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2010-06-30
iso4217:USD
xbrli:shares
xbrli:shares
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MANHATTAN ASSOCIATES INC
0001056696
--12-31
No
No
Yes
Accelerated Filer
10-Q
false
2011-06-30
Q2
2011
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of Presentation and Principles of Consolidation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><b>Basis of Presentation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The accompanying unaudited condensed consolidated financial statements of Manhattan
Associates, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete financial statements. In the
opinion of management, these condensed consolidated financial statements contain all normal
recurring adjustments considered necessary for a fair presentation of the Company’s financial
position at June 30, 2011, the results of operations for the three and six months ended June 30,
2011 and 2010 and cash flows for the six months ended June 30, 2011 and 2010. The results for the
three and six months ended June 30, 2011 are not necessarily indicative of the results to be
expected for the full year. These statements should be read in conjunction with the Company’s
audited consolidated financial statements and management’s discussion and analysis included in the
Company’s annual report on Form 10-K for the year ended December 31, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><b>Principles of Consolidation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The accompanying condensed consolidated financial statements include the Company’s accounts
and the accounts of its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - manh:RevenueRecognitionTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>2. Revenue Recognition</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company’s revenue consists of revenues from the licensing and hosting of software, fees
from implementation and training services (collectively, “professional services”), plus customer
support and software enhancements, and sales of hardware and other revenues (other revenues
consists of reimbursements of out-of-pocket expenses incurred in connection with its professional
services). All revenue is recognized net of any related sales taxes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company recognizes license revenue when the following criteria are met: (1) a signed
contract is obtained; (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 of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract accounting; (b)
vendor-specific objective evidence 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, other than the requirement for vendor-specific objective evidence of
the fair value of each delivered element of the arrangement, are satisfied. For those contracts
that contain significant customization or modifications, license revenue is recognized using
contract accounting.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company allocates revenue to customer support and software enhancements and any other
undelivered elements of the arrangement based on vendor specific objective evidence, or 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The accounting related to license revenue recognition in the software industry is complex and
affected by interpretations of the rules which are subject to change. 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.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. Fees from
professional services performed by the Company are generally billed on an hourly basis, and
revenue is recognized as the services are performed. Professional services are sometimes 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. Project losses are provided for in their entirety in the
period in which they become known. Revenue related to customer support services and software
enhancement is generally paid in advance and recognized ratably over the term of the agreement,
typically 12 months.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 in conjunction with the licensing of software.
These products include computer hardware, radio frequency terminal networks, radio frequency
identification (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 does not maintain hardware inventory.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 classified as hardware and other revenue. The total amount of
expense reimbursement recorded to revenue was $2.7 million and $2.3 million for the three months
ended June 30, 2011 and 2010, respectively, and $5.1 million and $4.1 million for the six months
ended June 30, 2011 and 2010, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:FairValueDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Fair Value Measurement</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: left">Level 1—Quoted prices in active markets for identical instruments.
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: left">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.
</div></td>
</tr>
<tr>
<td style="font-size: 8pt"> </td>
</tr>
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: left">Level 3—Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
</div></td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 greater than one year 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 realized gains and losses, cost is determined on a specific identification basis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At June 30, 2011, the Company’s cash, cash equivalent and short-term investments balance was
$72.1 million, $31.3 million and $6.0 million, respectively. Cash equivalents and short-term
investments primarily consist of highly liquid money market funds and certificates of deposit.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. The Company
currently has two remaining auction rate security investments with a par value totaling $4.5
million. During 2008, the Company recorded an other-than-temporary
impairment charge of $3.5 million for the larger of the two investments. The Company 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. The second
auction rate security with a par value of $1.0 million held by the Company at June 30, 2011 was
issued by a state educational loan authority, is collateralized by federally insured student loans
and matures in 2037. At June 30, 2011, the carrying value of this investment is $0.9 million as
the Company has recorded temporary impairment charges against this investment prior to 2011. This
investment has a high credit rating, and the Company intends and has the ability to hold this
security until maturity or until redeemed. In determining the fair value of the auction rate
security, the Company considered the credit worthiness of the counterparty, estimates of interest
rates, expected holding periods, and the timing and value of expected future cash flows. Changes
in the assumptions underlying the Company’s valuation could have a significant impact on the value
of this security, which may cause losses and potentially require the Company to record
other-than-temporary impairment charges on this investment in the future. The Company will
continue to evaluate the fair value of its auction rate security investment each reporting period
for a potential other-than-temporary impairment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company’s auction rate security is classified in the fair value hierarchy as Level 3 as
its valuation technique includes significant unobservable inputs. The Company uses quoted prices
from active markets which are classified at Level 1 as a highest level observable input in the
disclosure hierarchy framework for all other available-for-sale securities. The Company has no
investments classified at Level 2.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table set forth the assets carried at fair value measured on a recurring basis
at June 30, 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements at June 30, 2011 Using</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant Other</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Observable Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,665</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,665</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Auction rate security
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">909</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">909</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total available-for-sale securities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,665</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">909</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">30,574</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the first half of 2011, the Company’s valuation methodologies were consistent with
previous years, and there were no transfers into or out of Level 3 based on changes in observable
inputs.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Stock-Based Compensation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January 2010 the Compensation Committee of the Board of Directors approved certain changes
to the Company’s historical equity incentive grant practices, with the objective to optimize its
performance and retention strength while managing program share usage to improve long-term equity
overhang. The changes eliminate stock option awards in favor of 100% restricted stock grants,
which for the 2010 and 2011 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 equity compensation program change for employees was
effective January 2010 and for Outside Directors was effective May 2010. 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company recorded stock option expense of $0.5 million and $0.9 million during the three
months ended June 30, 2011 and 2010, respectively, and $1.0 million and $2.1 million during the
six months ended June 30, 2011 and 2010, respectively. During the six months ended June 30, 2010
the Company granted options to purchase 17,500 shares of common stock. No stock options were
granted during 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">A summary of changes in outstanding options for the six months ended June 30, 2011 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Number of Options</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Outstanding at December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">3,846,262</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,063,261</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited and expired
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(78,304</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Outstanding at June 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,704,697</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company granted 30,088 shares and 37,485 shares of restricted stock during the three
months ended June 30, 2011 and 2010, respectively. The Company recorded restricted stock expense
of $1.9 million and $1.6 million during the three months ended June 30, 2011 and 2010,
respectively. During the six months ended June 30, 2011 and 2010, the Company granted 336,392
shares and 417,428 shares of restricted stock, respectively. The Company recorded restricted
stock expense of $3.8 million and $3.0 million during the six months ended June 30, 2011 and 2010,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">A summary of changes in unvested shares of restricted stock for the six months ended June 30,
2011 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Number of Shares</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Outstanding at December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">658,146</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">336,392</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(237,645</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(49,457</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Outstanding at June 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>707,436</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company’s effective tax rate was 33.5% for both quarters ended June 30, 2011 and 2010, and
25.3% and 34.0% for the first six months ended June 30, 2011 and 2010, respectively. The effective
tax rate for the six months of 2011 includes 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 is attributable to the elimination of the tax holiday for Indian companies
under the STPI “Software Technology Park of India” tax plan, based on the February 2011 budget
proposed by the India Finance Ministry, which eliminated uncertainty as to the Company’s ability to
utilize tax assets previously reserved.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the six month period ended June 30, 2011 there were no material changes to unrecognized
tax benefits or accrued interest and penalties related to uncertain tax positions. There has been
no change to the Company’s policy that recognizes potential interest and penalties related to
uncertain tax positions within its global operations in income tax expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company conducts business globally and, as a result, files income tax returns in the
United States Federal jurisdiction and in many state and foreign jurisdictions. The Company is no
longer subject to US Federal or significant state, local or non-US jurisdiction income tax
examinations for the years before 2007. The Internal Revenue Service has commenced an examination
of the Company’s U.S. Federal income tax return for 2008. It is anticipated that the examination
will be completed within the next six months.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Comprehensive Income</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table sets forth the calculation of comprehensive income for the three and six
months ended June 30, 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12,339</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,189</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>19,505</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,384</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss), net of tax:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>62</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(739</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>177</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(95</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized loss on investments
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(107</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(107</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>62</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right"><b>177</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(202</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Comprehensive income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12,401</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,343</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>19,682</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,182</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Net Earnings Per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Basic net earnings 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 earnings per share is computed using net income divided by the sum of Weighted Shares
and common equivalent shares (“CESs”) outstanding for each period presented using the treasury
stock method.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following is a reconciliation of the net income and share amounts used in the computation
of basic and diluted net earnings per common share for the three and six months ended June 30,
2011 and 2011 (in thousands, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12,339</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,189</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>19,505</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,384</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Earnings per share:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>0.60</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.38</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>0.93</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.70</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of CESs
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(0.03</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.02</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(0.04</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(0.02</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>0.57</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.36</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>0.89</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.68</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Weighted average number of shares:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>20,696</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,718</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>20,861</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,837</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of CESs
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,079</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,058</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,065</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">818</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>21,775</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,776</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>21,926</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,655</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Weighted average shares issuable upon the exercise of stock options that were not
included in the calculation of diluted earnings per share were 2,750 shares and 949,508 shares for
the three months ended June 30, 2011 and 2010, respectively, and 28,000 shares and 2,245,599
shares for the six months ended June 30, 2011 and 2010, respectively. Such shares were not
included because they were anti-dilutive.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Contingencies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">From time to time, the Company may be involved in litigation relating to claims arising out
of its ordinary course of business. Many of the Company’s installations involve products that are
critical to the operations of its clients’ businesses. Any failure in a product could result in a
claim for substantial damages against the Company, regardless of its 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 the Company’s contracts will be enforceable in all
instances. The Company is not presently involved in any material litigation. However, it is
involved in various legal proceedings. The Company believes that any liability that may arise as
a result of these proceedings will not have a material adverse effect on its financial condition,
results of operations or cash flows. The Company expenses legal costs associated with loss
contingencies as such legal costs are incurred.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Operating Segments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company operates its business in three geographical segments: the Americas (North America
and Latin America), Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC). The
information for the periods presented below reflects these segments. 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 operating segment. The Chief Executive Officer and Chief
Financial Officer evaluate performance based on revenue and operating results for each region.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Americas segment charges royalty fees to the EMEA and APAC segments based on software
licenses sold by those operating segments. The royalties, which totaled approximately $1.0
million and $0.7 million for the three months ended June 30, 2011 and 2010, respectively, and $1.2
million and $1.4 million for the six months ended June 30, 2011 and 2010, respectively, are
included in cost of revenue in EMEA and APAC with a corresponding reduction in the Americas cost
of revenue. The revenues represented below are from external customers only. The
geographical-based costs consist of 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table presents the revenues, expenses and operating income by reporting segment
for the three and six months ended June 30, 2011 and 2010 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="36%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="30" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Americas</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>EMEA</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>APAC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Americas</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>EMEA</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>APAC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Revenue:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">License
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12,530</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>2,910</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>907</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>16,347</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,792</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,428</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,265</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,485</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Services
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>52,231</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,870</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,673</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>63,774</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44,959</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,955</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">54,780</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Hardware and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7,873</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>295</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>113</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,281</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,124</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">204</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,376</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total revenue
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>72,634</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>11,075</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,693</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>88,402</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">64,875</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,587</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,179</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">77,641</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Costs and Expenses:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cost of revenue
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>27,448</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5,707</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,588</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>35,743</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,064</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,542</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,116</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,722</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>27,355</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>3,309</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>1,559</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>32,223</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,770</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,446</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,368</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,584</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,082</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>96</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>45</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,223</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,205</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">69</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,318</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total costs and expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>56,885</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>9,112</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,192</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>70,189</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">55,039</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,057</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,528</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65,624</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>15,749</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,963</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>501</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>18,213</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9,836</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,530</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">651</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,017</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="30" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Americas</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>EMEA</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>APAC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Americas</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>EMEA</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>APAC</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Revenue:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Software license
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>19,379</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>3,359</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>1,371</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>24,109</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,899</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,872</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,921</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,692</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Services
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>98,028</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>15,532</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,292</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>119,852</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">89,734</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,267</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,240</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">108,241</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Hardware and other
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>15,412</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>520</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>219</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,151</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,131</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">437</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">89</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,657</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total revenue
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>132,819</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>19,411</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,882</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>160,112</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">126,764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,576</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,250</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">151,590</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Costs and Expenses:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cost of revenue
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>53,082</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>10,194</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,964</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>68,240</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50,019</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,130</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,255</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">63,404</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>52,953</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>6,162</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>2,767</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>61,882</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,105</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,324</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,524</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,953</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>3,948</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>183</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>93</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>4,224</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">88</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,733</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total costs and expenses
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>109,983</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>16,539</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7,824</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>134,346</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">106,595</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,867</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">128,090</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating income
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22,836</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>2,872</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>58</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>25,766</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,169</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,948</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,383</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,500</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company’s services revenues, which consist of fees generated from professional
services and customer support and software enhancements related to its software products, for the
three and six months ended June 30, 2011 and 2010 are as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Professional services
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>42,150</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">34,349</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>77,334</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">68,309</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer support and software enhancements
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>21,624</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,431</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>42,518</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,932</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total services revenue
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>63,774</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">54,780</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>119,852</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">108,241</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">License revenues related to the Company’s warehouse and non-warehouse product groups for
the three and six months ended June 30, 2011 and 2010 are as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Six Months Ended June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warehouse
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>10,090</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,633</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>15,460</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,355</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-Warehouse
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>6,257</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,852</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8,649</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,337</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total software license revenue
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>16,347</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,485</td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>24,109</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,692</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:DescriptionOfNewAccountingPronouncementsNotYetAdopted-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. New Accounting Pronouncements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June 2011, the FASB issued an Accounting Standards Update on the presentation of
comprehensive income. This guidance requires the presentation of comprehensive income, the
components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. This
guidance also requires presentation of adjustments for items that are reclassified from other
comprehensive income to net income in the statement where the components of net income and the
components of other comprehensive income are presented. This guidance is effective for interim and
annual periods beginning after December 15, 2011. The adoption of this guidance will only impact
the presentation of the Company’s financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In May 2011, the FASB issued an Accounting Standards Update on fair value measurements
that clarifies the application of existing guidance and disclosure requirements, changes certain
fair value measurement principles and requires additional disclosures about fair value
measurements. This guidance is effective for interim and annual periods beginning after December
15, 2011. The Company does not expect the adoption of this guidance to have a material impact on
its financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January 2010, the FASB issued an Accounting Standard Update to improve disclosures about
fair value measurements. This guidance requires enhanced disclosures regarding transfers in and
out of the levels within the fair value hierarchy. Separate disclosures are required for
significant transfers in and out of Level 1 and 2 in the fair value hierarchy and the reasons for
the transfers. This guidance also requires disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (Level 3) investments. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009 except Level 3 reconciliation disclosures which
are effective for the fiscal years and interim periods beginning after December 15, 2010. The
Company adopted the enhanced disclosures for Level 1 and 2 in its first quarter of 2010 reporting,
which did not have a material impact on its financial statements. The Company also adopted the
enhanced disclosures for Level 3 reconciliation disclosures in its first quarter of 2011 reporting,
which also did not have a material impact on its financial statements.
</div>
</div>