Manhattan Associates Reports Record Fourth Quarter and Full Year Revenue and Earnings

Leading supply chain solutions provider, Manhattan Associates, Inc. (NASDAQ: MANH), today reported fourth quarter GAAP diluted earnings per share of $0.17 on record fourth quarter license revenue of $19.0 million. On a non-GAAP basis, fourth quarter diluted earnings per share were a record $0.31, a 29% increase over the fourth quarter of 2005. FOURTH QUARTER FINANCIAL HIGHLIGHTS: Highlights of the 2006 fourth quarter performance, as compared to the 2005 fourth quarter, are: Total revenue increased 14% to a fourth quarter record $75.9 million; License revenue increased 18% to a fourth quarter record $19.0 million; Services revenue increased 14% to a fourth quarter record $49.9 million; GAAP operating income was $8.4 million, down 8%, which includes $2.9 million in legal settlement costs; Operating income, on a non-GAAP basis, increased 23% to $13.1 million; GAAP diluted earnings per share decreased 15% to $0.17 which includes the impact of legal settlement costs; Adjusted earnings per share increased 29% to $0.31, per share; Cash and investments on hand at December 31, 2006 increased 40% to $131.1 million over December 31, 2005. "We are pleased to report record revenue and adjusted earnings for the fourth quarter and full year of 2006,” said Pete Sinisgalli, President and Chief Executive Officer of Manhattan Associates. "With nine consecutive quarters of year-over-year double digit revenue growth, we continue to demonstrate solid market share and financial strength. We are well positioned to continue this success in 2007,” he continued. FULL YEAR FINANCIAL HIGHLIGHTS: Highlights for the full year 2006 results, as compared to the full year 2005, are: Total revenue increased 17% to a full year record $288.9 million; License revenue increased 16% to a full year record $66.5 million; Services revenue increased 17% to a full year record $194.5 million; GAAP operating income was $30.8 million, up 2% on higher license revenue; Operating income, on a non-GAAP basis, increased 14% to $45.3 million; GAAP diluted earnings per share increased 8% to $0.69; Adjusted earnings per share increased 23% to $1.08 per share; Cash flow from operations increased 32% to $44.1 million; The Company repurchased 773,301 shares of common stock during the year totaling $16.0 million at an average price of $20.73. The Company has $42.9 million remaining in share repurchase authority. Other significant achievements during the quarter include: Securing key new customers in the quarter including adidas A.G.; Associated Food Stores; C.S. Brooks World Carpets, Inc; Custom Building Products, Inc; Del Monte Fresh Produce; Donaldson Company, Inc; Ergon SCM de Mexico SA de CV; Fujitsu Asia Pte. Ltd.; GAZAL Apparel Pty Ltd; H&O Distribution; H.D. Smith Wholesale Drug Co.; MGA Entertainment, Inc; Paris S.A.; PJ Food Service; PUMA North America; Ronco; Sentry Logistics; Transtar Industries, Inc; Under Armour, Inc; and UWT Logistics; Expanding partnerships with many existing customers including Alco Industries, Inc; Asics America Corp; Bulova Corporation; C&J Clark America, Inc; Cabela’s; DHL Logistics Singapore Pte Ltd; Electronics for Imaging; Exel Plc; Fitness Quest, Inc; Friskars Brands; Innotrac Corporation; Interstate Distributor Co.; Mothercare UK Limited; Pacific Sunwear of California, Inc; Performance Team Freight Systems; Recreational Equipment, Inc; Sara Lee Corporation; Springs Global US, Inc; Systems Material Handling; and Warnaco, Inc.; Closing four large deals, each of which was $1 million or more in recognized license revenue. 2007 GUIDANCE Manhattan Associates provided the following diluted earnings per share guidance for the first quarter, first half and full year 2007. The GAAP diluted earnings per share includes the impact of stock options expense under SFAS 123(R). A full reconciliation of GAAP to non-GAAP diluted earnings per share is included in the supplemental attachments to this release.       Fully Diluted EPS Per Share range % Growth range GAAP Earnings Per Share Q1 2007 - diluted earnings per share $0.15  $0.19  88% 138% First half 2007 - diluted earnings per share $0.45  $0.49  32% 44% Full year 2007 - diluted earnings per share $1.00  $1.04  45% 51%     Adjusted Earnings Per Share Q1 2007 - diluted earnings per share $0.20  $0.24  25% 50% First half 2007 - diluted earnings per share $0.55  $0.59  8% 16% Full year 2007 - diluted earnings per share $1.20  $1.24  11% 15% Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. The statements regarding future financial performance are based on current expectations, which include a modestly improving general economic and information technology spending environment over the course of the current year. These statements are forward-looking. Actual results may differ materially, especially in the current uncertain economic environment. These statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of this release. Manhattan Associates will make its earnings release and published expectations available on its Web site (www.manh.com). Beginning March 15, 2007, Manhattan Associates will observe a "Quiet Period” during which Manhattan Associates and its representatives will not comment concerning previously published financial expectations. Prior to the start of the Quiet Period, the public can continue to rely on the expectations published in this 2007 Guidance section as still being Manhattan Associates' current expectation on matters covered, unless Manhattan Associates publishes a notice stating otherwise. The public should not rely on previously published expectations during the Quiet Period, and Manhattan Associates disclaims any obligation to update any previously published financial expectations during the Quiet Period. The Quiet Period will extend until the date when Manhattan Associates’ next quarterly earnings release is published, currently scheduled for the fourth week of April 2007. GAAP VERSUS NON-GAAP PRESENTATION The Company provides adjusted operating income, adjusted net income and adjusted earnings per share in this press release as additional information regarding the Company’s operating results. The measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that this presentation of adjusted operating income, adjusted net income and adjusted earnings per share provides useful information to investors regarding additional financial and business trends relating to the Company’s financial condition and results of operations. This release should be read in conjunction with our Form 8-K earnings release filing for the quarter ended December 31, 2006. The non-GAAP adjusted operating income, adjusted net income and adjusted earnings per share exclude the impact of acquisition-related costs and the amortization thereof, the recapture of previously recognized sales tax expense, the cost of settling two litigation matters, the severance and accounts receivable charge recorded in the same period and stock option expense under SFAS 123R. Fourth quarter 2006 results prepared in accordance with U.S. GAAP are reconciled with non-GAAP results excluding the impact of these adjustments. A full reconciliation of our GAAP financial measures to non-GAAP adjustments is included in the supplemental attachment to this release. LEGAL SETTLEMENTS In the quarter, the Company recorded settlement costs of $2.9 million pre-tax ($2.5 million after-tax or $0.09 per fully diluted share) related to two litigation matters, one with a large German customer and one with a domestic customer regarding implementation of warehouse management systems. In both litigation matters, a settlement was reached in January 2007. The recorded charges represent our portion of the settlement agreed to with our insurance carrier, which is included in our GAAP net earnings. These charges have been excluded from our adjusted operating income, adjusted net income and adjusted earnings per share consistent with our past earnings reports and due to the unusual nature of the litigation. About Manhattan Associates, Inc. Manhattan Associates® is a leading supply chain solutions provider. The company’s supply chain planning, supply chain execution, business intelligence and business process platform capabilities enable its more than 1200 customers worldwide to enhance profitability, performance and competitive advantage. For more information, please visit www.manh.com. This press release may contain "forward-looking statements” relating to Manhattan Associates, Inc. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are delays in product development, undetected software errors, competitive pressures, technical difficulties, market acceptance, availability of technical personnel, changes in customer requirements, risks of international operations and general economic conditions. Additional risk factors are set forth in Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results. MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)       Three Months Ended Twelve Months Ended December 31, December 31, 2006  2005  2006  2005  Revenue: License $ 19,003  $ 16,141  $ 66,543  $ 57,119  Services 49,879  43,767  194,521  166,091  Hardware and other 6,988  6,513  27,804  23,194    Total Revenue 75,870  66,421  288,868  246,404    Costs and Expenses: Cost of license 1,386  1,118  5,796  4,700  Cost of services 23,519  20,736  93,427  76,641  Cost of hardware and other 6,187  5,734  24,515  19,914  Research and development 11,070  9,555  41,468  34,139  Sales and marketing 11,870  10,458  45,888  40,302  General and administrative 7,280  5,796  29,143  22,047  Depreciation and amortization 3,333  3,145  13,247  12,074  Unusual charges 2,856  829  4,629  6,310  Total costs and expenses 67,501  57,371  258,113  216,127    Operating income 8,369  9,050  30,755  30,277    Other income, net 911  706  3,638  2,677  Income before income taxes 9,280  9,756  34,393  32,954  Income tax provision 4,466  4,021  15,062  14,319  Net income $ 4,814  $ 5,735  $ 19,331  $ 18,635      Basic earnings per share $ 0.18  $ 0.21  $ 0.71  $ 0.65  Diluted earnings per share $ 0.17  $ 0.20  $ 0.69  $ 0.64    Weighted average number of shares: Basic 27,290  27,560  27,183  28,690  Diluted 28,642  28,166  27,971  29,297  MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME RECONCILIATION OF GAAP TO NON-GAAP MEASURES (in thousands, except per share amounts)       Three Months Ended Three Months Ended December 31,   December 31, 2006  2006  2005  2005  GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Revenue: License $ 19,003  $ 19,003  $ 16,141  $ 16,141  Services 49,879  49,879  43,767  43,767  Hardware and other 6,988      6,988  6,513      6,513    Total Revenue 75,870  -  75,870  66,421  -  66,421    Costs and Expenses: Cost of license 1,386  1,386  1,118  1,118  Cost of services 23,519  45  (a) 23,564  20,736  20,736  Cost of hardware and other 6,187  6,187  5,734  5,734  Research and development 11,070  (349) (a) 10,721  9,555  9,555  Sales and marketing 11,870  (379) (a) 11,491  10,458  10,458  General and administrative 7,280  5  (a)(c) 7,285  5,796  370  (c) 6,166  Depreciation and amortization 3,333  (1,217) (b) 2,116  3,145  (1,200) (b) 1,945  Settlement charges 2,856  (2,856) (e) -  -  -  -  Acquisition-related charges -  -    -  829  (829) (d) -  Total costs and expenses 67,501  (4,751)   62,750  57,371  (1,659)   55,712    Operating income 8,369  4,751  13,120  9,050  1,659  10,709    Other income, net 911      911  706      706  Income before income taxes 9,280  4,751  14,031  9,756  1,659  11,415  Income tax provision 4,466  784  (f) 5,250  4,021  695  (f) 4,716  Net income $ 4,814  $ 3,967    $ 8,781  $ 5,735  $ 964    $ 6,699      Basic earnings per share $ 0.18  $ 0.32  $ 0.21  $ 0.24  Diluted earnings per share $ 0.17  $ 0.31  $ 0.20  $ 0.24    Weighted average number of shares: Basic 27,290  27,290  27,560  27,560  Diluted 28,642  28,642  28,166  28,166        (a) We adopted SFAS 123R on January 1, 2006 using the modified prospective method. SFAS 123R requires us to expense stock options issued to employees. Previously we did not record compensation expense for employee stock options. The 2006 adjustments to cost of services, research and development, and sales and marketing represent stock option compensation expense recorded during the period. The 2006 adjustment to general and administrative expense includes $509 of stock option compensation expense recorded during the three months ended December 31, 2006. Total stock option expense for the three months ended December 31, 2006 was $1.2 million pre-tax. Because stock option expense is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us. Thus, we have excluded the impact of this expense from adjusted non-GAAP results.   (b) Adjustments represent purchase amortization from prior acquisitions. Such amortization is commonly excluded from GAAP net income by companies in our industry and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results to that of our competitors.   (c) Adjustment includes recoveries of $514 and $370 for the three months ended December 31, 2006 and 2005 of previously expensed sales tax resulting primarily from the expiration of the sales tax audit statutes in certain states. Because we have recognized the full potential amount of the sales tax expense in prior periods, any recovery of that expense resulting from the expiration of the statutes or the collection of tax from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of anything occurring within our control during the current period. Thus, we have excluded these recoveries from adjusted non-GAAP results.   (d) In conjunction with the Evant acquisition, we paid $2.8 million into escrow for employee retention bonuses to be paid upon completion of up to 12 months of service with us. During 2006, we completed the Evant retention bonus program and paid out the final bonuses. The 2005 adjustment represents the current period expense associated with these retention bonuses. We have excluded these costs because they do not correlate to the expenses of our core operations.   (e) The amount for 2006 includes legal settlements of $2.9 million ($2.5 million after-tax or $.09 diluted EPS) resulting from legal disputes over the implementation of our software. We do not believe that these are common costs that result from normal operating activities.   (f) Amount represents the impact of the above adjustments on the income tax provision. The GAAP effective tax rate for 2006 is higher than the adjusted non-GAAP rate primarily due to stock compensation expense recorded on incentive stock options that is not deductible for tax purposes as well as our inability to recognize a tax benefit from $2.0 million of the legal settlements discussed above. MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME RECONCILIATION OF GAAP TO NON-GAAP MEASURES (in thousands, except per share amounts)       Twelve Months Ended Twelve Months Ended December 31,   December 31, 2006  2006  2005  2005  GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Revenue: License $ 66,543  $ 66,543  $ 57,119  $ 57,119  Services 194,521  194,521  166,091  166,091  Hardware and other 27,804      27,804  23,194      23,194    Total Revenue 288,868  -  288,868  246,404  -  246,404    Costs and Expenses: Cost of license 5,796  5,796  4,700  4,700  Cost of services 93,427  (1,564) (a) 91,863  76,641  76,641  Cost of hardware and other 24,515  24,515  19,914  19,914  Research and development 41,468  (1,086) (a) 40,382  34,139  34,139  Sales and marketing 45,888  (1,493) (a) 44,395  40,302  40,302  General and administrative 29,143  (930) (a)(c) 28,213  22,047  1,228  (c) 23,275  Depreciation and amortization 13,247  (4,868) (b) 8,379  12,074  (4,492) (b) 7,582  Severance, accounts receivable, and settlement charges 2,856  (2,856) (e) -  3,876  (3,876) (e) -  Asset impairment charge 270  (270) (f) -  -  -  Acquisition-related charges 1,503  (1,503) (d) -  2,434  (2,434) (d) -  Total costs and expenses 258,113  (14,570)   243,543  216,127  (9,574)   206,553    Operating income 30,755  14,570  45,325  30,277  9,574  39,851    Other income, net 3,638      3,638  2,677      2,677  Income before income taxes 34,393  14,570  48,963  32,954  9,574  42,528  Income tax provision 15,062  3,637  (g) 18,699  14,319  2,500  (g) 16,819  Net income $ 19,331  $ 10,933    $ 30,264  $ 18,635  $ 7,074    $ 25,709      Basic earnings per share $ 0.71  $ 1.11  $ 0.65  $ 0.90  Diluted earnings per share $ 0.69  $ 1.08  $ 0.64  $ 0.88    Weighted average number of shares: Basic 27,183  27,183  28,690  28,690  Diluted 27,971  27,971  29,297  29,297        (a) We adopted SFAS 123R on January 1, 2006 using the modified prospective method. SFAS 123R requires us to expense stock options issued to employees. Previously we did not record compensation expense for employee stock options. The 2006 adjustments to cost of services, research and development, and sales and marketing represent stock option compensation expense recorded during the period. The 2006 adjustment to general and administrative expense includes $2.5 million of stock option compensation expense recorded during the twelve months ended December 31, 2006. Total stock option expense for the twelve months ended December 31, 2006 was $6.6 million pre-tax. Because stock option expense is determined in significant part by the trading price of our common stock and the volatility thereof, over which we have no direct control, the impact of such expense is not subject to effective management by us. Thus, we have excluded the impact of this expense from adjusted non-GAAP results.   (b) Adjustments represent purchase amortization from prior acquisitions. Such amortization is commonly excluded from GAAP net income by companies in our industry and we therefore exclude these amortization costs to provide more relevant and meaningful comparisons of our operating results to that of our competitors.   (c) Adjustment includes recoveries of $1.6 million and $1.2 for the twelve months ended December 31, 2006 and 2005 of previously expensed sales tax resulting primarily from the expiration of the sales tax audit statutes in certain states. Because we have recognized the full potential amount of the sales tax expense in prior periods, any recovery of that expense resulting from the expiration of the statutes or the collection of tax from our customers would overstate the current period net income derived from our core operations as the recovery is not a result of anything occurring within our control during the current period. Thus, we have excluded these recoveries from adjusted non-GAAP results.   (d) In conjunction with the Evant acquisition, we paid $2.8 million into escrow for employee retention bonuses to be paid upon completion of up to 12 months of service with us. During the quarter ended September 30, 2006, we completed the Evant retention bonus program and paid out the final bonuses. The 2006 and 2005 adjustments represent the current period expense associated with these retention bonuses. We have excluded these costs because they do not correlate to the expenses of our core operations. The 2005 adjustment includes $.5 million in expense related to an unsuccessful acquisition attempt. We have excluded these costs because they do not correlate to the expenses of our core operations.   (e) The amount for 2006 includes legal settlements of $2.9 million ($2.5 million after-tax or $.09 diluted EPS) resulting from legal disputes over the implementation of our software. The amounts for 2005 include the write-off of a $2.8 million receivable from a German customer with whom we settled in 2006 as well as severance and other costs of $1.1 million resulting from the consolidation of EMEA operations and the termination of 17 employees. We do not believe that these are common costs that result from normal operating activities.   (f) During the quarter ended September 30, 2006, we recorded an impairment charge of $270 against a $2.0 million investment in a technology company. We made our original investment in 2003. Because the value of the investment is beyond our control and does not relate to our core operations, we have excluded the asset impairment from adjusted non-GAAP results.   (g) Amount represents the impact of the above adjustments on the income tax provision. The GAAP effective tax rate for 2006 is higher than the adjusted non-GAAP rate primarily due to stock compensation expense recorded on incentive stock options that is not deductible for tax purposes as well as our inability to recognize a tax benefit from $2.0 million of the legal settlements discussed above. MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)       Dec. 31, Dec. 31, 2006  2005      ASSETS Current Assets: Cash and cash equivalents $ 18,449  $ 19,419  Short term investments 90,570  36,091  Accounts receivable, net of a $4,901 and $4,892 allowance for doubtful accounts in 2006 and 2005, respectively 60,937  58,623  Deferred income taxes 5,208  6,377  Refundable income taxes 11  449  Prepaid expenses and other current assets 11,928  11,268  Total current assets 187,103  132,227    Property and equipment, net 15,850  14,240  Long-term investments 22,038  38,165  Acquisition-related intangible assets, net 14,344  19,213  Goodwill, net 70,361  54,607  Deferred income taxes 481  11,995  Other assets 4,716  2,951  Total assets $ 314,893  $ 273,398      LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities: Accounts payable $ 11,716  $ 7,904  Accrued compensation and benefits 16,560  15,224  Accrued and other liabilities 13,872  13,971  Deferred revenue 29,918  27,204  Income taxes payable 4,006  2,535  Current portion of capital lease obligations -  147  Total current liabilities 76,072  66,985    Other non-current liabilities 1,681  1,015    Shareholders' equity: Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2006 or 2005 -  -  Common stock, $.01 par value; 100,000,000 shares authorized, 27,610,105 shares issued and outstanding in 2006 and 27,207,260 shares issued and outstanding in 2005   276  272  Additional paid-in capital 98,704  87,476  Retained earnings 136,321  116,990  Accumulated other comprehensive income 1,839  863  Deferred compensation -  (203) Total shareholders' equity 237,140  205,398  Total liabilities and shareholders' equity $ 314,893  $ 273,398  MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)     Twelve Months Ended December 31, 2006  2005    Operating activities: Net income $ 19,331  $ 18,635  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,247  12,074  Stock compensation 6,762  184  Asset impairment charge 270  -  Gain on disposal of equipment 22  76  Tax benefit of options exercised 4,546  1,920  Excess tax benefits from stock based compensation (2,519) -  Deferred income taxes (574) 1,368  Unrealized foreign currency loss (317) 1,346  Changes in operating assets and liabilities: Accounts receivable, net (1,617) (8,692) Other assets (3,483) (4,383) Prepaid retention bonus 1,599  (1,599) Accounts payable, accrued and other liabilities 3,814  7,403  Income taxes 367  1,359  Deferred revenue 2,672  3,694      Net cash provided by operating activities 44,120  33,385    Investing activities: Purchase of property and equipment (9,641) (8,488) Net (purchases) maturities of investments (38,133) 61,124  Payments in connection with various acquisitions (126) (48,789)     Net cash (used in) provided by investing activities (47,900) 3,847    Financing activities: Payment of capital lease obligations (147) (104) Purchase of common stock (16,029) (61,011) Excess tax benefits from stock based compensation 2,519  -  Proceeds from issuance of common stock from options exercised 16,156  6,672      Net cash provided by (used in) financing activities 2,499  (54,443)     Foreign currency impact on cash 311  (799)   Net change in cash and cash equivalents (970) (18,010) Cash and cash equivalents at beginning of period 19,419  37,429  Cash and cash equivalents at end of period $ 18,449  $ 19,419  MANHATTAN ASSOCIATES, INC. SUPPLEMENTAL INFORMATION         1. GAAP and Adjusted Earnings per share by quarter are as follows:   2005  2006  1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year GAAP Diluted EPS $ 0.16  $ 0.10  $ 0.17  $ 0.20  $ 0.64  $ 0.08  $ 0.25  $ 0.19  $ 0.17  $ 0.69  Adjustments to GAAP: Stock option expense $ -  $ -  $ -  $ -  $ -  $ 0.04  $ 0.06  $ 0.05  $ 0.03  $ 0.19  Purchase amortization $ 0.02  $ 0.02  $ 0.02  $ 0.03  $ 0.09  $ 0.03  $ 0.03  $ 0.03  $ 0.03  $ 0.11  Acquisition related charges $ -  $ 0.01  $ 0.02  $ 0.02  $ 0.05  $ 0.02  $ 0.01  $ -  $ -  $ 0.03  Restructuring charge $ -  $ 0.03  $ -  $ (0.00) $ 0.03  $ -  $ -  $ -  $ -  $ -  Write off of receivable and settlement charges $ -  $ 0.09  $ -  $ -  $ 0.09  $ -  $ -  $ -  $ 0.09  $ 0.09  Asset impairment charge $ -  $ -  $ -  $ -  $ -  $ -  $ -  $ 0.01  $ -  $ 0.01  Sales tax recoveries $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.03) $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.03) Adjusted Diluted EPS $ 0.18  $ 0.25  $ 0.21  $ 0.24  $ 0.88  $ 0.16  $ 0.34  $ 0.27  $ 0.31  $ 1.08    2. Revenues and operating income (loss) by reportable segment are as follows (in thousands):   2005  2006  1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Revenue: $ -  Americas $ 46,776  $ 49,573  $ 49,175  $ 55,398  $ 200,922  $ 51,143  $ 65,695  $ 60,799  64,683  242,320  EMEA 6,626  7,924  8,490  7,632  30,672  6,952  6,850  6,478  7,071  27,351  Asia Pacific 2,905  3,872  4,642  3,391  14,810  4,690  5,356  5,035  4,116  19,197  $ 56,307  $ 61,369  $ 62,307  $ 66,421  $ 246,404  $ 62,785  $ 77,901  $ 72,312  $ 75,870  $ 288,868    GAAP Operating Income (Loss): Americas $ 9,107  $ 10,539  $ 6,085  $ 8,989  $ 34,720  $ 2,467  $ 10,095  $ 9,131  11,054  32,747  EMEA (1,314) (4,655) 690  926  (4,353) 245  3  (839) (2,226) (2,817) Asia Pacific (126) 425  476  (865) (90) 401  739  144  (459) 825  $ 7,667  $ 6,309  $ 7,251  $ 9,050  $ 30,277  $ 3,113  $ 10,837  $ 8,436  $ 8,369  $ 30,755    Adjustments (pre-tax): Americas: Stock option expense $ -  $ -  $ -  $ -  $ -  $ 1,558  $ 1,819  $ 1,700  $ 1,177  $ 6,254  Purchase amortization 924  1,207  1,161  1,200  4,492  1,217  1,217  1,217  1,217  4,868  Acquisition related charges -  524  1,081  829  2,434  722  607  174  -  1,503  Settlement charges -  -  -  -  -  -  -  -  810  810  Asset impairment charge -  -  -  -  -  -  -  270  -  270  Sales tax recoveries (327) (291) (240) (370) (1,228) (267) (465) (324) (514) (1,570) $ 597  $ 1,440  $ 2,002  $ 1,659  $ 5,698  $ 3,230  $ 3,178  $ 3,037  $ 2,690  $ 12,135  EMEA: Stock option expense $ -  $ -  $ -  $ -  $ -  $ 118  $ 125  $ 131  15  389  Restructuring charge -  1,061  -  -  1,061  -  -  -  -  -  Write off of receivable and settlement charges -  2,815  -  -  2,815  -  -  -  2,046  2,046  $ -  $ 3,876  $ -  $ -  $ 3,876  $ 118  $ 125  $ 131  $ 2,061  $ 2,435    Total Adjustments $ 597  $ 5,316  $ 2,002  $ 1,659  $ 9,574  $ 3,348  $ 3,303  $ 3,168  $ 4,751  $ 14,570    Adjusted non-GAAP Operating Income (Loss): $ -  Americas $ 9,704  $ 11,979  $ 8,087  $ 10,648  $ 40,418  $ 5,697  $ 13,273  $ 12,168  $ 13,744  44,882  EMEA (1,314) (779) 690  926  (477) 363  128  (708) (165) (382) Asia Pacific (126) 425  476  (865) (90) 401  739  144  (459) 825  $ 8,264  $ 11,625  $ 9,253  $ 10,709  $ 39,851  $ 6,461  $ 14,140  $ 11,604  $ 13,120  $ 45,325      3. Capital expenditures are as follows (in thousands):   2005  2006  1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year   Capital expenditures $ 2,507  $ 2,141  $ 2,698  $ 1,142  $ 8,488  $ 2,195  $ 2,603  $ 2,731  $ 2,112  $ 9,641      4. Adoption of Statement of Financial Accounting Standards 123(R), "Share-Based Payment":   The Company adopted SFAS 123R on January 1, 2006 using the modified prospective transition method. SFAS 123R requires the Company to expense stock options issued to employees. Previously, the Company did not record compensation expense for employee stock options. Actual stock option expense recorded for 2006, as well as proforma expense for 2005 as if the Company had previously adopted the new statement on January 1, 2005 is presented below. During the fourth quarter of 2005, the Board of Directors approved an Option Acceleration Agreement that accelerated the vesting of unvested stock options held by the Company's employees with an exercise price of $22.09 or higher. Stock option expense for the fourth quarter of 2005 includes $37.2 million of stock option expense ($26.9 million after tax) equal to the unamortized fair value of the options.   2005-Proforma 2006  1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Stock option expense (pre-tax) $ 5,694  $ 5,519  $ 5,392  $ 42,769  $ 59,374  $ 1,676  $ 1,944  $ 1,831  $ 1,192  $ 6,643  Income tax benefit (1,144) (1,112) (1,083) (11,631) (14,970) (499) (303) (370) (201) (1,373) Stock option expense, net of income tax $ 4,550  $ 4,407  $ 4,309  $ 31,138  $ 44,404  $ 1,177  $ 1,641  $ 1,461  $ 991  $ 5,270    Diluted EPS impact $ 0.15  $ 0.15  $ 0.15  $ 1.13  $ 1.55  $ 0.04  $ 0.06  $ 0.05  $ 0.03  $ 0.19      5. Effective tax rate   The GAAP effective tax rate for 2006 is higher than the adjusted non-GAAP rate primarily due to stock compensation expense recorded on incentive stock options that is not deductible for tax purposes as well as our inability to recognize a tax benefit from $2.0 million of the legal settlements discussed above. The impact of the nondeductible stock options expense and legal settlement was approximately 3.3% and 2.3%, respectively.   6. Stock Repurchase Activity   During 2006, we repurchased 0.8 million shares of common stock totaling $16 million at an average price of $20.73. During 2005, we repurchased 2.8 million shares totaling $61 million at an average cost of $21.58. We have $42.9 million remaining in share repurchase authority.