;
•
Improving compliance with customer requirements, including radio frequency identification (RFID) and electronic product
code (EPC) requirements; and
• Accelerating eco-friendliness through “green” initiatives such as reducing carbon footprints and greenhouse gas emissions
and improving reuse and recycling.
We believe that a platform-based approach is the best way to optimize an organization’s supply chain, as well as its entire
supply chain ecosystem (every enterprise that interacts with the supply chain). Supply chain ecosystems encompass disparate
functions within an organization that affect its supply chain (such as distribution, transportation, order lifecycle management,
inventory optimization, and planning and forecasting) as well as interactions with entities outside the organization that are integral to
its supply chain, including manufacturers, suppliers, distributors, trading partners, transportation providers, channels (such as
catalogers, store retailers, call centers, mobile devices and web outlets) and consumers.
We deliver these benefits in a distinctive way through a set of supply-chain-centered capabilities we call Manhattan MORE®:
Manhattan’s Optimized Roadmap to Excellence (See Figure 1). These elements work together to coordinate insights, people,
3
workflows, assets, events, and tasks across supply chain functions from planning through execution. They also help to coordinate
actions, data exchange, and communication among participants in supply chain ecosystems.
The Omni
Figure 1: Manhattan MORE® depicts Manhattan’s Optimized Roadmap to Excellence, our comprehensive
methodology for delivering customer value through supply-chain-centered people, principles, products, protocols,
and processes. We build long-term customer relationships through our Customer Excellence Lifecycle, which
leverages our software, expertise and enriched services in a high-touch cycle of engagement, deployment, and
adoption for continuous supply chain advancement.
Channel Revolution – For Retail and Beyond
For decades, the supply chain had been dominated by a focus on operating
efficiency and cost management. Over the past 23 years, Manhattan Associates has built a
foundation and world-class reputation for building technology solutions to solve the most
complex and business critical supply chain problems.
Today’s digital revolution puts the customer in the driver’s seat, and the power
shift between buyers and brands is transforming how business operates. This new omni-
channel age requires supply chains to become more than efficiency tools that push products
to market and drive costs out of an organization. They can, and must, drive profitable
commerce by helping companies get closer to their customers.
Creating closer connections with customers enables companies to deliver
personalized experiences that build loyalty and grow revenue, transforming the supply
chain from just a money-saver to also be a money-maker. At Manhattan Associates, we refer to this as Supply Chain Commerce.
And it presents unprecedented opportunities for all industries—retailers, manufacturers, wholesalers and 3PLs alike.
4
Because our platform-based approach connects money-saving supply chain solutions with money-making commerce chain
solutions, Manhattan Associates is uniquely qualified and totally committed to help our clients in the commerce revolution.
For almost every retailer, the omni-channel revolution has sparked an outright “land grab” for market share. Switching costs
for the average consumer have dropped radically, as virtually every major retailer operates on-line storefronts as well as physical,
brick and mortar locations, placing customer loyalty in jeopardy. Retailers know that in order to keep customers they must be able to
deliver a consistent shopping experience across every channel and at a cost that is competitive. As the multi-channel business model
has evolved, competitors have realized that winning requires more than a great website. Winning requires an integrated business
model that functions seamlessly across every channel and delivers a consistent experience at a cost structure that can deliver a profit.
Yet Supply Chain Commerce is not just about retail. From new customer buying patterns to different ways of connecting
directly with end customers to gain insight into their shopping habits and desires, Supply Chain Commerce is being felt through the
entire retail ecosystem. The wholesale marketplace is experiencing this pressure, thanks to Amazon Supply with its consumer-friendly
website, ecommerce-like service and world-class logistics to a market traditionally serviced by catalogs and sales reps. Across the
landscape, competitors are strategizing and evolving to improve, match and exceed what Amazon brings to bear. Just as retailers
leverage their store to compete, wholesales must leverage their people, domain knowledge and service capabilities to thrive in this
new marketplace.
Manufacturers are also finding new ways to get closer to their customers. Take a look at the range of new initiatives being
undertaken by these companies. Whether it is websites, brand identity programs or re-shoring to shrink supply chains and create new
customized offerings, manufacturers are evolving to address the demands of Supply Chain Commerce.
Manhattan Associates is leading the industry through this radical change with its platform-based solutions that connect
Supply Chain Solutions with Commerce Chain Solutions.
Manhattan Associates’ Software Solution Portfolios
Our supply chain commerce software solution portfolios – Manhattan SCOPE® and Manhattan SCALETM – are designed to
leverage our platform investments to deliver both the profitability benefits typically associated with supply chain improvements and
top line revenue gains created by commerce initiatives. Manhattan SCOPE (Supply Chain Optimization, Planning through Execution,
depicted in Figure 2) leverages our Supply Chain Process PlatformTM (SCPP, depicted in Figure 3) to bring together the supply and
commerce chains; Manhattan SCALE (Supply Chain Architected for Logistics Execution, depicted in Figure 4) leverages Microsoft’s
.NET® platform to unify logistics functions.
Our solutions operate across Unix, IBM System i, Linux and Microsoft’s .NET computing platforms, as well as on multiple
hardware platforms and systems. Because supply chain solutions necessarily interact with other business operation systems, our
solutions are designed to interoperate with software from other providers as well as with a company’s existing legacy systems. This
interfacing and open system capability enables customers to continue using existing computer resources and to choose among a wide
variety of existing and emerging computer hardware and peripheral technologies. We provide an integration framework to facilitate
rapid and reliable integration to any Enterprise Resource Planning (ERP) or host business systems (including certified integration to
both SAP and Microsoft Dynamics AX). We also offer certain of our solutions in both on-premise software and cloud computing
models so that customers can select the option that best meets their requirements for control, flexibility, cost of ownership, and time-
to-deployment.
Manhattan SCOPE®
SCOPE is positioned for companies that consider supply chain software, processes, and technology strategic to their market
leadership. It is the leading portfolio of supply chain commerce solutions built on a common technology platform. SCOPE is
distinctive for several reasons. First, it clearly defines the role and capabilities for supply chain and commerce chain solutions.
Second, it articulates the convergence of supply chain and commerce chain, particularly in the areas of Distribution Management and
Order Lifecycle Management. Finally, it highlights the central value of a supply chain platform by elevating visibility and insight
above all of the functional capabilities.
5
Figure 2: Manhattan SCOPE® Supply Chain Optimization, Planning through Execution leverages the
investments we’ve made in our Supply Chain Process Platform™to deliver both the traditional bottom-
line benefits associated with supply chain improvements and the top-line revenue gains created by
commerce initiatives. SCOPE provides Supply Chain Solutions to optimize efficiency and performance
coupled with Commerce Chain Solutions to seize opportunities for revenue growth. Our fully
integrated Visibility and Insight applications provide actionable insight into your overall performance.
Visibility and Insight
SCOPE offers a series of solutions designed to provide both network-wide visibility as well as analytical insight into all
functions across the supply chain. These solutions include Supply Chain Visibility and Supply Chain Event Management, which are
designed to provide global inventory and order visibility along with predictive alerting to critical events in the supply chain. Also
included is Total Cost to Serve, a financial analytics tool created to provide supply chain executives insight into granular level of cost
detail from purchase to final delivery. This level of information, along with simulation and predictive tools, enables executives and
analysts to better monetize their supply chain, driving revenue and profitability while enhancing customer service levels. Finally,
Visibility and Insights also includes Supply Chain Intelligence, Manhattan’s operational reporting and analytics solution.
Supply Chain Solution Suites
Inventory Optimization enables enterprises to reduce overall network inventory to release working capital while improving
sales and customer order fill rates. Inventory Optimization also provides analytical tools to better balance the financial trade-off
between improving customer service levels and overall inventory investments. Our multi-echelon, all-channel solution helps
organizations manage distribution networks with more than one type or level of distribution center between suppliers and various
endpoints. Demand Forecasting is a sophisticated, yet easy-to-use solution to help organizations anticipate demand and simplify
forecasting complexities by managing infinite combinations of locations, products and forecasting models; differing time horizons and
forecasting methods for assortment, financial and replenishment planning; distorted historical data; seasonal variations; and
exceptions. Vendor Managed Inventory helps formulate tighter, lasting relationships with key trading partners, such as replenishing
products into customers’ locations or sharing key supply chain performance indicators.
Transportation Management optimizes all aspects of transporting product through supply chains, from procurement through
delivery. The system helps companies manage assets, timing, accuracy, and costs for both inbound and outbound shipments, and
6
across private and contracted fleets. The solution also interconnects transportation partners and suppliers to improve visibility to initial
and changing requirements as well as to improve delivery and billing accuracy.
Distribution Management is designed to effectively manage the key assets required to run complex distribution operations,
and to move goods and information through a warehouse with precision and velocity. The suite enables (among other processes)
knowing what inventory will be arriving at a distribution center; receiving, inventory put away and shipping, and managing
distribution-related labor.
Commerce Chain Solution Suites
Order Management is the heart of the omni-channel enterprise. This solution set leverages network-wide inventory and uses
a single view of customer demand in order to drive new revenue and maximize profitability. Highlights include the ability to use store
inventory to fulfill online orders and to use inventory across the entire network to save in-store sales. Advanced algorithms can
identify either the most distressed inventory or the lowest fulfillment costs to maximize profit margins. For retailers, in-store, mobile
and call center capabilities enable their associates to locate and sell items from across their supply chain network to meet real-time
customer demand.
Store Inventory and Fulfillment brings execution tools to the store floor to enable omni-channel initiatives. Store Inventory
provides inventory receiving and auditing tools to help store associates build inventory integrity. Store Fulfillment includes a series of
tools to support pick-up in and fulfill from the store. These components provide critical capabilities to enable omni-channel
initiatives.
Planning supports all levels of enterprise merchandise planning, from strategic level planning down to assortment and key
item planning. Customer Preference Planning capabilities use multi-variable shopper preference data to create merchandise, pricing
and promotion plans tuned to how customers think when shopping and buying across multiple channels (including stores, catalogs, the
web, mobile devices and call centers) so retailers understand relationships among product type, style, brand, color, fabrication, and
price when their customers make decisions to buy.
Supply Chain Process Platform
At the foundation of Manhattan SCOPE is our Supply Chain Process Platform (SCPP), which utilizes a service-oriented
architecture (SOA), common data model, collaborative gateways, and an optimization engine (among other constructs) to facilitate
supply chain transformations that help our customers create and sustain competitive advantage. Specific elements of Manhattan’s
SCPP, along with related core benefits, are detailed in Figure 3.
Among its overall benefits, our SCPP enables customers using multiple Manhattan SCOPE applications to achieve cross-
application optimization—the compound benefits derived not only from optimizing multiple functional supply chain elements
individually, but also collectively by considering factors across multiple functions in a supply chain (e.g., warehouse management,
transportation, inventory, and labor) simultaneously, so that their individual and related impacts inform each decision to determine the
optimal course of action for the organization as a whole. Our SCPP’s common architecture also enables customers to speed
implementations, simplify upgrades, and achieve lower total cost of ownership over time.
7
Figure 3: Manhattan’s Supply Chain Process Platform provides the foundation for Manhattan SCOPE Supply
Chain Solution Suites, Commerce Chain Solution Suites and Visibility and Insight applications. This common
architecture provides agility and business differentiation advantages to operations executives while also
simplifying maintenance and upgrade paths and lowering the total cost of ownership over time for information
technology and financial executives.
Manhattan SCALETM
SCALE is our portfolio of logistics execution solutions built on Microsoft’s .NET platform. It is targeted toward companies
with execution-focused supply chain needs that require speed-to-value, resource-light system configuration and maintenance, and the
ability to quickly scale their logistics operations up or down in response to market fluctuations or business requirement changes.
SCALE combines the features of Trading Partner Management, Yard Management, Optimization, Warehouse Management, and
Transportation Execution, as shown in Figure 4.
Because SCALE leverages a common platform, solutions share common data elements, and each user can access all
applications through a single sign-on. Users also can set up “dashboards” that enable easy access to real-time information most
8
relevant to their jobs. SCALE’s ease of deployment, operation, and support make it a popular choice for organizations operating in
countries with emerging and developing economies, and where technical support resources are limited.
Figure 4: Manhattan’s Supply Chain Architected for Logistics Execution is a portfolio of logistics solutions that
leverages the Microsoft’s®.NET platform and is designed for organizations that want to improve their logistics
operations quickly with limited technical resources. SCALE also is a popular solution choice for organizations
operating in countries with emerging supply chain ecosystems.
Professional Services
We advise and assist our customers in planning and implementing our solutions through our global Professional Services
Organization. To ensure long-term successful customer relationships, consultants assist customers with the initial deployment of our
systems, the conversion and transfer of the customer’s historical data onto our systems, and ongoing training, education, and system
upgrades. We believe our Professional Services teams enable customers to implement our solutions knowledgeably and in the
appropriate amount of time, help customers achieve expected results from system investments, continuously identify new
opportunities for supply chain advancements, and meaningfully add to our industry-specific knowledge base to improve future
implementations and product innovations.
9
Substantially all of our customers utilize some portion of our Professional Services to implement and support our software
solutions. Professional Services typically are rendered under time and materials contracts, with services billed by the hour.
Professional Services sometimes are rendered under fixed-fee contracts, with payments due on specific dates or milestones. We
believe that increased sales of our software solutions will drive higher demand for our Professional Services.
We believe our Professional Services team delivers deep supply chain domain expertise to our customers through industry-
specific “best-practices” protocols and processes developed through the collective knowledge we have gained from 23 years of
implementing our supply chain solutions worldwide. We also extensively train our consulting personnel on supply chain operations
and on our solutions.
Business consultants, systems analysts, and technical personnel assist customers in all phases of implementing our systems,
including planning and design, customer-specific module configuration, on-site implementation- or conversion from existing systems,
and integration with customer systems such as Enterprise Resource Planning (ERP), web- and mobile-based commerce platforms, and
Material Handling Equipment (MHE) systems. At times, third-party consultants, such as those from major systems integrators, assist
our customers with certain implementations.
Customer Support Services and Software Enhancements
We offer a comprehensive program that provides our customers with software upgrades for additional or improved
functionality and technological advances incorporating emerging supply chain and industry initiatives. Over the past three years, our
annual renewal rate of customers subscribing to comprehensive support and enhancements has been greater than 90%. We are able to
remotely access customer systems to perform diagnostics, provide on-line assistance, and facilitate software upgrades. We offer 24
hour customer support every day of the year, plus software upgrades for an annual fee that is paid in advance and is based on the
solutions the customer has and the service level required. Software upgrades are provided under this program on a when-and-if-
available basis.
Training
We offer training in a structured environment for new and existing users. Training programs are provided at fixed fees per-
person, per-class, and cover topics such as (but not limited to) solution use, configuration, implementation, and system administration.
Several computer-based training programs can be purchased for a fixed fee for use at client sites.
Hardware Sales
Along with software licenses, and as a convenience for our customers, we resell a variety of hardware developed and
manufactured by others, including (but are not limited to) computer hardware, radio frequency terminal networks, RFID chip readers,
bar code printers and scanners, and other peripherals. We resell all third-party hardware products and related maintenance pursuant to
agreements with manufacturers or through distributor-authorized reseller agreements pursuant to which we are entitled to purchase
hardware products and services at discount prices and to receive technical support in connection with product installations and any
subsequent product malfunctions. We do not maintain hardware inventory as we generally purchase hardware from vendors only after
receiving related customer orders.
Strategy
Our objective is to extend our position as the leading global supply chain commerce solutions provider for supply chain
leaders, meaning organizations intent on creating and sustaining market advantages by leveraging supply chain solutions. Our
solutions help global distributors, wholesalers, retailers, logistics providers and manufacturers successfully manage accelerating and
fluctuating market demands, as well as master the increasing complexity and volatility of their local and global supply chains. We
believe our solutions are advanced, highly functional and highly scalable. They are designed to enable organizations to: create
customer experiences consistent with their brand values; improve relationships with suppliers, customers and logistics providers;
leverage investments across supply chain functions; effectively generate revenue and manage costs; and meet dynamically changing
customer requirements. We believe our solutions are uniquely positioned to holistically optimize supply chains from planning through
execution, and that customers can leverage this holistic approach to create operational and market advantages. Strategies to
accomplish our objectives include (but are not limited to) the following:
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Develop and Enhance Software Solutions. We intend to continue to focus our research and development resources on
enhancing our Supply Chain Commerce Solutions. We offer what we believe to be the broadest and most richly-featured software
portfolio in the supply chain solutions marketplace. To continuously expand functionality and value, we plan to continue to provide
enhancements to existing solutions and to introduce new solutions to address evolving industry standards and market needs. We
identify these opportunities through our Product Management, Professional Services, Customer Support and Account Management
organizations, through interactions such as ongoing customer consulting engagements and implementations, sessions with our solution
user groups, association with leading industry analyst and market research firms, and participation on industry standards and research
committees. Our solutions address needs 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. We intend to continue to
enhance our solutions to meet the dynamic requirements of these and new vertical markets as business opportunities dictate.
Expand International Presence. We believe our solutions offer significant benefits to customers in markets outside the
United States, and for organizations with global operations. Approximately 54% of our total 2,530 Manhattan employees work
outside the United States to build international sales, service our international clients, and further develop our solutions. 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. Our Europe, Middle
East, and Africa (EMEA) operations support sales, implementation services, and customer support functions for customers in Europe
as well as a number of customers across the Middle East, concentrated in countries we consider politically and economically stable.
Our Asia Pacific (APAC) operations service emerging opportunities in China, Southeast Asia, and India, as well as more established
markets in Japan, Australia and New Zealand. Our international strategy includes leveraging the strength of our relationships with
current U.S. and Europe-based customers that also have significant international operations.
Expand Our Strategic Alliances and Indirect Sales Channels. We currently sell our products primarily through our direct
sales personnel, and through partnership agreements with a select number of organizations in emerging markets where we do not
currently have a direct sales presence. We have worked on joint projects and joint sales initiatives with industry-leading consultants
and software systems implementers, including most of the large consulting firms and other systems consulting firms specializing in
our targeted industries, to supplement our direct sales force and professional services organization. We have been expanding our
indirect sales channels through reseller agreements, marketing agreements, and agreements with third-party logistics providers. These
alliances extend our market coverage and provide us with new business leads and access to trained implementation personnel.
Acquire or Invest in Complementary Businesses. We continuously evaluate strategic acquisition opportunities of
technologies, solutions, and businesses that are consistent with our platform-based strategy and enable us to enhance and expand our
supply chain planning and execution solutions and service offerings. Preferred acquisition targets are those that would be
complementary to our existing solutions and technologies, expand our geographic presence and distribution channels, extend our
presence into additional vertical markets with challenges and requirements similar to those we currently serve, and further solidify our
leadership position within the primary components of supply chain planning and execution.
Sales and Marketing
We employ multi-disciplinary sales teams that consist of professionals with industry experience in sales and technical sales
support. To date, we have generated the majority of our software sales (licensing) revenue through our direct sales force. We plan to
continue to invest in our sales, services, and marketing organizations within the United States, EMEA, and APAC, and to pursue
strategic marketing partnerships. We conduct comprehensive global marketing programs that include prospect profiling and targeting,
lead generation, public relations, analyst relations, trade show attendance and sponsorships, supply chain conference hosting, online
marketing, joint promotion programs with vendors and consultants, and ongoing customer communication programs.
Our sales cycle typically begins with the generation of a sales lead — through in-house telemarketing efforts, targeted
promotions, web inquiries, trade show presence, speaking engagements, hosted seminars, or other means of referral — or the receipt
of a request for proposal from a prospective customer. Leads are qualified and opportunities are closed through a process that includes
telephone-based assessments of requirements; responses to requests for proposals, presentations and product demonstrations, site visits
and/or reference calls with organizations already using our supply chain solutions, and contract negotiations. Sales cycles vary
substantially from opportunity to opportunity, but typically require nine to twelve months.
In addition to new customer sales, we plan to continue to leverage our existing customer base to drive revenue from system
upgrades, sales of additional licenses of purchased solutions, and sales of new or add-on solutions. To efficiently penetrate emerging
global markets, we leverage indirect sales channels, including sales through reseller agreements, marketing agreements, and
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agreements with third-party logistics providers. To extend our market coverage, generate new business leads, and provide access to
trained implementation personnel, we leverage strategic alliances with systems integrators skilled at implementing our solutions.
Business referrals and leads are positively influenced by systems integrators, which include most of the large consulting firms and
other systems consulting firms specializing in our targeted industries.
Our Manhattan Value Partner (Manhattan MVP™) and Manhattan GeoPartner™ programs foster joint sales and marketing
with other organizations. Manhattan Value Partners are proven software and hardware providers, trusted third-party integrators and
consultants who bring added value to customer engagements through vertical industry knowledge or technical specialization.
Manhattan MVPs support and complement our supply chain solutions so we can provide customers with a comprehensive approach
that is suited to their business requirements. This collaborative program is designed to benefit both Manhattan and our partners
through tailored joint marketing, sales and, in some cases, co-development efforts. Among others, Manhattan MVPs include IBM,
Deloitte, Kurt Salmon, Microsoft, and Motorola. Manhattan GeoPartners represent a select group of companies that sell and
implement our solutions in specific geographies around the world, each providing valuable localized expertise to meet customer needs
in areas such as Western Europe, Eastern Europe, Russia, the Middle East, Latin America, Africa, and the Asia Pacific region.
Customers
To date, our customers have been suppliers, manufacturers, distributors, retailers, and logistics providers in a variety of
industries. Our top five customers (new or pre-existing) in the aggregate accounted for 11%, 12%, and 15% of total revenue for the
years ended December 31, 2013, 2012, and 2011, respectively. No single customer accounted for more than 10% of our total revenue
in 2013, 2012, or 2011.
Product Development
We focus our development efforts on adding new functionality to existing solutions, integrating our various solution
offerings, enhancing the operability of our solutions across our Supply Chain Process Platform and across distributed and alternative
hardware platforms, operating systems, and database systems, and developing new solutions. We believe that our future success
depends, in part, on our ability to continue to enhance existing solutions, to respond to dynamically changing customer requirements,
and to develop new or enhanced solutions that incorporate new technological developments and emerging supply chain and industry
standards. To that end, development frequently focuses on base system enhancements and incorporating new user requirements and
features into our solutions. As a result, we deliver packaged, highly configurable solutions with increasingly rich functionality rather
than custom-developed software. We also deliver interface toolkits for many major ERP systems to enhance communication and
improve data flows between our core solutions and our clients’ host systems.
We leverage internal and external scientific advisors to inform our solution strategies and research and development
approaches with the most advanced thinking on supply chain opportunities, challenges, and technologies. Our internal research team
is comprised of Ph.D.-credentialed math and science experts who work on creating and solving algorithms and other constructs that
advance the optimization capabilities and other aspects of our solutions. Our external Science Advisory Board unites the thinking of
experts from leading educational institutions known for their supply chain disciplines, and practitioners from organizations deploying
supply chain technology in innovative and market-advancing ways. Together, our Research Team and Science Advisory Board
inform both the practical business approaches and the mathematical and scientific inventiveness of our solutions.
We conduct most research and development internally in the U.S. and India to retain domain knowledge and to promote
programming continuity standards. However, we may periodically outsource some projects that can be performed separately and/or
that require special skills. We also use third-party translation companies to localize our application software into various languages
such as, but not limited to, Chinese, French, Japanese, and Spanish.
Our research and development expenses for the years ended December 31, 2013, 2012, and 2011 were $44.5 million, $44.7
million, and $42.4 million, respectively. We intend to continue to invest significantly in product development.
Competition
Our solutions are solely focused on the supply chain planning and execution markets, which have been consolidating rapidly,
are intensely competitive, and are characterized by rapid technological change. The principal competitive factors affecting the
markets for our solutions include: industry expertise; company and solution reputation; company viability; compliance with industry
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standards; solution architecture; solution functionality and features; integration experience, particularly with ERP providers and
material handling equipment providers; ease and speed of implementation; proven return on investment; historical and current solution
quality and performance; total cost of ownership; solution price; and ongoing solution support structure. We believe we compete
favorably with respect to each of these factors.
Our competitors are diverse and offer a variety of solutions directed at various aspects of the supply chain, as well as at the
enterprise as a whole. Our existing competitors include:
• Corporate information technology departments of current or potential customers capable of internally developing
solutions;
• ERP vendors, including Oracle, SAP, and Infor, among others;
•
•
•
Supply chain execution vendors, including JDA Software Group, Inc. (JDA), HighJump Software Inc., and the
Sterling Commerce division of IBM, among others;
Supply chain planning vendors, including JDA and SAS Institute Inc., among others; and
Smaller independent companies that have developed or are attempting to develop supply chain execution solutions
and/or planning solutions that apply in specific countries and/or globally.
We anticipate facing increased competition from ERP and supply chain management (SCM) 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. Some of these ERP and other potential competitors
have longer operating histories; significantly more financial, technical, marketing and other resources; greater name recognition;
broader solutions; and larger installed bases of customers than us. To the extent that ERP and SCM vendors or other large competitors
develop or acquire systems with functionality comparable or superior to ours, their larger customer bases, long-standing customer
relationships, and ability to offer broader solutions outside the scope of supply chain could create significant competitive advantage
for them. It also is possible that new competitors or alliances among current and/or new competitors could emerge to win significant
market share. Increased competition could result in price reductions, fewer customer orders, reduced earnings and margins and loss of
market share. In turn, this could have a material adverse effect on our business, results of operations, cash flow, and financial
condition.
We believe we have established meaningful competitive advantages through our supply chain expertise; our platform-based
solution approach; our track record of continuous supply chain innovation and investment; our strong and endorsing customer
relationships; our significant success in deploying and supporting supply chains for market-leading companies; and our ability to out-
execute others in identifying sales opportunities and demonstrating expertise throughout the sales cycle. However, to further our
market success, we must continue to respond promptly and effectively to technological change and competitors’ innovations.
Consequently, we cannot assure that we will not be required to make substantial additional investments in research, development,
marketing, sales and customer service efforts in order to meet any competitive threat, or that we will be able to compete successfully
in the future.
International Operations; Segments
We have three reporting segments, based on geographic location: the Americas; Europe, Middle East and Africa (“EMEA”);
and Asia Pacific (“APAC”). For further information on our segments, see Note 7 to our consolidated financial statements. Our
international revenue was approximately $110.8 million, 104.4 million, and $90.7 million for the years ended December 31, 2013,
2012, and 2011, respectively, which represents approximately 27%, 28%, and 28% of our total revenue for the years ended December
31, 2013, 2012, and 2011, respectively. International revenue includes all revenue derived from sales to customers outside the United
States. We now have approximately 1,370 employees in our International operations.
Proprietary Rights
We rely on a combination of copyright, trade secret, trademark, and trade dress laws, confidentiality procedures, and
contractual provisions to protect our proprietary rights in our products, processes and technology. We have registered trademarks for
Manhattan Associates and the Manhattan Associates logo, as well as a number of our products and features. Generally we enter into
confidentiality and assignment-of-rights agreements with our employees, consultants, customers and potential customers and limit
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access to, and distribution of, our proprietary information. We license our proprietary products to our customers under license
agreements that we believe contain appropriate use and other restrictions in order to try to best protect our ownership of our products
and our proprietary rights in them, and to protect our revenue potential from our products. However, despite our efforts to safeguard
and maintain our proprietary rights, we cannot ensure that we will successfully deter misappropriation, unintended disclosure or
independent third-party development of our technology or our proprietary rights or information. Policing unauthorized use of our
products is difficult, and, while we are unable to determine the extent to which piracy of our software solutions exists, as is the case
with any software company, piracy could become a problem. Further, to the extent that we enter into transactions in countries where
intellectual property laws are not well developed or are poorly enforced, our efforts to protect our proprietary rights may be
ineffective. Whether we seek to enforce our proprietary rights in the U.S. or abroad, our efforts, including litigation to enforce our
rights, can result in substantial costs and diversion of resources, and such efforts, or our failure to succeed in such efforts, could have a
material adverse effect on our business, financial condition, results of operations or cash flows, regardless of the final outcome.
As the number of supply chain management solutions available in the marketplace increases and solution functionality
continues to overlap, supply chain software may increasingly become subject to claims of infringement or other misappropriation of
intellectual property. Third parties may assert infringement or misappropriation claims against us relating to our products, processes
or technology. Such claims, whether or not they have merit, generally are time-consuming and may result in costly litigation, divert
management’s attention or cause product shipment delays or require us to enter into royalty or licensing arrangements. Defense of
infringement or other misappropriation claims, entering into royalty or licensing agreements, the unavailability of such agreements, or
adverse determinations in proprietary rights litigation could have a material adverse effect on our business, results of operations, cash
flow and financial condition.
Employees
At December 31, 2013, we employed approximately 2,530 employees worldwide, of which 1,160 are based in the Americas,
170 in EMEA, and 1,200 in APAC (including India).
Available Information
We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the
“SEC” or the “Commission”). These materials can be inspected and copied at the SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the SEC’s Public
Reference Room at the above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-
SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC.
On our website, www.manh.com, we provide free of charge our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after they have been
electronically filed or furnished to the SEC. Information contained on our website is not part of this Form 10-K or our other filings
with the SEC.
Additionally, our code of business conduct and ethics and the charters of the Audit, Compensation, and Nomination and
Governance Committees of the Board of Directors are available on our website.
Item 1A. Risk Factors
You should consider the following and other risk factors in evaluating our business or an investment in our common stock.
The occurrence of adverse events described in the following risk factors or other adverse events not described in the following risk
factors could have a material adverse effect on our business, results of operations, cash flow and financial condition, and could cause
the trading price of our common stock to decline.
Our performance can be negatively impacted by global macroeconomic or other external influences which could have
a material adverse effect on our business, results of operations, cash flow and financial condition. We are a technology company
selling technology-based solutions with total pricing, including software and services, often, exceeding $1.0 million. Reductions in the
capital budgets of our customers and prospective customers could have an adverse impact on our ability to sell our solutions. We
believe that potential customer concerns over the slow economic recovery within the United States and/or other geographic regions in
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which we operate could cause delays in capital spending by our customers or delay the closing of our sales, which could have a
material adverse impact on our business and our ability to compete and further intensify in our already intensely competitive markets.
The recovering markets and the slow economic recovery in general may adversely affect our business, results of
operations, cash flow and financial condition. Demand for our products and services depends in large part upon the level of capital
and maintenance expenditures by many of our customers. Decreased capital and maintenance spending could have a material adverse
effect on the demand for our products and services, and on our business, results of operations and financial condition. Disruptions in
the financial markets, such as the events that began in the second half of 2008 may adversely impact the availability of credit already
arranged and the availability and cost of credit in the future, which could result in the delay or cancellation of projects or capital
programs on which our business depends.
In addition, continuing weakness or further deterioration in regional economies or the world economy could negatively
impact the capital and maintenance expenditures of our customers and end users. There can be no assurance that government
responses to the disruptions in the financial markets or to weakening economies will restore confidence, stabilize markets, or increase
liquidity and the availability of credit. These conditions may reduce the willingness or ability of our customers and prospective
customers to commit funds to purchase our products and services, or their ability to pay for our products and services after purchase.
We may not be able to continue to successfully compete with other companies. We compete in markets that are intensely
competitive and are expected to become more competitive as current competitors expand their product offerings. Our current
competitors come from many segments of the software industry and offer a variety of solutions directed at various aspects of the
extended supply chain, as well as the enterprise as a whole. We face competition for product sales from:
•
corporate information technology departments of current or potential customers capable of internally developing
solutions;
• ERP vendors, including Oracle, SAP, and Infor, among others;
•
•
•
supply chain execution vendors, including JDA Software Group, Inc. (JDA), HighJump Software Inc., and the
Sterling Commerce division of IBM, among others;
supply chain planning vendors, including JDA and SAS Institute Inc., among others; and
smaller independent companies that have developed or are attempting to develop supply chain execution solutions
and/or supply chain planning solutions that apply in specific countries and/or globally.
We anticipate facing increased competition from ERP and supply chain management (SCM) 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. Some of these ERP and other potential competitors
have longer operating histories, significantly more financial, technical, marketing, and other resources, greater name recognition,
broader solutions, and larger installed bases of customers than do we. To the extent that ERP and SCM vendors or other large
competitors develop or acquire systems with functionality comparable or superior to ours, their larger customer bases, long-standing
customer relationships, and ability to offer broader solutions outside the scope of supply chain could create significant competitive
advantage for them. It also is possible that new competitors or alliances among current and/or new competitors could emerge to win
significant market share. Increased competition could result in price reductions, fewer customer orders, reduced earnings and margins,
and loss of market share. In turn, this could have a material adverse effect on our business, results of operations, cash flow, and
financial condition.
We believe the domain expertise required to continuously innovate supply chain technology in our target markets, effectively
and efficiently implement solutions, identify and attract sales opportunities, and compete successfully in the sales cycle provides us
with a competitive advantage and is a significant barrier to market entry. However, in order to be successful in the future, we must
continue to respond promptly and effectively to technological change and competitors’ innovations, and consequently we cannot
assure you that we will not be required to make substantial additional investments in connection with our research, development,
marketing, sales, and customer service efforts in order to meet any competitive threat, or that we will be able to compete successfully
in the future. Some of our competitors have significant resources at their disposal, and the degree to which we will compete with their
new innovative products in the marketplace is undetermined.
Our operating results are substantially dependent on one line of business. We continue to derive our revenues from sales
of our supply chain solutions software and related services and hardware. Any factor adversely affecting the markets for supply chain
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solutions could have an adverse effect on our business, results of operations, cash flow, and financial condition. Accordingly, our
future operating results will depend on the demand for our supply chain products and related services and hardware by our customers,
including new and enhanced releases that we subsequently introduce. We cannot guarantee that the market will continue to demand
our current products or we will be successful in marketing any new or enhanced products. If our competitors release new products that
are superior to our products in performance or price, demand for our products may decline. A decline in demand for our products as a
result of competition, technological change, or other factors would reduce our total revenues and harm our ability to maintain
profitability.
Our operating results are difficult to predict and could cause our stock price to fall. Our quarterly revenue and operating
results are difficult to predict and can fluctuate significantly from quarter to quarter. If our quarterly revenue or operating results fall
below the expectations of investors or public market analysts, the price of our common stock could fall substantially. Our quarterly
revenue is difficult to forecast for several reasons, including the following: global macro-economic disruptions; credit and equity
market disruptions, which can significantly impact capital availability and spend timing of customers or potential customers; the
varying sales cycle for our products and services from customer to customer, including multiple levels of authorization required by
some customers; the varying demand for our products; customers’ budgeting and purchasing cycles; potential deferral of license
revenue well after entering into a license agreement due to extended payment terms, including, although infrequent, payment terms in
a contract extending beyond twelve months, significant software modifications, future software functionality deliverables not on a
stand-alone basis, or other negotiated terms that preclude software revenue recognition under U.S. general accepted accounting
principles; delays in our implementations at customer sites; timing of hiring new services employees and the rate at which these
employees become productive; timing of introduction of new products; development and performance of our distribution channels;
and timing of any acquisitions and related costs.
As a result of these and other factors, our license revenue is difficult to predict. Because our revenue from services is largely
correlated to our license revenue, a decline in license revenue could also cause a decline in our services revenue in the same quarter or
in subsequent quarters. In addition, an increase or decrease in hardware sales, which provide us with lower gross margins than sales
of software licenses or services, may cause variations in our quarterly operating results.
Most of our expenses, including employee compensation and rent, are relatively fixed. In addition, our expense levels are
based, in part, on our expectations regarding future revenue increases. As a result, any shortfall in revenue in relation to our
expectations could cause significant changes in our operating results from quarter to quarter and could result in quarterly losses. As a
result of these factors, we believe that period-to-period comparisons of our revenue levels and operating results are not necessarily
meaningful. Historical growth rates and historical quarterly revenue and operating results may not be a good indicator of future
operating results and reliance on historical results should not be used to predict our future performance.
Our future revenue is dependent on continuing license sales, which in turn drive sales of post-contract support and
professional services. We are dependent on our new customers as well as our large installed customer base to purchase additional
software licenses, post-contract support, and professional services from us. Our post-contract support agreements are generally for a
one-year term and our professional services agreements generally only cover a particular engagement. In future periods customers
may not license additional products, and in turn may not renew post-contract support agreements or purchase additional professional
services from us. If our customers decide not to license or purchase these products and services from us, or if they reduce the scope of
their post-contract support or hosting or professional services agreements, our revenue could decrease significantly, and that could
have a material adverse effect on our business, results of operations, cash flow and financial condition.
In addition, many of our customers are using older versions of our products for which we are no longer developing any
further upgrades or enhancements. While we intend to migrate our customers who are using these versions to newer versions or
products, there can be no assurance that these customers will do so. If customers using older versions of our products decide not to
license our current software products, or decide to discontinue the use of our products and associated post-contract support services,
our revenue could decrease and our operating results could be materially adversely affected.
We may encounter long sales cycles, particularly with our larger customers, which could have an adverse effect on
the amount, timing, and predictability of our revenue, adversely affecting our business, results of operations, cash flow, and
financial condition. Our products have lengthy sales cycles, which typically extend from six to twelve months and may take up to
several years. Potential and existing customers, particularly larger enterprise customers, often commit significant resources to an
evaluation of available solutions and services and require us to expend substantial time and resources in connection with our sales
efforts. The length of our sales cycles also varies depending on the type of customer to which we are selling, the product being sold,
and customer requirements. We may incur substantial sales and marketing expenses and expend significant management effort during
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this time, regardless of whether we make a sale. Many of the key risks relating to sales processes are beyond our control, including:
our customers’ budgetary and scheduling constraints; the timing of our customers’ budget cycles and approval processes; our
customers’ willingness to replace their currently deployed software solutions; and general economic conditions.
As a result of these lengthy and uncertain sales cycles of our products and services, it is difficult for us to predict when
customers may purchase products or services from us, thereby affecting when we can recognize the associated revenue, and our
operating results may vary significantly and may be adversely affected. The length of our sales cycle makes us susceptible to having
pending transactions delayed or terminated by our customers if they decide to delay or withdraw funding for IT projects. Our
customers may decide to delay or withdraw funding for IT projects for various reasons, including, but not limited to, global economic
cycles and capital market fluctuations.
Delays in implementing our products could adversely impact our business, results of operations, cash flow, and
financial condition. Due to the size and complexity of most of our software implementations, our implementation cycle can be
lengthy and may result in delays. Our products may require modification or customization and must integrate with many existing
computer systems and software programs of our customers. This can be time-consuming and expensive for customers and can result
in implementation and deployment delays of our products. Additional delays could result if we fail to attract, train, and retain services
personnel, or if our alliance companies fail to commit sufficient resources towards implementing our software. These delays and
resulting customer dissatisfaction could limit our future sales opportunities, impact revenue, and harm our reputation.
Our pricing models may need to be modified due to price competition. The competitive markets in which we operate may
oblige us to reduce our prices in order to contend with the pricing models of our competitors. If our competitors discount certain
products or services, we may have to lower prices on certain products or services in order to attract or retain customers. Any such
price modifications would likely reduce margins and could adversely affect our business, results of operations, cash flow, and
financial condition.
Our ability to license our software is highly dependent on the quality of our services offerings, and our failure to offer
high quality services could adversely impact our business, results of operations, cash flow, and financial condition. Most of our
customers rely to some extent on our professional services to aid in the implementation of our software solutions. Once our software
has been installed and deployed, our customers may depend on us to provide them with ongoing support and resolution of issues
relating to our software. Therefore, a high level of service is critical for the continued marketing and sale of our solutions. If we or our
partners do not efficiently and effectively install and deploy our software products, or succeed in helping our customers quickly
resolve post-deployment issues, our ability to sell software products to these customers would be adversely affected and our reputation
in the marketplace and with potential customers could suffer. In turn, our business, results of operations, cash flow, and financial
condition could be materially adversely affected.
Our failure to manage the growth of our operations may adversely affect our business, results of operations, cash
flow, and financial condition. We plan to continue to increase the scope of our operations domestically and internationally. This
growth may place a significant strain on our management systems and resources. We may further expand domestically or
internationally through internal growth or through acquisitions of related companies and technologies. If we fail to maintain continuity
in our executive officers; develop the management skills of our managers and supervisors; attract, retain, train, and motivate our
employees; improve our operational, financial, and management controls; and maintain adequate reporting systems and procedures
and our management and information control systems, our business, results of operations, and cash flow could be negatively impacted.
Our international operations have many associated risks. We continue to strategically manage our presence in
international markets, and these efforts require significant management attention and financial resources. We may not be able to
successfully penetrate international markets, or, if we do, there can be no assurance that we will grow our business in these markets at
the same rate as in North America. Because of these inherent complexities and challenges, lack of success is international markets
could adversely affect our business, results of operations, cash flow, and financial condition.
We have international offices in Europe: the United Kingdom, the Netherlands, and France; and in Asia: China, Japan,
Singapore, and India; and Australia. We have committed resources to maintaining and further expanding, where appropriate, our sales
offices and sales and support channels in key international markets. However, our efforts may not be successful. International sales are
subject to many risks and difficulties, including those arising from the following: building and maintaining a competitive presence in
new markets; staffing and managing foreign operations; managing international systems integrators; complying with a variety of
foreign laws; producing localized versions of our products; import and export restrictions and tariffs; enforcing contracts and
collecting accounts receivable; unexpected changes in regulatory requirements; reduced protection for intellectual property rights in
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some countries; potential adverse tax treatment; less stringent adherence to ethical and legal standards by prospective customers in
some countries; language and cultural barriers; currency fluctuations; political and economic instability abroad; and seasonal
fluctuations.
Our operating results may include foreign currency gains and losses. Due to our international operations, we conduct a
portion of our business in currencies other than the United States dollar. Our revenues, expenses, operating profit and net income are
affected when the dollar weakens or strengthens in relation to other currencies. In addition, we have a large development center in
Bangalore, India, that does not have a natural in-market revenue hedge to mitigate currency risk to our operating expense in
India. Fluctuations in the value of other currencies, particularly the Indian rupee, could significantly affect our revenues, expenses,
operating profit and net income.
We may have exposure to additional tax liabilities. As a multinational corporation, we are subject to income taxes in the
U.S. and various foreign jurisdictions. Significant judgment is required in determining our global provision for income taxes and other
tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the
ultimate tax determination is uncertain. Our income tax returns are routinely subject to audits by tax authorities. Although we
regularly assess the likelihood of adverse outcomes resulting from these examinations to determine our tax estimates, a final
determination of tax audits or tax disputes could have an adverse effect on our financial condition, results of operations and cash
flows. Also, the earnings of our foreign subsidiaries are considered to be indefinitely reinvested. If our plans change in the future or if
we elect to repatriate the unremitted earnings of our foreign subsidiaries in the form of dividends or otherwise, we would be subject to
additional income taxes which would result in a higher effective tax rate.
In addition, our future effective tax rates could be favorably or unfavorably affected by changes in tax rates, changes in the
valuation of our deferred tax assets or liabilities, or changes in tax laws or their interpretation. Such changes could have a material
adverse impact on our financial results.
We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services
taxes in the U.S. and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income
taxes and may have exposure to additional non-income tax liabilities, which could have an adverse effect on our results of operations,
financial condition and cash flows.
Fluctuations in our hardware sales may adversely impact our business, results of operations, cash flow, and financial
condition. A portion of our revenue in any period is from the resale of a variety of third-party hardware products to purchasers of our
software. However, our customers may purchase these hardware products directly from manufacturers or distributors rather than from
the Company. We view sales of hardware as non-strategic. We perform this service to our customers seeking a single source for their
supply chain needs. Hardware sales are difficult to forecast and fluctuate from quarter to quarter, leading to unusual comparisons of
total revenue and fluctuations in profits. If we are unable to maintain or grow our hardware revenue, our business, results of
operations, cash flow, and financial condition may be adversely affected.
Our technology must be advanced if we are to remain competitive. The market for our products is characterized by rapid
technological change, frequent new product introductions and enhancements, changes in customer demands, and evolving industry
standards. Our existing products could be rendered obsolete if we fail to continue to advance our technology. We have also found that
the technological life cycles of our products are difficult to estimate, partially because of changing demands of other participants in the
supply chain. We believe that our future success will depend in large part upon our ability to continue to enhance our current product
line while we concurrently develop and introduce new products that keep pace with competitive and technological developments.
These developments require us to continue to make substantial product development investments. Although we are presently
developing a number of product enhancements to our product sets, we cannot assure you that these enhancements will be completed
on a timely basis or gain customer acceptance.
Our research and development activities may not generate significant returns. Our product development activities are
costly, and recovering our investment in product development may take a significant amount of time, if it occurs at all. We anticipate
continuing to make significant investments in software research and development and related product opportunities because we
believe that we must continue to allocate a significant amount of resources to our research and development activities in order to
compete successfully. We cannot estimate with any certainty when we will, if ever, receive significant revenues from these
investments.
18
Our liability to clients may be substantial if our systems fail, which could adversely impact our business, results of
operations, cash flow, and financial condition. Our products are often critical to the operations of our customers’ businesses and
provide benefits that may be difficult to quantify. If our products fail to function as required, we may be subject to claims for
substantial damages. Courts may not enforce provisions in our contracts that would limit our liability or otherwise protect us from
liability for damages. Defending a lawsuit, regardless of its merit, could be costly and divert management’s time and attention.
Although we maintain general liability insurance and error and omissions coverage, these coverages may not continue to be available
on reasonable terms or in sufficient amounts to cover claims against us. In addition, our insurer may disclaim coverage as to any future
claim. If claims exceeding the available insurance coverage are successfully asserted against us, or our insurer imposes premium
increases or large deductibles or co-insurance requirements on us, then our business, results of operations, cash flow, and financial
condition could be adversely affected.
We incorporate third-party software in our solutions, the failure or unavailability of which could adversely affect our
ability to sell, support, and service our products. We incorporate and include third-party software into and with certain of our
products and solutions and expect to continue to do so. The operation of our products could be impaired if there are defects in that
third-party software. It may be difficult for us to correct any defects in third-party software because the development and maintenance
of the software is not within our control. Such defects could adversely affected or business.
In addition, there can be no assurance that these third parties will continue to make their software available to us on
acceptable terms, or at all; not make their products available to our competitors on more favorable terms; invest the appropriate levels
of resources in their products and services to maintain and enhance the capabilities of their software; or remain in business. Any
impairment in our relationship with these third parties or our ability to license or otherwise use their software could have a material
adverse effect on our business, results of operations, cash flow, and financial condition.
The use of open source software in our products may expose us to additional risks and harm our intellectual property,
which could adversely impact our business, results of operations, cash flow, and financial condition. Some of our products use or
incorporate software that is subject to one or more open source licenses. Open source software is typically freely accessible, usable
and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a
component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open
source software licenses require the user of such software to make any derivative works of the open source code available to others on
unfavorable terms or at no cost. This can subject previously proprietary software to open source license terms.
While we monitor the use of all open source software in our products, processes, and technology and try to ensure that no
open source software is used in such a way as to require us to disclose the source code to the related product or solution, such use
could inadvertently occur. Additionally, if a third-party software provider has incorporated open source software into software we
license from them for use in our products and solutions, we could, under certain circumstances, be required to disclose the source code
to our products and solutions. This could harm our intellectual property position and have a material adverse effect on our business,
results of operations, cash flow, and financial condition.
If we are unable to develop software applications that interoperate with computing platforms developed by others,
our business, results of operations, cash flow, and financial condition may be adversely affected. We develop software
applications that interoperate with operating systems, database platforms, and hardware devices developed by others, which we refer
to collectively as computing platforms. If the developers of these computing platforms do not cooperate with us or we are unable to
devote the necessary resources so that our applications interoperate with those computing platforms, our software development efforts
may be delayed and our business and results of operations may be adversely affected. When new or updated versions of these
computing platforms are introduced, it is often necessary for us to develop updated versions of our software applications so that they
interoperate properly with these computing platforms. We may not accomplish these development efforts quickly or cost-effectively,
and it is difficult to predict what the relative growth rates of adoption of these computing platforms will be. These development efforts
require substantial investment, the devotion of substantial employee resources, and the cooperation of the developers of the computing
platforms. For some computing platforms, we must obtain some proprietary application program interfaces from the owner in order to
develop software applications that interoperate with the computing platforms. Computing platform providers have no obligation to
assist in these development efforts. If they do not provide us with assistance or the necessary proprietary application program
interfaces on a timely basis, we may experience delays or be unable to expand our software applications into other areas.
The computing platforms we use may not continue to be available to us on commercially reasonable terms. Any loss of the
right to use any of these systems could result in delays in the provision of our products and services, and our results of operations may
be adversely affected. Defects in computing platforms could result in errors or failure of our products, which could harm our business.
19
Our software may contain undetected errors or “bugs,” or may be breached by hackers, resulting in harm to our
reputation which could adversely impact our business, results of operations, cash flow, and financial condition. Software
products as complex as those offered by us might contain undetected errors or failures when first introduced or when new versions are
released, or may be vulnerable to hackers. Despite testing, we cannot ensure that errors will not be found in new products or product
enhancements after commercial release, or that malefactors will not breach these systems. Any errors or security breaches could cause
substantial harm to our reputation, result in additional unplanned expenses to remedy any defects, delay the introduction of new
products, result in the loss of existing or potential customers, or cause a loss in revenue. Further, such errors or breaches could subject
us to claims from our customers for significant damages, and we cannot assure you that courts would enforce the provisions in our
customer agreements that limit our liability for damages. In turn, our business, results of operations, cash flow, and financial
condition could be materially adversely affected.
Our inability to attract, integrate, and retain management and other personnel could adversely impact our business,
results of operations, cash flow, and financial condition. Our success greatly depends on the continued service of our executives, as
well as our other key senior management, technical personnel, and sales personnel. Our success will depend on the ability of our
executive officers to work together as a team. The loss of any of our senior management or other key professional services, research
and development, sales and marketing personnel—particularly if they are lost to competitors—could impair our ability to grow our
business. We do not maintain key man life insurance on any of our executive officers.
Our future success will depend in large part upon our ability to attract, retain, and motivate highly skilled employees. We
face significant competition for individuals with the skills required to perform the services we offer, and thus we may encounter
increased compensation costs that are not offset by increased revenue. We cannot guarantee that we will be able to attract and retain
sufficient numbers of these highly skilled employees or motivate them. Because of the complexity of the supply chain market, we may
experience a significant time lag between the date on which technical and sales personnel are hired and the time at which these
persons become fully productive.
Our growth is dependent upon the successful development of our direct and indirect sales channel mix. We believe that
our future growth also will depend on further developing and maintaining a successful direct sales force and strategic relationships
with systems integrators and other technology companies. We are currently investing, and plan to continue to invest, significant
resources to further develop certain of our sales channels. Our investment could adversely affect our operating results if these efforts
do not generate license and service revenue necessary to offset the investment. Also, our inability to partner with other technology
companies and qualified systems integrators could adversely affect our results of operations. Because lower unit prices are typically
charged on sales made through indirect channels, a disproportionate increase in indirect sales could reduce our average selling prices
and result in lower gross margins. In addition, sales of our products through indirect channels typically do not generate consulting
services revenue for us at the same levels as direct sales, as the third-party systems integrators generally provide these services.
Similarly, indirect sales typically do not generate the same levels of direct contact between our human resources and those of our
customer, and we may have more difficulty accurately forecasting sales, evaluating customer satisfaction, and recognizing emerging
customer requirements. In addition, these systems integrators and third-party software providers may develop, acquire, or market
products competitive with our products.
Our strategy of marketing our products directly to customers and indirectly through systems integrators and other technology
companies may result in distribution channel conflicts. Our direct sales efforts may compete with those of our indirect channels and, to
the extent different systems integrators target the same customers, systems integrators may also come into conflict with each other.
Any channel conflicts that develop may have a material adverse effect on our relationships with systems integrators or harm our
ability to attract new systems integrators.
Our employee retention and hiring may be hindered by immigration restrictions, which could adversely impact our
business, results of operations, cash flow, and financial condition. Foreign nationals who are not U.S. citizens or permanent
residents constitute a significant part of our professional U.S. workforce. Our ability to hire and retain these workers, and their ability
to remain and work in the U.S. are impacted by laws and regulations as well as by processing procedures of various government
agencies. Changes in laws, regulations, or procedures may adversely affect our ability to hire or retain such workers and may affect
our costs of doing business and/or our ability to deliver services.
Our failure to adequately protect our proprietary rights could adversely impact our business, results of operations,
cash flow, and financial condition. Our success and ability to compete is dependent in part upon our proprietary technology. There
are no assurances that we will be able to protect our proprietary rights against unauthorized disclosure or third-party copying or use.
We rely on a combination of copyright, trademark, and trade secret laws, as well as confidentiality agreements, licensing
20
arrangements, and contractual commitments, to establish and protect our proprietary rights. Despite our efforts to protect our
proprietary rights, existing copyright, trademark, and trade secret laws afford only limited protection. In addition, the laws of certain
foreign countries do not protect our rights to the same extent as do the laws of the United States. Attempts may be made to copy or
reverse engineer aspects of our products or to obtain and use information that we regard as proprietary. Any infringement of our
proprietary rights could negatively impact our future operating results. Furthermore, policing the unauthorized use of our products is
difficult, and litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to
determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of
resources. In turn, our business, results of operations, cash flow, and financial condition could be materially adversely affected.
Our liability for intellectual property claims can be costly and result in the loss of significant rights, which could
adversely impact our business, results of operations, cash flow, and financial condition. It is possible that third parties will claim
that we have infringed their current or future products, inventions, or other intellectual property. We expect that supply chain software
developers like us will increasingly be subject to infringement claims as the number of products grows. Any claims, with or without
merit, could be time-consuming, result in costly litigation, cause product shipment delays, or require us to pay monetary damages or to
enter into royalty or licensing agreements, any of which could negatively impact our operating results. There are no assurances that
these royalty or licensing agreements, if required, would be available on terms acceptable to us, if at all. We also may be required to
indemnify our customers for damages they suffer as a result of such infringement. There are no assurances that legal action claiming
patent infringement will not be commenced against us, or that we would prevail in litigation given the complex technical issues and
inherent uncertainties in patent litigation. If a patent claim against us were successful and we could not obtain a license on acceptable
terms or license a substitute technology or redesign the product or feature to avoid infringement, we may be prevented from
distributing our software or required to incur significant expense and delay in developing non-infringing software. Any of these events
could seriously harm our business, results of operations, cash flow, and financial condition.
Mergers or other strategic transactions involving our competitors could weaken our competitive position or reduce
our revenue. Our competitors have been consolidating, which may make them more formidable competitors to us. Competing with
stronger companies may cause us to experience pricing pressure and loss of market share, either of which could have a material
adverse effect on our business, results of operations, cash flow, and financial condition. Our competitors may establish or strengthen
their cooperative relationships with vendors, systems integrators, third-party consulting firms, or other parties. Established companies
may not only develop their own products but may also acquire or partner with our current competitors. If any of these events occur,
our revenue and profitability could significantly decline.
Our business, results of operations, cash flow, and financial condition may be adversely affected if we cannot integrate
acquired companies or manage joint ventures. We may from time to time acquire companies with complementary products and
services. These acquisitions will expose us to increased risks and costs, including those arising from the following: assimilating new
operations and personnel; diverting financial and management resources from existing operations; and integrating acquired
technologies. We may not be able to generate sufficient revenue from any of these acquisitions to offset the associated acquisition
costs.
We will also be required to maintain uniform standards of quality and service, controls, procedures, and policies. Our failure
to achieve any of these standards may hurt relationships with customers, employees, and new management personnel. In addition,
future acquisitions may result in additional issuances of stock that could be dilutive to our shareholders.
Many acquisition candidates have significant intangible assets, and an acquisition of these businesses would likely result in
significant amounts of goodwill and other intangible assets. Goodwill and certain other intangible assets are not amortized to income,
but are subject to at least annual impairment reviews. If the acquisitions do not perform as planned, future charges to income arising
from such impairment reviews could be significant. Likewise, future quarterly and annual earnings could be significantly adversely
affected. In addition, these acquisitions could involve acquisition-related charges, such as one-time acquired research and development
charges.
We may also evaluate joint venture relationships with complementary businesses. Any joint venture we enter into would
involve many of the same risks posed by acquisitions, particularly the following: risks associated with the diversion of resources; the
inability to generate sufficient revenue; the management of relationships with third parties; and potential additional expenses.
Our business may require additional capital. We may require additional capital to finance our growth or to fund
acquisitions or investments in complementary businesses, technologies or product lines. Our capital requirements may be impacted by
many factors, including: demand for our products; the timing of and extent to which we invest in new technology; the timing of and
21
extent to which we acquire other companies; the level and timing of revenue; the expenses of sales and marketing and new product
development; the success and related expense of increasing our brand awareness; the cost of facilities to accommodate a growing
workforce; the extent to which competitors are successful in developing new products and increasing their market share; and the costs
involved in maintaining and enforcing intellectual property rights.
To the extent that our resources are insufficient to fund our future activities, we may need to raise additional funds through
public or private financing. However, additional funding, if needed, may not be available on terms attractive to us, or at all. In
addition, since we have historically financed our growth through cash flow from operations and available cash, our relative
inexperience in accessing the credit or capital markets may impair our ability to do so if the need arises. Our inability to raise capital
when needed could have a material adverse effect on our business, results of operations, cash flow and financial condition. If
additional funds are raised through the issuance of equity securities, the percentage ownership of our company held by our current
shareholders would be diluted.
Our stock price has been highly volatile. The trading price of our common stock has fluctuated significantly since our
initial public offering in April 1998. In addition, the trading price of our common stock could be subject to wide fluctuations in
response to various factors, including: global macro-economic contraction impacting demand for supply chain solutions; quarterly
variations in operating results; announcements of technological innovations or new products by us or our competitors; developments
with respect to patents or proprietary rights; changes in financial estimates by securities analysts; and mergers, acquisitions, and
combinations involving our competitors or us.
During 2013, we repurchased approximately $59.2 million of Manhattan Associates’ outstanding common stock under the
share repurchase program approved by our Board of Directors throughout the year. In January 2014, our Board of Directors approved
raising our remaining share repurchase authority to $50.0 million of Manhattan Associates outstanding common stock.
In addition, the stock market has recently experienced volatility that has particularly affected the market prices of equity
securities of many technology companies. The volatility often has been unrelated or disproportionate to the operating performance of
those companies. These broad market fluctuations may adversely affect the market price of our common stock.
Our articles of incorporation and bylaws and Georgia law may inhibit a takeover of our company. Our basic corporate
documents and Georgia law contain provisions that might enable our management to resist a takeover of our company. These
provisions might discourage, delay, or prevent a change in the control of our company or a change in our management. These
provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors and take
other corporate actions. The existence of these provisions could also limit the price that investors might be willing to pay in the future
for shares of our common stock.
Item 1B. Unresolved Staff Comments
As of December 31, 2013, we do not have any unresolved SEC staff comments.
Item 2. Properties
Our principal administrative, sales, marketing, support, and research and development facility is located in approximately
191,000 square feet of modern office space in Atlanta, Georgia. Substantially all of this space is leased to us through September 30,
2018. We have additional offices under multi-year agreements in Indiana. We also occupy facilities outside of the United States under
multi-year agreements in the United Kingdom, the Netherlands, France, China, Singapore, India, and Australia. We also occupy
offices under short-term agreements in other geographical regions. We believe our office space is adequate to meet our immediate
needs; however, we may expand into additional facilities in the future.
Item 3. Legal Proceedings
From time to time, we may be a party to legal proceedings arising in the ordinary course of business, and we could be a party
to legal proceedings not in the ordinary course of business. The Company is not currently a party to any legal proceeding the result of
which it believes could have a material adverse impact upon its business, financial position, results of operations, or cash flows.
22
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 contractually limit our 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 our contracts will be enforceable in all instances.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
Market for Common Stock
PART II
On December 19, 2013, the Board of Directors of the Company approved a four-for-one stock split of the Company’s
common stock, effected in the form of a stock dividend. Each shareholder of record at the close of business on December 31, 2013
received three additional shares for every outstanding share held on the record date. The additional shares were distributed on
January 10, 2014 and trading began on a split-adjusted basis on January 13, 2014. All references made to share or per share amounts
have been restated to reflect the effect of this four-for-one stock split for all periods presented.
Our common stock is traded on the Nasdaq Global Select Market under the symbol “MANH”. The following table sets forth
the high and low closing sales prices of the common stock as reported by the Nasdaq Global Select Market for the periods indicated:
Fiscal Period
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High Price
Low Price
$
18.75
$
15.09
19.90
24.02
30.59
17.07
19.85
22.88
$
12.53
$
9.94
12.74
14.64
15.65
10.85
10.37
13.92
On January 31, 2014, the last reported sales price of our common stock on the Nasdaq Global Select Market was $33.72 per
share. The number of shareholders of record of our common stock as of January 31, 2014 was approximately 17.
We do not intend to declare or pay cash dividends in the foreseeable future. Our management anticipates that all earnings and
other cash resources, if any, will be retained for investment in our business.
Equity Compensation Plan Information
The following table provides information regarding our current equity compensation plans as of December 31, 2013:
23
Equity Compensation Plan Information
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Number of securities to
be issued upon exercise of
outstanding options and
rights
Weighted-average
exercise price of
outstanding options and
rights
Number of securities
remaining available for
future issuance under
equity compensation plans
2,221,804
$5.23
13,536,716
-
-
-
Total
2,221,804
$5.23
13,536,716
Additional information regarding our equity compensation plans can be found in Note 2 of the Notes to our Consolidated
Financial Statements.
Purchase of Equity Securities
The following table provides information regarding our common stock repurchases on a post-split adjusted basis under our
publicly-announced share repurchase program and shares withheld for taxes due upon vesting of restricted stock for the quarter ended
December 31, 2013. All repurchases related to the share repurchase program were made on the open market.
Period
October 1 - October 31, 2013
November 1 - November 30, 2013
December 1 - December 31, 2013
Total
Total Number
of S hares
Purchased (a)
75,428
247,792
218,788
542,008
Average Price
Paid per S hare
(b)
Total Number of
S hares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Number (or
Approximate Dollar Value)
of S hares that May Yet Be
Purchased Under the Plans
or Programs
$27.10
73,572
$
48,000,323
$27.74 247,792
41,126,792
$29.98 215,452
34,667,466
$28.56
536,816
(a) Includes 1,856 and 3,336 shares withheld for taxes due upon vesting of restricted stock during October and December, respectively.
No restricted stock awards vested in November. These amounts do not include shares withheld for taxes due upon vesting of
restricted stock units.
(b) The average price paid per share for shares withheld for taxes due upon vesting of restricted stock was $24.02 and $30.06 in October
and December, respectively. No restricted stock awards vested in November.
During the year ended December 31, 2013, we repurchased a total of 2,831,520 shares at an average price per share of $20.91
under our publicly-announced share repurchase program. In January 2014, our Board of Directors approved raising our remaining
share repurchase authority to $50 million worth of Manhattan Associates outstanding common stock.
Item 6. Selected Financial Data
You should read the following selected consolidated financial data in conjunction with our Consolidated Financial
Statements and related Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” included elsewhere in this Form 10-K. The statement of income data for the years ended December 31, 2013, 2012, and
2011, and the balance sheet data as of December 31, 2013 and 2012, are derived from, and are qualified by reference to, the audited
24
financial statements included elsewhere in this Form 10-K. The statement of income data for the years ended December 31, 2010 and
2009 and the balance sheet data as of December 31, 2011, 2010, and 2009 are derived from audited financial statements not included
herein. Historical results are not necessarily indicative of results to be expected in the future.
Statement of Income Data:
Software license
Total revenue
Operating income
Net income
Earnings per diluted share
Balance Sheet Data:
Cash, cash equivalents and investments
Total assets
Debt
Shareholders' equity
2009
Year Ended December 31,
2010
2012
2011
(in thousands, except per share data)
2013
$
$
$
$
$
34,686
246,667
21,142
16,562
0.18
$
$
$
$
$
54,450
297,117
41,927
28,061
0.31
$
$
$
$
$
54,241
329,253
61,363
44,907
0.52
$
$
$
$
$
61,494
376,248
80,073
51,853
0.64
$
$
$
$
$
62,416
414,518
101,287
67,296
0.86
2009
2010
December 31,
2011
(in thousands)
2012
2013
$
123,014
$
264,711
$
-
$
183,365
$
126,869
$
280,464
$
-
$
183,800
$
99,114
259,600
$
$
-
$
162,080
$
103,047
261,813
$
$
-
$
161,509
$
132,956
297,828
$
$
-
$
181,586
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All statements, trend analyses, and other information contained in the following discussion relative to markets for our
products and trends in revenue, gross margins, and anticipated expense levels, as well as other statements including words such as
“anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend” and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and economic risks and uncertainties, including those discussed
under the caption “Risk Factors” in Item 1A of this Form 10-K, and our actual results of operations may differ materially from those
contained in the forward-looking statements.
Business Overview
We are a leading developer and implementer of supply chain commerce 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, while still maintaining a significant presence in, and a
relatively strong concentration of revenues from warehouse management solutions, which is a component of our distribution
management solution suite. Over time, as our non-warehouse management solutions have proliferated and increased in capability, the
Company’s revenue concentration in its warehouse management solutions has correspondingly decreased.
Our business model is singularly focused on the development and implementation of complex supply chain commerce
software solutions that are designed to optimize supply chain effectiveness and efficiency for our customers. We have three principal
sources of revenue:
25
•
•
•
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 revenue.
In 2013, we generated $414.5 million in total revenue, with a revenue mix of: license revenue 15%; services revenue 76%;
and hardware and other revenue 9%.
We manage our business based on three geographic regions: Americas, EMEA, and APAC. Geographic revenue is based on
the location of the sale. Our international revenue was approximately $110.8 million, $104.4 million, and $90.7 million for the years
ended December 31, 2013, 2012, and 2011, respectively, which represents approximately 27%, 28%, and 28% of our total revenue for
the years ended December 31, 2013, 2012, and 2011, respectively. International revenue includes all revenue derived from sales to
customers outside the United States. At December 31, 2013, we employed approximately 2,530 employees worldwide, of which
1,160 employees are based in the Americas, 170 employees in EMEA, and 1,200 employees in APAC (including 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 2013, approximately 73% of our total revenue was generated in the United States, 12% in EMEA, and the balance
in APAC, Canada, and Latin America. In addition, Gartner Inc., an information technology research and advisory company, estimates
that nearly 80% of every supply chain software solutions dollar invested is spent in the United States (50%) and Western Europe
(28%); consequently, the health of the U.S. and the Western European economies 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 our customers’ and prospects’ much larger capital commitment associated with facilities expansion and
business improvement. We believe that, given the lingering uncertainty in the global macro environment, the current sales cycles for
large license sales of $1.0 million or greater in our target markets have been extended. 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. Delays with respect to such decisions can have a material adverse impact on our business, and may
further intensify competition in our already highly competitive markets.
In January 2014, the International Monetary Fund (IMF) provided a World Economic Outlook (WEO) update projecting
slightly higher global growth for 2014. The WEO update noted that “Global activity and world trade picked up in the second half of
2013. Recent data even suggest that global growth during this period was somewhat stronger than anticipated in the October 2013
WEO. Final demand in advanced economies expanded broadly as expected—much of the upward surprise in growth is due to higher
inventory demand. In emerging market economies, an export rebound was the main driver behind better activity, while domestic
demand generally remained subdued, except in China. The WEO update projected that growth in the United States is expected to be
2.8 percent in 2014, up from 1.9 percent in 2013.”
During 2013 and 2012, the overall trend has been steady for our large license sales, with recognized $1.0 million or larger
software license sales totaling fourteen, twelve, and thirteen for 2013, 2012, and 2011,respectively. However, the large deal flow has
been inconsistent from quarter to quarter, reflecting what we believe to be ongoing macroeconomic uncertainty in the United States
and Western Europe. While we are encouraged by our 2013 and 2012 results, 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 customers’ and prospects’ enterprise software buying decisions,
making it more difficult to forecast sales cycles for our products and the timing of large enterprise software license sales.
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. In 2013, license revenue totaled $62.4 million, or 15% of total revenue, with gross margins
of 86%. For the year ended December 31, 2013, Americas, EMEA, and APAC recognized $49.5 million, $7.9 million, and $5.0
million in license revenue, respectively. Our typical license revenue percentage mix of new to existing customers historically has
26
approximated 50/50. However, for the year ended December 31, 2013, the percentage mix of new to existing customers was
approximately 35/65. We believe our current mix of new customer to existing customer license sales will fluctuate with continuing
global macroeconomic uncertainty; however, we anticipate that the mix will be at historically normal levels on a more consistent basis
in improved global economic conditions.
License revenue 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. In addition, the timing of the closing of a few large license
transactions can have a material impact on our license revenues, operating profit, operating margins and earnings per share. For
example, $1.0 million of license revenue in 2013 equates to approximately one cent of diluted earnings per share impact.
Our software solutions are singularly focused on the supply chain commerce planning and execution markets, which are
intensely competitive 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 ARC Advisory Group 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 through
investment in innovation. We expect to continue to face increased competition from Enterprise Resource Planning (ERP) and Supply
Chain Management application 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 customer training) and customer
support services and software enhancements (“CSSE”). In 2013, our services revenue totaled $315.9 million, or 76% of total revenue,
with gross margins of 55.0%. The Americas, EMEA, and APAC recognized $254.9 million, $41.0 million, and $20.0 million,
respectively, in services revenue for the year ended December 31, 2013. Professional services accounted for approximately 67% of
total services revenue and approximately 51% of total revenue in 2013. Our consolidated 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 profile as services margins are inherently lower than
license revenue margins.
At December 31, 2013, our professional services organization totaled approximately 1,560 employees, accounting for 62% 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 ongoing training, education,
and system upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the
customer’s success with 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
their 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 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 professional services 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 CSSE, we offer a comprehensive 24 hours 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 $105.1 million in 2013, representing approximately 33%
of services revenue and approximately 25% of total revenue, respectively. The growth of CSSE revenues is influenced by: (1) new
license revenue growth; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; and (4) 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 revenue is
27
generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. CSSE renewal revenue is
not recognized unless payment is received from the customer.
Hardware and other revenue: Our hardware and other revenue totaled $36.2 million in 2013 representing 9% of total
revenue with gross margins of 16.6%. 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 and related maintenance pursuant to agreements with manufacturers or through distributor-authorized reseller
agreements pursuant to which we are entitled to purchase hardware products and services at discount prices. We generally purchase
hardware from our vendors only after receiving an order from a customer. As a result, we generally 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 $15.3 million, $12.6 million, and $10.4 million for
2013, 2012, and 2011, respectively.
Product Development
We continue to invest significantly in research and development (R&D) 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 years ended December 31, 2013, 2012, and 2011 were $44.5 million, $44.7 million, and $42.4 million, respectively. At December
31, 2013, our R&D organization totaled approximately 650 employees, located in the U.S. and India.
We expect to 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 2013, we generated cash flow from operating activities of $89.4 million and have generated a cumulative total of $220.5
million for the three years ended December 31, 2013. Our cash and investments at December 31, 2013 totaled $133.0 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 common stock.
During 2013, we repurchased approximately $59.2 million of Manhattan Associates’ outstanding common stock under the
share repurchase program approved by our Board of Directors throughout the year. In January 2014, our Board of Directors approved
raising our remaining share repurchase authority to $50 million.
In 2014, we anticipate that our priorities for use of cash will be in developing sales and services resources and continued
investment in product development to drive and support profitable growth and 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 2014 for general corporate purposes.
Accounting Charges
28
Recovery of previously impaired investment. In 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. In 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.
Full Year 2013 Financial Summary
• On December 19, 2013, the Board of Directors approved a four-for-one stock split of the Company’s common stock,
effected in the form of a stock dividend. All references made to share or per share amounts have been restated to reflect
the effect of this four-for-one stock split for all periods presented.
• Diluted earnings per share for the twelve months ended December 31, 2013 was $0.86, compared to $0.64 for the twelve
months ended December 31, 2012;
• Consolidated revenue for the twelve months ended December 31, 2013 was $414.5 million, compared to $376.2 million
for the twelve months ended December 31, 2012. License revenue was $62.4 million for the twelve months ended
December 31, 2013, compared to $61.5 million for the twelve months ended December 31, 2012;
• Operating income was $101.3 million for the twelve months ended December 31, 2013, compared to $80.1 million for
the twelve months ended December 31, 2012;
• Operating margins for 2013 were 24.4% compared to operating margins of 21.3% in 2012;
• Cash flow from operations totaled $89.4 million for the full year 2013 compared to $75.3 million in 2012;
• Cash and investments on hand at December 31, 2013 was $133.0 million compared to $103.0 million at December 31,
2012;
• During the twelve months ended December 31, 2013, the Company repurchased approximately 2.8 million shares of
Manhattan Associates common stock under the share repurchase program authorized by the Board of Directors, for a
total investment of $59.2 million; and
•
In January 2014, the Board of Directors approved raising the Company’s remaining share repurchase authority to $50
million of Manhattan Associates’ outstanding common stock.
29
Results of Operations
The following table summarizes selected Statement of Income data for the years ended December 31, 2013, 2012, and 2011.
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and expenses:
Cost of license
Cost of services
Cost of hardware and other
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Recovery of previously impaired investment (1)
Total costs and expenses
Income from operations
Operating margin
Year Ended December 31,
% Change vs. Prior Year
2013
2012
2011
2013
2012
(in thousands)
$ 62,416
$ 61,494
$ 54,241
315,901
36,201
414,518
8,724
142,236
30,191
44,549
44,559
37,147
5,825
283,872
30,882
376,248
7,838
128,686
25,213
44,704
45,622
38,474
5,638
244,058
30,954
329,253
6,806
107,510
24,785
42,372
43,944
37,708
7,284
-
-
(2,519)
313,231
$ 101,287
296,175
$ 80,073
267,890
$ 61,363
24.4%
21.3%
18.6%
1%
11%
17%
10%
11%
11%
20%
0%
-2%
-3%
3%
N/A
6%
26%
13%
16%
0%
14%
15%
20%
2%
6%
4%
2%
-23%
N/A
11%
30%
(1)
Amount represents recovery of an auction rate security investment which had been impaired in a prior period.
30
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 2013, 2012, and 2011, 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:
Revenue:
Software license
Americas
EMEA
APAC
Total license
Services
Americas
EMEA
APAC
Total services
Hardware and Other
Americas
EMEA
APAC
Total hardware and other
Total Revenue
Americas
EMEA
APAC
Total revenue
Operating income:
Americas
EMEA
APAC
Total operating income
Year Ended December 31,
2013
2012
(in thousands)
% Change vs. Prior Year
2011
2013
2012
$ 49,574
7,858
4,984
$ 62,416
$ 50,036
9,569
1,889
$ 61,494
$ 45,506
6,362
2,373
$ 54,241
-1%
-18%
164%
1%
$ 254,934
41,020
19,947
$ 315,901
$ 228,673
36,167
19,032
$ 283,872
$ 198,041
30,824
15,193
$ 244,058
$ 33,836
1,536
829
$ 36,201
$ 28,883
1,402
597
$ 30,882
$ 29,312
1,109
533
$ 30,954
$ 338,344
50,414
25,760
$ 414,518
$ 307,592
47,138
21,518
$ 376,248
$ 272,859
38,295
18,099
$ 329,253
$ 83,451
10,288
7,548
$ 101,287
$ 65,517
9,725
4,831
$ 80,073
$ 53,550
5,239
2,574
$ 61,363
11%
13%
5%
11%
17%
10%
39%
17%
10%
7%
20%
10%
27%
6%
56%
26%
10%
50%
-20%
13%
15%
17%
25%
16%
-1%
26%
12%
0%
13%
23%
19%
14%
22%
86%
88%
30%
The results of our operations for the years ended December 31, 2013, 2012, and 2011 are discussed below.
Revenue
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.
31
Year Ended December, 31
% Change vs. Prior Year
2013
2012
2011
2013
2012
(in thousands)
% of Total Revenue
2012
2013
2011
Software license
$ 62,416
$ 61,494
$ 54,241
Services
Hardware and other
Total revenue
315,901
283,872
244,058
36,201
$414,518
30,882
$ 376,248
30,954
$ 329,253
1%
11%
17%
10%
13%
16%
0%
14%
15%
76%
9%
16%
76%
8%
17%
74%
9%
100% 100%
100%
License revenue
Year 2013 compared with year 2012
License revenue increased $0.9 million, or 1%, to $62.4 million in 2013 compared to 2012. We completed fourteen and
twelve large deals greater than $1.0 million in 2013 and 2012, respectively. Our APAC license revenue increased $3.1 million, while
Americas and EMEA license revenue decreased $0.5 million and $1.7 million, respectively, over 2012.
The license sales percentage mix across our product suite in 2013 was approximately 63% warehouse management solutions
and 37% non-warehouse management solutions. Our warehouse management solutions decreased $0.7 million, or 2%, in 2013
compared to 2012 and non-warehouse management solutions increased $1.6 million, or 7%, in 2013 over 2012.
Year 2012 compared with year 2011
License revenue increased $7.3 million, or 13%, to $61.5 million in 2012 compared to 2011. We completed twelve and
thirteen large deals greater than $1.0 million in 2012 and 2011, respectively. Our Americas and EMEA license revenue increased $4.5
million and $3.2 million, respectively, while APAC license revenue decreased $0.5 million over 2011.
The license sales percentage mix across our product suite in 2012 was approximately 65% warehouse management solutions
and 35% non-warehouse management solutions. Our warehouse management solutions increased $6.5 million, or 19%, in 2012
compared to 2011 and non-warehouse management solutions increased $0.7 million, or 4%, in 2012 over 2011.
Services revenue
Year 2013 compared with year 2012
Services revenue increased $32.0 million, or 11%, in 2013 compared to 2012 due to a $25.6 million, or 14%, increase in
professional services revenue and a $6.4 million, or 7%, increase in CSSE revenue. The Americas, EMEA, and APAC segments
increased $26.3 million, $4.8 million, and $0.9 million, respectively, compared to 2012. The increase in services revenue is primarily
due to customer-specific initiatives in conjunction with customer upgrade activity and license deals signed.
Year 2012 compared with year 2011
Services revenue increased $39.8 million, or 16%, in 2012 compared to 2011 due to a $28.4 million, or 18%, increase in
professional services revenue and an $11.4 million, or 13%, increase in CSSE revenue. The Americas, EMEA, and APAC segments
increased $30.6 million, $5.3 million, and $3.8 million, respectively, compared to 2011. The increase in services revenue is primarily
due to customer-specific initiatives in conjunction with customer upgrade activity and license deals signed.
Hardware and other
Sales of hardware increased $2.6 million to $20.9 million in 2013 compared to $18.3 million in 2012. Sales of hardware
decreased to $18.3 million in 2012 from $20.5 million in 2011. The majority of hardware sales are derived from our Americas
segment. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate. Other revenue represents
32
reimbursements for professional service travel expenses that 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 $15.3 million, $12.6 million, and
$10.4 million for 2013, 2012, and 2011, respectively.
Cost of Revenue
Cost of license
Cost of services
Cost of hardware and other
Total cost of revenue
Cost of License
Year Ended December 31,
% Change vs. Prior Year
2013
2012
2011
2013
2012
(in thousands)
$ 8,724
142,236
30,191
$ 181,151
$ 7,838
128,686
25,213
$ 161,737
$ 6,806
107,510
24,785
$ 139,101
11%
11%
20%
12%
15%
20%
2%
16%
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
increases in 2013 and 2012 are primarily due to increase in sales of third-party software over the prior year.
Cost of Services
Year 2013 compared with year 2012
Cost of services consists primarily of salaries and other personnel-related expenses of employees dedicated to professional
and technical services and customer support services. Cost of services increased $13.6 million, or 11%, in 2013 compared to 2012
principally due to a $11.9 million increase in compensation and other personnel-related expenses resulting from increased headcount
in our services organization and an increase of $0.8 million in third-party software maintenance costs and internal computer system
costs.
Year 2012 compared with year 2011
Cost of services increased $21.2 million, or 20%, in 2012 compared to 2011 principally due to a $14.3 million increase in
employee-related costs such as salary, benefits, and payroll taxes resulting from an increase in the number of professional services
personnel in 2012 to support demand and a $3.1 million increase in performance-based compensation expense.
Cost of Hardware and other
In 2013, cost of hardware increased $2.3 million to $15.1 million from $12.8 million in 2012 on increased sales of hardware.
In 2012, cost of hardware decreased $1.6 million to $12.8 million from $14.4 million in 2011. Cost of hardware and other includes
professional services billed travel expenses reimbursed by customers of approximately $15.1 million, $12.4 million, and $10.4 million
for 2013, 2012, and 2011, respectively. Changes in amounts of out-of-pocket expenses correlate to changes in amounts of services
revenue.
33
Operating Expenses
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Recovery of previously impaired investment
Operating expenses
Research and Development
Year Ended December 31,
2013
$ 44,549
44,559
37,147
5,825
-
$ 132,080
2012
(in thousands)
$ 44,704
45,622
38,474
5,638
-
$ 134,438
% Change vs. Prior Year
2011
2013
2012
$ 42,372
43,944
37,708
7,284
(2,519)
$ 128,789
0%
-2%
-3%
3%
N/A
-2%
6%
4%
2%
-23%
N/A
4%
Our principal research and development (R&D) activities during 2013, 2012, and 2011 focused on the expansion and
integration of new products and releases, while expanding the product footprint of our supply chain optimization solutions called
Supply Chain Optimization from Planning through Execution. The Manhattan SCOPE Platform provides not only a sophisticated
service oriented, architecture based application framework, but a platform that facilitates the integration with Enterprise Resource
Planning (ERP) and other supply chain solutions.
For the years ended December 31, 2013, 2012, and 2011, we did not capitalize any R&D costs because the costs incurred
following the attainment of technological feasibility for the related software product through the date of general release were
insignificant.
Year 2013 compared with year 2012
R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our R&D activities.
R&D expenses were essentially flat over prior year due to slightly lower headcount and favorable currency impact driven by a
weakening of the Indian rupee against the US dollar.
Year 2012 compared with year 2011
R&D expenses increased $2.3 million, or 6%, to $44.7 million in 2012 compared to $42.4 million in 2011 primarily due to a
$1.4 million increase in salary-related costs resulting from an increase in the number of R&D personnel to support our product
development and a $1.1 million increase in performance-based compensation expense.
Sales and Marketing
Year 2013 compared with year 2012
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 decreased by $1.1 million, or 2%, in 2013
compared to 2012. The decrease was mainly attributable to a $1.2 million decrease in performance-based compensation and a
decrease in stock compensation expense of $1.2 million partially offset by an increase in sales and marketing operating expenses of
$1.6 million.
Year 2012 compared with year 2011
Sales and marketing expenses increased by $1.7 million, or 4%, in 2012 compared to 2011. The increase was mainly
attributable to a $3.1 million increase in performance-based compensation partially offset by a decrease in sales and marketing
operating expenses of $1.1 million.
34
General and Administrative
Year 2013 compared with year 2012
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 decreased $1.3 million, or 3%, in 2013 primarily attributable to a $1.6
million reversal of a previously expensed transaction tax resulting from the expiration of the tax audit statutes.
Year 2012 compared with year 2011
General and administrative expenses increased $0.8 million, or 2%, in 2012 primarily attributable to an increase in
compensation, employee-related expenses, and temporary contracted personnel of $1.8 million and an increase in performance-based
compensation expense of $0.4 million partially offset by a $1.1 million decrease in equity-based compensation and a $0.7 million
decrease in professional fees.
Depreciation and Amortization
Depreciation expense amounted to $5.8 million, $5.6 million, and $6.1 million during 2013, 2012, and 2011, respectively,
and has decreased due to lower capital expenditures over the past several years. Amortization of intangibles was nil in 2013 and 2012,
and $2.3 million in 2011. We have recorded goodwill and other acquisition-related intangible assets as part of the purchase
accounting associated with various acquisitions prior to 2006. The decreases in amortization expense in 2013 and 2012 were
associated with certain finite-lived intangible assets related to prior acquisitions, which are now fully amortized.
Recovery of previously impaired investment
In the quarter ended September 30, 2011, we were able to sell a previously impaired auction rate security, recovering 72%, or
$2.5 million, of our original investment.
Operating Income
Operating income for the year ended December 31, 2013 increased $21.2 million to $101.3 million, compared to $80.1
million for the year ended December 31, 2012. Operating margins were 24.4% for 2013 versus 21.3% for 2012. Operating income
and margin for the year ended December 31, 2013 included a $1.6 million reversal of a previously expensed transaction tax resulting
from the expiration of the tax audit statutes. Furthermore, operating income and margins increased due to strong revenue growth and
expense management during the year in addition to favorable foreign currency translation effects of $1.9 million for the year ended
December 31, 2013, primarily due to the weakening of the Indian Rupee versus the U.S. dollar during the year ended December 31,
2013 compared to the same period in the prior year. Operating income in the Americas, EMEA, and APAC segments increased by
$17.9 million, $0.6 million, and $2.7 million, respectively in 2013.
Operating income for the year ended December 31, 2012 increased $18.7 million to $80.1 million, compared to $61.4
million, which includes a $2.5 million recovery of an auction rate security investment which had been impaired in a prior period, for
the year ended December 31, 2011. Operating margins were 21.3% for 2012 versus 18.6% for 2011. Operating income and margins
increased due to increased services revenue. Operating income in the Americas, EMEA, and APAC segments increased by
$12.0 million, $4.5 million, and $2.2 million, respectively in 2012.
Other Income (Loss) and Income Taxes
Year Ended December 31,
Other income, net
Income tax provision
$ 1,822
$ 965
$ 1,864
35,813
29,185
18,320
2013
2012
2011
% Change vs. Prior Year
2013
89%
23%
2012
-48%
59%
35
Other Income, net
Other income, net primarily includes interest income, foreign currency gains and losses, and other non-operating expenses.
Interest income was $1.2 million for the year ended December 31, 2013 and $1.1 million for the years ended December 31, 2012 and
2011. The weighted-average interest rate earned on cash and investments was approximately 1% for the years ended December 31,
2013, 2012 and 2011. We recorded a net foreign currency gain of $0.7 million in 2013, a net foreign currency loss of $0.1 million in
2012, and a net foreign currency gain of $0.8 million in 2011. The foreign currency gain and losses mainly resulted from gains or
losses on intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar
relative to other foreign currencies, primarily the Indian Rupee.
Income Tax Provision
Our effective income tax rates were 34.7%, 36.0%, and 29.0% in 2013, 2012, and 2011, respectively. Our effective income
tax rate takes into account the source of taxable income, domestically by state and internationally by country, and available income tax
credits. The effective tax rate in 2013 decreased from 2012 mainly due to the reinstatement of the federal research and development
tax credit in January 2013 for the 2012 and 2013 tax years as well as reductions in valuation allowances for state tax credit
carryforwards, partially offset by increases in foreign taxes and reserves for uncertain tax positions.
The effective rate for the year ended December 31, 2011 was impacted by the $2.5 million recovery of a previously impaired
auction rate security investment discussed above. We did not record a tax benefit in 2008 on the original impairment charge as there
were no future capital gains to offset the loss, and we therefore did not have tax expense related to the recovery of the charge. Also,
the effective tax rate in 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 was attributable to the elimination of the tax holiday for Indian
companies under the Software Technology Park of India (STPI) 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 year ended
December 31, 2011 included a tax benefit from the disqualifying disposition of incentive stock options that were previously expensed
and the reduction of income tax reserves that resulted from the expiration of tax audit statutes and the settlement of an IRS audit.
Liquidity and Capital Resources
During 2013, 2012, and 2011, we funded our business through cash generated from operations. Our cash and investments as
of December 31, 2013 included $95.3 million held in the U.S. and $37.7 million held by our foreign subsidiaries. We believe that our
cash balances in the U.S. are sufficient to fund our U.S. operations. In the future, if we elect to repatriate the unremitted earnings of
our foreign subsidiaries in the form of dividends or otherwise, we would be subject to additional U.S. income taxes which would result
in a higher effective tax rate. However, our intent is to indefinitely reinvest these funds outside of the U.S. and we do not have a
current cash requirement need to repatriate them to the U.S.
Our cash flow from operating activities totaled $89.4 million, $75.3 million, and $55.8 million in 2013, 2012, and 2011,
respectively. Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the
period, the timing and amount of employee bonus payments and income tax payments, and the timing of cash collections from our
customers which is our primary source of operating cash flow. Cash flow from operating activities for 2013 increased $14.1 million
compared to 2012 primarily attributable to higher revenue and net earnings. Cash flow from operating activities for 2012 increased
$19.4 million compared to 2011 primarily attributable to higher revenue and net earnings combined with lower tax payments in 2012.
Days sales outstanding (DSO) was 61, 60, and 62 days at December 31, 2013, 2012, and 2011, respectively, reflecting solid cash
collections.
Our investing activities used cash of approximately $7.8 million, $7.0 million, and $4.6 million in 2013, 2012, and 2011,
respectively. The use of cash for investing activities for the year ended December 31, 2013 was for capital expenditures of
approximately $4.7 million and net purchases of $3.1 million in investments. The use of cash for investing activities for the year
ended December 31, 2012 was $7.9 million in capital expenditures partially offset by the net maturities of $0.9 million in investments.
The use of cash for investing activities for the year ended December 31, 2011 was $5.1 million in capital expenditures partially offset
by the net maturities of $0.5 million in investments.
Our financing activities used cash of approximately $51.8 million, $63.5 million, and $77.9 million in 2013, 2012, and 2011,
respectively. The principal use of cash for financing activities for the year ended December 31, 2013 was to purchase approximately
$64.2 million of our common stock, including $5.0 million for shares withheld for taxes due upon vesting of restricted stock, partially
36
offset by proceeds generated from options exercised of $5.8 million and a $6.6 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 year ended December
31, 2012 was to purchase approximately $103.2 million of our common stock, including $3.5 million for shares withheld for taxes due
upon vesting of restricted stock, partially offset by proceeds generated from options exercised of $32.1 million and a $7.5 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 year ended December 31, 2011 was to purchase approximately $133.1 million of our common stock,
including $2.4 million for shares withheld for taxes due upon vesting of restricted stock, partially offset by proceeds generated from
options exercised of $52.7 million and a $2.5 million excess tax benefit related to the exercise of stock options and vesting of
restricted stock awards. In January 2014, our Board of Directors increased our remaining share repurchase authority to a total of $50
million.
Periodically, opportunities may arise to grow our business through the acquisition of complementary 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 our existing 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. In 2014,
we anticipate that our priorities for use of cash will be similar to prior years, with our first priority being continued investment in
product development and profitably growing our business 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
2014 for general corporate purposes.
New Accounting Pronouncements
In February 2013, the Financial Accounting Standard Board (FASB) issued an Accounting Standards Update (ASU) on
reporting of amounts reclassified out of accumulated other comprehensive income, which is an amendment to the Presentation of
Comprehensive Income Topic of the FASB Accounting Standards Codification. The ASU requires disclosure of amounts reclassified
out of accumulated other comprehensive income by component. In addition, companies are required to present either on the face of the
financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective
line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same
reporting period. For amounts that are not required to be reclassified in their entirety to net income, companies are required to cross-
reference to other disclosures that provide additional detail about those amounts. This guidance is effective prospectively for annual
and interim periods beginning after December 15, 2012. We adopted the ASU in our first quarter of 2013 reporting, which did not
have an impact on our financial statements.
In July 2013, the FASB issued an ASU on presentation of an unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward exists, an amendment to the Income Taxes Topic of the FASB
Accounting Standards Codification. The ASU requires companies to net the liability related to an unrecognized tax benefit against a
deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. In addition, under this
ASU, unrecognized tax benefits will be netted against all available same-jurisdiction loss or other tax carryforwards that would be
utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. This guidance is effective
prospectively for annual and interim periods beginning after December 15, 2013 but may be adopted earlier. We adopted this ASU as
of December 31, 2013. The adoption of the ASU did not have a material impact on our financial statements.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Our principal commitments as of December 31, 2013 consist of obligations under operating leases. We expect to fulfill all of
the following commitments from our working capital. We have no off-balance sheet arrangements within the meaning of SEC rules.
Lease Commitments
We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various
dates through 2018. Rent expense for these leases aggregated $5.9 million, $5.8 million, and $5.7 million during 2013, 2012, and
2011, respectively.
37
The following table summarizes our contractual commitments as of December 31, 2013 (in thousands):
Operating Lease Obligations
Indemnities
Total
$ 28,405
2014
$ 6,248
2015
$ 6,098
2016
$ 6,009
2017
$ 5,900
2018
$ 4,150
Thereafter
$ -
Our customer contracts generally contain infringement indemnity provisions. Under those provisions, we generally agree,
subject to certain exceptions, to indemnify, defend, and hold harmless the customer in connection with third party claims against the
customer alleging that the customer’s use of our software products in compliance with their license infringe the third party’s patent,
copyright, or other intellectual property rights. Conditions to our obligations generally include that we are provided the right to
control the defense of the claims and, in general, to control settlement negotiations. Those provisions generally provide also that, if
the customer is prevented from using our software because of a third party infringement claim, our sole obligation (in addition to the
indemnification, defense, and hold harmless obligation referred to above) is to, at our expense, (i) procure for the customer the right to
continue to use the software, (ii) to replace or modify the product so that its use by the customer does not infringe, or, if either of the
foregoing are not reasonably feasible, to terminate the customer contract and provide a refund of the unamortized portion of the
customer’s license fee (based on a five year amortization period). Our customer contracts sometimes also require us to indemnify,
defend, and hold harmless the customer in connection with death, personal injury, or property damage claims made by third parties
with respect to actions of our personnel or contractors. The indemnity obligations contained in our customer contracts generally have
no specified expiration date and no specified monetary limitation on liability. We have not previously incurred costs to settle claims or
pay awards under these indemnification obligations. We account for these indemnity obligations in accordance with FASB guidance
on accounting for contingencies, and record a liability for these obligations when a loss is probable and reasonably estimable. We have
not recorded any liabilities for these contracts as of December 31, 2013.
Warranties
In general, in our customer contracts we warrant to our customers that our software products will perform in all material
respects in accordance with our standard published specifications in effect at the time of delivery of the licensed products to the
customer for six months after first use of the licensed products, but no more than 24 months after execution of the license agreement.
Additionally, we warrant to our customers that our services will be performed consistent with generally accepted industry standards or
specific service levels through completion of the agreed upon services. If necessary, we would provide for the estimated cost of
product and service warranties based on specific warranty claims and claim history. However, we have not incurred significant
recurring expense under our product or service warranties. As a result, we believe the estimated fair value of these agreements is
nominal. Accordingly, we have no liabilities recorded for these agreements as of December 31, 2013.
Application of Critical Accounting Policies and Estimates
The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. We believe
that estimates, judgments, and assumptions upon which we rely are reasonable based on information available to us at the time that
these estimates, judgments, and assumptions are made. To the extent there are material differences between those estimates,
judgments, or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more
significant estimates, judgments, and assumptions are: Revenue Recognition, Allowance for Doubtful Accounts, Valuation of
Goodwill, Accounting for Income Taxes, and Stock-based Compensation.
Revenue Recognition
The Company’s revenue consists of fees from the licensing and hosting of software (collectively included in “Software
license” revenue in the Consolidated Statements of Income), fees from implementation and training services (collectively,
“professional services”) and customer support services and software enhancements (collectively included in “Services” revenue in the
38
Consolidated Statements of Income), and sales of hardware and other revenue, which consists of reimbursements of out-of-pocket
expenses incurred in connection with our professional services (collectively included in “Hardware and other” revenue in the
Consolidated Statements of Income). 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 covering all
elements of the arrangement, (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 (VSOE) of the fair values of all undelivered elements in a multiple-
element arrangement that is not accounted for using long-term contract accounting, (b) VSOE 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, 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 services and software enhancements and any other undelivered elements
of the arrangement based on 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.
Payment terms for the Company’s software licenses vary. Each contract is evaluated individually to determine whether the
fees in the contract are fixed or 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 that extend beyond contract execution in a particular contract do not preclude the conclusion that the fees in the contract are
fixed or determinable. Although infrequent, when payment terms in a contract extend beyond twelve months, the Company has
determined that such fees are not fixed or 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. Professional services include system planning, design, configuration,
testing, and other software implementation support and are not typically essential to the functionality of our software. Fees from
professional services performed by the Company are separately priced and 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 enhancements 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, 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
39
generally purchases hardware from the Company’s vendors only after receiving an order from a customer. As a result, the Company
generally does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the FASB’s Accounting
Standards Codification, the Company recognizes amounts associated with reimbursements from customers for out-of-pocket expenses
as revenue. Such amounts have been included in “Hardware and other” revenue in the Consolidated Statements of Income. The total
amount of expense reimbursement recorded to revenue was $15.3 million, $12.6 million, and $10.4 million for 2013, 2012, and 2011,
respectively.
Allowance for Doubtful Accounts
We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts
based upon our historical experience and any specific customer collection issues that we have identified. Additions to the allowance
for doubtful accounts generally represent a sales allowance on services revenue, which are recorded to operations as a reduction to
services revenue. While such losses have historically been within our expectations and the provisions established, we cannot guarantee
that we will continue to experience the same loss rates that we have in the past.
Valuation of Goodwill
In accordance with the Intangibles - Goodwill and Other Topic of the FASB Accounting Standards Codification, we do not
amortize goodwill and other intangible assets with indefinite lives. Our goodwill is subject to an annual impairment test, which
requires us to estimate the fair value of our business compared to the carrying value. When evaluating goodwill for impairment, we
may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is
greater than its carrying amount based on economic, industry and company-specific factors. If it is determined that the carrying value
of the reporting unit exceeds its fair value, an additional step is performed to measure the amount of the impairment loss, if any. The
impairment review requires an analysis of future projections and assumptions about our operating performance. Should such review
indicate the assets are impaired, we would record an expense for the impaired assets.
Annual tests or other future events could cause us to conclude that impairment indicators exist and that our goodwill is
impaired. For example, if we had reason to believe that our recorded goodwill had become impaired due to decreases in the fair
market value of the underlying business, we would have to record a charge to income for that portion of goodwill that we believed was
impaired. Any resulting impairment loss could have a material adverse impact on our financial position and results of operations. At
December 31, 2013, our goodwill balance was $62.3 million.
Accounting for Income Taxes
We provide for the effect of income taxes on our financial position and results of operations in accordance with the Income
Taxes Topic of the FASB Accounting Standards Codification. Under this accounting pronouncement, income tax expense is
recognized for the amount of income taxes payable or refundable for the current year and for the change in net deferred tax assets or
liabilities resulting from events that are recorded for financial reporting purposes in a different reporting period than recorded in the
tax return. Management must make significant assumptions, judgments, and estimates to determine our current provision for income
taxes and also our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax asset.
Our judgments, assumptions, and estimates relative to the current provision for income tax take into account current tax laws,
our interpretation of current tax laws, allowable deductions, projected tax credits, and possible outcomes of current and future audits
conducted by foreign and domestic tax authorities. We do not recognize a tax benefit unless we conclude that it is more likely than not
that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If
the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is
greater than 50 percent likely to be realized. Changes in tax law or our interpretation of tax laws and the resolution of current and
future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations.
Our assumptions, judgments, and estimates relative to the value of our net deferred tax asset take into account predictions of the
amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future
years could render our current assumptions, judgments, and estimates of recoverable net deferred taxes inaccurate, thus materially
impacting our financial position and results of operations.
40
Equity-Based Compensation
In January 2012, in order to simplify equity grant administration, we changed our practice of granting restricted stock in
favor of granting restricted stock units, or RSUs, which convert to our common stock upon vesting. There is no material difference
between the grant of restricted stock and the grant of RSUs to either us or the recipients receiving the grants; however, in contrast to
the granting of restricted stock, no stock will actually be issued under the granting of RSUs until the units vest. We do not currently
grant stock options.
The restricted stock awards and restricted stock units contain vesting provisions that are 50% service-based and 50%
performance-based. The awards have a four year vesting period, with the performance portion tied to their grant year revenue and
adjusted earnings per share targets.
We recognize compensation cost for service-based awards with graded vesting on a straight-line basis over the entire vesting
period, with the amount of compensation cost recognized at any date at least equal to the portion of the grant-date value of the award
that is vested at that date. For our performance-based restricted stock awards with graded vesting, we recognize compensation cost on
an accelerated basis applying straight-line expensing for each separately vesting portion of each award. Compensation cost
recognized in any period is impacted by the number of stock-based awards granted, the vesting period of the awards (which generally
is four years), the estimated forfeiture rate, and the probable outcome of any performance conditions.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Business
Our international business is subject to risks typical of an international business, including, but not limited to differing
economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate
volatility. Our international operations currently include business activity out of offices in the United Kingdom, the Netherlands,
France, Australia, China, Japan, Singapore, and India. When the U.S. dollar strengthens against a foreign currency, the value of our
sales and expenses in that currency converted to U.S. dollars decreases. When the U.S. dollar weakens, the value of our sales and
expenses in that currency converted to U.S. dollars increases. We recognized a foreign exchange gain of $0.7 million in 2013, a
foreign exchange loss of $0.1 million in 2012, and a foreign exchange gain of $0.8 million in 2011. Foreign exchange rate transaction
gains and losses are classified in “Other (loss) income, net” in our Consolidated Statements of Income. A fluctuation of 10% in the
period end exchange rates at December 31, 2013 relative to the U.S. dollar would result in a change of approximately $0.5 million in
the reported foreign currency gain. A fluctuation of 10% in the period end exchange rates at December 31, 2012 relative to the U.S.
dollar would result in a change of approximately $0.4 million.
Interest Rates
We currently invest our cash in a variety of financial instruments, including taxable and tax-advantaged floating rate
obligations in money market funds and certificates of deposit. These investments are mainly denominated in U.S. dollars. Cash
balances in foreign currencies overseas are derived from business operations. At December 31, 2013, our cash, cash equivalents, and
investment balances totaled $133.0 million, of which $124.4 million is highly liquid. The remaining $8.6 million balance is invested
in short-term certificates of deposit. Our cash equivalents balance at December 31, 2013 was $36.2 million. Cash equivalents
principally consist of highly liquid money market funds and certificates of deposit with maturities of less than three months when
purchased.
Investments in both fixed rate and floating rate interest-earning instruments carry interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income
than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to
changes in interest rates, or we may suffer losses in principal if forced to sell securities that have seen a decline in market value due to
changes in interest rates. The weighted-average interest rate of return on cash and investment securities was approximately 1% for the
years ended December 31, 2013 and 2012. The fair value of cash equivalents and investments held at December 31, 2013 and 2012
was $44.8 million and $52.3 million, respectively. Based on the average investments outstanding during 2013 and 2012, increases or
decreases in the rates of return of 25 basis points would result in increases or decreases to interest income of approximately $0.3
million for both years from the reported interest income.
41
Item 8. Financial Statements and Supplementary Data
Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Management’s Annual Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Internal Control over
Financial Reporting
Report of Independent Registered Public Accounting Firm on the Consolidated Financial
Statements
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
41
42
43
44
45
46
47
48
49
42
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Manhattan Associates, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s
principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting
principles.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and
the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the Company’s 2013 fiscal year, management conducted an assessment of the Company’s internal control over
financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992 Framework) (COSO). Based on this assessment, management has
determined that the Company’s internal control over financial reporting as of December 31, 2013 was effective.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year
ended December 31, 2013, has audited the Company’s internal control over financial reporting as of December 31, 2013 and has
issued a report regarding the Company’s internal control over financial reporting appearing on page 44, which expresses an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013.
/s/ Eddie Capel
Eddie Capel
President and Chief Executive Officer
February 6, 2014
/s/ Dennis B. Story
Dennis B. Story
Executive Vice President, Chief Financial
Officer, and Treasurer
February 6, 2014
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
We have audited Manhattan Associates, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (1992 Framework) (the COSO criteria). Manhattan Associates, Inc. and subsidiaries’ management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Manhattan Associates, Inc. and subsidiaries maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Manhattan Associates, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related
consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity for each of the three years in the
period ended December 31, 2013 of Manhattan Associates, Inc. and subsidiaries, and our report dated February 6, 2014 expressed an
unqualified opinion thereon.
Atlanta, Georgia
February 6, 2014
/s/ Ernst & Young LLP
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Manhattan Associates, Inc. and subsidiaries as of December 31,
2013 and 2012, and the related consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity for
each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Manhattan Associates, Inc. and subsidiaries at December 31, 2013 and 2012, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Manhattan Associates, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 Framework), and our report dated February 6, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 6, 2014
45
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share amounts)
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and expenses:
Cost of license
Cost of services
Cost of hardware and other
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Year Ended December 31,
2013
2012
2011
$ 62,416
$ 61,494
$ 54,241
315,901
36,201
283,872
30,882
244,058
30,954
414,518
376,248
329,253
8,724
142,236
30,191
44,549
44,559
37,147
5,825
7,838
128,686
25,213
44,704
45,622
38,474
5,638
6,806
107,510
24,785
42,372
43,944
37,708
7,284
Recovery of previously impaired investment
-
-
(2,519)
Total costs and expenses
313,231
296,175
267,890
Operating income
Interest income
Other income (loss), net
Income before income taxes
Income tax provision
Net income
101,287
80,073
61,363
1,167
1,062
1,072
655
(97)
792
103,109
81,038
63,227
35,813
29,185
18,320
$ 67,296
$ 51,853
$ 44,907
Basic earnings per share
Diluted earnings per share
$
$
0.88
0.86
$
$
0.66
0.64
$
$
0.55
0.52
Weighted average number of shares:
Basic
Diluted
76,664
77,932
78,640
81,084
81,820
85,968
The accompanying notes are an integral part of these Consolidated Statements of Income.
46
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
Unrealized gain (loss) on investments, net of taxes of $0, $53 and $(20) in
2013, 2012 and 2011, respectively
Other comprehensive income (loss)
Year Ended December 31,
2012
2013
2011
$
67,296
$
51,853
$
44,907
(3,079)
-
(3,079)
318
92
410
(4,024)
(33)
(4,057)
Comprehensive income
$
64,217
$
52,263
$
40,850
The accompanying notes are an integral part of these Consolidated Statements of Comprehensive Income.
47
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
Current Assets:
ASSETS
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance of $3,156 and $6,235 in 2013 and 2012, respectively
Deferred income taxes
Prepaid expenses
Other current assets
Total current assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Property and equipment, net
Goodwill, net
Deferred income taxes
Other assets
Total assets
Current liabilities:
Accounts payable
Accrued compensation and benefits
Accrued and other liabilities
Deferred revenue
Income taxes payable
Total current liabilities
Deferred rent, long-term
Deferred income taxes
Other non-current liabilities
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or
outstanding in 2013 and 2012
Common stock, $.01 par value; 100,000,000 shares authorized;76,374,180 and 78,483,868
shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
The accompanying notes are an integral part of these Consolidated Balance Sheets.
48
December 31,
2013
2012
$
124,375
8,581
71,136
7,300
6,345
1,001
218,738
$
96,737
6,310
62,102
7,787
7,386
1,185
181,507
14,342
62,272
427
2,049
297,828
$
15,650
62,265
732
1,659
261,813
$
$
11,555
19,465
12,225
53,812
7,131
104,188
$
10,229
16,720
12,233
47,935
4,024
91,141
4,722
3,176
4,156
5,770
656
2,737
-
-
764
188,604
(7,782)
785
165,427
(4,703)
181,586
297,828
$
161,509
261,813
$
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
67,296
$
51,853
$
44,907
Year Ended December 31,
2012
2011
2013
Depreciation and amortization
Recovery of previously impaired investment
Equity-based compensation
Loss (gain) on disposal of equipment
Tax benefit of stock awards exercised/vested
Excess tax benefits from equity-based compensation
Deferred income taxes
Unrealized foreign currency (gain) loss
Changes in operating assets and liabilities:
Accounts receivable, net
Other assets
Accounts payable, accrued and other liabilities
Income taxes
Deferred revenue
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment
Purchases of short-term investments
Maturities of short-term investments
Sales of long-term investments
Net cash used in investing activities
Financing activities:
Purchase of common stock
Proceeds from issuance of common stock from options exercised
Excess tax benefits from equity-based compensation
Net cash used in financing activities
Foreign currency impact on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information:
Cash paid for taxes
5,825
-
7,325
31
6,980
(6,637)
3,165
205
(9,174)
697
3,164
4,500
6,010
89,387
(4,740)
(14,751)
11,686
-
(7,805)
(64,199)
5,754
6,637
(51,808)
(2,136)
5,638
-
8,338
(46)
9,901
(7,531)
5,388
427
(5,446)
281
(162)
8,831
(2,201)
75,271
(7,873)
(7,582)
7,446
1,000
(7,009)
7,284
(2,519)
10,372
25
7,481
(2,474)
2,409
(189)
(8,994)
(1,332)
(3,537)
(2,514)
4,905
55,824
(5,074)
(7,296)
4,438
3,323
(4,609)
(103,155)
32,082
7,531
(63,542)
(163)
(133,144)
52,721
2,474
(77,949)
(1,830)
27,638
96,737
124,375
$
4,557
92,180
96,737
$
(28,564)
120,744
92,180
$
$
21,191
$
6,277
$
11,113
The accompanying notes are an integral part of these Consolidated Statements of Cash Flows.
49
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5
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012 and 2011
1. Organization, Consolidation and Summary of Significant Accounting Policies
Organization and Business
Manhattan Associates, Inc. (“Manhattan” or the “Company”) is a developer and provider of supply chain commerce solutions
that help organizations optimize the effectiveness, efficiency, and strategic advantages of their supply chains. The Company’s
solutions consist of software, services, and hardware, which coordinate people, workflows, assets, events, and tasks holistically across
the functions linked in a supply chain from planning through execution. These solutions also help coordinate the actions, data
exchange, and communication of participants in supply chain ecosystems, such as manufacturers, suppliers, distributors, trading
partners, transportation providers, channels (such as catalogers, store retailers, and Web outlets), and consumers.
The Company’s operations are in North America, Europe (EMEA), and the Asia/Pacific (APAC) region. The European
operations are conducted through the Company’s wholly-owned subsidiaries, Manhattan Associates Limited, Manhattan Associates
Europe B.V., Manhattan France SARL, and Manhattan Associates GmbH, in the United Kingdom, the Netherlands, France, and
Germany, respectively. The Company’s Asia/Pacific operations are conducted through its wholly-owned subsidiaries, Manhattan
Associates Pty Ltd., Manhattan Associates KK, Manhattan Associates Software (Shanghai), Co. Ltd., Manhattan Associates Software
Pte Ltd., and Manhattan Associates (India) Development Centre Private Limited in Australia, Japan, China, Singapore, and India,
respectively. The Company occasionally sells its products and services in other countries, such as countries in Latin America, Eastern
Europe, Middle East, and Asia, through its direct sales channel as well as various reseller channels.
Stock Split
On December 19, 2013, the Board of Directors of the Company approved a four-for-one stock split of the Company’s
common stock, effected in the form of a stock dividend. Each shareholder of record at the close of business on December 31, 2013
received three additional shares for every outstanding share held on the record date. The additional shares were distributed on
January 10, 2014 and trading began on a split-adjusted basis on January 13, 2014. All references made to share or per share amounts
in the accompanying consolidated financial statements and applicable disclosures have been restated to reflect the effect of this four-
for-one stock split for all periods presented. The Company retained the current par value of $0.01 per share for all shares of common
stock. Stockholders’ equity reflects the stock split by reclassifying an amount equal to the par value of the additional shares arising
from the split from “Additional Paid-in Capital” or “Retained Earnings” to “Common stock.”
Principles of Consolidation and Foreign Currency Translation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The financial statements of foreign subsidiaries have been translated into United States dollars in accordance with the foreign
currency matters topic in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (the
“Codification”). Revenues and expenses from international operations were denominated in the respective local currencies and
translated using the average monthly exchange rates for the year. All balance sheet accounts have been translated using the exchange
rates in effect at the balance sheet date and the effect of changes in exchange rates from year to year are disclosed as a separate
component of shareholders’ equity and comprehensive income.
New Accounting Pronouncements
In February 2013, the FASB issued an Accounting Standards Update (ASU) on reporting of amounts reclassified out of
accumulated other comprehensive income, an amendment to the Presentation of Comprehensive Income Topic of the FASB
Accounting Standards Codification. The ASU requires disclosure of amounts reclassified out of accumulated other comprehensive
income by component. In addition, companies are required to present either on the face of the financial statements or in the notes,
significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if
the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not
required to be reclassified in their entirety to net income, companies are required to cross-reference to other disclosures that provide
additional detail about those amounts. This guidance is effective prospectively for annual and interim periods beginning after
December 15, 2012. The Company adopted the ASU in its first quarter of 2013 reporting, which did not have an impact on its
financial statements.
51
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
In July 2013, the FASB issued an ASU on presentation of an unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss, or a tax credit carryforward exists, which is an amendment to the Income Taxes Topic of the FASB
Accounting Standards Codification. The ASU requires companies to net the liability related to an unrecognized tax benefit against a
deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. In addition, under this
ASU, unrecognized tax benefits will be netted against all available same-jurisdiction loss or other tax carryforwards that would be
utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. This guidance is effective
prospectively for annual and interim periods beginning after December 15, 2013, but may be adopted earlier. The Company adopted
this ASU as of December 31, 2013. The adoption of the ASU did not have a material impact on its financial statements.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash or
cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of
cash and cash equivalents, short- and long-term investments and accounts receivable. The Company maintains cash and cash
equivalents and short- and long-term investments with various financial institutions. Amounts held are above the federally insured
limit.
The Company’s sales are primarily to companies located in the United States, Europe and Asia. The Company performs
periodic credit evaluations of its customers’ financial condition and does not require collateral. Accounts receivable are due
principally from large U.S., European and Asia Pacific companies under stated contract terms. Accounts receivable, net as of
December 31, 2013 for the Americas, EMEA, and APAC companies were $57.0 million, $9.9 million, and $4.2 million, respectively.
Accounts receivable, net as of December 31, 2012 for the Americas, EMEA, and APAC companies were $51.0 million, $8.2 million,
and $2.8 million, respectively. The Company’s top five customers in aggregate accounted for 11%, 12%, and 15% of total revenue
recognized for each of the years ended December 31, 2013, 2012, and 2011, respectively. No single customer accounted for more than
10% of revenue in the years ended December 31, 2013, 2012, and 2011 or for more than 10% of accounts receivable as of December
31, 2013 and 2012.
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.
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 one year or greater 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
52
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
realized gains and losses, cost is determined on a specific identification basis.
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. In the quarter ended September 30, 2008, the Company recorded an other-
than-temporary impairment charge of $3.5 million for one of its investments. In 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 Consolidated
Statements of Income. During 2010, 2011, and 2012, the Company sold all of its remaining auction rate securities investments at their
par value totaling $3.0 million. The Company currently has no long-term investments.
At December 31, 2013, the Company’s cash, cash equivalents, and short-term investments balances were $88.2 million,
$36.2 million, and $8.6 million, respectively. Cash equivalents consist of highly liquid money market funds and certificates of
deposit. Short-term investments consist of certificates of deposit. The Company uses quoted prices from active markets that are
classified at Level 1 as a highest level observable input in the disclosure hierarchy framework for all available-for-sale securities. At
December 31, 2013, the Company has $30.4 million in money market funds, which are classified as Level 1 and are included in cash
and cash equivalents on the Consolidated Balance Sheet. The Company has no investments classified as Level 2 or Level 3.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting
period. Significant estimates include the allowance for doubtful accounts, which is based upon an evaluation of historical amounts
written-off, the customers’ ability to pay, and general economic conditions; self-insurance accruals; impairment of goodwill; stock
based compensation, which is based on the number of awards ultimately expected to vest; and the Company’s effective income tax
rate (including the impact of unrecognized tax benefits) and deferred tax assets, which are based upon the Company’s expectations of
future taxable income, allowable deductions, and projected tax credits. Actual results will differ from these estimates.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other financial instruments
included in the accompanying Consolidated Balance Sheets approximate their fair values principally due to the short-term maturities
of these instruments. Unrealized gains and losses on investments are included as a separate component of “Accumulated other
comprehensive loss,” net of any related tax effect, in the Consolidated Balance Sheets.
Risks Associated with Single Business Line, Technological Advances, and Foreign Operations
The Company currently derives a substantial portion of its revenues from sales of its software and related services and
hardware. The markets for supply chain execution and supply chain planning solutions are highly competitive, subject to rapid
technological change, changing customer needs, frequent new product introductions, and evolving industry standards that may render
existing products and services obsolete. As a result, the Company’s position in these markets could be eroded rapidly by unforeseen
changes in customer requirements for application features, functions, and technologies. The Company’s growth and future operating
results will depend, in part, upon its ability to enhance existing applications and develop and introduce new applications that meet
changing customer requirements that respond to competitive products and that achieve market acceptance. Any factor adversely
affecting the markets for supply chain execution and supply chain planning solutions could have an adverse effect on the Company’s
business, financial condition, results of operations and operating cash flows.
The Company’s international business is subject to risks typical of an international business, including, but not limited to,
differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign
exchange rate volatility. In addition, we have a large development center in Bangalore, India, that does not have a natural in-market
revenue hedge to mitigate currency risk to our operating expense in India. Fluctuations in the value of other currencies, particularly
the Indian rupee, could significantly affect our revenues, expenses, operating profit and net income. The Company recognized a
foreign exchange gain of $0.7 million in 2013, a foreign exchange rate loss of $0.1 million in 2012, and a foreign exchange rate gain
of $0.8 million in 2011. Foreign exchange rate transaction gains and losses are classified in “Other (loss) income, net” on the
Consolidated Statements of Income.
53
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Revenue Recognition
The Company’s revenue consists of fees from the licensing and hosting of software (collectively included in “Software
license” revenue in the Consolidated Statements of Income), fees from implementation and training services (collectively,
“professional services”), customer support services and software enhancements (collectively included in “Services” revenue in the
Consolidated Statements of Income), and sales of hardware and other revenue, which consists of reimbursements of out-of-pocket
expenses incurred in connection with our professional services (collectively included in “Hardware and other” revenue in the
Consolidated Statements of Income). 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 covering all
elements of the arrangement, (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 (VSOE) of the fair values of all undelivered elements in a multiple-
element arrangement that is not accounted for using long-term contract accounting, (b) VSOE 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, 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 services and software enhancements and any other undelivered elements
of the arrangement based on 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.
Payment terms for the Company’s software licenses vary. Each contract is evaluated individually to determine whether the
fees in the contract are fixed or 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 that extend beyond contract execution in a particular contract do not preclude the conclusion that the fees in the contract are
fixed or determinable. Although infrequent, when payment terms in a contract extend beyond twelve months, the Company has
determined that such fees are not fixed or 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. Professional services include system planning, design, configuration,
testing and other software implementation support and are not typically essential to the functionality of our software. Fees from
professional services performed by the Company are separately priced and 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 enhancements is generally paid in advance and recognized ratably
over the term of the agreement, typically twelve months.
54
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
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, 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
generally 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 included in “Hardware and other” revenue in the
Consolidated Statements of Income. The total amount of expense reimbursement recorded to revenue was $15.3 million, $12.6
million, and $10.4 million for 2013, 2012, and 2011, respectively.
Deferred Revenue
Deferred revenue represents amounts collected prior to having completed performance of professional services, customer
support services and software enhancements, and significant remaining obligations under license agreements. The Company generally
expects to complete such services or obligations within the next twelve months.
Returns and Allowances
The Company has not experienced significant returns or warranty claims to date and, as a result, has not recorded a provision
for the cost of returns and product warranty claims at December 31, 2013 or 2012.
The Company records an allowance for doubtful accounts based on the historical experience of write-offs and a detailed
assessment of accounts receivable. Additions to the allowance for doubtful accounts generally represent a sales allowance on services
revenue, which are recorded to operations as a reduction to services revenue. The total amounts charged to operations were $2.9
million, $4.3 million, and $2.5 million for 2013, 2012, and 2011, respectively. In estimating the allowance for doubtful accounts,
management considers the age of the accounts receivable, the Company’s historical write-offs, and the creditworthiness of the
customer, among other factors. Should any of these factors change, the estimates made by management will also change accordingly,
which could affect the level of the Company’s future allowances. Uncollectible accounts are written off when it is determined that the
specific balance is not collectible.
Property and Equipment
Property and equipment is recorded at cost and consists of furniture, computers, other office equipment, internal use
software, and leasehold improvements. The Company depreciates the cost of furniture, computers, other office equipment, and
internal use software on a straight-line basis over their estimated useful lives (three to five years for computer software, five years for
office equipment, seven years for furniture and fixtures). Leasehold improvements are depreciated over the lesser of their useful lives
or the term of the lease. Depreciation and amortization expense for property and equipment for the years ended December 31, 2013,
2012, and 2011 was approximately $5.8 million, $5.6 million, and $6.1 million, respectively, and was included in “Depreciation and
amortization” in the Consolidated Statements of Income.
Property and equipment, at cost, consist of the following (in thousands):
55
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Office equipment
Computer software
Furniture and fixtures
Leasehold improvement
Property, plant and equipment, gross
Less accumulated depreciation and amortization
Property, plant and equipment, net
Software Development Costs
December 31,
2013
2012
$
29,767
$
28,889
16,485
2,707
15,313
64,272
(49,930)
15,727
2,892
15,606
63,114
(47,464)
$
14,342
$
15,650
Research and development expenses are charged to expense as incurred. For the years ended December 31, 2013, 2012, and
2011, the Company did not capitalize any internal research and development costs because the costs incurred between the attainment
of technological feasibility for the related software product through the date when the product was available for general release to
customers have been insignificant.
The Company determines the amount of development costs capitalizable under the provisions of FASB Codification
accounting for costs of computer software to be sold, leased, or marketed. Under this guidance, computer software development costs
are charged to R&D expense until technological feasibility is established, after which remaining software production costs are
capitalized. The Company has defined technological feasibility as the point in time at which the Company has a detailed program
design or a working model of the related product, depending on the type of development efforts, and high-risk development issues
have been resolved through end-to-end system testing.
Impairment of Long-Lived Assets
The Company reviews the values assigned to long-lived assets, including property and certain intangible assets, to determine
whether events and circumstances have occurred which indicate that the remaining estimated useful lives may warrant revision or that
the remaining balances may not be recoverable. In such reviews, undiscounted cash flows associated with these assets are compared
with their carrying value to determine if a write-down to fair value is required. During 2013, 2012, and 2011, the Company did not
recognize any impairment charges associated with its long-lived or intangible assets. As of December 31, 2013, the Company’s
intangible assets are fully amortized.
The evaluation of asset impairment requires management to make assumptions about future cash flows over the life of the
asset being evaluated. These assumptions require significant judgment, and actual results may differ from assumed and estimated
amounts.
Goodwill and Impairment of Goodwill
Goodwill
Goodwill represents the excess of purchase price over fair value of net identified tangible and intangible assets and liabilities
acquired. The Company does not amortize goodwill, but instead tests goodwill for impairment on at least an annual basis. Goodwill
was $62.3 million at the end of each year ended December 31, 2013 and 2012. Approximately $36.0 million of the gross Goodwill
balance is deductible for income tax purposes. To date, there have been no goodwill impairments.
Impairment of Goodwill
The Company evaluates the carrying value of goodwill annually as of December 31 and between annual evaluations if events
occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.
56
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Such circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate,
(2) unanticipated competition, or (3) an adverse action or assessment by a regulator.
The Company adopted the simplified goodwill impairment test for the fiscal year ended December 31, 2013, that permits
companies to perform a qualitative assessment based on economic, industry and company-specific factors as the initial step in the
annual goodwill impairment test for all or selected reporting units. Based on the results of the qualitative assessment, companies are
only required to perform Step 1 of the annual impairment test for a reporting unit if the company concludes that it is more likely than
not that the unit’s fair value is less than its carrying amount. To the extent the Company concludes it is more likely than not that a
reporting unit’s fair value is less than its carrying amount, the two-step approach is applied. The first step would require a comparison
of each reporting unit’s fair value to the respective carrying value. If the carrying value exceeds the fair value, a second step is
performed to measure the amount of impairment loss, if any. The Company did not identify any macroeconomic or industry
conditions as of December 31, 2013, that would indicate the fair value of the reporting units were more likely than not to be less than
their respective carrying values. If circumstances change or events occur to indicate it is more likely than not that the fair value of any
reporting units have fallen below their carrying value, the Company would test such reporting unit for impairment. The Company
previously performed its periodic review of its goodwill for impairment as of December 31, 2012, and 2011, and did not identify any
impairment as a result of the review.
Guarantees and Indemnities
The Company accounts for guarantees in accordance with the guarantee accounting topic in the FASB Codification. Our
customer contracts generally contain infringement indemnity provisions. Under those provisions, we generally agree, subject to certain
exceptions, to indemnify, defend, and hold harmless the customer in connection with third party claims against the customer alleging
that the customer’s use of our software products in compliance with their license infringe the third party’s patent, copyright, or other
intellectual property rights. Conditions to our obligations generally include that we are provided the right to control the defense of the
claims and, in general, to control settlement negotiations. Those provisions generally provide also that, if the customer is prevented
from using our software because of a third party infringement claim, our sole obligation (in addition to the indemnification, defense,
and hold harmless obligation referred to above) is to, at our expense, (i) procure for the customer the right to continue to use the
software, (ii) to replace or modify the product so that its use by the customer does not infringe, or, if either of the foregoing are not
reasonably feasible, to terminate the customer contract and provide a refund of the unamortized portion of the customer’s license fee
(based on a five year amortization period). Our customer contracts sometimes also require us to indemnify, defend, and hold harmless
the customer in connection with death, personal injury, or property damage claims made by third parties with respect to actions of our
personnel or contractors. The indemnity obligations contained in our customer contracts generally have no specified expiration date
and no specified monetary limitation on liability. We have not previously incurred costs to settle claims or pay awards under these
indemnification obligations. We account for these indemnity obligations in accordance with FASB guidance on accounting for
contingencies, and record a liability for these obligations when a loss is probable and reasonably estimable. We have not recorded any
liabilities for these contracts as of December 31, 2013, or 2012.
In general, in our customer contracts, the Company warrants to its customers that its software products will perform in all
material respects in accordance with the standard published specifications in effect at the time of delivery of the licensed products to
the customer for six months after first use of the licensed products, but no more than 24 months after execution of the license
agreement. Additionally, the Company warrants to its customers that services will be performed consistent with generally accepted
industry standards or specific service levels through completion of the agreed upon services. If necessary, the Company will provide
for the estimated cost of product and service warranties based on specific warranty claims and claim history. However, the Company
has not incurred significant recurring expense under product or service warranties. As a result, the Company believes the estimated
fair value of these agreements is nominal. Accordingly, the Company has no liabilities recorded for these agreements as of
December 31, 2013, and 2012.
Segment Information
The Company has three reporting segments: Americas, EMEA, and APAC as defined by FASB Codification topic for
segment reporting. See Note 7 for discussion of the Company’s reporting segments.
57
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Advertising Costs
Advertising costs are expensed as incurred and totaled approximately $154,000, $95,000, and $240,000 in 2013, 2012, and
2011, respectively. Advertising costs are included in “Sales and marketing” in the Consolidated Statements of Income.
Basic and Diluted Net Income Per Share
Basic net income 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 income per share is computed using net income divided by Weighted Shares and the treasury stock method effect
of common equivalent shares (“CESs”) outstanding for each period presented. The following is a reconciliation of the shares used in
the computation of net income per share for the years ended December 31, 2013, 2012, and 2011 (in thousands, except per share data
– stock split adjusted):
Net income
Earnings per share:
Basic
Effect of CESs
Diluted
Weighted average number of shares:
Basic
Effect of CESs
Diluted
Year Ended December 31,
2012
2013
2011
$
67,296
$
51,853
$
44,907
$ 0.88
(0.02)
$ 0.86
$ 0.66
(0.02)
$ 0.64
$ 0.55
(0.03)
$ 0.52
76,664
78,640
81,820
1,268
77,932
2,444
81,084
4,148
85,968
There were no anti-dilutive CESs in 2013 and 2012. Options to purchase 8,000 shares of common stock were outstanding at
December 31, 2011 but were not included in the computation of diluted earnings per share because the options’ exercise prices were
greater than the average market price of the common shares during 2011. See Note 2 for further information on those securities.
Accumulated Other Comprehensive Income
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 entire accumulated other comprehensive
income balance as of December 31, 2013 and 2012 represents foreign currency translation adjustments.
2. Equity-Based Compensation
Equity Based Compensation Plans
As discussed in Note 1, on December 19, 2013, the Board of Directors of the Company approved a four-for-one stock split of
the Company’s common stock, effected in the form of a stock dividend. All references to stock award data have been restated to
reflect the effect of the stock split for all periods presented.
The Manhattan Associates, Inc. 1998 Stock Incentive Plan (the “1998 Plan”) was adopted by the Board of Directors and
approved by the shareholders in February 1998. Options originally granted under the 1998 Plan could not have a term exceeding ten
years. Options typically have an annual graded vesting schedule over four years and vest based on service conditions. Following
approval of the Manhattan Associates, Inc. 2007 Stock Incentive Plan (the “2007 Plan”) discussed below, additional awards under the
1998 Plan were discontinued.
58
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
The 2007 Plan was approved by the shareholders of the Company in May 2007 and was subsequently amended in May 2009
and May 2011. The 2007 Plan replaced the 1998 Plan and provides for the grant of stock options, restricted stock, restricted stock
units, and stock appreciation rights. Vesting conditions can be service-based or performance-based, or a combination of both.
As amended, a maximum of 30,000,000 shares are available for grant under the 2007 Plan. Each stock option or stock
appreciation right granted is counted against the maximum share limitation as one share, and each share of restricted stock or
restricted stock unit granted (including those that are service based or performance based) counts against the maximum share
limitation as two shares. Options and stock appreciation rights cannot have a term exceeding seven years. As of December 31, 2013,
there were 13,536,716 shares available for issuance under the amended 2007 Plan. The 1998 and 2007 Plans are administered by the
Compensation Committee of the Board of Directors. The committee has the authority to interpret the provisions thereof.
The restricted stock 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 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 recognizes compensation cost for service-based restricted awards
with graded vesting on a straight-line basis over the entire vesting period, with the amount of compensation cost recognized at any
date at least equal to the portion of the grant-date value of the award that is vested at that date. For its performance-based restricted
stock awards with graded vesting, the Company recognizes compensation cost on an accelerated basis applying straight-line expensing
for each separately vesting portion of each award.
In January 2012, in order to simplify equity grant administration, the Company changed its practice of granting restricted
stock in favor of granting restricted stock units, or RSUs, which convert to the Company’s common stock upon vesting. There is no
material difference between the grant of restricted stock and the grant of RSUs to either the Company or the recipients receiving the
grants; however, in contrast to the granting of restricted stock, no stock will actually be issued under the granting of RSUs until the
units vest. The Company does not currently grant stock options.
Stock Option Awards
The Company recorded equity-based compensation related to stock options granted prior to 2011 of $0.2 million, $0.6
million, and $2.0 million during the years ended December 31, 2013, 2012, and 2011, respectively. A summary of changes in
outstanding options for the year ended December 31, 2013 is as follows:
Outstanding at January 1, 2013
Exercised
Forfeited and expired
Outstanding at December 31, 2013
Vested or expected to vest at December 31, 2013
Exercisable at December 31, 2013
Number of
Shares
1,487,000
(1,014,956)
(27,624)
444,420
444,420
444,420
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual Term
Average
Intrinsic
Value (in
thousands)
$5.53
5.67
5.25
$5.23
$5.23
$5.23
1.7
$
10,726
1.7
1.7
$
10,726
$
10,726
No stock options were granted in 2011, 2012 or 2013.
Options with graded vesting are valued as a single award. The total value of the award is expensed on a straight line basis
over the vesting period with the amount of compensation cost recognized at any date at least equal to the portion of the grant-date fair
value of the award that is vested at that date. The total intrinsic value of options exercised during the years ended December 31, 2013,
2012, and 2011 based on market value at the exercise dates was $13.9 million, $31.2 million, and $25.8 million, respectively. As of
December 31, 2013, there is no unrecognized compensation cost related to unvested stock option awards.
Restricted Stock and RSU Awards
A summary of changes in unvested shares/units of restricted stock for the year ended December 31, 2013 are as follows:
59
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Outstanding at January 1, 2013
Granted
Vested
Forfeited
Outstanding at December 31, 2013
Number of
Shares
Grant Date Fair
Value
2,388,796
$
8.18
848,156
(910,996)
(548,572)
1,777,384
16.31
8.02
10.32
11.74
$
The Company recorded equity-based compensation related to restricted stock and RSUs of $7.1 million, $7.7 million, and
$8.4 million during the years ended December 31, 2013, 2012, and 2011, respectively. The total fair value of restricted stock awards
vested during the years ended December 31, 2013, 2012, and 2011, based on market value at the vesting dates was $26.8 million,
$15.2 million, and $10.8 million, respectively. As of December 31, 2013, unrecognized compensation cost related to unvested
restricted stock awards totaled $10.2 million and is expected to be recognized over a weighted average period of approximately 2.6
years.
Included in the RSU grants for the year ended December 31, 2013, are 262,316 units that have performance-based vesting
criteria. As noted above, the performance criteria are tied to the Company’s 2013 financial performance. As of December 31, 2013,
the performance criteria for the fiscal year were met and the associated equity-based compensation expense has been recognized for
the portion of the award attributable to 2013 services.
3. Income Taxes
The Company is subject to future federal, state, and foreign income taxes and has recorded net deferred tax assets on the
Consolidated Balance Sheets at December 31, 2013 and 2012. Deferred tax assets and liabilities are determined based on the
difference between the financial accounting and tax bases of assets and liabilities. Significant components of the Company’s deferred
tax assets and liabilities as of December 31, 2013 and 2012 are as follows (in thousands):
60
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Deferred tax assets:
Accounts receivable
Accrued liabilities
Equity-based compensation
Capitalized costs
Accrued sales taxes
Deferred rent
State tax credits
Foreign subsidiary net operating losses
Tax credits - foreign
Valuation allowance
Other
Deferred tax liabilities:
Intangible assets
Depreciation
Net deferred tax assets
December 31,
2013
2012
$ 1,010
$ 2,128
5,780
4,131
2,948
3,595
2,106
2,647
181
765
2,140
2,435
4,018
3,079
1,770
2,246
210
683
(6,188)
(5,965)
560
591
$
14,535
$
16,335
7,806
6,155
2,178
2,317
9,984
4,551
$
8,472
7,863
$
The components of income from domestic and foreign operations before income tax expense for the years ended December
31, 2013, 2012, and 2011, are as follows (in thousands):
Domestic
Foreign
Total
Year Ended December 31,
2012
2011
2013
$
94,336
$
75,731
$
55,487
8,773
103,109
$
5,307
81,038
$
7,740
63,227
$
The components of the income tax provision for the years ended December 31, 2013, 2012, and 2011, are as follows (in
thousands):
61
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Year Ended December 31,
2012
2011
2013
$
25,682
3,292
3,674
$
20,150
1,835
1,702
$
12,438
1,043
2,432
32,648
23,687
15,913
2,877
(341)
629
4,670
232
596
4,036
240
(1,869)
3,165
35,813
$
5,498
29,185
$
2,407
18,320
$
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
The income tax benefits related to the exercise of stock options were approximately $4.8 million, $11.0 million, and $9.2
million, for the years ended December 31, 2013, 2012, and 2011, respectively.
As a result of losses in foreign locations, the Company has net operating loss carry-forwards (“NOLs”) of approximately $6.3
million available to offset future income. Approximately $6.1 million of the NOLs expire in 2014 to 2020, and the remainder does not
expire. The Company has established a valuation allowance for substantially all of these NOLs because the ability to utilize them is
not more likely than not.
The Company has tax credit carry-forwards of approximately $6.2 million available to offset future state tax. These tax
credit carry-forwards expire in 2017 to 2023. These credits represent a deferred tax asset of $4.1 million after consideration of the
federal benefit of state tax deductions. A valuation allowance of $3.0 million has been established for these credits because the ability
to use them is not more likely than not.
The Company recorded a $2.0 million tax benefit in 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 Software Technology Park of India (STPI) tax plan, based on the February 2011 budget approved by the
India Finance Ministry, which will allow the Company to utilize tax assets previously reserved. The Company expects to fully utilize
the credits by 2015.
Deferred taxes are not provided for temporary differences of approximately $31.4 million, $29.5 million, and $24.9 million
as of December 31, 2013, 2012, and 2011, respectively, representing earnings of non-U.S. subsidiaries that are intended to be
permanently reinvested. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and
state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to
various foreign countries. It is impractical to calculate the tax impact until such repatriation occurs.
The following is a summary of the items that cause recorded income taxes to differ from taxes computed using the statutory
federal income tax rate for the years ended December 31, 2013, 2012, and 2011:
62
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Statutory federal income tax rate
Effect of:
State income tax, net of federal benefit
State credit carryforwards
U.S. federal R&D tax credit
Foreign operations
Tax exempt income
Tax contingencies
Other permanent differences
Change in valuation allowance
Year Ended December 31,
2012
2011
2013
35.0%
35.0%
35.0%
2.0
(0.9)
(2.0)
(0.4)
-
1.2
(0.5)
0.3
1.8
(0.1)
-
-
-
(0.7)
-
2.1
(0.2)
(0.8)
(4.9)
-
(0.3)
(0.3)
(1.6)
Income taxes
34.7%
36.0%
29.0%
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December
31, 2013, 2012, and 2011 (in thousands):
December 31,
2012
2011
2013
Unrecognized tax benefits at January 1,
$
(3,375)
$
(3,466)
$
(3,396)
Gross amount of increases in unrecognized tax benefits as a result of tax positions
taken during a prior period
Gross amount of decreases in unrecognized tax benefits as a result of tax
positions taken during a prior period
Gross amount of increases in unrecognized tax benefits as a result of tax positions
taken during the current period
Amounts of decreases in the unrecognized tax benefits relating to settlements
with taxing authorities
Reductions to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations
Unrecognized tax benefits at December 31,
(804)
(94)
(217)
61
87
40
(1,460)
(142)
(526)
-
-
228
456
(5,122)
$
240
(3,375)
$
405
(3,466)
$
The Company’s unrecognized tax benefits totaled $5.1 million and $3.4 million as of December 31, 2013 and 2012,
respectively. Included in these amounts are unrecognized tax benefits totaling $3.1 million and $2.2 million as of December 31, 2013
and 2012, respectively, which, if recognized, would affect the effective tax rate. Prior periods shown in the tabular rollforward above
have been adjusted to conform to the current year presentation which includes disclosing the gross amount of unrecognized tax
benefits irrespective of related deferred tax assets.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global
operations in income tax expense. For the years ended December 31, 2013, 2012, and 2011, the Company recognized $0.2 million,
$0.2 million, and $0.1 million, respectively, of expense for the potential payment of interest and penalties. Accrued interest and
penalties were $0.7 million and $0.5 million for the years ended December 31, 2013, and 2012. The Company conducts business
globally and, as a result, files income tax returns in the United State federal jurisdiction and in many state and foreign jurisdictions.
The Company is generally no longer subject to U.S. federal, state, and local, or non-US income tax examinations for the years before
2010. Due to the expiration of statutes of limitations in multiple jurisdictions globally during 2014, the Company anticipates it is
reasonably possible that unrecognized tax benefits may decrease by $0.6 million.
63
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
4. Shareholders’ Equity
During 2013, 2012, and 2011, the Company purchased 2,831,520, 7,779,312, and 14,429,068 shares of the Company’s
common stock for approximately $59.2 million, $99.7 million, and $130.7 million, respectively, through open market transactions as
part of a publicly-announced share repurchase program. In January 2014, the Board of Directors increased the remaining share
repurchase authority to $50 million.
5. Commitments and Contingencies
Leases
Rents charged to expense were approximately $5.9 million, $5.8 million, and $5.7 million for the years ended December 31,
2013, 2012, and 2011, respectively. During the first quarter of 2007, the Company extended its Atlanta headquarters lease, which was
set to expire in March 2008 to September 30, 2018. The landlord funded leasehold improvements of $7.9 million in conjunction with
the new lease which was recorded as an increase in leasehold improvements and deferred rent. Additionally, the Company had a rent
holiday from April to September 2008. In August 2012, the Company amended its Atlanta headquarters lease to obtain additional
space and received reimbursement of $0.2 million from the landlord for leasehold improvements as part of the agreement. The entire
cash rent obligation is being amortized to expense on a straight line basis over the lease term.
Aggregate future minimum lease payments under noncancellable operating leases as of December 31, 2013 are as follows (in
thousands):
Year Ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total minimum payments required
$ 6,248
6,098
6,009
5,900
4,150
-
$ 28,405
There are no future minimum lease payments under capital leases as of December 31, 2013.
Legal and Other Matters
From time to time, the Company may be involved in litigation relating to claims arising out of its ordinary course of business,
and occasionally legal proceeding not in the ordinary course. Many of the Company’s installations involve products that are critical
to the operations of its clients’ businesses. Any failure in a Company product could result in a claim for substantial damages against
the Company, regardless of the Company’s 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 its contracts will be enforceable in all instances. The Company is not currently a party to any ordinary course
legal proceeding or other legal proceedings the result of which it believes is likely to have a material adverse impact upon its business,
financial position, results of operations, or cash flows. The Company expenses legal costs associated with loss contingencies as such
legal costs are incurred.
6. Employee Benefit Plan
The Company sponsors the Manhattan Associates 401(k) Plan and Trust (the “401(k) Plan”), a qualified profit sharing plan
with a 401(k) feature covering substantially all employees of the Company. Under the 401(k) Plan’s deferred compensation
arrangement, eligible employees who elect to participate in the 401(k) Plan may contribute up to 60% of eligible compensation up to
64
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
$17,500, as defined, to the 401(k) Plan. The Internal Revenue Service raised the eligible compensation limit to $255,000 for 2013. In
2011, the Company provided a 25% matching contribution up to 6% of eligible compensation being contributed after the participant’s
first year of employment. In 2012, the Company increased the 401(k) match to a 50% matching contribution up to 6% of eligible
compensation. During the years ended December 31, 2013, 2012 and 2011, the Company made matching contributions to the 401(k)
Plan of $2.7 million, $2.4 million, and $0.9 million, respectively.
7. Reporting Segments
The Company manages the business by geographic segment. The Company has identified three geographic reportable
segments: the Americas, EMEA, and APAC. 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 reporting segment. The chief executive officer and chief financial officer evaluate performance based on revenue and operating
results for each region.
The Americas segment charges royalty fees to the other segments based on software licenses sold by those reporting
segments. The royalties, which totaled $3.2 million, $2.9 million, and $2.2 million in 2013, 2012, and 2011, respectively, are included
in cost of revenue for each segment with a corresponding reduction in America’s cost of revenue. The revenues represented below are
from external customers only. The geographical-based costs consist of costs of professional services personnel, direct sales and
marketing expenses, cost of infrastructure to support the employees and customer base, billing and financial systems, management and
general and administrative support. 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 operating expenses for the Americas segment include $1.2 million of amortization expense on intangible assets in 2011.
Amortization expense on intangible assets in 2013 and 2012 was immaterial.
In accordance with the segment reporting topic of the FASB Codification, the Company has included a summary of financial
information by reportable segment. The following table presents the revenues, expenses, and operating income by reportable segment
for the years ended December 31, 2013, 2012, and 2011 (in thousands):
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and Expenses:
Cost of revenue
Operating expenses
Depreciation and amortization
Total costs and expenses
Operating income
Americas
EMEA
APAC
Consolidated Americas EMEA APAC Consolidated
2013
2012
Year Ended December 31,
$ 49,574
$ 7,858
$ 4,984
$ 62,416
$ 50,036
$9,569
$1,889
$ 61,494
254,934
41,020
19,947
315,901
228,673
36,167
19,032
283,872
33,836
1,536
829
36,201
28,883
1,402
597
30,882
338,344
50,414
25,760
414,518
307,592
47,138
21,518
376,248
142,006
26,111
13,034
181,151
126,342
23,998
11,397
161,737
107,639
13,707
4,909
126,255
110,575
13,153
5,072
128,800
5,248
308
269
5,825
5,158
262
218
5,638
254,893
40,126
18,212
313,231
242,075
37,413
16,687
296,175
$ 83,451
$ 10,288
$ 7,548
$ 101,287
$ 65,517
$9,725
$4,831
$ 80,073
65
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and Expenses:
Cost of revenue
Operating expenses
Depreciation and amortization
Recovery of previously impaired investment
Total costs and expenses
Operating income
Year Ended December 31, 2011
Americas
EMEA
APAC
Total
$ 45,506
$ 6,362
$ 2,373
$ 54,241
198,041
30,824
15,193
244,058
29,312
1,109
533
30,954
272,859
38,295
18,099
329,253
108,648
20,436
10,017
139,101
106,439
12,268
5,317
124,024
6,741
352
191
7,284
(2,519)
219,309
-
33,056
- (2,519)
267,890
15,525
$ 53,550
$ 5,239
$ 2,574
$ 61,363
The following table presents the goodwill, long-lived assets, and total assets by reporting segment for the years ended
December 31, 2013 and 2012 (in thousands):
As of December 31, 2013
As of December 31, 2012
Goodwill
Long lived assets
Americas
$ 54,766
14,885
EMEA
$ 5,543
752
APAC
$ 1,963
754
Consolidated Americas
$
62,272
16,391
$ 54,766
15,810
EMEA
$ 5,536
800
APAC
$ 1,963
699
Consolidated
$
62,265
17,309
Total assets
267,778
20,556
9,494
297,828
235,945
17,391
8,477
261,813
For the years ended December 31, 2013, 2012, and 2011, we derived revenue from sales to customers outside the United
State of approximately $110.8 million, $104.4 million, and $90.7 million, respectively. Our remaining revenue was derived from
domestic sales.
License revenues related to our warehouse and non-warehouse product groups for the years ended December 31, 2013, 2012,
and 2011, are as follows (in thousands):
Year ended December 31,
2012
2011
2013
Warehouse
Non-Warehouse
Total license revenue
$
$
39,409
23,007
62,416
$
$
40,068
21,426
61,494
$
$
33,560
20,681
54,241
Our services revenue consists of fees generated from professional services, customer support services and software
enhancements related to our software products for the years ended December 31, 2013, 2012, and 2011, are as follows (in thousands):
Professional services
Customer support and software enhancements
Total services revenue
66
Year ended December 31,
2012
185,242
98,630
283,872
2013
210,823
105,078
315,901
$
$
$
$
2011
156,794
87,264
244,058
$
$
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013, 2012, and 2011
8. Subsequent Events
The Company evaluated all subsequent events that occurred after the date of the accompanying financial statements and
determined that there were no events or transactions during this subsequent event reporting period which require recognition or
disclosure in the Company’s financial statements.
67
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure 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.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the
system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated
effectively in all cases. Our disclosure controls and procedures, however, are designed to provide reasonable assurance that the
objectives of disclosure controls and procedures are met.
As of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer evaluated, with
the participation of management, 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 were effective to provide reasonable assurance that the objectives of disclosure controls and procedures are
met.
Management’s Report on Internal Control over Financial Reporting
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31,
2013, and the report of Ernst & Young LLP on the effectiveness of the Company’s internal control over financial reporting are
contained on pages 43 and 44 of this report.
Change in Internal Control over Financial Reporting
During the fourth quarter of 2013, 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.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item is incorporated by reference from the information contained in our Proxy Statement for
the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 11, 2014, under the captions “Election of
Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Ethics,” and “Board
Committees.”
Item 11. Executive Compensation
The information required by this item is incorporated by reference from the relevant information contained in our Proxy
Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 11, 2014, under the captions
“Director Compensation,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and
“Compensation Committee Report.”
69
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this item is incorporated by reference from the relevant information contained in our Proxy
Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 11, 2014, under the caption
“Security Ownership of Certain Beneficial Owners and Management.” The information required by this item with respect to the
Company’s securities authorized for issuance under equity compensation plans is included in Part II, Item 5 of this Annual Report on
Form 10-K and is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the relevant information contained in our Proxy
Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 11, 2014, under the captions
“Related Party Transactions” and “Election of Directors.”
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference from the relevant information contained in our Proxy
Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 11, 2014, under the caption
“Ratification of Appointment of Independent Registered Public Accounting Firm.”
Item 15. Exhibits and Financial Statement Schedules
(a)
1.
Financial Statements.
PART IV
The response to this item is submitted as a separate section of this Form 10-K. See Item 8.
2.
Financial Statement Schedule.
70
The following financial statement schedule is filed as a part of this report:
SCHEDULE II
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Classification:
Allowance for Doubtful Accounts
For the year ended:
December 31, 2011
December 31, 2012
December 31, 2013
Deferred Tax Asset Valuation Allowance
For the year ended:
December 31, 2011
December 31, 2012
December 31, 2013
Restructuring Charge Accrual
For the year ended:
December 31, 2011
Balance at
Beginning of
Period
Additions
charged to
Operations
Net
Deductions
Balance at End of
Period
$
$
$
5,711,000
4,816,000
6,235,000
$
$
$
2,508,000
4,294,000
2,901,000
$
$
$
3,403,000
2,875,000
5,980,000
(a)
(a)
(a)
$
$
$
4,816,000
6,235,000
3,156,000
$
$
$
7,689,000
6,711,000
5,965,000
$
-
$
-
$
223,000
(c)
$
978,000
$
746,000
$
-
(b)
(b)
$
$
$
6,711,000
5,965,000
6,188,000
$
63,000
$
-
$
63,000
$
-
(a) Represents write-offs of accounts, net of recoveries.
(b) Represents current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets.
All other schedules are omitted because they are not required or the required information is shown in the consolidated
financial statements or notes thereto.
3.
Exhibits.
See (b) below.
The exhibits listed below under “Exhibit Index” are filed with or incorporated by reference in this Report. Where such filing
(b)
is made by incorporation by reference to a previously filed registration statement or report, such registration statement or report is
identified in parentheses.
(c)
See Item 15(a)(2).
71
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
MANHATTAN ASSOCIATES, INC.
By: /s/ Eddie Capel
Eddie Capel
President, Chief Executive Officer, and Director
Date: February 6, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ John J. Huntz, Jr.
John J. Huntz, Jr.
/s/ Eddie Capel
Eddie Capel
/s/ Dennis B. Story
Dennis B. Story
/s/ Brian J. Cassidy
Brian J. Cassidy
/s/ Dan J. Lautenbach
Dan J. Lautenbach
/s/ Thomas E. Noonan
Thomas E. Noonan
/s/ Deepak Raghavan
Deepak Raghavan
/s/ Peter F. Sinisgalli
Peter F. Sinisgalli
Chairman of the Board
February 6, 2014
President, Chief Executive Officer, and
Director (Principal Executive Officer)
February 6, 2014
Executive Vice President, Chief Financial
Officer, and Treasurer (Principal
Financial and Accounting Officer)
February 6, 2014
February 6, 2014
February 6, 2014
February 6, 2014
February 6, 2014
February 6, 2014
Director
Director
Director
Director
Director
72
The following exhibits are filed with this Report.
EXHIBIT INDEX
Description
Exhibit
Number
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s
Registration Statement on Form S-1 (File No. 333-47095), filed on February 27, 1998).
Amended Bylaws of the Registrant (As Amended Effective October 13, 2010) (Incorporated by reference to
Exhibit 3.2 to the Company’s Form 8-K (File No. 000-23999), filed on October 19, 2010).
Provisions of the Articles of Incorporation and Bylaws of the Registrant defining rights of the holders of common
stock of the Registrant (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on
Form S-1 (File No. 333-47095), filed on February 27, 1998).
Specimen Stock Certificate (Incorporated by reference to Exhibit 4.2 to the Company’s Pre-Effective Amendment
No. 1 to its Registration Statement on Form S-1 (File No. 333-47095), filed on April 2, 1998).
Lease Agreement by and between Wildwood Associates, a Georgia general partnership, and the Registrant dated
September 24, 1997 (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form
S-1 (File No. 333-47095), filed on February 27, 1998).
First Amendment to Lease between Wildwood Associates, a Georgia general partnership, and the Registrant dated
October 31, 1997 (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-
1 (File No. 333-47095), filed on February 27, 1998).
Second Amendment to Lease Agreement between Wildwood Associates, a Georgia general partnership, and the
Registrant, dated February 27, 1998 (Incorporated by reference to Exhibit 10.8 to the Company’s Pre-Effective
Amendment No. 1 to its Registration Statement on Form S-1 (File No. 333-47095), filed on April 2, 1998).
Third Amendment to Lease Agreement between Wildwood Associates and the Registrant, dated October 24, 2000
(Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report for the period ended December 31,
2000 (File No. 000-23999), filed on April 2, 2001).
Lease Agreement by and between Wildwood Associates, a Georgia general partnership, and the Registrant, dated
June 25, 2001 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report for the period ended
June 30, 2001 (File No. 000-23999), filed August 14, 2001).
First Amendment to Lease Agreement between Wildwood Associates, and the Registrant, dated June 10, 2002
(Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report for the period ended December 31,
2006 (File No. 000-23999), filed on March 14, 2007).
Second Amendment to Lease Agreement between 2300 Windy Ridge Parkway Investors LLC, and the Registrant,
dated February 27, 2007 (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report for the
period ended December 31, 2006 (File No. 000-23999), filed on March 14, 2007).
Lease Agreement by and between Tektronix UK Limited, Manhattan Associates Limited and Manhattan
Associates, Inc., dated October 21, 1999 (Incorporated by reference to Exhibit 10.27 to the Company’s Annual
Report for the period ended December 31, 1999 (File No. 000-23999), filed on March 30, 2000).
73
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.19
10.20 *
10.21 *
10.22 *
10.23 *
Lease (Burlington Business Center) by and between Gateway Rosewood, Inc. and Manhattan Associates, Inc.,
dated August 23, 2004 (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report for the period
ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005).
Agreement to Build and Lease between Orchid Apartments Private Limited and Manhattan Associates India
Development Centre Private Limited, executed on November 19, 2004 (Incorporated by reference to Exhibit 10.8
to the Company’s Annual Report for the period ended December 31, 2004 (File No. 000-23999), filed on
March 16, 2005).
Lease Agreement between IGE Energy Services (UK) Limited, Manhattan Associates Limited and Manhattan
Associates, Inc., dated February 1, 2005 (Incorporated by reference to Exhibit 10.9 to the Company’s Annual
Report for the period ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005).
Sub-Sublease Agreement between Scientific Research Corporation, a Georgia corporation, and the Registrant,
dated July 2, 1998 (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report for the period
ended December 31, 1998 (File No. 000-23999), filed on March 31, 1999).
Sub-Sublease Agreement between The Profit Recovery Group International 1, Inc., a Georgia corporation, and the
Registrant, dated August 19, 1998 (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report
for the period ended December 31, 1998 (File No. 000-23999), filed on March 31, 1999).
Standard Sublease Agreement between Life Office Management Association, Inc. and the Registrant, dated
October 20, 2000 (Incorporated by reference to Exhibit 10.17 to the Company’s Annual Report for the period
ended December 31, 2000 (File No. 000-23999), filed on April 2, 2001).
Standard Sublease Agreement between Chevron USA Inc. and the Registrant, dated November 20, 2000
(Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report for the period ended December 31,
2000 (File No. 000-23999), filed on April 2, 2001).
Form of Director and Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.2 to the
Company’s Form 8-K (File No. 000-23999) filed on April 4, 2013).
Summary Plan Description of the Registrant’s 401(k) Plan and Trust, effective January 1, 1995 (Incorporated by
reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-47095), filed on
February 27, 1998).
Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 10.10 to the
Company’s Registration Statement on Form S-1 (File No. 333-47095), filed on February 27, 1998).
First Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.22 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999),
filed on March 31, 1999).
Second Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.23 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999),
filed on March 31, 1999).
Third Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.24 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999),
filed on March 31, 1999).
74
10.24 *
10.25 *
10.26 *
10.27 *
10.28 *
Fourth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.25 to the Company’s Annual Report for the period ended December 31, 1999 (File No. 000-23999),
filed on March 30, 2000).
Fifth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 4.8 to the Company’s Form S-8 (File No. 333-68968), filed on September 5, 2001).
Sixth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Annex A to the Company’s Proxy Statement for its Annual Meeting held May 17, 2002 (File No. 000-23999),
filed on April 24, 2002).
Amendment No. 7 to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 4.10 to the Company’s Form S-8 (File No. 333-105913), filed on June 6, 2003).
Form of Composite Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s
Quarterly Report for the period ended March 31, 2006 (File No. 000-23999), filed on May 4, 2006).
10.30(a)*
Executive Employment Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of
February 25, 2004 (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report for the period
ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004).
(b)*
(c)*
Modification dated July 19, 2007 by and between the Company and Peter F. Sinisgalli to the Executive
Employment Agreement dated February 25, 2004 (Incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K (File No. 000-23999), filed on July 24, 2007).
Executive Employment Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of April 13,
2012 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on
December 23, 2011).
10.31 *
10.32(a)*
Separation and Non-Competition Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of
February 25, 2004 (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report for the period
ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004).
Form of Executive Employment Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-
K (File No. 000-23999) filed on April 4, 2013).
(b)*
Updated Schedule to Form of Executive Employment Agreement of Initial Salaries and Target Bonus
Opportunities for Named Executive Officers (Incorporated by reference to Exhibit 10.1(b) to the Company’s
Quarterly Report on Form 10-Q for the period ended June 30, 2013 (File No. 000-23999) filed on July 31, 2013).
10.33 *
Executive Employment Agreement with Steven P. Smith (Incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013 (File No. 000-23999) filed on July
31, 2013).
10.40
*
Form of Modification Agreement for Terms and Conditions for Stock Options. (Incorporated by reference to
Exhibit 10.3 to the Company’s Form 8-K (File No. 000-23999), filed on January 2, 2009).
10.44 *
2007 Stock Incentive Plan, as amended by the First Amendment thereto (Incorporated by reference to Annex A to
the Company’s Definitive Proxy Statement related to its 2009 Annual Meeting of Shareholders (File No. 000-
23999) filed on April 20, 2009).
75
10.47*
10.48*
10.49*
10.50*
10.51*
10.52*
10.53*
10.54*
10.55*
Written Summary of Manhattan Associates, Inc. Annual Cash Incentive Plan (Incorporated by reference to
Exhibit 10.47 to the Company’s Annual Report for the period ended December 31, 2009 (File No. 000-23999),
filed on February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Employees (Incorporated by reference
to Exhibit 10.48 to the Company’s Annual Report for the period ended December 31, 2009 (File No. 000-23999),
filed on February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Non-Employee Directors
(Incorporated by reference to Exhibit 10.49 to the Company’s Annual Report for the period ended December 31,
2009 (File No. 000-23999), filed on February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Unit Award Agreement for Employees (Incorporated by
reference to Exhibit 10.50 to the Company’s Annual Report for the period ended December 31, 2012 (File
No. 000-23999), filed on February 23, 2012).
Form of Manhattan Associates, Inc. Restricted Stock Unit Award Agreement for Non-Employee Directors
(Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December 31,
2012 (File No. 000-23999), filed on February 23, 2012).
Executive Employment Agreement by and between the Registrant and Bruce Richards, effective as of August 1,
2011 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December
31, 2012 (File No. 000-23999), filed on February 23, 2012).
Severance and Non-Competition Agreement by and between the Registrant and Bruce Richards, effective as of
August 1, 2011 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended
December 31, 2012 (File No. 000-23999), filed on February 23, 2012).
Modification Agreement for Terms and Conditions for Stock Options by and between the Registrant and Eddie
Capel, effective as of June 4, 2007 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report
for the period ended December 31, 2012 (File No. 000-23999), filed on February 23, 2012).
Severance and Non-Competition Agreement by and between the Registrant and Eddie Capel, effective as of
March 18, 2010 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended
December 31, 2012 (File No. 000-23999), filed on February 23, 2012).
21.1
List of Subsidiaries.
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
31.1
31.2
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
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
32 **
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
101 .INS
101 .SCH
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
76
101.CAL
101 .DEF
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB***
XBRL Taxonomy Extension Label Linkbase Document
101 .PRE ***
XBRL Taxonomy Extension Presentation Linkbase Document
* Management contract or compensatory plan or agreement.
**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.
77
MANHATTAN ASSOCIATES, INC. SUBSIDIARIES
Subsidiaries
Manhattan Associates Limited
Manhattan Associates Europe B.V.
Manhattan Associates France SARL
Manhattan Associates GmbH
Manhattan Associates KK
Manhattan Associates Software (Shanghai), Co. Ltd.
Manhattan Associates Pty Ltd.
Manhattan Associates Software Pte Ltd.
Manhattan Associates (India) Development Centre Private Limited
Manhattan Associates, S. de R.L. de CV
Manhattan Associates Services, S. de R.L. de CV
EXHIBIT 21.1
Place of Incorporation
United Kingdom
Netherland
France
Germany
Japan
China
Australia
Singapore
India
Mexico
Mexico
Manhattan Associates Supply Chain Software, LLC
Georgia, USA
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
We consent to the incorporation by reference in the following Registration Statements:
1. Registration Statement (Form S-8 No. 333-60635) pertaining to the Manhattan Associates, Inc. Stock Incentive Plan,
2. Registration Statement (Form S-8 No. 333-45802) pertaining to the Manhattan Associates, Inc. 1998 Stock Incentive Plan,
3. Registration Statement (Form S-8 No. 333-68968) pertaining to the Manhattan Associates, Inc. 1998 Stock Incentive Plan,
4. Registration Statement (Form S-8 No. 333-105913) pertaining to the Manhattan Associates, Inc. Stock Incentive Plan,
5. Registration Statement (Form S-8 No. 333-129272) pertaining to the Manhattan Associates, Inc. Stock Incentive Plan,
6. Registration Statement (Form S-8 No. 333-139598) pertaining to the Manhattan Associates, Inc. Stock Incentive Plan,
7. Registration statement (Form S-8 No. 333-143611) pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan,
8. Registration statement (Form S-8 No. 333-159852) pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan,
and
9. Registration statement (Form S-8 No. 333-174499) pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan;
of our reports dated February 6, 2014, with respect to the consolidated financial statements and schedule of Manhattan Associates, Inc.
and subsidiaries and the effectiveness of internal control over financial reporting of Manhattan Associates, Inc. and subsidiaries
included in this Annual Report (Form 10-K) of Manhattan Associates, Inc. and subsidiaries for the year ended December 31, 2013.
Atlanta, Georgia
February 6, 2014
/s/ Ernst & Young LLP
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 31.1
I, Eddie Capel, certify that:
1.
I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated this 6th day of February, 2014
/s/ Eddie Capel
Eddie Capel, President and Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(d), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Dennis B. Story, certify that:
1.
I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated this 6th day of February, 2014
/s/ Dennis B. Story
Dennis B. Story, Executive Vice President, Chief Financial
Officer, and Treasurer
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
EXHIBIT 32
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18
(Crimes and Criminal Procedures) of the United States Code and shall not be relied on by any person for any other purpose.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer, respectively, of Manhattan Associates, Inc. (the
“Company”), hereby each certify that, to the undersigned’s knowledge:
1. the Annual Report on Form 10-K of the Company for the twelve month period ended December 31, 2013 (the “Report”), which
accompanies this Certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
2. all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Dated this 6th day of February, 2014
/s/ Eddie Capel
Eddie Capel, President and Chief Executive Officer
/s/ Dennis B. Story
Dennis B. Story, Executive Vice President, Chief Financial
Officer, and Treasurer
In accordance with SEC Release No. 34-47986, this Exhibit is 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. A signed original of this written
statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the registrant and will be retained by the
registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Registrar and Transfer Agent
Computershare Trust Company, NA
P O Box 30170
College Station, TX 77842
+1 800.568.3476
Inquiries regarding stock transfers, lost
certificates or address changes should be
directed to above address.
Auditors
Ernst & Young LLP
Atlanta, Georgia
Legal Counsel
Kilpatrick Townsend & Stockton LLP
Atlanta, Georgia
Nasdaq Symbol
The Company’s common stock is traded on the Nasdaq Global Select Market under the symbol MANH. Additional
copies of this 2013 10-K, filed with the Securities and Exchange Commission, may be obtained by shareholders online at
www.manh.com or without charge by writing to Manhattan Associates Investor Relations at the Company’s headquarters.
Stock Performance
The following line-graph provides a comparison of the cumulative total shareholder return for Manhattan
Associates, Inc. (“Manhattan”) common stock for the period from December 31, 2008 through December 31, 2013,
against the cumulative shareholder return during such period achieved by The NASDAQ Stock Market (“NASDAQ
Composite”) and the NASDAQ Computer and Data Processing Index. The graph assumes that $100 was invested
on December 31, 2008 in the Common Stock and in each of the comparison indices and assumes reinvestment of
dividends. No cash dividends have been declared on shares of Manhattan common stock. The data for the graph
was provided to us by Zacks Investment Research, Inc.
Comparison of 5-Year Cumulative Total Return
Assumes Initial Investment of $100
December 31, 2013
800 _________________________________________________________________________________
700 _________________________________________________________________________________
600 _________________________________________________________________________________
500 ___________________________________________________________________________________________________________________________________________
400 _________________________________________________________________________________
300 _________________________________________________________________________________
200 _________________________________________________________________________________
100 _________________________________________________________________________________
0 _________________________________________________________________________________
2008
2009
2010
2011
2012
2013
Stock Performance Graph Data Points for fiscal year ended December 31:
2008
2009
2010
2011
2012
2013
Manhattan Associates, Inc.
NASDAQ Composite
100
100
NASDAQ Computer and Data Processing Index
100
152
145
163
193
172
186
256
170
180
382
201
205
744
281
295
24
www.manh.comcommerce-ready
Global Headquarters
2300 Windy Ridge Parkway | Atlanta, Georgia 30339
tel +1 770.955.7070 | fax +1 770.955.0302
North & South America + 1 877.596.9208 | Europe, the Middle East and
Africa +44 (0)1344 318000 | Asia Pacific +61 (0)2 9454 5400
www.manh.com
Manhattan Associates is committed to developing supply chain solutions that foster environmental stewardship.
Cert no. XXX-XXX-XXXX
©2014 Manhattan Associates, Inc. All rights reserved.