UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2001
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-23057
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LOGILITY, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-2281338
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
470 East Paces Ferry Road, N.E., Atlanta, Georgia 30305
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(Address of principal executive offices) (Zip Code)
(404) 261-9777
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x]
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practicable date.
Class Outstanding at September 13, 2001
-------------------------------- ---------------------------------
Common Stock, no par value 13,249,203 Shares
LOGILITY, INC.
Form 10-Q
Quarter Ended July 31, 2001
Index
Page
Number
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Part I - Financial Information
Item 1. Financial Statements
Condensed Balance Sheets (Unaudited)
July 31, 2001 and April 30, 2001 3
Condensed Statements of Operations (Unaudited)
Three Months Ended July 31, 2001 and 2000 4
Condensed Statements of Cash Flows (Unaudited)
Three Months Ended July 31, 2001 and 2000 5
Notes to Condensed Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II - Other Information 15
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LOGILITY, INC.
Condensed Balance Sheets (Unaudited)
(in thousands, except share data)
July 31, April 30,
2001 2001
------------- -------------
Current Assets:
Cash and cash equivalents $ 6,421 $ 5,376
Investments-current 10,114 10,420
Trade accounts receivable, less allowance for doubtful accounts of
$604 and $552 at July 31, 2001 and April 30, 2001, respectively:
Billed 3,667 4,353
Unbilled 2,248 1,636
Due from American Software, Inc. 2,535 2,916
Prepaid expenses and other current assets 451 500
------------- -------------
Total current assets 25,436 25,201
Investments-noncurrent 4,212 4,910
Furniture and equipment, less accumulated depreciation 1,362 1,497
Intangible assets, less accumulated amortization 8,041 8,219
Other assets, net 1,176 1,014
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$ 40,227 $ 40,841
============= =============
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable $ 681 $ 1,074
Accrued compensation and related costs 1,621 1,749
Other current liabilities 1,408 1,531
Deferred revenues 5,842 6,378
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Total current liabilities 9,552 10,732
Deferred income taxes 3,321 3,321
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Total liabilities 12,873 14,053
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Shareholders' equity:
Preferred stock: 2,000,000 shares authorized; no shares issued - -
Common stock, no par value; 20,000,000 shares authorized;
13,885,214 and 13,878,714 shares issued at July 31, 2001
and April 30, 2001, respectively - -
Additional paid-in capital 44,703 44,684
Accumulated deficit (12,887) (13,480)
Treasury stock, at cost - 636,011 and 621,011 shares at July 31,
2001 and April 30, 2001, respectively (4,462) (4,416)
------------- -------------
Total shareholders' equity 27,354 26,788
Commitments and contingencies
------------- -------------
$ 40,227 $ 40,841
============= =============
See accompanying notes to condensed financial statements.
3
Item 1. Financial Statements (continued)
LOGILITY, INC.
Condensed Statements of Operations (Unaudited)
(In thousands, except per share data)
Three Months Ended
July 31,
--------------------------------------------
2001 2000
----------------- -----------------
Revenues:
License fees $2,549 $1,859
Maintenance 2,836 2,657
Services and other 2,732 2,406
----------------- -----------------
Total revenues 8,117 6,922
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Cost of revenues:
License fees 1,016 778
Maintenance 488 411
Services and other 1,892 1,404
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Total cost of revenues 3,396 2,593
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Gross margin 4,721 4,329
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Operating expenses:
Research and development 1,457 2,161
Less: Capitalized development (929) (798)
Sales and marketing 2,994 3,076
General and administrative 896 972
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4,418 5,411
Total operating expenses ----------------- -----------------
Operating income (loss) 303 (1,082)
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Other income, net 290 323
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Income (loss) before income taxes 593 (759)
Income taxes - -
----------------- -----------------
Net income (loss) $ 593 $ (759)
================= =================
Net income (loss) per common share - Basic and Diluted $0.04 $ (0.06)
================= =================
Shares used in per share calculation: Basic 13,260 13,307
================= =================
Diluted* 13,314 13,307
================= =================
* Diluted weighted average common shares outstanding are not included in the
three months ended July 31, 2000 calcuation due to the anti-dilution of the net
loss.
See accompanying notes to condensed financial statements.
4
Item 1. Financial Statements (continued)
LOGILITY, INC.
Condensed Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended
July 31,
-------------------------------------
2001 2000
----------------- ----------------
Cash flows from operating activities:
Net income (loss) $ 593 $ (759)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,081 830
(Increase) decrease in assets:
Accounts receivable 74 1,557
Related party net receivable 381 (1,176)
Prepaid expenses and other assets 70 (43)
Increase (decrease) in liabilities:
Accounts payable, accrued costs and other (644) (996)
Deferred revenues (536) (361)
----------------- ----------------
Net cash provided by (used in) operating activities 1,019 (948)
----------------- ----------------
Cash flows from investing activities:
Additions to capitalized computer software development costs (929) (798)
Additions to purchased computer software costs (6) (48)
Proceeds from maturities of investments 3,999 23,038
Purchases of investments (2,995) (22,007)
Purchases of furniture and equipment (16) (116)
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Net cash provided by investing activities 53 69
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Cash flows from financing activities:
Repurchases of common stock (46) -
Proceeds from exercise of stock options 19 -
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Net cash used in financing activities (27) -
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Net change in cash and cash equivalents 1,045 (879)
Cash and cash equivalents at beginning of period 5,376 3,524
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Cash and cash equivalents at end of period $ 6,421 $ 2,645
================= ================
See accompanying notes to condensed financial statements.
5
Item 1. Financial Statements (continued)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. Basis of Presentation
The accompanying condensed financial statements of Logility, Inc. (the
"Company"), are unaudited. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). The financial information presented in the condensed
financial statements reflects all normal recurring adjustments, which are,
in the opinion of management, necessary for a fair presentation of the
periods indicated. These financial statements should be read in conjunction
with the Company's Form 10-K for the fiscal year ended April 30, 2001, as
filed with the SEC on July 24, 2001. The interim results reflected in the
condensed financial statements are not necessarily indicative of the
results to be expected for the full year.
The Company is an approximately 85% owned subsidiary of American Software,
Inc. (the "Parent"), a publicly held provider of enterprise resource
planning solutions and managed services (NASDAQ - AMSWA).
B. Industry Segments
On February 1, 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures About Segments of an Enterprise and Related
Information. The Company operates and manages its business in one segment,
providing business-to-business collaborative commerce solutions to optimize
supply chain operations for manufacturers, distributors and retailers.
C. Comprehensive Income
On May 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial
statements. No statements of comprehensive income (loss) have been included
in the accompanying condensed financial statements since comprehensive
income (loss) and net income (loss) presented in the accompanying condensed
statements of operations would be the same.
D. Revenue Recognition
The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2, Software Revenue Recognition, and SOP 98-9, Software Revenue
Recognition with Respect to Certain Transactions. License revenues in
connection with license agreements for standard proprietary and tailored
software are recognized upon delivery of the software, providing collection
is considered probable, the fee is fixed or determinable, there is evidence
of an arrangement, and vendor specific evidence exists to defer any revenue
related to undelivered elements of the arrangement.
6
Item 1. Financial Statements (continued)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
E. Net Earnings (Loss) Per Common Share
Basic earnings (loss) per common share available to common shareholders
is based on the weighted-average number of common shares outstanding.
Diluted earnings (loss) per common share available to common shareholders
is based on the weighted-average number of common shares outstanding and
dilutive potential common shares, such as dilutive stock options.
The numerator in calculating both basic and diluted earnings (loss) per
common share for each period is the same as net earnings (loss). The
denominator is based on the following number of common shares:
Three Months ended
July 31,
2001 2000
------------------------
Common Shares:
Weighted average common shares outstanding 13,260 13,307
Dilutive effect of outstanding stock options* 54 -
------------------------
Total 13,314 13,307
========================
Net earnings (loss): $ 593 $ (759)
Net earnings (loss) per common share:
Basic $ 0.04 $ (0.06)
========================
Diluted $ 0.04 $ (0.06)
========================
*For the three months ended July 31, 2001, options to purchase 440,000
shares of common stock were excluded from the calculation of dilutive
earnings per share because the options' exercise price was greater
than the average market price of the common stock.
For the three months ended July 31, 2000, total options outstanding to
purchase 366,940 shares of common stock were excluded from the
calculation of dilutive earnings per share because of the antidilutive
effect of the net loss.
7
LOGILITY, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements, which are subject
to substantial risks and uncertainties. There are a number of factors that could
cause actual results to differ materially from those anticipated by statements
made herein. The timing of releases of our software products can be affected by
customer needs, marketplace demands and technological advances. Development
plans frequently change, and it is difficult to predict with accuracy the
release dates for products in development. In addition, other factors, including
but not limited to changes in general economic conditions, technology and the
market for our products and services, including economic conditions within the
e-commerce markets, the timely availability and market acceptance of these
products and services, the effect of competitive products and pricing, the
continued viability and effectiveness of strategic alliances, and the irregular
pattern of our revenues could affect our future performance.
OVERVIEW
Logility, Inc. ("Logility" or the "Company") develops, markets and supports
e-Business solutions for business-to-business (B2B) collaborative commerce that
optimize supply chain management of manufacturers, suppliers, distributors,
retailers and other organizations. The supply chain refers to the complex
network of relationships that organizations maintain with trading partners to
source, manufacture and deliver products to the customer. Logility Voyager
Solutions(TM) consists of an Internet-based, integrated software suite that
provides advanced supply chain management including collaborative planning,
strategic network design, sales forecasting, optimized supply sourcing,
warehouse management, and collaborative logistics capabilities that are designed
to increase revenues, reduce inventory costs, improve forecast accuracy,
decrease order cycle times, optimize production scheduling, streamline logistics
operations, reduce transportation costs and improve customer service across our
customers' supply chains, via corporate Internet portals and public e-Business
trading exchanges.
Leveraging our supply chain management expertise, we have been an innovator in
developing and deploying B2B e-Business with our first Internet-based
collaborative planning solution implemented in 1996. We continue to invest and
expand our e-Business offerings and innovative solutions, which support the
Voluntary Interindustry Commerce Standards Association ("VICS"), Collaborative
Planning, Forecasting and Replenishment (CPFR(R)) standards, as well as other
emerging collaborative supply chain management standards for transportation and
distribution center management. Our Logility Voyager Solutions suite and related
services are designed to power the emerging Internet trading exchanges and
private marketplaces for collaborative planning and procurement of direct
materials and collaborative transportation management. We market our solution
worldwide, primarily to large enterprises that require comprehensive supply
chain planning, warehouse management and logistics solutions. Sales are made
through a dedicated sales force and through relationships with third-party
vendors (including American Software) and service providers.
We previously conducted our business and operations as three separate business
units of American Software: a supply chain planning software group, a warehouse
management software group, and a transportation management software group.
Effective January 1997, American Software transferred substantially all of the
business, operations (including research and development), assets and associated
liabilities of its Supply Chain Planning division to us. Effective August 1997,
American Software transferred to us the WarehousePRO software and substantially
all associated operations, assets and liabilities. Also effective August 1997,
American Software's wholly-owned subsidiary, Distribution Sciences, Inc., was
merged into Logility, transferring its
8
Item 2. Management's Discussion and Analysis (continued)
business, operations, assets and liabilities, including the Transportation
Planning and Transportation Management software, to us.
Our revenues are derived primarily from three sources: software licenses,
maintenance and services. Software licenses generally are based upon the number
of modules, servers, users and/or sites licensed. License fee revenues are
recognized upon delivery of the software, provided collection is considered
probable, the fee is fixed or determinable, there is evidence of an arrangement,
and vendor-specific evidence exists to allocate the total fee to all elements of
the arrangement. Maintenance agreements typically are for a one- to three-year
term and usually are entered into at the time of the initial product license.
Maintenance revenues are recognized ratably over the term of the maintenance
agreement. Services revenues consist primarily of fees from software
implementation, training, consulting and customization services and are
recognized as the services are rendered.
COMPARISON OF RESULTS
The following table sets forth certain revenue and expense items as a percentage
of total revenues and the percentage increases or decreases in those items for
the three months ended July 31, 2001 and 2000:
Percentage of Pct. Change
Total Revenues in Dollars
------------------------------------ ------------------
2001 2000 2001 vs 2000
---------------- ---------------- ------------------
Revenues:
License fees 31 % 27 % 37 %
Maintenance 35 38 7
Services 34 35 14
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Total revenues 100 100
17
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Cost of revenues:
License fees 13 11 31
Maintenance 6 6 19
Services 23 20 35
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Total cost of revenues 42 37 31
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Gross margin 58 63 9
Operating expenses:
Research and development (net) 6 20 (61)
Sales and marketing 37 44 (3)
General and administrative 11 15 (8)
Provision for doubtful accounts - - 0
---------------- ---------------- ------------------
Total operating expenses 54 79 (18)
---------------- ---------------- ------------------
Operating income (loss) 4 (16) nm
---------------- ---------------- ------------------
Other income, net 3 5 (10)
---------------- ---------------- ------------------
Income (loss) before income taxes 7 (11) nm
Income taxes - - -
---------------- ---------------- ------------------
Net income (loss) 7 % (11) nm
================ ================ ==================
nm - not meaningful
9
Item 2. Management's Discussion and Analysis (continued)
THREE MONTHS ENDED JULY 31, 2001 AND 2000:
-----------------------------------------
REVENUES:
Our total revenues increased 17% to approximately $8.1 million from $6.9 million
for the comparable quarter a year ago. This increase was due primarily to
increases in our license fees and related services, and to a lesser extent an
increase in maintenance revenues. International revenues represented
approximately 15% of total revenues in the quarter ended July 31, 2001 compared
to approximately 17% a year ago.
LICENSES. License fee revenues increased 37% to approximately $2.5 million from
the same quarter a year ago primarily as a result of increased effectiveness of
our recently reorganized sales and sales management teams. The direct sales
channel provided approximately 96% of license fee revenues for the quarter ended
July 31, 2001, compared to approximately 73% in the comparable quarter a year
ago. This increase is due primarily to lower sales contribution from our
indirect channels, as well as higher overall levels of license fees.
MAINTENANCE. Maintenance revenues increased 7% to approximately $2.8 million
from a year ago, due to continued growth in the installed base of our software.
Maintenance revenues have a direct relationship to current and historic license
fee revenues, since new licenses are the potential source of new maintenance
customers.
SERVICES AND OTHER. Services and other revenues increased 14% to approximately
$2.7 million from a year ago as a result of increased license fee sales in the
last two quarters resulting in higher software implementation service levels.
GROSS MARGIN:
Total gross margin in the quarter ended July 31, 2001 was 58% of total revenues,
compared to 63% a year ago. This decrease was largely due to the decreased gross
margin on services revenues, which fell to 31% from 42% a year ago. The decrease
in services gross margin was primarily due to lower margin third party business.
The gross margin on license fees increased slightly to 60% from 58% a year ago,
while maintenance gross margins decreased slightly to 83% from 85% in the prior
year quarter.
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT. Gross product development costs include all non-
capitalized and capitalized software development costs. A breakdown of the
research and development costs is as follows:
Three Months Ended
-----------------------------------
July 31, Percent July 31,
2001 Change 2000
---------- --------- ---------
Gross product development costs $ 1,457 (33) % $ 2,161
Percentage of total revenues 18 % 31 %
Less: Capitalized development (929) 16 % (798)
Percentage of gross prod. dev. costs 64 % 37 %
Product development expenses $ 528 (61) % $ 1,363
Percentage of total revenues 6 % 20 %
10
Item 2. Management's Discussion and Analysis (continued)
Gross product development costs decreased 33% in the quarter ended July 31, 2001
compared to a year ago, due to cost reduction efforts and the reallocation of
some R&D resources to services and support. Capitalized development increased
16% from a year ago, and the rate of capitalized development as a percentage of
gross product development costs increased to 64% versus 37% a year ago,
primarily as a result of lower gross development costs, as well as the
completion of several capitalized projects during this quarter. Gross
development costs decreased, while capitalized development increased, due to
timing issues between the research and development phases of certain projects.
Product development expenses, as a percentage of total revenues, decreased to 6%
from 20% a year ago, due primarily to higher levels of capitalized development,
as well as increased total revenues.
SALES AND MARKETING. Sales and marketing expenses decreased 3% from the same
period a year ago. As a percentage of total revenues, sales and marketing
expenses were 37% for the quarter ended July 31, 2001, compared to 44% for the
quarter ended July 31, 2000. This decrease was due to the increase in overall
revenues, as well as the decreased expenditures.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased 8% to
approximately $896,000 from a year ago, mainly as a result of a decrease in the
number of employees. For the three months ended July 31, 2001, the average
number of employees was approximately 165, compared to approximately 207 for the
three months ended July 31, 2000.
OTHER INCOME:
Other income is comprised of earnings from the investment of our cash reserves.
Our investments are primarily short term in nature, and all investments mature
within three years. For the quarter ended July 31, 2001, these investments
generated a yield of approximately 4.8%.
INCOME TAXES:
We are included in the consolidated federal income tax return filed by American
Software, Inc. However, we provide for income taxes as if we were filing a
separate income tax return. For the quarter ended July 31, 2001, we did not
record any income taxes as a result of the cumulative operating losses incurred
since our initial public offering.
11
Item 2. Management's Discussion and Analysis (continued)
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The following table shows information about our cash flows during the three
months ended July 31, 2001 and July 31, 2000. This table and the discussion that
follows should be read in conjunction with our condensed consolidated statements
of cash flows contained in "Item 1. Financial Statements" in Part I of this
report and in our Annual Report on Form 10-K for the fiscal year ended April 30,
2001.
Three Months Ended
July 31,
----------------------------
2001 2000
----------------------------
Net cash provided by operating activities before
changes in operating assets and liabilities. 1,674 71
Decrease in operating assets and liabilities (655) (1,019)
----------------------------
Net cash provided by (used in) operating activities 1,019 (948)
Net cash provided by investing activities 53 69
Net cash used in financing activities (27) -
----------------------------
Net increase (decrease) in cash and cash equivalents 1,045 (879)
============================
We normally fund our operations and capital expenditures primarily with cash
generated from operating activities. The changes in net cash used for operating
activities generally reflect the changes in net income and non-cash operating
items plus the effect of changes in operating assets and liabilities, such as
trade accounts receivable, trade accounts payable, accrued expenses and deferred
revenue.
Our operating activities provided cash of approximately $1.0 million in the
three months ended July 31, 2001, and used cash of approximately $948,000 in the
same period last year. Operating cash flows increased for the period primarily
because of the net income of $593,000 for the period, compared to the net loss
of $759,000 for the prior year period.
Cash provided by investing activities was approximately $53,000 for the three
months ended July 31, 2001. This was composed primarily of the net sale of
investments of $1.0 million, which was partially offset by $929,000 in additions
to capitalized software development costs. For the same period last year, cash
provided by investing activities was approximately $69,000, composed primarily
of $1.0 million in net sale of investments, partially offset by $798,000 in
additions to capitalized software development costs.
Cash used in financing activities was $27,000 for the three months ended July
31, 2001, and no cash was used in financing activities in the same period last
year. Cash flows used in financing activities for the current period were
composed of $46,000 in repurchases of our common stock, partially offset by
$19,000 in cash proceeds from the exercise of stock options.
Days Sales Outstanding (DSO) in accounts receivable were 72 days as of July 31,
2001, compared to 85 days as of July 31, 2000. This decrease was due primarily
to higher levels of revenues for the current quarter, as well as improved
collection efforts.
Our current ratio on July 31, 2001 was 2.7 to 1 and we have no debt. Our
principal sources of liquidity are our cash and investments, which totaled
approximately $20.7 million at July 31, 2001. We believe that our sources of
liquidity and capital resources will be sufficient to satisfy our presently
anticipated requirements during at least the next twelve months for working
capital, capital expenditures and other corporate needs. Management is not aware
of any condition that would materially alter this trend.
12
Item 2. Management's Discussion and Analysis (continued)
On December 15, 1997, our Board of Directors approved a resolution authorizing
the repurchase of up to 350,000 shares of our common stock through open market
purchases at prevailing market prices. We completed this repurchase plan in
November 1998. In November 1998 we adopted an additional repurchase plan for up
to 800,000 shares. The timing of any repurchases would depend on market
conditions, the market price of Logility's common stock and management's
assessment of our liquidity and cash flow needs. For both plans, through
September 13, 2001, we had purchased a cumulative total of 636,011 shares at a
total cost of approximately $4.5 million.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement was amended in June 2000 by Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." These Statements became
effective for us beginning May 1, 2001. These new Statements require all
derivatives to be recorded on the balance sheet at fair value and establishes
accounting treatment for three types of hedges: hedges of changes in the fair
value of assets, liabilities, or firm commitments; hedges of the variable cash
flows of forecasted transactions; and hedges of foreign currency exposures of
net investments in foreign operations. We have not invested in derivative
instruments nor participated in hedging activities and therefore there was no
material impact on the results of operations or financial position from
Statements No. 133 or No. 138.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101") and amended it in March 2000, and again in June 2000. We adopted the
provisions of SAB 101 in our fourth quarter of fiscal 2001, and there was not a
material impact on the results of operations or financial position as a result
of the adoption.
In July 2001, the FASB issued Statement No. 141, "Business Combinations", and
Statement No. 142, "Goodwill and Other Intangible Assets". Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement 141 also provides
that intangible assets acquired in a purchase method business combination must
meet certain specified criteria in order to be recognized and reported apart
from goodwill, noting that any purchase price allocable to an assembled
workforce may not be accounted for separately. Statement 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of Statement 142. Statement 142 will also require that
intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
We are required to adopt the provisions of Statement 141 immediately, and
Statement 142 effective January 1, 2002. Furthermore, goodwill and intangible
assets determined to have an indefinite useful life acquired in a purchase
business combination completed after June 30, 2001, but before Statement 142 is
adopted in full will not be amortized, but will continue to be evaluated for
impairment in accordance with the appropriate pre-Statement 142 accounting
literature.
13
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency. For the three months ended July 31, 2001, we generated 15% of
our revenues outside the United States. International sales usually are made by
our foreign subsidiaries or value added resellers, and are denominated typically
in U.S. Dollars or British Pounds Sterling. However, the expense incurred by
foreign subsidiaries is denominated in the local currencies. We have not engaged
in any hedging activities.
Interest rates. We manage our interest rate risk by maintaining an investment
portfolio of held-to-maturity instruments with high credit quality and
relatively short average maturities. These instruments include, but are not
limited to, money-market instruments, bank time deposits, and taxable and
tax-advantaged variable rate and fixed rate obligations of corporations,
municipalities, and national, state, and local government agencies, in
accordance with our investment policy. These instruments are denominated in U.S.
dollars. The fair value of securities held at July 31, 2001 was approximately
$14.3 million.
We also hold cash balances in accounts with commercial banks in the United
States and foreign countries. These cash balances represent operating balances
only and are invested in short-term time deposits of the local bank. Such
operating cash balances held at banks outside the United States are minor and
denominated in the local currency.
Many of our investments carry a degree of interest rate risk. When interest
rates fall, our income from investments in variable-rate securities declines.
When interest rates rise, the fair market value of our investments in fixed-rate
securities declines. We attempt to mitigate risk by holding fixed-rate
securities to maturity, but should our liquidity needs force us to sell
fixed-rate securities prior to maturity, we may experience a loss of principal.
We believe that a 10% swing in interest rates would not have a material effect
on our accompanying statement of operations.
14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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The registrant is not currently involved in legal proceedings
requiring disclosure under this item.
Item 2. Changes in Securities and Use of Proceeds
------- -----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
------- -------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
Not applicable.
Item 5. Other Information
------- -----------------
None.
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits:
None
(b) No report on Form 8-K was filed during the quarter ended July
31, 2001.
15
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOGILITY, INC.
DATE September 13, 2001
-------------------------- /s/ J. Michael Edenfield
---------------------------
J. Michael Edenfield
President, Chief Executive
Officer
DATE September 13, 2001
-------------------------- /s/ Vincent C. Klinges
---------------------------
Vincent C. Klinges
Chief Financial Officer
DATE September 13, 2001
-------------------------- /s/ Deirdre J. Lavender
---------------------------
Deirdre J. Lavender
Controller and Principal
Accounting Officer
16