United States
Securities And Exchange Commission

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Manhattan Associates, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Georgia		0-23999		58-2373424
(State or Other Jurisdiction of		(Commission File Number)		(I.R.S. Employer Identification No.)
Incorporation or organization)

2300 Windy Ridge Parkway, Suite 1000, Atlanta, Georgia
30339
(Address of Principal Executive Offices)
(Zip Code)

(770) 955-7070
(Registrant’s telephone number, including area code)

NONE
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition.

     On October 21, 2008, Manhattan Associates, Inc. (the “Company”) issued a press release providing the results for its financial performance for the third quarter and nine months ended September 30, 2008. A copy of this press release is attached as Exhibit 99.1. Pursuant to General Instruction B.2 of Form 8-K, this exhibit is “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

     Non-GAAP Financial Measures in the Press Release

     The press release includes, as additional information regarding our operating results, our adjusted operating income, adjusted net income and adjusted earnings per share, which excludes the impact of acquisition-related costs and the amortization thereof, the recapture of previously recognized transaction tax expense, stock option expense under SFAS 123(R), and asset impairment charges, all net of income tax effects, and unusual tax adjustments. The press release also presents our growth in GAAP revenue, operating income and adjusted operating income between periods excluding the effects of foreign currency exchange. These various measures are not in accordance with, or an alternative for, financial measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) and may be different from similarly titled non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with the GAAP.

     Adjusted Income and Earnings Per Share

     We believe that these adjusted (non-GAAP) results provide more meaningful information regarding those aspects of our current operating performance that can be effectively managed, and consequently have developed our internal reporting, compensation and planning systems using these measures.

	•		Because we sporadically engage in acquisitions, we incur acquisition-related costs that consist primarily of expenses from accounting and legal due diligence, whether or not we ultimately proceed with the transaction. Additionally, we might assume and incur certain unusual costs, such as employee retention benefits, that result from arrangements made prior to the acquisition. These acquisition costs are practically difficult to predict and do not correlate to the expenses of our core operations. The amortization of acquisition-related intangible assets is commonly excluded from the GAAP operating income, net income and earnings per share by companies in our industry, and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results with that of our competitors.
	•		Because we have recognized the full potential amount of the transaction (sales) tax expense in prior periods, any recovery of that expense resulting from the expiration of the state sales tax statutes or the collection of the taxes from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of anything occurring within our control during the current period.
	•		Because stock option expense under SFAS 123(R) is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us.

			Excluding the impact of SFAS 123(R) in adjusted operating income, adjusted net income and adjusted earnings per share is consistent with similar practice by our competitors and other companies within our industry.
	•		We do not believe that the asset impairment charges recorded in the third quarter of 2008 are common costs that results from normal operating activities. We do not include the impairments in the assessment of our operating performance.
	•		Lastly, we do not include the unusual tax adjustments in our evaluation of our operating results as it does not relate to our core operations.

     For these reasons, we have developed our internal reporting, compensation and planning systems using non-GAAP measures which adjust for these amounts.

     We believe the reporting of adjusted operating income, adjusted net income and adjusted earnings per share facilitates investors’ understanding of our historical operating trends, because it provides important supplemental measurement information in evaluating the operating results of our business, as distinct from results that include items that are not indicative of ongoing operating results, and thus provide the investors with useful insight into our profitability exclusive of unusual adjustments. While these adjusted items may not be considered as non-recurring in nature in a strictly accounting sense, the management regards those items as infrequent and not arising out of the ordinary course of business and finds it useful to utilize a non-GAAP measure in evaluating the performance of our underlying core business.

     We also believe that adjusted operating income, adjusted net income and adjusted earnings per share provides a basis for more relevant comparisons to other companies in the industry, enables investors to evaluate our operating performance in a manner consistent with our internal basis of measurement and also presents our investors our operating results on the same basis as that used by our management. Management refers to adjusted operating income, adjusted net income and adjusted earnings per share in making operating decisions because we believe they provide meaningful supplemental information regarding our operational performance and our ability to invest in research and development and fund acquisitions and capital expenditures. In addition, adjusted operating income, adjusted net income and adjusted earnings per share facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results. Further, we rely on adjusted operating income, adjusted net income and adjusted net income per share information as primary measures to review and assess the operating performance of our company and our management team in connection with our executive compensation and bonus plans. Since most of our employees are not directly involved with decisions surrounding acquisitions or severance-related activities and other items that are not central to our core operations, we do not believe it is appropriate or fair to have their incentive compensation affected by these items. By adjusting those items not indicative of ongoing operating results, non-GAAP financial measures could serve as an alternative useful measure to evaluate our prospects for future performance because our investors are able to more conveniently predict the results of our operating activities on an on-going basis when excluding these less common items.

     Excluding the Effect of Foreign Currency Exchange

     In the press release, we have presented our growth in GAAP revenue, GAAP operating income and adjusted (non-GAAP) operating income on a ‘constant currency’ basis. Such constant currency financial data is not a GAAP financial measure. Constant currency removes from financial data the impact of changes in exchange rates between the U.S. dollar (our financial reporting currency) and the functional currencies of our foreign subsidiaries, by translating the current period financial data into U.S.

dollars using the same foreign currency exchange rates that were used to translate the financial data for the previous period. We believe presenting certain information on a constant currency basis is useful to investors because it allows a more meaningful comparison of the performance of our foreign operations from period to period. Constant currency information should not be considered in isolation or as an alternative to financial information that reflect current period exchange rates, or to other financial information calculated and presented in accordance with GAAP.

Item 2.06		Material Impairments.

     In connection with the preparation of the financial statements required to be included in our Form 10-Q for the quarter ended September 30, 2008, we determined that an impairment charge of $1.7 million to write down the remaining balance of $2.0 million investment in a technology company and an impairment charge of $3.5 million related to an investment in an auction rate security were required. We estimate that neither impairment will result in future cash expenditures by us. See Item 2.02, which is incorporated herein by reference, for further description of the material impairments.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits.

Exhibit
Number		Description
99.1		Press Release, dated October 21, 2008.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 21, 2008

EXHIBIT INDEX

Exhibit
Number		Description
99.1		Press Release, dated October 21, 2008.

Contact:		Dennis Story		Terrie O’Hanlon
		Chief Financial Officer		Chief Marketing Officer
		Manhattan Associates, Inc.		Manhattan Associates, Inc.
		678-597-7115		678-597-7120
		dstory@manh.com		tohanlon@manh.com

 

ATLANTA — October 21, 2008 — Leading supply chain optimization provider Manhattan Associates, Inc. (NASDAQ: MANH) today reported third quarter 2008 Earnings Per Share (EPS) in line with adjusted guidance previously issued for the quarter. The Company also revised its Earnings Per Share guidance for the full year after recalibrating its outlook on market demand for the fourth quarter of 2008 based on challenging global economic conditions.

The Company’s third quarter adjusted diluted earnings per share were $0.34, equal to the same metric in the quarter ended September 30, 2007, and at the low end of the Company’s previously issued guidance range of $0.34 to $0.42 for the quarter ended September 30, 2008. GAAP diluted earnings per share were $0.18, a 38% decrease over the third quarter of 2007, on overall revenue of $82.7 million, which was down 2% from overall revenue posted in the third quarter of 2007.

Manhattan Associates President and CEO Pete Sinisgalli commented, “Due to downward pressure on economies worldwide, we saw a significant number of software license deals we expected to close in the third quarter slip to the fourth quarter, and possibly later. The silver lining in this challenging time is that our competitive win rate remains strong, and as the capital markets return to healthier levels, we are well positioned to win a greater share of business.”

“Our current market outlook assumes that market pressures similar to those in the third quarter continue through the fourth quarter,” Sinisgalli added. “We therefore have recalibrated our full-year 2008 Adjusted Earnings Per Share guidance to a range of $1.36 to $1.46, representing growth of between 5% and 12% over 2007 full-year Earnings Per Share.”

Summarized results for the 2008 third quarter, as compared to the 2007 third quarter, follow:

•		Adjusted diluted earnings per share, a non-GAAP measure, remained unchanged at $0.34 per share for each of the quarters ended September 30, 2008 and 2007.
•		GAAP diluted earnings per share decreased 38% to $0.18 per share, which includes the impact of asset write-downs and the release of tax contingency reserves due to expiring tax audit statutes for 2004 and prior years.

•

Consolidated revenue decreased 2% to $82.7 million. Currency changes during the quarter did not significantly impact total revenue.

	-		License revenue decreased 20%, to $13.8 million.
	-		Services revenue totaled $60.0 million, increasing 3%.

•		GAAP Operating income decreased 69% to $3.2 million, which includes $5.2 million in asset write-downs for a technology investment and an auction-rate security investment. Excluding the impact of currency changes, GAAP operating income decreased 75%.
•		Operating income, on a non-GAAP basis, decreased 17% to $10.6 million. Excluding the impact of currency changes, operating income on a non-GAAP basis decreased 21%.

•		Cash Flow from Operations was a record $18.4 million, increasing 190% over the third quarter of 2007, with Days Sales Outstanding of 79 days.
•		Cash and Investments on hand at September 30, 2008 was $82.8 million.

•		The Company repurchased 511,404 common shares totaling $12.6 million at an average share price of $24.73 in the third quarter of 2008, thereby completing its $50 million buyback program approved in October 2007.
•		In October 2008, the Board of Directors approved the repurchase of up to an additional $25 million of Manhattan Associates outstanding common stock.

Summarized results for the first nine months of 2008, as compared to the first nine months of 2007, follow:

•		GAAP diluted earnings per share increased 5% to $0.84.
•		Adjusted diluted earnings per share, a non-GAAP measure, increased to $1.12, a 19% gain.

•

Consolidated revenue increased 4% to $261.6 million. Excluding the impact of currency changes, revenue increased 3%.

	-		License revenue decreased 5%, to $51.5 million.
	-		Services revenue totaled $182.1 million, increasing 8%.

•		GAAP operating income decreased 19% to $25.6 million. Excluding the impact of currency changes, GAAP operating income decreased 20%.
•		On a non-GAAP basis, operating income slightly decreased from $37.3 million to $37.1 million. Excluding the impact of currency changes, operating income on a non-GAAP basis decreased 2%.

•		GAAP and non-GAAP effective tax rates were 29.36% and 32.70% respectively, compared to 34.75% on a GAAP and non-GAAP basis in the first half of 2008. The lower tax rates primarily resulted from tax contingency reserves released due to expiring tax audit statutes.
•		On a non-GAAP basis, a lower tax rate was achieved through recognition of credits related to research and development and job training.

•

The Company repurchased approximately 1.1 million common shares during the first nine months of 2008 at an average share price of $23.72, for a total investment of $25.0 million

Significant sales-related achievements during the quarter include:

•		Closing four contracts of $1.0 million or more in recognized license revenue during the quarter. Year-to-date, the company has closed 11 contracts of this size.
•		Software license wins with new customers such as Chery Automobile Company, Ltd., Crete Carrier Corporation, Lennox International, Inc., Republic National Distributing Company, SamsonOpt, Santrade, Ltd., Select Carrier Group, Inc., The Men’s Wearhouse and Triplefin LLC.
•		Expanding partnerships with existing customers such as Amerisource Bergen Services Corporation, Anvil Knitwear, Inc., Belk, Inc, Clapper Technology Sdn Bhd, David’s Bridal,

Inc., DHL, Estes Express, Giant Eagle, Inc., GoldToeMoretz LLC, HoMedics, Jones Apparel Group, Inc., LeSaint Logistics, Natasha, Olympus America, Inc., Ozburn-Hessey Logistics,Inc., Polo Ralph Lauren, Robinson Manufacturing, The Apparel Group, Ltd., The Bunsha Company, Walgreen Co., Winzer and Wirtz Corporation.

FOURTH QUARTER STAFF ADJUSTMENTS

The Company also announced that, based on its view of intermediate-term market demand, it has identified over-staffed areas and eliminated approximately 150 positions worldwide to realign capacity with demand forecasts. The adjustment represents fewer than 7% of about 2,300 associates worldwide.

“While it is always difficult to release good associates, we took the responsible action of recalibrating our investment in staff based on our adjusted market outlook,” Sinisgalli said. “Based on our estimates, we remain sufficiently staffed to meet current and anticipated needs, and have protected our ability to continue investing in areas critical to our short- and long-term success,” he added.

“Most of the positions eliminated were in the United States, and most were in the Company’s Professional Services organization, which had been sized based on a growth trajectory no longer aligned with global economic conditions,” Sinisgalli concluded.

2008 GUIDANCE

Manhattan Associates provided the following diluted earnings per share guidance for the fourth quarter and full year 2008. A full reconciliation of GAAP to non-GAAP diluted earnings per share is included in the supplemental information attached to this release.

 

 

		Fully Diluted EPS
		Per Share range								% Growth range
GAAP Earnings Per Share
Q4 2008 - diluted earnings per share		$	0.19			$	0.29				-42	%			-12	%
Full year 2008 - diluted earnings per share		$	1.03			$	1.13				-9	%			0	%
Adjusted Earnings Per Share
Q4 2008 - diluted earnings per share		$	0.24			$	0.34				-35	%			-8	%
Full year 2008 - diluted earnings per share		$	1.36			$	1.46				5	%			12	%

Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. These statements are forward-looking. Actual results may differ materially, especially in the current uncertain economic environment. These statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of this release.

Manhattan Associates will make its earnings release and published expectations available on its Web site (www.manh.com). Beginning December 15, 2008, Manhattan Associates will observe a “Quiet Period” during which Manhattan Associates and its representatives will not comment concerning previously published financial expectations. Prior to the start of the Quiet Period, the public can continue to rely on the expectations published in this 2008 Guidance section as still being Manhattan Associates’ current expectation on matters covered, unless Manhattan Associates publishes a notice stating otherwise. During the Quiet Period, previously published expectations should be considered historical only, speaking only as of or prior to the Quiet Period, and Manhattan Associates disclaims any obligation to update any previously published financial expectations during the Quiet Period. The Quiet Period will extend until the date when Manhattan Associates’ next quarterly earnings release is published, currently scheduled for the first week of February 2009.

CONFERENCE CALL

The Company’s conference call regarding its third quarter financial results will be held at

4:30 p.m. Eastern Time on Tuesday, October 21, 2008 after the market closes. Investors are invited to listen to a live webcast of the conference call through the investor relations section of Manhattan Associates’ website. To listen to the live webcast, please go to Manhattan’s website, www.manh.com, at least 15 minutes before the call to download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay can be

accessed shortly after the call by dialing +1.800.642.1687 in the U.S. and Canada, or +1.973.200.3379 outside the U.S., and entering the conference identification number 65476910, or via www.manh.com. The phone replay will be available for two weeks after the call, and the Internet broadcast will be available until Manhattan Associates’ fourth quarter 2008 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income, adjusted net income and adjusted earnings per share in this press release as additional information regarding the Company’s operating results. These measures are not in accordance with — or an alternative for — GAAP, and may be different from non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that the presentation of these non-GAAP financial measures facilitates investors’ understanding of its historical operating trends, because it provides important supplemental measurement information in evaluating the operating results of its business, as distinct from results that include items that are not indicative of ongoing operating results. The Company consequently believes that the presentation of these non-GAAP financial measures provides investors with useful insight into its profitability. This release should be read in conjunction with its Form 8-K earnings release filing for the quarter ended September 30, 2008.

The non-GAAP adjusted operating income, adjusted net income and adjusted earnings per share exclude the impact of acquisition-related costs and the amortization thereof, the recapture of previously recognized sales tax expense, stock option expense under SFAS 123(R), and asset impairment charges, all net of income tax effects, and unusual tax adjustments. A reconciliation of the Company’s GAAP financial measures to non-GAAP adjustments is included in the supplemental information attached to this release.

The Company has also presented its revenue, operating income and adjusted operating income growth between periods excluding the effect of changes in exchange rates between the U.S. dollar and the functional currencies of its foreign subsidiaries. Certain information regarding the effect of currency exchange rate fluctuation on results is included in note 5 to the supplemental information attached to this release.

ABOUT MANHATTAN ASSOCIATES, INC.

Manhattan Associates continues to deliver on its 17-year heritage of providing global supply chain excellence to more than 1,200 customers worldwide that consider supply chain optimization core to their strategic market leadership. The company’s supply chain innovations include: Manhattan SCOPE™, a portfolio of software solutions and technology that leverages a Supply Chain Process Platform to help organizations optimize their supply chains from planning through execution; Manhattan ILS™, a portfolio of distribution management and transportation management solutions built on Microsoft^® .NET technology; and Manhattan Carrier™, a suite of supply chain solutions specifically addressing the needs of the motor carrier industry. For more information, please visit www.manh.com.

###

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenue:
Software license		$	13,802			$	17,303			$	51,479			$	54,454
Services			60,023				58,437				182,149				169,100
Hardware and other			8,911				8,849				27,922				28,854
Total Revenue			82,736				84,589				261,550				252,408
Costs and Expenses:
Cost of license			1,528				1,599				4,313				4,045
Cost of services			29,376				28,348				90,512				81,631
Cost of hardware and other			7,036				7,286				22,619				24,511
Research and development			12,546				11,887				36,911				35,316
Sales and marketing			11,579				13,079				39,827				40,177
General and administrative			9,099				8,397				27,037				24,926
Depreciation and amortization			3,125				3,406				9,531				10,261
Asset impairment charges			5,205				—				5,205				—
Total costs and expenses			79,494				74,002				235,955				220,867
Operating income			3,242				10,587				25,595				31,541
Other income, net			927				1,619				3,878				3,009
Income before income taxes			4,169				12,206				29,473				34,550
Income tax provision			(140	)			4,321				8,653				12,253
Net income		$	4,309			$	7,885			$	20,820			$	22,297
Basic earnings per share		$	0.18			$	0.31			$	0.86			$	0.84
Diluted earnings per share		$	0.18			$	0.29			$	0.84			$	0.80
Weighted average number of shares:
Basic			24,069				25,739				24,246				26,536
Diluted			24,568				26,879				24,736				27,723

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
RECONCILIATION OF SELECTED GAAP TO NON-GAAP MEASURES
(in thousands, except per share amounts)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Operating income		$	3,242			$	10,587			$	25,595			$	31,541
Stock option expense (a)			1,399				1,224				4,075				3,475
Purchase amortization (b)			769				1,180				2,494				3,570
Sales tax recoveries (c)			—				(269	)			(234	)			(1,292	)
Asset impairment charges (d)			5,205				—				5,205				—
Adjusted operating income (Non-GAAP)		$	10,615			$	12,722			$	37,135			$	37,294
Income tax provision		$	(140	)		$	4,321			$	8,653			$	12,253
Stock option expense (a)			486				435				1,416				1,234
Purchase amortization (b)			267				419				867				1,267
Sales tax recoveries (c)			—				(96	)			(81	)			(459	)
Asset impairment charges (d)			(94	)			—				(94	)			—
Unusual tax adjustments (e)			2,651				—				2,651				—
Adjusted income tax provision (Non-GAAP)		$	3,170			$	5,079			$	13,412			$	14,295
Net income		$	4,309			$	7,885			$	20,820			$	22,297
Stock option expense (a)			913				789				2,659				2,241
Purchase amortization (b)			502				761				1,627				2,303
Sales tax recoveries (c)			—				(173	)			(153	)			(833	)
Asset impairment charges (d)			5,299				—				5,299				—
Unusual tax adjustments (e)			(2,651	)			—				(2,651	)			—
Adjusted Net income (Non-GAAP)		$	8,372			$	9,262			$	27,601			$	26,008
Diluted EPS		$	0.18			$	0.29			$	0.84			$	0.80
Stock option expense (a)			0.04				0.03				0.11				0.08
Purchase amortization (b)			0.02				0.03				0.07				0.08
Sales tax recoveries (c)			—				(0.01	)			(0.01	)			(0.03	)
Asset impairment charges (d)			0.22				—				0.21				—
Unusual tax adjustments (e)			(0.11	)			—				(0.11	)			—
Adjusted Diluted EPS (Non-GAAP)		$	0.34			$	0.34			$	1.12			$	0.94
Fully Diluted Shares			24,568				26,879				24,736				27,723

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Cost of services		$	119			$	108			$	358			$	321
Research and development			199				160				591				474
Sales and marketing			435				375				1,281				1,115
General and administrative			646				581				1,845				1,565
Total stock option expense		$	1,399			$	1,224			$	4,075			$	3,475

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		September 30,				December 31,
		2008				2007
ASSETS
Current Assets:
Cash and cash equivalents		$	79,802			$	44,675
Short term investments			—				17,904
Accounts receivable, net of allowance of $4,832 and $6,618 in 2008 and 2007, respectively			71,078				72,534
Deferred income taxes			6,577				6,602
Prepaid expenses and other current assets			8,325				8,646
Total current assets			165,782				150,361
Property and equipment, net			23,606				24,421
Long-term investments			3,033				10,193
Acquisition-related intangible assets, net			7,197				9,691
Goodwill, net			62,281				62,285
Deferred income taxes			9,797				9,846
Other assets			2,865				4,863
Total assets		$	274,561			$	271,660
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	8,998			$	9,112
Accrued compensation and benefits			16,436				19,357
Accrued and other liabilities			11,868				10,040
Deferred revenue			33,978				31,817
Income taxes payable			7,399				8,156
Total current liabilities			78,679				78,482
Other non-current liabilities			8,650				7,473
Shareholders’ equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2008 or 2007			—				—
Common stock, $.01 par value; 100,000,000 shares authorized; 24,222,343 and 24,899,919 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively			240				249
Additional paid-in capital			2,515				17,744
Retained earnings			186,009				165,189
Accumulated other comprehensive (loss) income			(1,532	)			2,523
Total shareholders’ equity			187,232				185,705
Total liabilities and shareholders’ equity		$	274,561			$	271,660

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Nine Months Ended
		September 30,
		2008				2007
Operating activities:
Net income		$	20,820			$	22,297
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			9,531				10,261
Asset impairment charge			5,205				—
Stock compensation			6,616				4,939
Loss on disposal of equipment			41				26
Tax benefit of stock awards exercised/vested			181				1,596
Excess tax benefits from stock based compensation			(81	)			(607	)
Deferred income taxes			—				(742	)
Unrealized foreign currency gain			(743	)			(880	)
Changes in operating assets and liabilities:
Accounts receivable, net			1,131				(11,341	)
Other assets			266				2,228
Accounts payable, accrued and other liabilities			1,249				(7,173	)
Income taxes			(752	)			(1,304	)
Deferred revenue			2,059				3,261
Net cash provided by operating activities			45,523				22,561
Investing activities:
Purchase of property and equipment			(6,818	)			(7,934	)
Net maturities of investments			21,558				63,185
Net cash provided by investing activities			14,740				55,251
Financing activities:
Purchase of common stock			(25,053	)			(74,932	)
Excess tax benefits from stock based compensation			81				607
Proceeds from issuance of common stock from options exercised			3,018				9,356
Net cash used in financing activities			(21,954	)			(64,969	)
Foreign currency impact on cash			(3,182	)			1,239
Net change in cash and cash equivalents			35,127				14,082
Cash and cash equivalents at beginning of period			44,675				18,449
Cash and cash equivalents at end of period		$	79,802			$	32,531
Supplemental disclosures of cash flow information- noncash investing activity:
Tenant improvements funded by landlord		$	—			$	7,918

MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION

1.

GAAP and Adjusted Earnings per share by quarter are as follows:

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
GAAP Diluted EPS		$	0.19			$	0.32			$	0.29			$	0.33			$	0.30			$	0.37			$	0.18			$	0.80			$	0.84
Adjustments to GAAP:
Stock option expense			0.03				0.03				0.03				0.02				0.03				0.04				0.04				0.08				0.11
Purchase amortization			0.03				0.03				0.03				0.03				0.02				0.02				0.02				0.08				0.07
Sales tax recoveries			(0.01	)			(0.02	)			(0.01	)			—				(0.01	)			—				—				(0.03	)			(0.01	)
Asset impairment charge			—				—				—				—				—				—				0.22				—				0.21
Unusual tax adjustments			—				—				—				—				—				—				(0.11	)			—				(0.11	)
Adjusted Diluted EPS		$	0.23			$	0.36			$	0.34			$	0.37			$	0.35			$	0.42			$	0.34			$	0.94			$	1.12

2.

Revenues and operating income (loss) by reportable segment are as follows (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Revenue:
Americas		$	68,446			$	75,599			$	69,850			$	70,427			$	72,129			$	73,551			$	67,957			$	213,895			$	213,637
EMEA			5,844				9,809				10,463				10,733				12,028				11,961				10,083				26,116				34,072
APAC			3,900				4,221				4,276				3,833				4,167				4,978				4,696				12,397				13,841
		$	78,190			$	89,629			$	84,589			$	84,993			$	88,324			$	90,490			$	82,736			$	252,408			$	261,550
GAAP Operating Income (Loss):
Americas		$	8,734			$	12,338			$	8,894			$	10,334			$	7,065			$	10,643			$	1,618			$	29,966			$	19,326
EMEA			(1,321	)			1,145				1,432				1,166				2,055				2,215				1,292				1,256				5,562
APAC			(131	)			189				261				17				(31	)			406				332				319				707
		$	7,282			$	13,672			$	10,587			$	11,517			$	9,089			$	13,264			$	3,242			$	31,541			$	25,595
Adjustments (pre-tax):
Americas:
Stock option expense		$	1,082			$	1,090			$	1,184			$	816			$	1,267			$	1,335			$	1,361			$	3,356			$	3,963
Purchase amortization			1,195				1,195				1,180				1,083				881				844				769				3,570				2,494
Sales tax recoveries			(373	)			(650	)			(269	)			(146	)			(234	)			—				—				(1,292	)			(234	)
Asset impairment charge			—				—				—				—				—				—				5,205				—				5,205
		$	1,904			$	1,635			$	2,095			$	1,753			$	1,914			$	2,179			$	7,335			$	5,634			$	11,428
EMEA:
Stock option expense		$	39			$	40			$	40			$	(17	)		$	37			$	37			$	38			$	119			$	112
		$	39			$	40			$	40			$	(17	)		$	37			$	37			$	38			$	119			$	112
Total Adjustments		$	1,943			$	1,675			$	2,135			$	1,736			$	1,951			$	2,216			$	7,373			$	5,753			$	11,540
Adjusted non-GAAP Operating Income (Loss):
Americas		$	10,638			$	13,973			$	10,989			$	12,087			$	8,979			$	12,822			$	8,953			$	35,600			$	30,754
EMEA			(1,282	)			1,185				1,472				1,149				2,092				2,252				1,330				1,375				5,674
APAC			(131	)			189				261				17				(31	)			406				332				319				707
		$	9,225			$	15,347			$	12,722			$	13,253			$	11,040			$	15,480			$	10,615			$	37,294			$	37,135

3.

Our services revenue consists of fees generated from professional services and customer support and software enhancements related to our software products as follows (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Professional services		$	38,831			$	39,865			$	41,488			$	38,946			$	41,718			$	42,866			$	40,693			$	120,184			$	125,277
Customer support and software enhancements			15,969				15,998				16,949				18,107				18,119				19,423				19,330				48,916				56,872
Total services revenue		$	54,800			$	55,863			$	58,437			$	57,053			$	59,837			$	62,289			$	60,023			$	169,100			$	182,149

4.

Hardware and other revenue includes the following items (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Hardware revenue		$	6,666			$	7,270			$	5,614			$	5,661			$	7,141			$	5,428			$	5,756			$	19,550			$	18,325
Billed Travel			2,971				3,098				3,235				3,702				3,034				3,408				3,155				9,304				9,597
Total Hardware and other revenue		$	9,637			$	10,368			$	8,849			$	9,363			$	10,175			$	8,836			$	8,911			$	28,854			$	27,922

MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION

5.		Impact of Currency Fluctuation
		The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Revenue		$	748			$	992			$	1,049			$	1,231			$	1,131			$	1,189			$	132			$	2,789			$	2,452
Costs and Expenses			858				1,306				1,629				1,892				1,601				911				(500	)			3,793				2,012
Operating Income			(110	)			(314	)			(580	)			(661	)			(470	)			278				632				(1,004	)			440
Foreign currency gains (losses) in other income			(22	)			(602	)			897				892				1,641				299				542				273				2,482
		$	(132	)		$	(916	)		$	317			$	231			$	1,171			$	577			$	1,174			$	(731	)		$	2,922

Manhattan Associates has a large research and development center in Bangalore, India. The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Operating Income		$	(14	)		$	(443	)		$	(693	)		$	(725	)		$	(619	)		$	59			$	711			$	(1,150	)		$	151
Foreign currency gains (losses) in other income			(82	)			(536	)			(312	)			(248	)			94				385				787				(930	)			1,266
Total impact of changes in the Indian Rupee		$	(96	)		$	(979	)		$	(1,005	)		$	(973	)		$	(525	)		$	444			$	1,498			$	(2,080	)		$	1,417

6. Other income includes the following components (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Interest income		$	1,114			$	900			$	722			$	707			$	660			$	351			$	385			$	2,736			$	1,396
Foreign currency gains (losses)			(22	)			(602	)			897				892				1,641				299				542				273				2,482
Total other income		$	1,092			$	298			$	1,619			$	1,599			$	2,301			$	650			$	927			$	3,009			$	3,878

7.

Capital expenditures are as follows (in thousands):

		2007																2008												2007				2008
		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				1st Qtr				2nd Qtr				3rd Qtr				YTD				YTD
Capital expenditures		$	2,956			$	3,511			$	1,467			$	1,467			$	2,716			$	2,844			$	1,258			$	7,934			$	6,818