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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
                                   FORM 10-K
                             ---------------------
(MARK ONE)
   [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
 
   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
            FOR THE TRANSITION PERIOD FROM           TO           .
 
                        COMMISSION FILE NUMBER 000-23091
 
                             J.D. EDWARDS & COMPANY
             (Exact Name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                                            <C>
                  DELAWARE                                      84-0728700
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                     Identification Number)
    ONE TECHNOLOGY WAY, DENVER, COLORADO                           80237
  (Address of principal executive offices)                      (Zip code)
</TABLE>
 
        Registrant's telephone number, including area code 303/334-4000
                             ---------------------
        Securities registered pursuant to Section 12(b) of the Act: NONE
          Securities registered pursuant to Section 12(g) of the Act:
 
                              TITLE OF EACH CLASS
                    Common Stock, par value $0.001 per share
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No  [ ]
 
     Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]
 
     As of January 15, 1999, there were 103,510,566 shares of the Registrant's
common stock outstanding, and the aggregate market value of such shares held by
non-affiliates of the Registrant (based upon the closing sale price of such
shares on the Nasdaq National Market on January 15, 1999) was approximately $1.1
billion. Shares of the Registrant's common stock held by each executive officer
and director and by each entity that owns 5% or more of the Registrant's
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Certain sections of the Registrant's definitive Proxy Statement for the
1999 Annual Meeting of Stockholders to be held on March 24, 1999 are
incorporated by reference in Part III of this Form 10-K to the extent stated
herein.
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<PAGE>   2
 
                                     PART I
 
     This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about J.D. Edwards' industry, management's beliefs and certain
assumptions made by J.D. Edwards' management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results may differ materially from those expressed or
forecasted in any such forward-looking statements. Such risks and uncertainties
include those set forth herein under "Factors Affecting the Company's Business,
Operating Results, and Financial Condition" on pages 11 through 20. Unless
required by law, the Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, readers should carefully review the risk factors
set forth in other reports and documents that the Company files from time to
time with the Securities and Exchange Commission, particularly the Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K.
 
     J.D. Edwards is a registered trademark of J.D. Edwards & Company. The names
of all other products and services of J.D. Edwards used herein are trademarks or
registered trademarks of J.D. Edwards World Source Company. All other product
names used herein are trademarks or registered trademarks of their respective
owners.
 
ITEM 1. BUSINESS.
 
OVERVIEW
 
     J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning ("ERP") software for managing the supply chain. The Company
provides the core software products to run an entire business. These software
solutions operate on multiple computing platforms and are designed to deliver
the solutions that organizations need to maintain control of their business as
circumstances, technologies and market environments change.
 
     One of the problems with complex ERP software systems is that once
installed or implemented, the system becomes difficult to modify. In today's
changing business environment, a customers' inability to change its business
processes can be an impediment to growth. The Company's unique Idea to
Action(TM) concept enabled through ActivEra(TM), a collection of tools, extends
the capabilities of the Company's solutions and enables customers to change
their technology as their business practices change and evolve. The Company's
integrated software application suites give customers control over their
manufacturing, finance, distribution/ logistics, human resources and customer
service management operations for multi-site and multinational organizations.
The Company also provides implementation, training and support services designed
to enable customers to rapidly achieve the benefits of the Company's ERP
solutions. The Company has developed and marketed ERP solutions for over 20
years, principally for operation on AS/400 and other IBM mid-range systems and,
more recently, on leading Windows NT ("NT") and UNIX servers through Windows-and
Internet browser-enabled desktop clients.
 
     The Company's family of application suites is designed to improve most
organizations' core business processes and supply chain. In addition, the
Company extends its application suites to address certain vertical markets with
specific configurations, templates and additional software features designed to
meet these industries' needs. The Company offers two versions of its application
suites -- OneWorld(TM) and WorldSoftware(TM). OneWorld incorporates the
Company's Configurable Network Computing(TM) ("CNC") architecture and operates
on leading NT and UNIX servers, as well as the AS/400 platform. Through its CNC
architecture, the Company's ERP software is specifically designed to enable
customers to make business changes quickly and easily. The Company believes its
network-centric CNC architecture provides a valuable extension beyond
traditional client/server architectures by masking complexity, lowering cost of
change and facilitating greater scalability. WorldSoftware operates in a
host-centric environment on the AS/400 platform.
 
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With the addition of the WorldVision(R) thin client interface, WorldSoftware
applications can be operated through a Windows-based graphical user interface.
In addition, OneWorld and WorldSoftware are capable of operating together in a
unified enterprise-wide environment. The Company also provides OneWorld and
WorldSoftware toolsets to enable rapid implementation, customization and
modification of its application suites.
 
     The Company distributes, implements and supports its products worldwide
through 50 offices and more than 270 third-party business partners. To date, the
Company has more than 5,000 customers with sites in over 100 countries.
 
     The Company was incorporated in Colorado in March 1977 and was
reincorporated in Delaware in August 1997. The Company's principal executive
office is located at One Technology Way, Denver, Colorado 80237 and its
telephone number is 303/334-4000. The Company's home page can be located on the
World Wide Web at http://www.jdedwards.com. Except as otherwise noted herein,
all references to "J.D. Edwards" or the "Company" shall mean J.D. Edwards &
Company and its subsidiaries.
 
THE J.D. EDWARDS SOLUTION
 
     The Company's ERP solutions are designed to offer the following customer
benefits:
 
     DELIVER AND SUPPORT COMPREHENSIVE SOLUTIONS FOR GLOBAL ENTERPRISES. The
Company's ERP software supports an organization's core business processes
through a family of application suites, including manufacturing, finance,
distribution/logistics, human resources and customer service management. These
application suites are designed to enable a customer to integrate business
information across its organization and throughout its supply chain; accommodate
diverse business practices across a geographically dispersed organization; and
support multiple languages, currencies and countries. The Company's experienced
service organization provides training, support and a tested methodology to
enable rapid implementation of its ERP solutions.
 
     FACILITATE CHANGES IN TECHNOLOGY AND BUSINESS PRACTICES. The Company's CNC
architecture is designed to mask the complexities of underlying platform
technologies, thus enhancing flexibility and simplifying software modification.
Using the Company's highly flexible software toolset, customers can modify the
Company's application suites to accommodate their business practices without
regard to the underlying hardware, software and network technologies. By masking
the complexity of the underlying technology, the Company's CNC architecture
facilitates the incorporation of new technologies and enables customers to
modify business practices without extensive low-level software code modification
or support.
 
     OFFER TECHNOLOGY CHOICES FOR DIFFERENT MARKET SEGMENTS. Customers can
select between two versions of the Company's application suites. The Company
provides its OneWorld version to customers who want the accessibility of
information and ease of use typically associated with client/server systems,
without the burdens often associated with these complex systems. OneWorld's
object-based technology is designed to enhance programmer productivity,
facilitate modification of business practices and leverage network scalability.
OneWorld, introduced in late 1996, operates on leading NT and UNIX servers, in
addition to the AS/400 platform. The Company offers its WorldSoftware version to
customers who seek the reliable performance and lower cost of ownership
associated with host-centric systems. By offering two versions of its software,
the Company addresses different segments and allows customers to maintain
consistent business functionality while combining different technologies to meet
their specific requirements.
 
     PRESERVE AND EXTEND CUSTOMER INVESTMENT. The Company designed OneWorld to
provide customers with a migration path to a network-centric architecture, while
preserving the customers' existing investments in AS/400 platforms. The
Company's CNC architecture enables OneWorld and WorldSoftware application suites
to co-exist on the AS/400 platform, allowing customers to incorporate the new
technologies of OneWorld while maintaining consistent functionality with their
WorldSoftware systems. This architecture minimizes disruptions and reduces the
overall cost of change for customers.
 
     LOWER COST OF OWNERSHIP. The Company's ERP solutions are designed to reduce
overall cost of ownership through a combination of advanced technology and
comprehensive service and support. The
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Company's CNC architecture is specifically designed to enable customers to
change business practices or technology environments without significant costs
or business interruptions. In addition, the Company's OneWorld software version
is platform independent, allowing customers to select the best price and
performance solutions from multiple hardware and software suppliers. The Company
also offers implementation services and support enabling more rapid deployment
of the Company's ERP solutions, thus reducing customers' overall cost of
ownership.
 
     ESTABLISH LONG-TERM CUSTOMER RELATIONSHIPS. The Company has designed its
ERP software solutions with broad business functionality and flexibility to
reduce the need for significant custom modifications. By minimizing custom
modifications, the customer's ability to benefit from subsequent releases is
enhanced, as is the Company's ability to support the software as implemented.
The Company believes its investment in worldwide customer support services and
user groups facilitates customer communication and feedback, enhancing customer
satisfaction. The Company believes this focus on standard software functionality
and flexibility, and its investment in customer support and user groups,
contribute to long-term customer relationships.
 
PRODUCTS
 
  Application Suites
 
     The Company's family of application suites includes manufacturing, finance,
distribution/logistics, human resources and customer service management. The
Company's application suites accommodate different business practices across a
geographically dispersed organization, as well as multiple languages, currencies
and countries. Each suite can operate on a stand-alone basis, or can be
integrated with other Company suites and selected third-party applications and
systems. The majority of the Company's customers deploy multiple application
suites.
 
     MANUFACTURING. The Company's manufacturing application suite is designed to
enable organizations to optimize their manufacturing operations resources within
a single plant or across multiple locations and to provide information links to
other departments within the organization. This suite offers customers
everything from product configuration to enterprise facilities planning to
position themselves for the challenges faced in their manufacturing operations.
 
     FINANCE. The expanding markets and changing processes of today require
flexible financial practices. The Company's finance application suite is
designed to provide structure, security and the ability to audit a customer's
financial systems without limiting the customer's ability to respond to
operational and market changes. The application suite provides a central
repository of financial information with simplified transaction processing. This
suite enables customers to respond to the latest changes in management and
market trends.
 
     DISTRIBUTION/LOGISTICS. The distribution/logistics process continues to
face increasing demand for the fast delivery of customers' products, emphasis on
value added services and pressure to control costs. The Company's
distribution/logistics application suite is designed to address these changing
needs. This suite offers an extensive breadth and depth of functionality that
allows customers to meet the demands of their customers. The
distribution/logistics suite includes features that enable customers to manage
their warehouses, inventory and transportation for a single site or multiple
sites around the world.
 
     HUMAN RESOURCES. The human resources department requires efficient
solutions to meet its complex information needs. The Company's human resources
application suite is designed to maximize the contributions of a customers'
human resources staff. This suite enables customers to change operational
processes to support shifting business strategies, as well as eliminate
redundancies while providing immediate access to online information.
 
     CUSTOMER SERVICE MANAGEMENT. The Company offers the customer service
management ("CSM") suite, which allows the Company's customers to communicate
customer service information across the supply chain from a single information
source, tailor a response to the needs of their customers, and streamline
processes for increased productivity and rapid identification of new service
opportunities. With CSM, the Company's customers receive the flexibility to
manage workflow for the unique and changing requirements of
 
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their customers. CSM offers customer information management, installed-base
management, service contract management, call center management, service order
management and flexible reporting and online inquiry.
 
 Vertical Market Application Suites
 
     Over the last 20 years, the Company has acquired significant vertical
market experience and expertise through developing, selling and deploying ERP
solutions for over 5,000 customers across a variety of industries. The Company
has recently enhanced its strategic focus on key vertical markets in order to
better address customers' needs. The Company's new focus offers customers
greater tailored solutions, faster implementation and broader industry-specific
expertise. The Company believes that by aligning the sales and support
organizations along vertical lines that it will be able to shorten the sales
cycle, broaden industry offerings and better enable customers to quickly react
to business changes. The Company currently targets the following industry
sectors:
 
     - The industrial sector focuses on industrial fabrication and assembly,
       electronics and automotive supply solutions.
 
     - The consumer sector focuses on consumer-packaged goods, pharmaceuticals
       and energy and chemical solutions.
 
     - The service industries sector focuses on engineering, architecture,
       construction, real estate, mining and public services solutions.
 
     The Company intends to pursue solutions for retail, health care and service
providers and other areas as appropriate during 1999.
 
     The Company plans to continue its strategy of customizing application
suites and templates for these vertical markets. The Company also plans to offer
industry specific training and services to these markets.
 
     The Company's application suites are licensed under perpetual, fully paid
licenses. The prices for such licenses are based on the functionality of the
application suite and the number and type of licensed users. Customers pay a
base amount per application suite plus a per user amount.
 
  Solutions For Emerging Businesses
 
     The Company has created solutions for small emerging companies. These
solutions were created to fit the operational needs and budgets of smaller
businesses and offer fast startup and ease of use. The Company offers two
solutions for emerging businesses: the Small Business Solution and the Genesis
Channel.
 
     SMALL BUSINESS SOLUTIONS. The Company offers the Small Business Solution
("SBS") for companies with annual revenues of $35 million or less. This solution
delivers the Company's WorldSoftware pre-loaded on the IBM AS/400 System 170.
This allows customers to simply connect the system to their network and begin
implementation. The SBS minimizes customers' costs and time to benefit through
innovative online implementation tools and streamlined training processes. The
online implementation methodology tools guide customers through a step by step
setup process.
 
     GENESIS CHANNEL. The Company's Genesis channel focuses on mid-tier
companies with revenues of $100 million or less and that face the constraints of
smaller budgets and fewer dedicated information technology ("IT") staff and
resources. This channel allows mid-tier customers to purchase the Company's
solution and receive exclusive implementation tools from the Company's Genesis
partners. By working through the Company's Genesis partners, customers can
tailor and implement the software, receive dedicated service and support and
benefit from the Genesis partners' expertise.
 
J.D. EDWARDS SCORE(X) (SUPPLY CHAIN OPTIMIZATION AND REAL-TIME EXTENDED
EXECUTION)
 
     The Company introduced the J.D. Edwards SCORE(X) solution in May 1998. This
solution is designed to integrate and extend a company's business lifecycle and
execute tailored supply chains for individual customers. It allows companies to
effectively manage the dynamics of customer-centric supply chains with
network-centric computing. The Company's functionally rich components and
advanced architecture provide
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customer focused supply chain solutions that allow companies to understand the
changing requirements of their customers and then make the changes to their
business to meet those customer requirements. J.D. Edwards SCORE(X) gives
companies the capability to take an order, price it, manufacture it, source it,
package it and ship it the way the customer wants. J.D. Edwards SCORE(X)
provides the comprehensive information backbone for managing processes and
enterprise data between suppliers' suppliers and customers' customers.
 
TECHNOLOGY
 
  Architecture
 
     The Company offers two versions of its application suites -- OneWorld and
WorldSoftware. OneWorld incorporates the Company's CNC architecture and operates
on leading NT and UNIX servers, as well as the AS/400. WorldSoftware operates in
a host-centric environment on the AS/400 platform. In addition, OneWorld and
WorldSoftware are capable of operating together in a unified enterprise-wide
environment.
 
     OneWorld is an object-based, event-driven technology designed to provide
the information access and other user benefits of traditional client/server
systems while masking complexity and accommodating future change. OneWorld's CNC
architecture enables the deployment of a single version of an application across
a network, regardless of the underlying technologies.
 
     The CNC architecture consists of three components: (1) the application
layer; (2) the toolset layer; and (3) the technology layer.
 
     The OneWorld application layer contains the specific business functionality
of the OneWorld manufacturing, finance, distribution/logistics, human resources
and customer service management application suites. OneWorld application suites
are composed of over 3,000 reusable objects. The applications are distributed by
the OneWorld deployment server in object form to individual platforms where they
are compiled and executed. A customer changes the application logic by modifying
the objects or creating new objects using the OneWorld toolset. Applications
containing the modified or newly created objects are then redistributed to
individual platforms. The Company believes that this single-point-of-change
architecture significantly reduces the cost of change compared to traditional
client/server architectures.
 
     The OneWorld toolset is used to create or modify OneWorld objects, allowing
customers or the Company's developers to quickly create new application
functionality. The toolset also insulates users from lower level technologies.
For example, OneWorld objects exist independent of any specific computer
language. Currently, the OneWorld toolset can generate objects in three computer
languages -- C, C++ and Java. The Company believes it can readily incorporate
new languages in the future as market requirements dictate. The Company also
believes that this unified toolset approach significantly reduces customers'
cost of ownership when compared to traditional client/server systems that
require a variety of tools.
 
     The OneWorld technology layer is designed to mask the differences between
underlying platforms and provide a uniform interface for OneWorld applications.
This uniformity allows a single object to execute on a wide variety of
platforms, a "write once, run anywhere" capability. The technology layer is able
to support IBM's AS/400 platform, Digital Equipment Corporation's Alpha- and
Intel-based NT servers, IBM's RS/6000, Hewlett-Packard's 9000, Sun Microsystems'
platform, as well as other NT servers from NEC and Fujitsu. Supported clients
include personal computers running Windows 95 and Windows NT or any desktop
system running an Internet browser. Supported databases include Oracle
databases, the IBM DB2 family and Microsoft's SQL Server. The Company intends to
continue to integrate additional platforms, servers and software as necessary to
meet market demands.
 
     The technology layer also integrates a variety of components not typically
integrated in traditional client/server architectures, including an object
request broker, a transaction processing monitor, a workflow engine, a C/C++
generator and a Java generator. In traditional client/server implementations,
customers often have to integrate these components obtained from multiple
suppliers. The Company believes that its architecture and high degree of
integration reduce the cost of ownership and facilitate change when compared to
traditional client/server implementations.
 
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     WorldSoftware is a well established, procedural-based technology designed
to take advantage of the security, integrity and easily maintained architecture
of the AS/400 platform. Unlike many host-centric ERP systems, WorldSoftware
provides flexibility to make run-time changes in application suites without the
need to recompile software. WorldSoftware also incorporates features such as an
active data dictionary, user defined codes and a variety of run-time options.
With the addition of the WorldVision thin client interface, WorldSoftware
applications can be operated through a Windows-based graphical user interface.
 
  ActivEra Activators
 
     The ActivEra activators are discrete applications or utilities that
facilitate changes to the system. The Company currently provides over 150
activators that allow customers to quickly react to changes in their business.
The Company plans to continue to develop additional activators both internally
and through third parties over the next several years. Third-party developed
activators will be designed to "snap in" and operate within the Company's
application suites. The Company has developed activators for both the business
professional and technology professional. These separate activators allow each
group to make changes to the system independently of the other group.
 
     BUSINESS ACTIVATORS. The business activators allow business professionals
to shape the way applications work and the way the customer conducts its
business. Business solutions can be visually composed in real-time with
point-and-click, drag-and-drop ease. A selection of intuitive graphical
navigators such as automated question and answer directors, flowcharts, menus
and user defined shortcuts automatically direct the business professional to
where they need to go in the system to make changes. The Company has designed
three types of business activators: the work activators, application activators
and process activators.
 
     The work activators are a series of activators designed to modify the way
users interact with their individual working environment. By using these
activators, the business professional can define how individual users are able
to interact with the ERP applications and receive output. Work activators give
users the ability to make immediate changes in the areas of user interface,
navigation and output operations and choices.
 
     The application activators are a series of activators designed to modify
the functional attributes of the ERP application. These activators reference
application attributes running either locally on the client workstation or
remotely on the ERP server and provide users with the ability to make
modifications to the Company's applications. This enables users to respond to
the changing business conditions within their environment.
 
     The process activators are a series of activators designed to modify the
way ERP applications can be used to control business processes. These activators
provide users with the ability to engage in business scripting. Business
scripting is a guided path that provides users with a mechanism that enables or
establishes company characteristics and processing rules to support the business
process. Users are then lead through a set of questions and activities designed
to gather specific information about the business process. Once completed, these
activators implement the process changes that meet the business process
requirements.
 
     TECHNOLOGY ACTIVATORS. The technology activators enable technology
professionals to streamline management of the information system infrastructure.
This allows the systems administrators, integrators and developers to work with
a common set of activators that insulate applications programming and network
configuration from the underlying applications database, operating system,
hardware, messaging systems and telecommunications protocols. The Company has
designed three types of technology activators: the system activators,
integration activators and object activators.
 
     The system activators are a series of activators designed to modify the way
ERP applications work with the computer system environment. These activators
enable technology professionals to deploy changes and enhancements
instantaneously across the entire network. This allows users to implement global
modifications to the Company's system on a unified network environment.
 
     The integration activators are a series of activators designed to modify
the way ERP applications communicate with other applications. These activators
allow application integration by enabling applications to share logic and data.
This interoperability allows users to leverage technology and to enhance the
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productivity of their employees. This means technology professionals can easily
integrate third-party applications.
 
     The object activators are a series of activators designed to modify the way
ERP applications increase their functionality by utilizing software objects and
components. These activators provide users with a simple object scripting
methodology. Object scripting allows business critical changes to be easily
incorporated and deployed enterprise-wide automatically.
 
  ActivEra Console And Extension Architecture
 
     The ActivEra console, which will be released in 1999 as a part of the
OneWorld application, acts as a window for systems users to view the actions
required for implementing a change to the system. When a customer wants to make
a change, they will use the ActivEra console to launch the appropriate wizard,
which then walks them through the change process.
 
     The ActivEra extension architecture, which will be released in 1999, will
allow customers to "snap in" third-party activators. This means that third
parties can create and develop activators that meet customers' best business
practices.
 
  Toolsets
 
     The Company's software application suites were developed with the Company's
OneWorld and WorldSoftware toolsets. These toolsets are also used for the
ongoing enhancement and modification of the Company's products. The Company
believes the advantages of these toolsets include increased productivity,
increased code consistency, self-documenting code and improved quality.
 
     The OneWorld and WorldSoftware toolsets are bundled with the OneWorld and
WorldSoftware applications, respectively, providing customers the same
productivity, consistency and quality benefits enjoyed by the Company's own
developers, thus reducing the complexities typically associated with upgrades to
new releases. Since modifications made by both the customers and the Company
made with the same toolset, it is easier and faster to upgrade to new releases
while preserving the customers' modifications. The Company believes that this
capability enables customers to incorporate new functionality more rapidly,
while also reducing the Company's support costs.
 
     The Company's OneWorld toolset incorporates more advanced technologies,
including object-based methods and event-driven models. The OneWorld toolset
generates code in C, C++ and Java for a multi-platform, network-centric
environment. Because the OneWorld toolset rigorously separates business logic
from underlying technologies, it also facilitates the incorporation of new
technologies. The Company believes that the ability to incorporate new
technologies by regenerating, rather than rewriting, applications provides a
competitive advantage.
 
     The Company's WorldSoftware toolset provides a high-level architecture,
allowing the Company's development staff to express business practices as an
abstract model. The toolset then uses the model to generate RPG code that runs
on an AS/400 platform in a host-centric, procedural architecture. The Company
continues to use this toolset to add new functionality to the WorldSoftware
application suites.
 
NETWORK APPLICATION SERVICES
 
     The Company announced during 1998 its Network Application Services ("NAS")
program. This program allows customers to rent or outsource the Company's ERP
software solutions. When customers subscribe to NAS, they gain access to the
Company's application suites over a secure network line at an off-site computer
center. Customers receive 24 hour access to their data and their systems are
monitored by trained specialists who are available to answer questions at any
time. The NAS solution allows for continuous system and application support for
a fixed monthly per-user fee. By outsourcing through NAS, customers can take
advantage of the latest technologies while reducing up-front capital investment
and IT staffing costs. In addition, the user-based subscription fees are
scaleable so customers only pay for what they currently require.
 
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PRODUCT ALLIANCES
 
     One of the Company's on-going goals is to form relationships with
organizations whose products enhance the Company's OneWorld and WorldSoftware
solutions. This allows the Company to keep development costs down, while at the
same time offering our customers the broadest spectrum of products and services
needed. The Company's product alliance partners allow customers to benefit from
well-rounded solutions and the assurance of compatible technology and qualified
support. The Company currently has over 60 product alliance partners.
 
DIRECT IMPLEMENTATION SERVICES AND TRAINING
 
     The Company believes that delivery of its ERP software together with high
quality consulting, implementation, support and training services enables the
Company to achieve a high level of customer satisfaction, strong customer
references and long-term relationships, as well as facilitate software
improvement based on customer feedback. The Company offers extensive
implementation and training services directly and through third parties to
assist customers in rapidly achieving benefits from its ERP solutions. As of
October 31, 1998, the Company had 1,571 employees in its customer services and
training departments, located worldwide.
 
     The Company has designed an implementation process called J.D. Edwards
OnTrack ("OnTrack"). OnTrack enables customers to implement quickly and gives
customers the flexibility to meet their changing business needs. OnTrack
includes a six-step process: define, train, model, configure, go live and
refine. With the OnTrack shared implementation approach, accelerated
implementation tools, custom built documentation and classroom training, the
Company and its partners enable on-time, on-budget implementation.
 
     In addition to its standard implementation services, the Company also
offers a full range of custom implementation services, including conversion
programs, upgrade assistance, custom modifications and interfaces, and technical
documentation. Implementation services are generally provided on a time and
materials basis.
 
THIRD-PARTY IMPLEMENTATION PROVIDERS
 
     The Company seeks to provide its customers with high quality implementation
services in the most efficient and effective manner. In some cases where the
Company does not provide implementation services itself, it subcontracts such
services through third parties. The Company also has relationships with a number
third-party implementation providers that contract directly with customers for
the implementation of the Company's software. The Company selects these
third-party providers carefully to ensure that they have the ability and
knowledge to represent the Company and implement its ERP solutions properly.
Providers receive extensive training regarding the Company's application suites
and its implementation process. In addition, the Company evaluates these
providers on a regular basis to ensure quality service and support to its
customers. The Company continues to move toward relying on more third-party
implementation providers to contract directly with customers for the
implementation of the OneWorld version of its applications suites. These
relationships will enable the Company to provide implementation services through
third-party personnel with extensive client/server expertise, while expanding
its service capacity, focusing on license fee revenue generation and
concentrating its own service resources on those activities it can perform most
efficiently. The Company believes that this direct- and third-party customer
service strategy will enable it to deliver comprehensive and timely services
worldwide.
 
EDUCATION AND TRAINING
 
     The Company offers a comprehensive education and training program to its
customers and to the Company's third party implementation providers. Classes are
offered at the Company's in-house facilities located throughout the world, as
well as at customer locations. The Company's instructors are certified for each
course they teach, and their backgrounds generally include cross-functional
experience in product testing, customer support and implementation services.
 
                                        8
<PAGE>   10
 
SUPPORT
 
     The Company believes that providing business solutions along with a high
level of on-going support to its customers is a critical element in establishing
long-term relationships and maintaining a high level of customer satisfaction.
The Company provides support services for an annual fee, which entitles the
customer to receive telephone customer support, as well as enhancements and
updates to its licensed version of the Company's software. The Company provides
customer support through three customer support centers located in Denver,
London and Singapore, which are connected through a wide area network. Customer
support from these centers is provided in nine languages on a 12-hour-per-day,
five-day-per-week basis, and in English-only on a 24-hour-per-day,
seven-day-per-week basis. Customer support personnel have the ability to access
customer systems remotely to diagnose and resolve problems. As of October 31,
1998, the Company had 522 employees in its customer support department.
 
CUSTOMERS
 
     The Company, to date, has licensed its application suites to over 5,000
customers. During each of the last three fiscal years, no customer accounted for
more than 10% of total revenue.
 
SALES AND MARKETING
 
     Selling the Company's software to multinational organizations typically
requires the Company to engage in a lengthy sales cycle, generally between 6 and
15 months, and to expend substantial time, effort and money educating
prospective customers regarding the use and benefits of the Company's products.
However, the Company has recently begun to experience a shortening of the sales
cycle. See "Factors Affecting the Company's Business, Operating Results and
Financial Condition -- Lengthy Sales Cycles." The Company sells its software and
services through direct sales and business partner channels throughout the
world. In addition, the Company utilizes more than 270 sales and consulting
business partners worldwide as an indirect distribution channel to penetrate
certain vertical markets and geographic areas, in particular those areas in
which the Company has not invested resources to establish a direct presence. The
Company expects to continue to rely on indirect channels in order to enhance its
market penetration and implementation capabilities. See "Factors Affecting the
Company's Business, Operating Results and Financial Condition -- Management of
Growth and Hiring of Qualified Personnel." International revenue as a percentage
of total revenue ranged between 35% and 37% for each of the past three fiscal
years, and the Company expects that revenue from international customers will
continue to account for a significant portion of the Company's total revenue.
 
     The Company's marketing strategy is to position itself as a premier
provider of ERP solutions and to increase recognition of the J.D. Edwards name.
In support of this strategy, the Company's marketing programs include developing
and maintaining industry analyst and public relations, developing databases of
targeted customers, conducting advertising and direct mail campaigns, and
maintaining a World Wide Web home page.
 
PRODUCT DEVELOPMENT
 
     The Company has invested and expects to continue to invest substantial
resources in research and product development. The research and product
development department is organized into three groups that work closely
together: the development technologies group; the application development group;
and the documentation, localization and translations group. The efforts of these
groups are enhanced by cross-functional product management teams, frequent
solicitation of customer feedback and close contact with customers through the
Company's implementation services. As of October 31, 1998, the Company's
research and product development operations included 889 employees, primarily
located in Denver, Colorado. Research and development expenditures, which
include capitalized software development costs, were $89.4 million, $62.8
million and $47.6 million for the fiscal years ended October 31, 1998, 1997 and
1996, respectively.
 
                                        9
<PAGE>   11
 
     The Company's development technologies group is responsible for both the
toolsets and underlying technologies of OneWorld and WorldSoftware. The OneWorld
development technologies team focuses on enhancing the flexibility, simplicity
and performance of the OneWorld toolset, as well as OneWorld's ActivEra
Activators and CNC technology layer. The WorldSoftware development technologies
team is primarily focused on maintaining and enhancing the toolset and
underlying technologies for WorldSoftware. Both development technologies teams
share responsibility for cross-functional coordination with sales and support,
as well as with hardware and software suppliers with whom the Company has
relationships, to identify, analyze, prioritize and schedule new features and
functionalities.
 
     The application development group is responsible for developing, enhancing
and maintaining the OneWorld and WorldSoftware application suites, including the
vertical market application suites. Separate application development teams use
the toolsets developed by the development technologies group to create and
enhance each application suite. The Company has designed its toolsets to enable
application programming to be performed by nonprogrammers responsible for
business practices. These application development teams also work with customers
and third-party implementation providers to identify, analyze, prioritize and
schedule new functionality in the Company's existing application suites, as well
as to establish specifications and priorities for new vertical markets.
 
     The Company's documentation, localization and translations group is
responsible for the documentation, localization and translation of the Company's
application suites for particular foreign markets, as well as the vertical
market application suites and templates, for both OneWorld and WorldSoftware.
The documentation, localization and translations group works closely with
domestic and international customers and third-party implementation providers,
as well as cross-functional Company teams of development, implementation,
support and training professionals, to ensure that appropriate enhancements are
incorporated into products, documentation and implementation processes. The
Company's OneWorld application suites are currently translated into and operate
in 18 languages and the Company's WorldSoftware application suites are currently
translated into and operate in 21 languages. In addition, this group develops
and maintains a single database for documentation, which is currently translated
into eight languages. The Company intends to offer additional language
translations in the future.
 
COMPETITION
 
     The Company competes in the ERP software solutions market. This market is
highly competitive, subject to rapid technological change and significantly
affected by new product introductions. The Company competes with a large number
of independent software vendors in this market, as well as with suppliers of
custom developed business application software. Some of the Company's
competitors have significantly greater financial, technical, marketing and other
resources and there can be no assurance that the Company will be able to
successfully compete. See "Factors Affecting the Company's Business, Operating
Results and Financial Condition -- Competition."
 
PROPRIETARY RIGHTS AND LICENSING
 
     The Company's success depends, in part, on its ability to protect its
proprietary rights. To protect these rights the Company relies primarily on a
combination of copyright, trade secret and trademark laws; confidentiality
agreements with employees and third parties; and protective contractual
provisions. While the Company seeks to protect its proprietary rights there can
be no assurances that such protection is adequate. See "Factors Affecting the
Company's Business, Operating Results and Financial Condition -- Limited
Protection of Proprietary Technology and Infringement Rights."
 
EMPLOYEES
 
     As of October 31, 1998, the Company had 4,950 full-time employees: 889 in
research and development; 1,242 in sales and marketing; 1,571 in customer
services and training; 522 in customer support; and 726 in management and
administration. The Company believes that its continuing success will depend, in
part, on its ability to retain a limited number of key employees and other
members of senior management, as well as its
 
                                       10
<PAGE>   12
 
ability to attract and retain highly skilled technical, marketing and management
personnel, who are in great demand. See "Factors Affecting the Company's
Business, Operating Results and Financial Condition -- Management of Growth and
Hiring of Qualified Personnel." The Company has not had a work stoppage, and no
employees are represented under collective bargaining agreements. The Company
considers its employee relations to be good.
 
FACTORS AFFECTING THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION
 
     In addition to other information in this Annual Report on Form 10-K and in
the documents incorporated by reference therein, the following risk factors
should be carefully considered in evaluating the Company and its business
because such factors currently have a significant impact or may have significant
impact in the future on the Company's business, operating results or financial
conditions.
 
     For your convenience we have written our risk factors in Plain English.
 
     QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. Our
revenues and operating results have varied widely in the past and we expect that
they will continue to vary significantly from quarter to quarter due to a number
of factors, including the following:
 
     - demand for our software products and services
 
     - the size and timing of our sales
 
     - the level of product and price competition that we encounter
 
     - the length of our sales cycle
 
     - the timing of our new product introductions and enhancements and those of
       our competitors
 
     - market acceptance of our new products
 
     - changes in our pricing policies and those of our competitors
 
     - announcements of new hardware platforms that may delay customer's
       purchases
 
     - variations in the length of our product implementation process
 
     - the mix of products and services sold
 
     - the mix of distribution channels through which we sell our software
 
     - the mix of international and domestic revenue
 
     - changes in our sales incentives
 
     - changes in the renewal rate of our support agreements
 
     - the life cycles of our products
 
     - software defects and other product quality problems
 
     - the expansion of our international operations
 
     - the general economic and political conditions
 
     - the budgeting cycles of our customers
 
     Our software products are typically shipped when we receive orders.
Consequently, license backlog in any quarter generally represents only a small
portion of that quarter's revenue. As a result, license fee revenue is difficult
to forecast due to its dependence on orders received and shipped in that
quarter. We also recognize a substantial amount of our revenue in the last month
of each quarter and increasingly in the last week of the quarter. Because many
of our operating expenses are relatively fixed, a shortfall in anticipated
revenue or delay in recognizing revenue could cause our operating results to
vary significantly from quarter to quarter and could result in operating losses.
The timing of large individual sales is also difficult for us to predict. In
some cases,
                                       11
<PAGE>   13
 
sales have occurred in quarters subsequent to those anticipated by us. To the
extent one or more such sales are lost or occur later than we expected,
operating results could be materially adversely affected. If our revenues fall
below our expectations in any particular quarter, our business, operating
results and financial condition could be materially adversely affected.
 
     We continue to experience significant seasonality with respect to software
license revenues. We recognize a disproportionately greater amount of revenue
for any fiscal year in our fourth quarter and an even greater proportion of net
income in such quarter. As a result of this and our relatively fixed operating
expenses, our operating margins tend to be significantly higher in the fourth
fiscal quarter than other quarters. We believe this seasonality is primarily the
result of the efforts of our direct sales force to meet or exceed fiscal
year-end quotas and the tendency of certain of our customers to finalize sales
contracts at or near our fiscal year end. Because revenue, operating margins and
net income are greater in the fourth quarter, any shortfall in revenue,
particularly license fee revenue, in the fourth quarter, would have a
disproportionately large adverse effect on our operating results for the fiscal
year. Additionally, our revenue and net income in the first quarter is
historically lower than in the preceding fourth quarter. Our first fiscal
quarter revenue also slows during the holiday season in November and December.
 
     As a result of the unpredictability of our sales cycle, increasing
uncertainty in the ERP market attributed to many factors including global
economic conditions, issues surrounding the Year 2000 and strong competitive
forces, we continue to have reduced visibility of future revenue and operating
results.
 
     Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarter, our operating results may
be below expectations of public market analysts or investors. In this event, the
price of our common stock may fall.
 
     LIMITED DEPLOYMENT OF ONEWORLD AND ENTRANCE INTO NEW MARKETS. We first
shipped the OneWorld version of our application suites in late calendar 1996.
Our revenue growth depends on our ability to market OneWorld and to license it
to new non-installed base customers. We do not anticipate generating much
revenue of OneWorld sales from our current WorldSoftware users. We have also
found that it takes longer to implement OneWorld than WorldSoftware. As of
October 31, 1998, 120 of our customers have implemented OneWorld. We believe
that certain customers may not license OneWorld or may find it difficult to
implement OneWorld because:
 
     - customers may lack the necessary hardware, software or networking
       infrastructure
 
     - implementation may be too lengthy and/or costly for some customers
 
     - OneWorld may not be perceived as competitive with other products on the
       market
 
     - significant defects or "bugs" may exist in OneWorld
 
     - OneWorld may fail to meet our customer's expectations
 
     With the introduction of OneWorld, we also entered new markets -- the NT
and UNIX markets. In order to be competitive in these markets, we must overcome
obstacles such as competitors with significantly more experience and name
recognition, continuing to establish relationships with third-party
implementation providers, and limited reference accounts in the open systems
market.
 
     If we are unable to successfully sell or implement OneWorld, our reputation
would be damaged and we would suffer material adverse effects to our business,
operating results and financial condition. Additionally, failure to achieve
success in marketing OneWorld could result in a drop in our stock price.
 
     COMPANY DEPENDENCE ON IBM AS/400 PLATFORM. We continue to be substantially
dependent upon the market for software products on the IBM AS/400 platform. All
of our revenue in fiscal 1996 and most of the revenue for fiscal 1997 and a
substantial portion for 1998 was derived from the sale of software products and
related services for the AS/400 market. We will continue to offer enhanced
software products for this market. There is no guarantee that our customers will
buy or support these enhanced software products.
 
                                       12
<PAGE>   14
 
     The AS/400 market is expected to grow at a minimal rate and there can be no
assurance that it will grow at all in the future. Our future growth depends, in
part, on our ability to gain market share in this market. There can be no
assurance that we can maintain or gain market share in the AS/400 market. As we
continue to focus more on our OneWorld software version, it may become more
difficult to gain market share in the AS/400 market. We introduced OneWorld in
late calendar 1996 and it is our software version that runs on leading NT and
UNIX servers. If we lose AS/400 installed base customers or market share in the
AS/400 market, we may suffer material adverse affects to our business, operating
results or financial condition.
 
     COMPETITION. We compete in the ERP software solutions market. This market
is highly competitive, subject to rapid technological change and significantly
affected by new products. Our products are designed and marketed for the AS/400
and NT and UNIX platforms. We compete with a large number of independent
software vendors including:
 
     - companies offering products that run on Windows NT- or UNIX-based
       systems, such as SAP Aktiengesellschaft (SAP), Baan Company N.V. (Baan),
       PeopleSoft, Inc. (PeopleSoft) and Oracle Corporation (Oracle)
 
     - companies offering products on the AS/400 platform, such as System
       Software Associates, Inc., Marcam Corporation, Infinium Software, Inc.
       and JBA Holdings plc
 
     - companies offering either standard or fully customized products that run
       on mainframe computer systems, such as SAP.
 
     In addition, we compete with suppliers of custom developed business
applications software, such as systems consulting groups of major accounting
firms and IT departments of potential customers. There can be no assurances that
we will be able to successfully compete with new or existing competitors or that
such competition will not materially adversely effect our business, operating
results or financial condition.
 
     Some of our competitors, SAP and Oracle in particular, have significantly
greater financial, technical, marketing and other resources than we do. In
addition, they have wider name recognition and a larger installed base. In
contrast, we entered the NT and UNIX markets only two years ago. SAP, Baan,
PeopleSoft and Oracle have significantly more experience and name recognition
with NT and UNIX implementations and platforms and have more referenceable
accounts. Such competitors also have substantially more customers than we have
in the NT and UNIX markets. Additionally, several of our competitors have
well-established relationships with our current or potential customers. These
relationships may prevent us from competing effectively in divisions or
subsidiaries of such customers. Many of our competitors have also announced
their intention to offer vertical applications to mid-sized organizations, which
is the market that comprises a substantial portion of our revenue. There can be
no assurances that we can successfully compete against any of these competitors.
Further, several of our competitors regularly and significantly discount prices
on their products. If our competitors continue to discount or increase the
frequency of their discounts, we may be required to similarly discount our
products. This could have a material adverse effect on our operating margins.
 
     We continue to rely on a number of systems consulting and systems
integration firms for implementation, customer support services, and
recommendations of our products during the evaluation stage by potential
customers. A number of our competitors have more well-established relationships
with such firms, and as a result, such firms may be more likely to recommend our
competitors' products over our products. It is also possible that these third
parties will market software products that compete with our products in the
future. If we are unable to maintain or increase our relationships with these
third parties that recommend, implement or support our software, our business,
operating results and financial condition will be materially adversely affected.
 
                                       13
<PAGE>   15
 
     We believe that the following are the principal competitive factors
affecting the market for our software products:
 
     - responsiveness to customers' needs
 
     - product functionality
 
     - speed of implementation
 
     - ease of use
 
     - product performance and features
 
     - product quality and reliability
 
     - vendor and product reputation
 
     - quality of customer support
 
     - price
 
     We believe that we compete favorably with respect to the above factors. In
order to be successful in the future, we must continue to respond promptly and
effectively to the challenges of technological change and our competitors'
innovations. We cannot guarantee that our products will continue to compete
favorably or that we will be successful in facing the increasing competition
from new products and enhancements introduced by our existing competitors or new
companies entering the market.
 
     LENGTHY SALES CYCLE. Customers make a substantial capital investment in
purchasing our software for division or enterprise-wide business critical
purposes. Potential customers spend significant time and resources on
determining which software to purchase. This requires us to spend substantial
time, effort and money educating and convincing prospective customers to
purchase our software over our competitors. Selling our products requires an
extensive sales effort because the decision to license software generally
involves evaluation by a significant number of customer personnel in various
functional and geographic areas. We also have no control over which company a
customer favors or if the customer chooses to delay or forego a purchase. Due to
all of these factors, our sales cycle generally can range from six (6) to
fifteen (15) months. Since the sales cycle is unpredictable, we cannot forecast
the timing or amount of specific sales, and sales vary from quarter to quarter.
Recently, we have experienced a shortening in our sales cycle and during fiscal
1998 our sales force closed more transactions within a time period toward the
shorter end of this range. The delay to complete one or more large sales could
have a material adverse effect on our business, operating results or financial
condition.
 
     LENGTHY IMPLEMENTATION PROCESS. Our software is complex and affects many
different business-critical functions across various functional or geographic
areas of an enterprise. This results in a complex and lengthy implementation
processes. The implementation process requires the involvement of significant
resources of the customer and can result in significant risks. Our OneWorld
implementation process is more complex than our WorldSoftware implementation
process. Delays in implementation by us or our business partners, may result in
customer dissatisfaction or damage to our reputation. This could result in
material adverse effects to the our business, operating results and financial
condition.
 
     RELIANCE ON THIRD PARTIES AND DEVELOPMENT OF THIRD-PARTY RELATIONSHIPS. We
heavily rely on third-party implementation providers to implement the OneWorld
version of our application suites. Additionally, we have adopted a strategy in
which an increasing number of OneWorld implementations will be performed by
third parties that contract directly with our customers. Executing this strategy
requires our current third-party implementation providers to allocate additional
resources to OneWorld implementations. In addition, we must continue to enter
into additional third-party implementation relationships. Due to the limited
resources and capacities of many third-party implementation providers, there can
be no assurance that we will establish or maintain relationships with third
parties having sufficient resources to provide the necessary implementation
services to support the demand of our OneWorld customers. If we cannot obtain
such resources, we will be required to perform the implementation services
ourselves. There is no guarantee that we will have sufficient
                                       14
<PAGE>   16
 
resources available for such purposes. If we are unable to establish and
maintain effective long-term relationships with such third party implementation
providers or if such providers do not meet our customers needs, our business,
operating results and financial condition could be materially adversely
affected.
 
     We have established relationships with a number of third parties, including
consulting and system integration firms, hardware suppliers, and database,
operating system and other independent software vendors to enhance our sales,
marketing and customer service efforts. Many of these third parties also have
relationships with one or more of our competitors and may, in some instances,
select or recommend the software offerings of our competitors rather than our
software. In addition, certain of these third parties compete with us directly
in developing and marketing ERP software applications. Competition between us
and these third parties could result in the deterioration in or the termination
of our relationship. This could have a material adverse effect on our business,
operating results or financial condition.
 
     DEPENDENCE ON SERVICE REVENUE. We license our software under non-cancelable
license agreements and provide related services such as consulting,
implementation, support and training. Until fiscal 1998, our service revenue as
a percent of total revenue had increased as a result of our continued emphasis
on providing consulting and training services that complement our software
products and that benefit our growing installed base of customers. Historically,
we have subcontracted a portion of our consulting and training services to third
parties. We are currently pursuing a strategy of relying on third-party
implementation providers to contract directly with our OneWorld customers for
implementation and related services. To the extent we are successful with this
strategy, revenue from subcontracted services and service revenue as a
percentage of total revenue will most likely decrease. If such revenue decreases
more than anticipated, our operating results will be materially adversely
affected. There can be no assurances that we will be successful in implementing
this strategy or that such services will achieve market acceptance. The failure
of this could have a material adverse effect on our business, operating results
and financial condition.
 
     MANAGEMENT OF GROWTH AND HIRING OF QUALIFIED PERSONNEL. Our ability to
successfully offer products and services and implement our business plan in a
rapidly evolving market requires an effective planning and management process.
Continued growth of our business may place a significant strain on our existing
management systems and resources. To compete effectively and manage future
growth, we must continue to evaluate and improve the adequacy of our management
structure and existing procedures, including our financial and internal
controls. If we are not successful, our business, operating results and
financial condition would be materially adversely affected. Additionally, we
have focused a significant amount of our resources on the NT and UNIX markets as
a result of the development and release of the OneWorld version of our
application suites. We must also continue to maintain a focus on the AS/400
market. If our efforts to maintain a focus on these markets are unsuccessful,
our business, operating results and financial condition could be materially
adversely affected.
 
     Our future performance depends, in part, on our ability to attract and
retain highly skilled technical, managerial, sales, marketing, service and
support personnel. We have experienced and expect to continue to experience
difficulty in recruiting and hiring qualified personnel. If we are not able to
hire qualified personnel on a timely basis, our business, operating results and
financial condition would be materially adversely affected.
 
     YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. As a result, software that records only the last two digits of the
calendar year may not be able to distinguish whether "00" means 1900 or 2000.
This may result in software failures or the creation of erroneous results.
Significant uncertainty exists in the software industry concerning the potential
effects associated with the century change. Based on our assessments, we believe
the current versions of our software products are generally Year 2000 compliant.
 
     We believe that our customers and potential customers purchasing patterns
may be affected by Year 2000 issues in a number of ways. Many companies are
expending significant resources to correct or "patch" their current software
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase software products such as those that we offer.
Additionally, it is possible that certain of our customers are purchasing
support contracts only to ensure that they are Year 2000 compliant, and once
                                       15
<PAGE>   17
 
compliant, will cancel such contracts. We also believe that many potential
customers may defer purchasing Year 2000 compliant products until it is
absolutely necessary, accelerate purchasing Year 2000 compliant products, switch
to other systems or suppliers, or purchase our products only as an interim
solution. If any of the above were to happen, our business, operating results or
financial condition could be materially adversely affected.
 
     We also need to ensure Year 2000 compliance of our own internal third-party
computer systems. We do not expect the total cost of Year 2000 compliance issues
to be material to our business, operating results or financial condition. We
cannot provide assurances that we or our customers and suppliers will identify
and remediate all significant Year 2000 problems on a timely basis. Remediation
efforts may involve significant time and expense and unremediated problems could
materially adversely effect our business, operating results and financial
condition. See "Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Impact of the Year 2000 Issue."
 
     EURO CURRENCY. In January 1999, a new currency called the ECU or the "euro"
was introduced in certain Economic and Monetary Union ("EMU") countries. During
2002, all EMU countries are expected to be operating with the euro as their
single currency. During the next three years, business in EMU member states will
be conducted in both the existing national currency and the euro. As a result,
companies operating in or conducting business in EMU member states will need to
ensure that their financial and other software systems are capable of processing
transactions and properly handling these currencies, including the euro.
Although we currently offer software products that are designed to be euro
currency enabled and we believe will be able to accommodate any required euro
currency changes, there can be no assurance that our software will contain all
the necessary changes or meet all of the euro currency requirements. If our
software does not meet all the euro currency requirements our business,
operating results and financial condition would be materially adversely
affected. See "Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Euro."
 
     INTERNATIONAL OPERATIONS AND CURRENCY FLUCTUATIONS. We market and sell our
products in the United States and internationally. Our international revenue
continues to represent a significant portion of our total revenue. We currently
maintain 29 international sales offices located throughout Canada, Europe, Asia,
Latin America and Africa. We intend to continue to substantially expand our
international operations and enter new international markets. This expansion
will require significant management attention and financial resources.
Traditionally, our international operations are characterized by higher
operating expenses and lower operating margins. As a result, if our
international revenue increases as a percentage of total revenue, our operating
margins may be adversely affected. Additionally, costs associated with
international expansion include the establishment of additional offices, hiring
of additional personnel, localization and marketing of our products in foreign
markets, and the development of relationships with international service
providers. If international revenue is not adequate to offset the expense of
expanding foreign operations, our business, operating results and financial
condition could be materially adversely affected. Our international operations
are also subject to other inherent risks, including:
 
     - imposition of governmental controls
 
     - export license requirements
 
     - restrictions on the export of certain technology
 
     - cultural and language difficulties
 
     - the impact of a recessionary environment in economies outside the United
       States
 
     - reduced protection for intellectual property rights in some countries
 
     - the potential exchange and repatriation of foreign earnings
 
     - political instability
 
     - trade restrictions and tariff changes
 
                                       16
<PAGE>   18
 
     - localization and translation of products
 
     - difficulties in staffing and managing international operations
 
     - difficulties in collecting accounts receivable and longer collection
       periods
 
     - the impact of local economic conditions and practices
 
     Our success in expanding our international operations depends, in part, on
our ability to anticipate and effectively manage these and other risks. We
cannot guarantee that these or other factors will not materially adversely
affect our business, operating results or financial condition.
 
     We have assessed and continue to closely monitor our international business
risks due to the deterioration of global economic conditions in the Asian
markets, particularly in Japan, and in certain other geographic regions.
Although we expect that the current worldwide economic conditions may negatively
impact our business to some degree, we do not believe such impact will be
material primarily due to the broad geographic diversity of our operations.
Consistent with our historical results, we expect to continue to recognize a
small percentage of our revenue and operating income from the Asian and other
specific geographic areas that are currently being impacted by adverse economic
conditions.
 
     A significant portion of our revenue is received in currencies other than
United States dollars and as a result we have been subject to risks associated
with foreign exchange rate fluctuations. We have recently broadened our foreign
exchange hedging activities to limit our exposure risk. In fiscal 1998, 1997 and
1996, we incurred foreign exchange losses of approximately $2.8 million, $2.0
million and $1.7 million, respectively. Due to the substantial volatility of
foreign exchange rates, there can be no assurance that our hedging activities
will effectively limit our exposure or that such fluctuations will not a have a
material adverse effect on our business, operating results or financial
condition.
 
     RISKS ASSOCIATED WITH NEW VERSIONS AND PRODUCTS, RAPID TECHNOLOGY CHANGE
AND DEFECTS. The software market in which we compete is characterized by rapid
technological change, evolving industry standards, changes in customer
requirements, and frequent new product introductions and enhancements. For
instance, existing products can become obsolete and unmarketable when products
utilizing new technologies are introduced or new industry standards emerge. As a
result, the life cycles of our software products are difficult to estimate. To
be successful, we must be able to enhance existing products, develop and
introduce new products that keep pace with technological development, satisfy
our customer's requirements and achieve market acceptance. There can be no
assurances that we will successfully identify new product opportunities, develop
and bring new products to the market in a timely and cost-effective manner, or
that products, capabilities or technologies developed by our competitors will
not render our products obsolete. We have addressed the need to develop new
products and enhancements primarily through internal development efforts, though
on occasion we have licensed third-party technology and will consider acquiring
technology. Licensing third-party technology is risky. See "Limited Protection
of Proprietary Technology and Infringement Risks." If we are unable to develop
new software products or enhancements, or if such products do not achieve market
acceptance, our business, operating results or financial condition may be
materially adversely affected.
 
     Historically, we have issued significant new releases of our software
products periodically with minor interim releases issued more frequently. As a
result of the complexities inherent in our software, major new product
enhancements and new products often require long development and testing periods
before they are released. On occasion, we have experienced delays in the
scheduled release date of new and/or enhanced products and we cannot provide any
assurances that we will not miss future scheduled release dates. The delay of
product releases or enhancements or the failure of such products or enhancements
to achieve market acceptance could materially adversely affect our business,
operating results or financial condition.
 
     Software products as complex as our products frequently contain undetected
errors or "bugs" when first introduced or as new versions are released. Despite
extensive testing, some bugs are not discovered until the product has been
installed and used by our customers. To date, our business, operating results
and financial condition have not been materially adversely affected by the
release of products containing errors. There can
                                       17
<PAGE>   19
 
be no assurance that any future errors will not result in the delay or loss of
revenue, diversion of development resources, damage to our reputation, increased
service or warranty costs or impaired market acceptance of these products. Any
of these results could materially adversely effect our business, operating
results or financial condition.
 
     FIXED-PRICE SERVICE CONTRACTS. We offer a combination of software,
implementation and support services to our customers. We typically enter into
service agreements with our customers that provide consulting and implementation
services on a time and materials basis. We have, from time to time, entered into
fixed-price service contracts with certain of our customers. These types of
contracts specify that we must obtain certain milestones prior to payment,
regardless of the actual costs incurred by us. We believe that such fixed price
service contracts may be offered more frequently by our competitors to
differentiate their products and services. As a result, we may be forced to
enter into more of such contracts. We can offer no assurance that we can
successfully complete these contracts on budget or that our inability to do so
would not have a material adverse effect on our business, operating results and
financial condition.
 
     DEPENDENCE ON KEY PERSONNEL. Our success depends, to a significant extent,
upon a limited number of members of our senior management and other key
employees. The loss of one or more of our key employees could result in a
material adverse effect to our business. Although we maintain key man life
insurance on C. Edward McVaney, chairman and co-founder, such insurance is
minimal and is not maintained on our chief executive officer or other key
personnel. In addition, we believe that our future success will depend, in part,
on our ability to attract and retain highly skilled technical, managerial, sales
and marketing personnel. Competition for such personnel in the computer software
industry is intense. There can be no assurance that we will be successful in
attracting or retaining such personnel. The failure to do so, could have a
material adverse effect on our business, operating results or financial
condition.
 
     LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY AND INFRINGEMENT RISKS. Our
success depends, in part, on our ability to protect our proprietary rights. To
protect our proprietary rights, we rely primarily on a combination of copyright,
trade secret and trademark laws; confidentiality agreements with employees and
third parties; and protective contractual provisions such as those contained in
our license agreements with consultants, vendors and customers. We currently
have 2 patents and 6 patent applications pending on various aspects of our
software application suites. We pursue the registration of certain of our
trademarks and service marks in the United States and in certain other
countries. However, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States and
effective copyright, trademark and trade secret protection may not be available
in other jurisdictions. Nevertheless, we believe that the following factors are
more essential to protecting our technology leadership position:
 
     - the technological and creative skills of our personnel
 
     - new product developments
 
     - frequent product enhancements
 
     - name recognition
 
     - customer training and support
 
     - reliable product support
 
     We generally enter into confidentiality or license agreements with our
employees, consultants, and vendors. These agreements control access to and
distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties may
copy aspects of our products, obtain and use information that we regard as
proprietary, or develop similar technology through reverse engineering or other
means. Preventing or detecting unauthorized use of our products is difficult.
There can be no assurances that the steps we take will prevent misappropriation
of our technology or that our license agreements will be enforceable. In
addition, we may resort to litigation to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of
others' proprietary rights, or to defend against claims of infringement or
invalidity in the future. Such litigation
 
                                       18
<PAGE>   20
 
could result in significant costs or the diversion of resources. This could
materially adversely affect our business, operating results or financial
condition.
 
     We generally license our products to end users through our standard license
agreement. Each agreement is negotiated individually and may contain variations.
We also license our products to independent third-party distributors with a
right to sub-license. Although we establish conditions under which our products
are licensed by our distributors to end users, there can be no assurances that
our distributors do not deviate from such conditions.
 
     We may receive notice of claims of infringement of other parties'
proprietary rights in the normal course of business. Although we do not believe
that our products infringe the proprietary rights of third parties, we cannot
guarantee that such infringement or invalidity claims will not be asserted or
prosecuted against us. Defending such claims, regardless of their validity,
could result in significant costs and diversion of resources. Such assertions or
defense of such claims may materially adversely affect our business, operating
results or financial condition. In addition, such assertion could result in
injunctions against us. Injunctions that prevent us from distributing our
products would have a material adverse effect on our business, operating results
and financial condition. If such claims are asserted against us, we may seek to
obtain a license to use such intellectual property rights. There can be no
assurance that such a license would be available on commercially reasonable
terms.
 
     We also rely on certain technology that we license from third parties,
including software that is integrated with our internally developed software. In
particular, we license the graphical user interface to our WorldSoftware, which
we market as WorldVision. There can be no assurances that these third-party
licenses will continue to be available to us on commercially reasonable terms.
The loss of, or inability to maintain, any of these licenses, would result in
delays or reductions in product shipments until we could identify, license or
develop and integrate equivalent technology. Any such delays or reductions in
product shipments would materially adversely affect our business, operating
results or financial condition. Although we are generally indemnified by third
parties against claims that such third parties' technology infringes the
proprietary rights of others, such indemnification is not always available for
all types of intellectual property. Often such third-party indemnifiers are not
well capitalized and may not be able to indemnify us in the event that their
technology infringes the proprietary rights of others. As a result, we may face
substantial exposure in the event that technology licensed from a third party
infringes another party's proprietary rights. We currently do not maintain
liability insurance to protect against this risk. There can be no assurance that
such infringement claims will not be asserted against the company or that such
claims would not materially adversely affect our business, operating results or
financial condition. Defending such infringement claims, regardless of their
validity, could result in significant costs and diversion of resources. Such
assertions or defense of such claims may materially adversely effect our
business, operating results or financial condition.
 
     RISKS OF SECURITY OF PRODUCTS. We have included security features in
certain of our Internet browser-enabled products that are intended to protect
the privacy and integrity of customer data. Despite these security features, our
products may be vulnerable to break-ins and similar problems caused by Internet
users. Such break-ins and other disruptions could jeopardize the security of
information stored in and transmitted through the computer systems of our
customers. Break-ins include such things as hackers bypassing firewalls and
misappropriating confidential information. Addressing problems caused by such
break-ins may have a material adverse effect on our business, operating results
and financial condition.
 
     Although our license agreements with our customers contain provisions
designed to limit our exposure as a result of the defects listed above, such
provisions may not be effective. Existing or future federal, state or local laws
or ordinances or unfavorable judicial decisions could effect their
enforceability. To date, we have not experienced any such product liability
claims, but there can be no assurance that this will not occur in the future.
Because our products are used in business-critical applications, a successful
product liability claim could have a material adverse effect on our business,
operating results and financial condition. Additionally, defending such a suit,
regardless of its merits, could entail substantial expense and require the time
and attention of key management personnel, either of which could have a material
adverse effect on our business, operating results or financial condition.
 
                                       19
<PAGE>   21
 
     ECONOMIC AND MARKET CONDITION RISKS. Various segments of the software
industry have experienced significant economic downturns characterized by
decreased product demand, price erosion, work slowdown and layoffs. In addition,
there is increasing uncertainty in the ERP market attributed to many factors
including global economic conditions, issues surrounding the Year 2000 and
strong competitive forces. Our future license fee revenue and results of
operations may experience substantial fluctuations from period to period as a
consequence of these factors and such conditions may affect the timing of orders
from major customers and other factors affecting capital spending. Although we
have a diverse client base, we have targeted a number of vertical markets. As a
result, any economic downturns in general or in our targeted vertical markets
would have a material adverse effect on our business, operating results or
financial condition.
 
     VOLATILITY OF COMMON STOCK PRICE. The market price of our common stock has
fluctuated in the past and is likely to fluctuate in the future. In addition,
securities markets have experienced significant price and volume fluctuations
and the market prices of high-tech companies have been especially volatile.
Investors may be unable to resell their shares of our common stock at or above
the price they paid for it. In the past, companies that have experienced
volatility in the market price of their stock have been the object of securities
class action litigation. If we were the object of securities class action
litigation, it could result in substantial costs and diversion of management's
attention and resources.
 
     CONTROL BY EXISTING SHAREHOLDERS. As of January 25, 1999, J.D. Edwards
executive officers, directors and entities affiliated with them, in the
aggregate, beneficially owned approximately 52.1% of our outstanding common
stock. These stockholders, if acting together, would be able to significantly
influence all matters requiring approval by stockholders, including the election
of directors and the approval of mergers or other business combinations.
Additionally, C. Edward McVaney, Robert C. Newman and Jack L. Thompson, the
founders of J.D. Edwards, have entered into an Amended and Restated Stockholders
Agreement. This agreement provides that Messrs. Newman and Thompson must cast
their votes in the same proportion as the votes cast by Mr. McVaney with respect
to certain significant corporate issues, including:
 
     - any revision to our Certificate of Incorporation
 
     - any merger, consolidation, share exchange or similar event
 
     - any sale or disposition of all or substantially all of our assets
 
     - any dissolution or liquidation
 
     - any bankruptcy filing
 
     As a result of this agreement, Mr. McVaney has substantial control over the
approval of such matters. In addition, each founder must vote for the election
of the other founders to the board of directors or a designee appointed by such
other founder.
 
     ANTITAKEOVER EFFECTS AND DELAWARE LAW. Certain provisions of our Amended
and Restated Certificate of Incorporation, Bylaws, and Delaware law could make
it more difficult for a third party to acquire us, even if doing so would be
beneficial to our stockholders. This could adversely affect the market price of
our common stock.
 
ITEM 2. PROPERTIES.
 
     The Company's corporate headquarters and executive offices are in Denver,
Colorado, where the Company leases approximately 750,000 square feet of space in
multiple facilities. The leases on these facilities expire at various dates
ranging from 1999 through 2012. The Company also leases approximately 250,000
square feet of space, primarily for regional sales and support offices,
elsewhere in the United States. Additionally, the Company leases approximately
337,000 square feet of office space in countries outside the United States, used
primarily for sales and support offices. Expiration dates on sales and support
office leases range from fiscal 1999 to 2010. In addition, a third and fourth
corporate facility of approximately 200,000 square feet each are being built.
The Company will lease these buildings upon their scheduled completion in March
and November 1999, respectively. The Company believes that its current domestic
and international
 
                                       20
<PAGE>   22
 
facilities will be sufficient to meet its needs for at least the next twelve
months. See Note 7 of Notes to Consolidated Financial Statements for information
regarding the Company's obligations under its facilities leases and Note 9 of
Notes to Consolidated Financial Statements for information regarding the
Company's recent financing activities.
 
ITEM 3. LEGAL PROCEEDINGS.
 
     From time to time, the Company is involved in legal proceedings and
litigation arising in the ordinary course of business. While the outcome of
these matters cannot be predicted with certainty, in the opinion of management,
the adverse outcome of any such current legal proceedings would not have a
material adverse effect on the Company's results of operations or financial
condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Not applicable.
 
EXECUTIVE OFFICERS OF THE COMPANY
 
     The executive officers of the Company and their ages as of January 15, 1999
are as follows:
 
<TABLE>
<CAPTION>
          NAME             AGE                           POSITION(S)
          ----             ---                           -----------
<S>                        <C>   <C>
Douglas S. Massingill....  41    President and Chief Executive Officer
David E. Girard..........  43    Executive Vice President and Chief Operating Officer
Richard E. Allen.........  41    Senior Vice President, Finance and Administration and Chief
                                   Financial Officer
Paul E. Covelo...........  43    Senior Vice President
Michael A. Schmitt.......  41    Senior Vice President
Daniel B. Snyder.........  41    Senior Vice President
Pamela L. Saxton.........  46    Vice President of Finance, Controller and Chief Accounting
                                 Officer
Richard G. Snow, Jr. ....  53    Vice President, General Counsel and Secretary
</TABLE>
 
     Douglas S. Massingill has been President and Chief Executive Officer of the
Company since November 1998. From March 1997 to October 1998, he was Executive
Vice President and Chief Operating Officer. From February 1994 to March 1997, he
was Executive Vice President of Worldwide Operations, and from January 1993 to
March 1994, Mr. Massingill was Vice President and General Manager of the South
Area. He joined the Company in June 1990 as Account Executive for the Large
Accounts Program. Mr. Massingill holds a B.A. in accounting from Shorter College
and an M.B.A. from Georgia Southern University.
 
     David E. Girard has been Executive Vice President and Chief Operating
Officer of the Company since November 1998. From November 1997 to October 1998,
he was Senior Vice President. He was Vice President and General Manager of the
East Area from May 1994 through October 1997. Mr. Girard holds a B.S. in
marketing from University of Connecticut and attended the Columbia Executive
Marketing Management Program at Columbia University.
 
     Richard E. Allen has been Senior Vice President, Finance and Administration
since November 1997 and Chief Financial Officer, Treasurer and Assistant
Secretary since January 1990. From January 1990 through October 1997, he was
Vice President, Finance and Administration. From August 1985 to September 1994,
Mr. Allen served as Controller of the Company and as Secretary from March 1986
to January 1990. Mr. Allen holds a B.S. in business administration from Colorado
State University.
 
     Paul E. Covelo has been Senior Vice President since November 1997. From
August 1994 to October 1997, he was Vice President of International Operations.
He served as Vice President and General Manager of the West Area from January
1992 to September 1994 and Manager of the Newport Beach Region from July 1988 to
January 1992. Mr. Covelo holds a B.A. in marketing from Loyola Marymount
University.
 
                                       21
<PAGE>   23
 
     Michael A. Schmitt has been Senior Vice President since November 1997. From
September 1996 to October 1997, he held the position of Vice President and
General Manager of Central European operations, and from October 1994 to August
1996 he was Vice President and General Manager of the West area. Mr. Schmitt
holds a B.S. in Business Administration from California Polytechnic State
University.
 
     Daniel B. Snyder has been Senior Vice President since November 1997. He was
Vice President and General Manager of the Midwest Area from March 1992 to
October 1997, and from January 1992 to March 1992, he served as Director of
Large Accounts for the Midwest Area. Mr. Snyder holds a B.S. in business
administration from Arizona State University, and an M.B.A. in finance from
University of Southern California.
 
     Pamela L. Saxton has been Vice President of Finance, Controller and Chief
Accounting Officer since joining the Company in September 1994. Ms. Saxton holds
a B.S. in accounting from University of Colorado.
 
     Richard G. Snow, Jr. has been Vice President, General Counsel and Secretary
since joining the Company in January 1990. He holds a B.S. in business
administration from the University of California, Berkeley and a J.D. from
California Western University Law School.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
 
     (a) The Company made its initial public offering on September 23, 1997 at a
price of $23.00 per share The Company's common stock is listed on the Nasdaq
National Market under the symbol "JDEC." The following table sets forth the high
and low closing sale prices per share of the Company's common stock for the
periods indicated.
 
<TABLE>
<CAPTION>
                                                               HIGH     LOW
                                                              ------   -----
<S>                                                           <C>      <C>
1997
  Fourth Quarter (beginning September 23, 1997).............  40.375   31.00
1998
  First Quarter.............................................  35.19    26.31
  Second Quarter............................................  41.50    28.75
  Third Quarter.............................................  46.25    32.75
  Fourth Quarter............................................  49.38    26.25
</TABLE>
 
     As of January 15, 1999, there were 469 holders of record of the Company's
common stock. Because many of the Company's shares of common stock are held by
brokers and other institutions on behalf of stockholders, the Company is unable
to estimate the total number of stockholders represented by these record
holders. The Company has never declared or paid any cash dividend on its common
stock. Since the Company currently intends to retain all future earnings to
finance future growth, it does not anticipate paying any cash dividends in the
foreseeable future.
 
     (b) In connection with J.D. Edwards' acquisition of substantially all of
the assets of a privately-held company (the "Acquired Company"), which included
2.7 million shares of J.D. Edwards' Common Stock, the Company issued 2,707,316
shares of J.D. Edwards' Common Stock (the "New Shares") to the Acquired Company.
The New Shares were issued pursuant to an exemption from the registration
requirements of the Securities Act afforded by Regulation D under Section 4(2)
of the Securities Act. The stockholders of the Acquired Company were either
accredited or sophisticated investors with access to all relevant information
regarding J.D. Edwards necessary to evaluate the investment, and each
stockholder represented that the New Shares were being acquired for investment
intent. There was no general solicitation or advertising, and J.D. Edwards used
reasonable care to assure that the stockholders of the Acquired Company were not
underwriters.
 
                                       22
<PAGE>   24
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected consolidated financial data of the Company should be
read in conjunction with "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations," the consolidated financial
statements and notes thereto and other financial information included elsewhere
in this Annual Report on Form 10-K. The consolidated statements of income data
set forth below for the years ended October 31, 1996, 1997 and 1998 and the
consolidated balance sheet data as of October 31, 1997 and 1998 are derived
from, and are qualified by reference to, the Company's consolidated financial
statements audited by PricewaterhouseCoopers LLP, independent accountants, which
are included elsewhere in this Annual Report on Form 10-K. The consolidated
statements of income data for the years ended October 31, 1994 and 1995 and the
consolidated balance sheet data as of October 31, 1994, 1995 and 1996 are
derived from consolidated financial statements audited by PricewaterhouseCoopers
LLP, independent accountants, which are not included in this Annual Report on
Form 10-K. Historical results are not necessarily indicative of results for any
future period. The Company has never declared or paid any cash dividend on its
Common Stock. See "Consolidated Financial Statements" under Item 14(a).
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED OCTOBER 31,
                                                    ----------------------------------------------------
                                                      1994       1995       1996       1997       1998
                                                    --------   --------   --------   --------   --------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>        <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenue:
  License fees....................................  $107,561   $134,138   $180,366   $248,707   $386,081
  Services........................................   133,026    206,628    297,682    399,105    547,901
                                                    --------   --------   --------   --------   --------
         Total revenue............................   240,587    340,766    478,048    647,812    933,982
Costs and expenses:
  Cost of license fees............................    12,832     18,461     27,443     36,444     43,404
  Cost of services................................    87,826    128,144    184,846    244,640    349,689
  Sales and marketing.............................    76,169    102,310    128,759    176,031    261,400
  General and administrative......................    27,377     38,677     53,052     69,850     83,450
  Research and development........................    18,936     24,296     40,321     60,591     89,401
                                                    --------   --------   --------   --------   --------
         Total costs and expenses.................   223,140    311,888    434,421    587,566    827,344
                                                    --------   --------   --------   --------   --------
Operating income..................................    17,447     28,878     43,627     60,256    106,638
Other income (expense):
  Interest income.................................       483      1,697        629      1,686     15,294
  Interest expense................................      (101)      (576)      (899)      (829)      (843)
  Foreign currency losses and other, net..........      (486)      (411)    (1,403)    (1,787)    (2,886)
                                                    --------   --------   --------   --------   --------
Income before income taxes........................    17,343     29,588     41,954     59,326    118,203
  Provision for income taxes(1)...................     5,280     11,379     15,628     22,098     43,735
                                                    --------   --------   --------   --------   --------
Net income........................................  $ 12,063   $ 18,209   $ 26,326   $ 37,228   $ 74,468
                                                    ========   ========   ========   ========   ========
Net income per common share:(2)
  Basic...........................................  $   0.15   $   0.23   $   0.33   $   0.46   $   0.76
                                                    ========   ========   ========   ========   ========
  Diluted.........................................  $   0.15   $   0.22   $   0.30   $   0.39   $   0.68
                                                    ========   ========   ========   ========   ========
Shares used in computing per share amounts:
  Basic...........................................    80,872     79,139     79,044     80,546     98,264
  Diluted.........................................    82,253     82,504     87,667     96,500    109,993
</TABLE>
 
<TABLE>
<CAPTION>
                                                                        OCTOBER 31,
                                                    ----------------------------------------------------
                                                      1994       1995       1996     1997(3)      1998
                                                    --------   --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.........................  $ 28,615   $ 34,897   $ 25,554   $224,437   $183,115
Short- and long-term investments..................        --         --         --    138,560    351,194
Total assets......................................   127,131    175,191    243,786    643,037    950,473
Mandatorily redeemable shares, at redemption
  value...........................................    14,290     19,973     47,024         --         --
Stockholders' equity..............................    13,612     22,972     22,902    396,861    583,996
</TABLE>
 
---------------
 
(1) A valuation allowance provided against foreign tax loss carryforwards
    totaling $2.4 million was eliminated in the year ended October 31, 1994 as a
    result of the Company's determination that it would likely realize these
    benefits.
 
(2) See Note 1 of Notes to Consolidated Financial Statements in Item 14 for a
    discussion of the computation of earnings per common share and weighted
    average common shares outstanding.
 
(3) The Company completed an initial public offering ("IPO") in September 1997.
    Upon closing the IPO, the mandatory redemption feature of the mandatorily
    redeemable shares was eliminated.
 
                                       23
<PAGE>   25
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following discussion should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial statements and notes
thereto included elsewhere in this Annual Report on Form 10-K. This item
contains forward-looking statements that involve risks and uncertainties. Actual
results may differ materially from those indicated in such forward-looking
statements. Factors that may cause such a difference include, but are not
limited to, those discussed in "Item 1: Business -- Factors Affecting the
Company's Business, Operating Results and Financial Condition."
 
OVERVIEW
 
     J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning ("ERP") software for managing the supply chain. The Company
provides the core software products to run an entire business. These software
solutions operate on multiple computing platforms and are designed to deliver
the solutions that organizations need to maintain control of their businesses as
circumstances, technologies and market environments change.
 
     The Company released the OneWorld version of its application suites in late
calendar 1996 to take advantage of potential opportunities in the Windows NT and
UNIX markets, as well as to enhance its position as a leader in the AS/400
market. The Company's software application suites had historically been designed
to operate exclusively on certain mid-range computing platforms, most recently
the IBM AS/400 platform. The WorldSoftware version of application suites for use
on the AS/400 platform first shipped in 1988, and sales of such applications and
related services accounted for substantially all of the Company's revenue until
the most recent two fiscal years.
 
     The Company licenses software under non-cancelable license agreements and
provides related services, including consulting, implementation, support and
training. Revenue is recognized in accordance with Statement of Position ("SOP")
91-1, "Software Revenue Recognition." Consulting, implementation and training
services are not essential to the functionality of the Company's software
products, are separately priced and are available from a number of suppliers.
Accordingly, revenue from these services is recorded separately from the license
fee. License fee revenue is recognized when a non-cancelable license agreement
has been signed, the product has been delivered, collection is probable and all
significant contractual obligations relating to this license have been
satisfied. Revenue on all software license transactions in which there are
significant outstanding obligations is deferred and recognized once such
obligations are fulfilled. Typically, the Company's software licenses do not
include significant post-delivery obligations to be fulfilled by the Company and
payments are due within a twelve-month period from date of delivery. Where
software license contracts call for payment terms in excess of twelve months
from date of delivery, revenue is recognized as payments become due and all
other conditions for revenue recognition have been satisfied. Revenue from
consulting, implementation and training services is recognized as services are
performed. Revenue from agreements for supporting and providing periodic
upgrades to the licensed software is recorded as unearned revenue and is
recognized ratably over the support service period, and includes a portion of
the related license fee equal to the fair value of any bundled support services.
The Company does not require collateral for its receivables and reserves are
maintained for potential losses.
 
     In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued SOP 97-2, "Software Revenue Recognition," which provides
guidance on recognizing revenue on software transactions and supersedes SOP
91-1. Further guidance was published during 1998 in SOP 98-4, "Software Revenue
Recognition" and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions." Additionally, the AICPA
issued technical questions and answers on financial accounting and reporting
issues related to SOP 97-2 in January 1999. The Company will apply the
provisions of SOP 97-2 on a prospective basis for new software transactions
entered into beginning in the first quarter of fiscal 1999. Management believes
that the adoption of this guidance will not have a material impact on its
financial condition or results of operations and will not have a significant
impact on its current licensing or revenue recognition practices. However,
comprehensive interpretations and commonly accepted business practices for these
statements have not yet been established. There can be no assurance that
additional
                                       24
<PAGE>   26
 
guidance and commonly accepted business practices pertaining to the new
standards will not result in unexpected modifications to the Company's current
revenue recognition practices which could materially adversely impact the
Company's license fee revenue, results of operations and net income.
 
     The Company distributes its products and services through both direct and
indirect sales channels. Currently, the Company has 50 direct sales and
consulting offices located throughout the world. The Company also utilizes more
than 270 outside sales and consulting partners with offices throughout the world
as an indirect distribution channel to penetrate certain vertical markets or
geographic areas. Generally, operating margins are higher on domestic revenue
than on international revenue. Additionally, operating margins are generally
higher in the geographic areas where the Company's operations are more
established than in the geographic areas where the Company is investing new
resources. International revenue as a percentage of total revenue ranged between
35% and 37% for each of the past three fiscal years.
 
     Total revenue from both license fees and services has increased from year
to year. As a percentage of total revenue, service revenue is higher than
license revenue primarily as a result of the Company's historical emphasis on
providing consulting and training services that complement its software products
and due to increased support revenue from the Company's growing installed base
of customers. A change in the mix between license fee and service revenue could
impact operating income as the gross margins on license fee revenue are
generally higher than gross margins on service revenue. The revenue mix may
change in future periods depending upon a number of factors, particularly the
Company's success in penetrating the Windows NT and UNIX markets with the
OneWorld version of its application suites and in its implementation strategy
for OneWorld. The Company has historically subcontracted a substantial portion
of its consulting and training services to third parties. Such subcontracted
services accounted for 40%, 43% and 46% of this service revenue in fiscal 1996,
1997 and 1998, respectively. Currently, the Company is also pursuing a strategy
of relying on third-party implementation providers to contract directly with its
customers for OneWorld implementations and related services. See "Item 1:
Business -- Third Party Implementation Providers." To the extent the Company is
successful in implementing this strategy and the OneWorld version of the
Company's application suites achieves increased market acceptance in future
periods, revenue from subcontracted services and total service revenue as a
percentage of total revenue will likely decrease. However, there can be no
assurance that the Company will be successful in implementing its strategy or
that such products will achieve substantial market acceptance.
 
     The Company has reassessed, and continues to closely monitor, its
international business risks due to the deterioration of global economic
conditions in the Asian markets, particularly in Japan, and in certain other
geographic regions. Although the Company expects that the current worldwide
economic conditions may negatively impact its business to some degree,
management does not believe such an impact will be material primarily due to the
broad geographic diversity of its operations. The Company plans to continue to
make investments in certain international areas as such opportunities are deemed
appropriate and are consistent with the Company's overall growth strategies.
Consistent with its historical results, the Company expects that during fiscal
1999 it will continue to recognize a small percentage of its revenue and
operating income from Asia and other specific geographic areas that are
currently being impacted by adverse economic conditions. The Company does not
anticipate material changes in its projections of future revenue or operating
income as a result of its international operations. However, there can be no
assurance that the current economic conditions in Asia or other geographic areas
will not worsen or that the situation will not have a material negative impact
on the Company's financial condition or results of operations.
 
     The Company has experienced, and expects to continue to experience, a high
degree of seasonality, with a disproportionately greater amount of its revenue
and an even greater proportion of net income for any fiscal year being
recognized in its fourth fiscal quarter. For example, in the fourth quarter of
1998, the Company recognized 32.9% of total revenue, 37.2% of license fee
revenue, 29.9% of service revenue and 50.6% of net income. Because the Company's
operating expenses are relatively fixed in the near term, the Company's
operating margins have historically been significantly higher in its fourth
fiscal quarter than in its other quarters. The Company believes that such
seasonality is primarily the result of both the efforts of the Company's direct
sales force to meet or exceed fiscal year-end sales quotas and the tendency of
certain customers to finalize sales contracts at or near the Company's fiscal
year end. Because total revenue, operating
                                       25
<PAGE>   27
 
margins and net income are greater in the fourth quarter, any shortfall from
anticipated revenue, particularly license fee revenue, in the fourth quarter
would have a disproportionately large adverse effect on the Company's operating
results for the fiscal year. The Company's first quarter revenue has
historically slowed during the holiday season in November and December, and its
total revenue, license fee revenue, service revenue and net income in its first
fiscal quarter have historically been lower than those in the immediately
preceding fourth quarter. For example, total revenue, license fee revenue,
service revenue and net income in the first quarter of fiscal 1998 decreased
17.7%, 30.4%, 7.3% and 71.9%, respectively, from the fourth quarter of fiscal
1997.
 
     Historically, the sales cycle typically ranged between 6 and 15 months.
During fiscal 1998, the Company experienced a shortening of the software sales
cycle and the Company's sales force closed more transactions within a time
period toward the shorter end of this range. Additionally there is increasing
uncertainty in the ERP market attributed to a number of factors including global
economic conditions, issues surrounding the Year 2000 and strong competitive
forces which could reduce the growth in the Company's license fee revenue. Due
to these factors the Company is experiencing reduced visibility of future
revenue and operating results. As a result, there can be no assurance that the
Company's future license fee revenue and operating results will not be adversely
affected by these factors or that its financial condition, results of operations
and market price of the Company's common stock will not be adversely impacted.
(See "Item 1: Business -- Factors Affecting the Company's Business, Operating
Results and Financial Condition -- Lengthy Sales Cycle and -- Competition.")
 
RESULTS OF OPERATIONS
 
     The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of income as a percentage of total
revenue (except for gross margin data):
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED OCTOBER 31,
                                                              ------------------------
                                                               1996     1997     1998
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Revenue:
  License fees..............................................   37.7%    38.4%    41.3%
  Services..................................................   62.3     61.6     58.7
                                                              -----    -----    -----
          Total revenue.....................................  100.0    100.0    100.0
Costs and expenses:
  Cost of license fees......................................    5.7      5.6      4.7
  Cost of services..........................................   38.7     37.8     37.4
  Sales and marketing.......................................   27.0     27.2     28.0
  General and administrative................................   11.1     10.8      8.9
  Research and development..................................    8.4      9.3      9.6
                                                              -----    -----    -----
          Total costs and expenses..........................   90.9     90.7     88.6
Operating income............................................    9.1      9.3     11.4
Other income (expense), net.................................    (.3)     (.2)     1.3
                                                              -----    -----    -----
Income before income taxes..................................    8.8      9.1     12.7
  Provision for income taxes................................    3.3      3.4      4.7
                                                              -----    -----    -----
Net income..................................................    5.5%     5.7%     8.0%
                                                              =====    =====    =====
Gross margin on license fee revenue.........................   84.8%    85.3%    88.8%
Gross margin on service revenue.............................   37.9%    38.7%    36.2%
</TABLE>
 
  Fiscal Years Ended October 31, 1997 and 1998
 
     Total Revenue. Total revenue increased to $934.0 million for fiscal 1998
from $647.8 million for fiscal 1997, representing an increase of 44%. The
Company has achieved a greater acceptance of its software products by mid-sized
organizations in key domestic and international markets. Additionally, new
releases of
 
                                       26
<PAGE>   28
 
the Company's application suites, and enhanced services, support and custom
programming capabilities have further increased such acceptance. The total
revenue increase in fiscal 1998 was due to growth in both software license
transactions and services, with higher growth in license fees than services. The
revenue mix between license fees and services was 41.3% and 58.7%, respectively,
compared to 38.4% and 61.6%, respectively, for fiscal 1997. The Company is
pursuing a strategy to change its revenue mix by achieving greater license fee
growth compared to services. The Company increased the number of large license
transactions and the number of new customers as compared to fiscal 1997,
expanding its installed base of customers by 16% compared to the end of last
fiscal year to approximately 5,000 at October 31, 1998. Additionally, the
Company is continuing with a strategy of relying on third parties to contract
directly with the Company's customers for OneWorld implementations and related
services which may affect the revenue mix in future periods. However, there can
be no assurance that the Company will be successful in implementing this
strategy or that OneWorld will achieve substantial market acceptance.
 
     Geographically, the overall growth was led by strong performance in Europe,
the Middle East and Africa (EMEA), with a 61% increase in total revenue during
fiscal 1998 compared to last year. The geographic areas defined as United
States, EMEA and the rest of the world accounted for 63%, 22% and 15% of total
revenue, respectively, for fiscal 1998. Comparatively, during fiscal 1997, the
United States, EMEA and the rest of the world accounted for 63%, 20% and 17% of
total revenue, respectively.
 
     License fees. License fee revenue increased to $386.1 million for fiscal
1998 from $248.7 million for fiscal 1997, representing an increase of 55%. The
growth was primarily due to increases in the volume of license transactions, the
number of new customers added during the year, and the number of large license
transactions. The OneWorld version of application suites expanded the Company's
target market to include customers using Windows NT and UNIX platforms in
addition to those using the AS/400 platform. The portion of license fee revenue
generated from customers using either Windows NT or UNIX platforms increased to
16% in fiscal 1998 from 11% in fiscal 1997. The Company expects that an
increasing portion of the Company's future license fee revenue will be generated
from customers using Windows NT or UNIX platforms compared to the previous
fiscal years.
 
     During fiscal 1998, the Company expanded several sales channel
opportunities in an effort to increase license revenue generated through
indirect sales channels in future periods. In addition to other international
relationships, the Company's Genesis distribution channel, which is focused on
companies with annual revenue of less than $100 million, expanded to also
include international partners. A new distribution channel, the Small Business
Solution, was established to focus on companies with annual revenue of less than
$35 million. Also, the Company began partnering with other established software
development vendors in key niche markets to focus on expansion outside the
traditional ERP market.
 
     Services. Service revenue increased to $547.9 million for fiscal 1998 from
$399.1 million for fiscal 1997, representing an increase of 37%. The Company
continued to experience increased demand for services in fiscal 1998 compared to
last year. The increase in total service revenue was led by higher revenue from
consulting, the largest component of services, although training and support
revenue also increased. Consulting revenue increased primarily due to the
increase in license transactions and the demand for implementations as well as
the expanded capacity from both internal personnel and business partner
resources. Support revenue increased primarily as a result of the Company's
growing installed base of customers. Training revenue increased primarily due to
the increase in license transactions, expanded capacity, additional personnel
resources and an increase in prices for certain courses. As a percentage of
total revenue, services revenue remained higher than license fee revenue due to
the continued increases in demand and the Company's ongoing commitment to
provide consulting and training services that complement its software products.
In any fiscal year, total service revenue is dependent upon license transactions
closed during the current and preceding quarters, the growth in the Company's
installed base of customers, the amount and size of consulting engagements, the
number of Company and business partner consultants available to staff
engagements, the number of customers who have contracted for support and the
amount of the related fees, billing rates for consulting services and training
courses, and number of customers attending training courses.
 
                                       27
<PAGE>   29
 
     The Company subcontracts a portion of its consulting and training services
to third parties. The portion of such service revenue generated through
subcontracted work accounted for 46% in fiscal 1998 compared to 43% in fiscal
1997. In addition to subcontracting out some of its service work to business
partners, the Company put a strategy in place during the previous fiscal year to
utilize third parties to contract directly with its customers to implement the
OneWorld version of its applications suites. During fiscal 1998, new business
alliances were established to achieve this objective, and several existing
alliance partners provided significantly more resources to implement OneWorld;
however, to date the Company has referred only a limited number of its
implementations to such third parties. The transition to this referral strategy
had a limited impact on the fiscal 1998 results due to direct service contracts
currently in place and established relationships with existing customers. To the
extent the Company is successful in establishing this strategy, consulting
revenue as a percentage of total revenue is likely to gradually decrease as
compared to the previous fiscal year. However, there can be no assurance that
the Company will be successful in implementing its strategy or that OneWorld
will achieve substantial market acceptance.
 
     Cost of license fees. Cost of license fees includes royalties, business
partner commissions, amortization of capitalized software development costs,
documentation costs and software delivery expenses. Cost of license fees
increased to $43.4 million for fiscal 1998 from $36.4 million for fiscal 1997.
The increase in the dollar amount of costs in fiscal 1998 compared to last
fiscal year was primarily due to the volume of license transactions closed
through business partners, resulting in higher commissions to the business
partners. In future periods, business partner costs may represent a larger
percentage of revenue compared to the previous year if the Company is successful
with its expanded sales channel initiatives and business alliances that would
drive an increase in expense. The overall increase in costs compared to fiscal
1997 were partially offset by the Company's renegotiation of certain royalty
agreements effective in fiscal 1998 which lowered royalty expense in the current
year compared to last year. Amortization of capitalized software development
costs was relatively consistent at $6.1 million for fiscal 1998 compared to $6.0
million for fiscal 1997. Capitalized software costs primarily relate to the
OneWorld applications and will continue to be amortized through the first
quarter of fiscal 2000.
 
     The gross margin on license fee revenue increased to 88.8% in fiscal 1998
from 85.3% in fiscal 1997. Gross margin on license fee revenue varies from
quarter to quarter depending upon the revenue volume in relation to certain
fixed costs such as the amortization of software development costs, the volume
of license transactions closed through business partners, internal terms, and
the proportion of the Company's software products that are subject to royalty
payments. The fiscal 1998 results were positively impacted by the overall
increase in license fee revenue volume and lower royalty expense on
complementary third-party software products licensed through the Company in
fiscal 1998 compared to fiscal 1997.
 
     Cost of services. Cost of services includes the personnel and related
overhead costs for consulting, implementation, support and training services,
together with fees paid to third parties for subcontracted services. Cost of
services increased to $349.7 million for fiscal 1998 from $244.6 million for
fiscal 1997. The dollar amount increase was primarily due to additional
personnel and subcontracted service costs to support the growth in demand for
implementation and consulting services as well as an increase in customer
support staff. During fiscal 1998, the Company invested additional resources for
training its personnel and business partners on the OneWorld applications and
related computer platforms. As a result, the gross margin on service revenue
decreased to 36.2% in fiscal 1998 from 38.7% in fiscal 1997.
 
     Generally, the gross margin on support revenue is higher than on consulting
and training revenue, and any change in the mix in types of services will affect
the gross margin on total service revenue. In particular, the extent to which
the Company is successful in implementing its strategy of relying on third
parties to contract directly with the Company's customers for OneWorld
implementations and related services will affect gross margin on service
revenue.
 
     Sales and marketing. Sales and marketing expense consists of personnel and
related overhead costs, including commissions, for the sales and marketing
activities of the Company, together with advertising and promotion costs. Sales
and marketing expense increased to $261.4 million for fiscal 1998 from $176.0
million for fiscal 1997, representing 28.0% and 27.2% of total revenue,
respectively. Increased license fee revenue
 
                                       28
<PAGE>   30
 
impacted sales and marketing expenses during fiscal 1998 by driving higher sales
commission expense as compared to fiscal 1997. The increase in the total dollar
amount of expense was also the result of additional personnel and increased
advertising and promotion costs for the Company's expanded publicity activities.
The total number of sales and marketing personnel increased 52% at October 31,
1998 compared to a year ago. Sales and marketing expenses as a percentage of
total revenue increased primarily as a result of outside costs associated with
the Company's marketing, promotion, and advertising placement activity in fiscal
1998 as compared to last year. The Company expects to continue recruiting
additional direct sales personnel in relation to the Company's future sales
goals and the Windows NT and UNIX market opportunities with the OneWorld version
of its application suites. Additional personnel may also be required to support
the Company's marketing and promotion efforts. As a result, future compensation
and other related costs are expected to increase. Additionally, sales and
marketing expenses may continue to increase as a percentage of total revenue in
future periods as a result of the Company's anticipated growth and potential
timing differences between the anticipated revenue growth in relation to the
additional expense from the new sales personnel.
 
     General and administrative. General and administrative expense includes
personnel and related overhead costs for the support and administration
functions of the Company. General and administrative expense increased to $83.5
million for fiscal 1998 from $69.9 million for fiscal 1997, representing 8.9%
and 10.8% of total revenue, respectively. The total dollar amount of expense was
higher in fiscal 1998 primarily due to an increase in personnel and
subcontracted services to facilitate the growth in the Company's operations.
General and administrative expenses as a percentage of total revenue declined
primarily as a result of the growth in revenue volume and increased efficiencies
within support functions to effectively manage the overall growth in the
Company's operations. The growth in support personnel was less than planned as
of October 31, 1998, and general and administrative expenses are likely to
increase at a rate more comparable to the overall growth of the Company in
subsequent periods. As a result, future general and administrative expenses are
not expected to continue to decline substantially as a percentage of total
revenue in future fiscal years as compared to fiscal 1998.
 
     Research and development. Research and development expense includes
personnel and related overhead costs for product development, enhancements,
upgrades, quality assurance and testing. Research and development expense
increased to $89.4 million for fiscal 1998 from $60.6 million for fiscal 1997.
In addition, no software development costs were capitalized in fiscal 1998 while
$2.2 million was capitalized in fiscal 1997. Total research and development
expenditures were higher in fiscal 1998 primarily due to a 37% increase in
personnel, together with increases in related facilities and equipment costs.
Development resources were primarily devoted to enhancements of both the
Company's World and OneWorld application suites during both fiscal 1997 and
1998. Capitalized software development costs in fiscal 1997 primarily consisted
of OneWorld development costs which the Company ceased capitalizing during the
first half of fiscal 1997 following the release of the version in late calendar
1996. As a percentage of total revenue, research and development expenditures,
including capitalized software development costs in fiscal 1997, were relatively
consistent at 9.6% in fiscal 1998 and 9.7% in fiscal 1997. The Company
anticipates that research and development expense will increase in subsequent
periods.
 
     Other income (expense). Other income (expense) includes interest income on
cash, cash equivalents and investments, interest expense on the Company's
financing arrangements and its bank line of credit, foreign currency gains and
losses, and other non-operating income and expenses. Interest income increased
to $15.3 million for fiscal 1998 from $1.7 million for fiscal 1997 primarily due
to interest earned on the investment of proceeds from the Company's initial
public offering completed in September 1997. Foreign currency losses increased
to $2.8 million for fiscal 1998 from $2.0 million for fiscal 1997 primarily due
to the strengthening of the U.S. dollar against certain foreign currencies.
 
     During late fiscal 1998, the Company broadened its foreign exchange hedging
activities to help offset the effects of exchange rate changes on cash exposures
from receivables and payables denominated in foreign currencies. Such hedging
activities cannot completely protect the Company from the risk of foreign
currency losses due to the number of currencies in which the Company conducts
business, the volatility of currency rates, and the constantly changing currency
exposures. Foreign currency gains and losses will continue to result from
fluctuations in the value of the currencies in which the Company conducts its
operations as
                                       29
<PAGE>   31
 
compared to the U.S. dollar, and future operating results will be affected to
some extent by gains and losses from foreign currency exposure.
 
     The Company uses hedging instruments to mitigate certain currency risk of
foreign denominated assets and liabilities. The primary hedging instruments are
forward foreign exchange contracts with maturities of generally three months or
less in term, and all contracts are entered into with major financial
institutions. Gains and losses on these contracts are recognized as other income
or expense in the current period, consistent with the period in which the gain
or loss of the underlying transaction is recognized. All gains and losses
related to foreign exchange contracts are included in cash flows from operating
activities in the consolidated statements of cash flows.
 
  Fiscal Years Ended October 31, 1996 and 1997
 
     Total Revenue. Total revenue increased to $647.8 million for fiscal 1997
from $478.0 million for fiscal 1996, representing an increase of 36%. This
increase was primarily a result of greater acceptance of the Company's software
products by mid-sized organizations in key domestic and international markets,
together with new releases of the Company's application suites, and enhanced
services, support and custom programming capabilities. International revenue as
a percentage of total revenue was 37.2% of total revenue in fiscal 1997 and
34.9% in fiscal 1996.
 
     License fees. License fee revenue increased to $248.7 million for fiscal
1997 from $180.4 million for fiscal 1996, representing an increase of 38%. The
increase was primarily due to a greater volume of license transactions and an
increase in average transaction size. During fiscal 1996, all license fee
revenue was generated from customers operating on the AS/400 platform. The
Company began generating some of its license fee revenue from customers
operating on UNIX and NT platforms during fiscal 1997; however, the substantial
majority of all license fee revenue was still generated from customers operating
on the AS/400 platform.
 
     Services. Service revenue increased to $399.1 million for fiscal 1997 from
$297.7 million for fiscal 1996, representing an increase of 34%. This increase
was primarily due to higher revenue from consulting, which is the largest
component of services, although support and training revenue also increased.
Total service revenue is dependent upon the amount and size of consulting
engagements, the number of Company and business partner consultants available to
staff engagements, the number of customers who have contracted for support and
the amount of the related fees, billing rates for consulting services and
training courses, and average training course sizes. Service revenue as a
percentage of total revenue was 61.6% for fiscal 1997 compared to 62.3% for
fiscal 1996. The consistent demand for services resulted from the Company's
emphasis on providing consulting and training services that complement its
software products and the growth in its installed base of customers.
 
     Cost of license fees. Cost of license fees increased to $36.4 million for
fiscal 1997 from $27.4 million for fiscal 1996. Gross margin on license fee
revenue increased to 85.3% for fiscal 1997 from 84.8% for fiscal 1996, primarily
as a result of lower royalty expense on complementary third-party software
products licensed through the Company in fiscal 1997 compared to fiscal 1996.
 
     Amortization of capitalized software development costs increased to $6.0
million for fiscal 1997 compared to $2.6 million for fiscal 1996. This increase
was the result of the amortization of capitalized OneWorld development costs,
which began upon the release of the OneWorld version of the Company's
application suites in late calendar 1996. Gross margin on license fee revenue
varies, in part, depending upon the proportion of the Company's software
products that are subject to royalty payments. The Company offers certain
complementary software products that are subject to royalties payable by the
Company to third parties. License fees subject to royalties were lower during
fiscal 1997 compared to fiscal 1996 primarily due to declining license fee
revenue from application suites incorporating WorldVision, a graphical user
interface for WorldSoftware that utilizes technology licensed from third
parties, as more of the Company's customers seeking such functionality during
the later part of fiscal 1997 chose to purchase OneWorld. Also affecting license
fee margins in fiscal 1997 was an increase in business partner commissions from
fiscal 1996 due
 
                                       30
<PAGE>   32
 
primarily to an increase in license fee revenue from the Company's Genesis
version of its application suites, which is offered exclusively through business
partners.
 
     Cost of services. Cost of services increased to $244.6 million for fiscal
1997 from $184.8 million for fiscal 1996. This increase was due to increased
personnel and subcontracted services to support the growing demand for
implementation and consulting services. Gross margin on service revenue
increased to 38.7% in fiscal 1997 from 37.9% in fiscal 1996 primarily due to
lower compensation costs as a percentage of the related revenue.
 
     Sales and marketing. Sales and marketing expense increased to $176.0
million for fiscal 1997 from $128.8 million for fiscal 1996, representing 27.2%
and 27.0% of total revenue, respectively. The increase was primarily the result
of the addition of direct sales personnel necessary to support the Company's
selling efforts, especially the OneWorld version of its application suites.
 
     General and administrative. General and administrative expense increased to
$69.9 million for fiscal 1997 from $53.1 million for fiscal 1996, representing
10.8% and 11.1% of total revenue, respectively. Total dollar amount of expense
was higher in fiscal 1997 primarily due to an increase in personnel to support
the growth in the Company's operations.
 
     Research and development. Research and development expense increased to
$60.6 million for fiscal 1997 from $40.3 million for fiscal 1996. In addition,
capitalized software development costs were $2.2 million for fiscal 1997, down
from $7.3 million for fiscal 1996. Total research and development expenditures,
including the capitalized software development costs, were higher in fiscal 1997
primarily due to a 29% increase in personnel, together with increases in related
facilities and equipment costs. During each period, development resources were
devoted to continued enhancements of the Company's application suites.
Capitalized software development costs for both periods primarily consisted of
OneWorld development costs. Due to the release of the OneWorld version in late
calendar 1996, the Company ceased capitalizing OneWorld development costs during
the first half of fiscal 1997. As a percentage of total revenue, research and
development expenditures, including capitalized software development costs, were
relatively consistent at 9.7% in fiscal 1997 and 10.0% in fiscal 1996.
 
     Other income (expense). Interest income increased to $1.7 million for
fiscal 1997 from $629,000 for fiscal 1996 primarily due to interest earned on
the investment of proceeds from the Company's initial public offering completed
in September 1997. Interest expense decreased to $829,000 for fiscal 1997 from
$899,000 for fiscal 1996 due to lower average borrowings outstanding on the
Company's line of credit during fiscal 1997. Foreign currency losses increased
to $2.0 million for fiscal 1997 from $1.7 million for fiscal 1996 primarily due
to the strengthening of the U.S. dollar against most European currencies.
 
                                       31
<PAGE>   33
 
QUARTERLY RESULTS OF OPERATIONS/SUPPLEMENTARY FINANCIAL INFORMATION
 
     The following table sets forth certain unaudited consolidated statements of
income data, both in absolute dollars and as a percentage of total revenue
(except for gross margin data), for each of the Company's last eight quarters.
This data has been derived from unaudited consolidated financial statements that
have been prepared on the same basis as the annual audited consolidated
financial statements and, in the opinion of the Company, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information. These unaudited quarterly results should be
read in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Annual Report on Form 10-K. The consolidated results
of operations for any quarter are not necessarily indicative of the results for
any future period.
 
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                 ---------------------------------------------------------------------------------------
                                 JAN. 31,   APRIL 30,   JULY 31,   OCT. 31,   JAN. 31,   APRIL 30,   JULY 31,   OCT. 31,
                                   1997       1997        1997       1997       1998       1998        1998       1998
                                 --------   ---------   --------   --------   --------   ---------   --------   --------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                              <C>        <C>         <C>        <C>        <C>        <C>         <C>        <C>
CONSOLIDATED STATEMENTS OF
  INCOME DATA:
Revenue:
  License fees.................  $ 40,934   $ 51,129    $ 58,983   $ 97,661   $ 67,990   $ 76,424    $ 98,122   $143,545
  Services.....................    81,887     94,725     103,551    118,942    110,266    132,567     141,480    163,588
                                 --------   --------    --------   --------   --------   --------    --------   --------
        Total revenue..........   122,821    145,854     162,534    216,603    178,256    208,991     239,602    307,133
Costs and expenses:
  Cost of license fees.........     7,698      9,386       7,900     11,460     11,119      8,185      11,199     12,901
  Cost of services.............    51,493     57,813      64,306     71,028     70,588     84,559      91,283    103,259
  Sales and marketing..........    34,706     39,029      44,881     57,415     50,421     61,440      68,334     81,205
  General and administrative...    14,772     16,315      17,352     21,411     18,439     18,211      20,639     26,161
  Research and development.....    10,142     14,391      16,567     19,491     19,938     20,640      22,399     26,424
                                 --------   --------    --------   --------   --------   --------    --------   --------
        Total costs and
          expenses.............   118,811    136,934     151,006    180,805    170,505    193,035     213,854    249,950
Operating income...............     4,010      8,920      11,528     35,798      7,751     15,956      25,748     57,183
Other income (expense), net....      (313)    (1,178)        (22)       583      2,449      3,620       2,907      2,589
                                 --------   --------    --------   --------   --------   --------    --------   --------
Income before income taxes.....     3,697      7,742      11,506     36,381     10,200     19,576      28,655     59,772
  Provision for income taxes...     1,368      2,893       4,286     13,551      3,774      7,243      10,602     22,116
                                 --------   --------    --------   --------   --------   --------    --------   --------
Net income.....................  $  2,329   $  4,849    $  7,220   $ 22,830   $  6,426   $ 12,333    $ 18,053   $ 37,656
                                 ========   ========    ========   ========   ========   ========    ========   ========
Net Income per common share
  Basic........................  $   0.03   $   0.06    $   0.09   $   0.27   $   0.07   $   0.13    $   0.18   $   0.37
                                 ========   ========    ========   ========   ========   ========    ========   ========
  Diluted......................  $   0.02   $   0.05    $   0.07   $   0.23   $   0.06   $   0.11    $   0.16   $   0.34
                                 ========   ========    ========   ========   ========   ========    ========   ========
Shares used in computing per
  share amounts:
  Basic........................    79,094     79,112      79,146     84,789     93,413     96,975     100,522    102,145
  Diluted......................    93,520     95,544      96,799    100,107    108,116    109,525     110,867    111,466
AS A PERCENTAGE OF TOTAL
  REVENUE:
Revenue:
  License fees.................      33.3%      35.1%       36.3%      45.1%      38.1%      36.6%       41.0%      46.7%
  Services.....................      66.7       64.9        63.7       54.9       61.9       63.4        59.0       53.3
                                 --------   --------    --------   --------   --------   --------    --------   --------
        Total revenue..........     100.0      100.0       100.0      100.0      100.0      100.0       100.0      100.0
Costs and expenses:
  Cost of license fees.........       6.3        6.4         4.9        5.3        6.2        3.9         4.7        4.2
  Cost of services.............      41.9       39.6        39.6       32.8       39.6       40.5        38.1       33.6
  Sales and marketing..........      28.2       26.8        27.6       26.5       28.3       29.4        28.5       26.5
  General and administrative...      12.0       11.2        10.7        9.9       10.4        8.7         8.6        8.5
  Research and development.....       8.3        9.9        10.2        9.0       11.2        9.9         9.4        8.6
                                 --------   --------    --------   --------   --------   --------    --------   --------
        Total costs and
          expenses.............      96.7       93.9        93.0       83.5       95.7       92.4        89.3       81.4
Operating income...............       3.3        6.1         7.0       16.5        4.3        7.6        10.7       18.6
Other income (expense), net....       (.3)       (.8)        (.0)        .3        1.4        1.7         1.2        0.9
                                 --------   --------    --------   --------   --------   --------    --------   --------
Income before income taxes.....       3.0        5.3         7.0       16.8        5.7        9.3        11.9       19.5
  Provision for income taxes...       1.1        2.0         2.6        6.3        2.1        3.4         4.4        7.2
                                 --------   --------    --------   --------   --------   --------    --------   --------
Net income.....................       1.9%       3.3%        4.4%      10.5%       3.6%       5.9%        7.5%      12.3%
                                 ========   ========    ========   ========   ========   ========    ========   ========
Gross margin on license fee
  revenue......................      81.2%      81.6%       86.6%      88.3%      83.6%      89.3%       88.6%      91.0%
Gross margin on service
  revenue......................      37.1%      39.0%       37.9%      40.3%      36.0%      36.2%       35.5%      36.9%
</TABLE>
 
     In the last eight quarters, expenses and operating income as a percentage
of total revenue have varied primarily due to seasonality, which has resulted in
disproportionately higher license fee revenue in the fourth fiscal quarter.
Expenses as a percentage of revenue have decreased in the fourth quarter due to
seasonally
 
                                       32
<PAGE>   34
 
higher license fee revenue. Gross margin on license fee revenue has varied
quarterly from 81.2% to 91.0% within the last eight quarters due to fluctuations
in license volume and the mix of fixed and variable costs of licenses. Gross
margin on service revenue has declined moderately primarily due to the
investment in resources for training personnel and business partners on OneWorld
applications and has decreased in the first quarters of fiscal 1997 and fiscal
1998 due to lower service revenue during the holiday season in November and
December.
 
     Based on all of the foregoing, the Company believes that future revenue,
expenses and operating results are likely to vary significantly from quarter to
quarter. As a result, quarterly comparisons of operating results are not
necessarily meaningful or indicative of future performance. Furthermore, the
Company believes it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts or
investors. In such event, or in the event that adverse conditions prevail, or
are perceived to prevail, with respect to the Company's business or generally,
the market price of the Company's Common Stock would likely be materially
adversely affected.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     As of October 31, 1998, the Company's principal sources of liquidity
consisted of $183.1 million of cash and cash equivalents, $351.2 million of
short-term and long-term investments and a $50.0 million, unsecured, revolving
line of credit which can be utilized for working capital requirements and other
general corporate purposes. As of October 31, 1998, the Company had working
capital of $171.4 million and no amounts were outstanding under the Company's
bank line of credit. Short-term deferred revenue and customer deposits totaling
$121.1 million are included in determining this amount. The short-term deferred
revenue primarily represents annual support payments billed to customers that is
recognized ratably as revenue over the support service period. Without the
short-term deferred revenue and customer deposits, working capital would have
been $292.5 million, and including short-term and long-term investments working
capital would have been $643.7 million.
 
     The Company calculates accounts receivable days sales outstanding (DSO) by
dividing its accounts receivable balance at the end of the quarter by the sum of
revenue for the quarter plus the net change in unearned revenue divided by 90
days. The net change in unearned revenue is included in the calculation to
better reflect sales activity timing rather than revenue recognition timing.
Calculated as such, DSO was 81 days as of October 31, 1998 compared to 77 days
as of the previous fiscal year end. The Company's DSO can fluctuate depending
upon a number of factors, including the concentration of transactions that occur
toward the end of each quarter and the variability of quarterly operating
results. See "Factors Affecting The Company's Business, Operating Results and
Financial Condition -- Quarterly Financial Results are Subject to Significant
Fluctuations."
 
     The Company generated operating cash flow of $150.8 million for fiscal 1998
and $74.2 million and $42.4 million for fiscal 1997 and 1996, respectively. The
increases in operating cash flow from year to year were due primarily to
increased net income. During these periods, growth in operating assets such as
accounts receivable has been funded by similar growth in operating liabilities,
primarily deferred revenue and accrued liabilities. Tax deductions associated
with stock option exercises during fiscal 1998 increased the deferred income tax
asset and additional paid-in capital in the balance sheet as of October 31,
1998.
 
     The Company utilized cash for investing activities of $241.2 million,
$154.6 million and $51.2 million for fiscal 1998, 1997 and 1996, respectively.
The increased net levels in fiscal 1998 and 1997 were due to the investment of
cash from the initial public offering. During each of these fiscal years, the
Company purchased furniture, fixtures and equipment that were necessary to
support its expanding operations. In fiscal 1998 and 1997, the Company's cash
utilized for investing activities was offset in part by $7.7 million and $8.7
million, respectively, of proceeds from the sale of assets. In fiscal 1996, the
Company invested $19.4 million to purchase land in Denver, Colorado, a portion
of which is being used by the Company for a headquarters facility.
 
     Financing activities provided $47.8 million in cash from exercises of
common stock options and the Employee Stock Purchase Plan activity. The Company
issued a total of 9.9 million shares of common stock
                                       33
<PAGE>   35
 
during fiscal 1998. In September 1997, the Company completed its initial public
offering of 18.2 million shares of common stock, of which 12.8 million were
issued by the Company, generating net proceeds of $276.5 million. Additionally,
during fiscal 1997, the Company issued 941,000 shares of common stock upon the
exercise of options and received $3.2 million in proceeds. The Company did not
have other significant net financing activities for fiscal 1998, 1997, or 1996.
The Company utilized its bank line of credit for working capital and other
general corporate purposes during fiscal 1997 and 1996 but repaid all amounts
borrowed within each of these periods.
 
     Management believes its cash and cash equivalents balance, short-term and
long-term investments, amounts available under existing credit facilities and
funds generated from operations will be sufficient to meet its cash needs for at
least the next twelve months. Additionally, the Company may also use a portion
of its short and long-term investments to acquire businesses, products or
technologies that are complementary to those of the Company or to acquire
treasury stock. There can be no assurance, however, that the Company will not
require additional funds to support its working capital requirements or for
other purposes, in which case the Company may seek to raise such additional
funds through public or private equity financing or from other sources. There
can be no assurance that such additional financing will be available or that, if
available, such financing will be obtained on terms favorable to the Company and
would not result in additional dilution to the Company's stockholders.
 
IMPACT OF THE YEAR 2000 ISSUE
 
     The Year 2000 issue is a result of computer systems and other electronic
equipment using processors or embedded chips which use only two digit entries in
the date code field and may not be able to distinguish whether "00" means 1900
or 2000. The potential for system errors and failures involves all aspects of
the Company's operations, including computer systems, voice and data networks
and the infrastructure of its facilities.
 
     To address the company-wide internal Year 2000 readiness activities, the
Company established a corporate readiness program during fiscal 1998 to
coordinate efforts already underway in the information technology ("IT") and
software development departments and to expand the program to include all
business functions and geographic areas. The program is addressing internal
operational and financial risks as well as those associated with business
partners and other third-parties. Status reports on this program are presented
to the Company's senior management and to the audit committee of the board of
directors periodically.
 
     State of Readiness. The Company's business operations are significantly
dependent upon the proprietary software products it licenses to customers.
Management believes it has already successfully addressed the Year 2000 issues
in the current versions of its proprietary software products and does not
anticipate any business interruptions associated with these applications.
Certain custom software applications used internally are not yet Year 2000
ready, and the Company plans to finish the programming of needed revisions,
testing and implementation by its fourth quarter in fiscal 1999. An internal
upgrade to product versions of third-party software that are Year 2000 ready is
also expected to be completed by its fourth quarter in fiscal 1999. The Company
is working with all service providers to protect its operations from the
potential effects of a third-party failing to become Year 2000 ready, and the
Company has been encouraging its customers to migrate to current product
versions that are Year 2000 ready.
 
     The following six-step process is being followed to assess the Company's
internal state of readiness and to direct preparations for the Year 2000:
 
          1) Awareness -- Make all levels of the organization aware of Year 2000
     issues.
 
          2) Inventory -- Obtain complete detailed lists of specific issues from
     representatives in every area of the Company's business.
 
          3) Assessment -- Complete a detailed inventory review to determine and
     prioritize areas of exposure; identify mission critical processes and
     systems; initiate certification of Year 2000 compliance for
     vendors/suppliers/landlords; establish contingency plans.
 
                                       34
<PAGE>   36
 
          4) Resolution -- Decide which systems to replace, retrofit or retire;
     initiate conversion to systems that are Year 2000 ready.
 
          5) Testing -- Obtain assurance that conversions were completed
     properly and that the systems and processes will function correctly;
     implement contingency plans.
 
          6) Deployment -- Implement modified systems and processes back into
     normal production; monitor contingency plans.
 
     Overall, the Company had accomplished a 48% completion of its readiness
process to date, excluding any issues related to the current versions of its
proprietary software products which management believes to be generally Year
2000 compliant. The Company had finished the first three steps of the process
and had completed 30% of the "resolution" phase in its readiness of IT systems.
In relation to its state of readiness for non-IT areas and issues related to
third parties with which the Company has a material relationship, the Company
had completed the "awareness" and "inventory" phases and was 98% complete with
the "assessment" phase. Management expects to be substantially Year 2000 ready
company-wide no later than December 1999.
 
     Costs. The Company estimates the direct costs to remediate Year 2000 issues
will total $2.4 million and does not anticipate such costs will have a material
impact on its results of operations. Such costs include the budget for the
Company's corporate readiness programs, IT and non-IT costs, legal expenses, and
expenses associated with a field readiness task force and equipment purchases.
Such costs do not include an estimate for labor, overhead or other resources
that are associated with the impact of Year 2000 compliance but are not directly
involved in the project. To date, the direct costs incurred to remediate Year
2000 issues were less than $500,000.
 
     Risks. Failure to correct mission critical Year 2000 problems could cause a
serious interruption in business operations and could have a material impact on
the Company's results of operations, liquidity and financial condition. The
actions currently being taken are expected to significantly reduce the risks of
an adverse impact. However, due to the scope of the Company's operations and the
extent of Year 2000 risks, it is likely that the Company will not be able to
eliminate all potential problems before they arise.
 
     Significant uncertainty exists in the ERP software industry concerning the
potential effects associated with Year 2000 readiness. Management believes that
customers and potential customers purchasing patterns may be affected in a
number of ways. Many companies are expending significant resources to upgrade
their systems. These expenditures may result in reduced funds available to
purchase software products such as those the Company offers. Additionally, it is
possible that certain of our customers are purchasing support contracts only to
ensure that they are Year 2000 ready and then will cancel such contracts. Many
potential customers may defer purchasing Year 2000 ready products as long as
possible, accelerate purchasing such products, switch to other systems or
suppliers, or purchase the Company's products only as an interim solution.
Although the Company currently offers software products that are designed and
have been tested to be ready for the Year 2000, there can be no assurance that
the Company's software products contain all necessary date code changes.
Furthermore, it has been widely reported that a significant amount of litigation
surrounding business interruptions will arise out of Year 2000 issues. It is
uncertain whether, or to what extent, the Company may be affected by such
litigation.
 
     The Company mailed information regarding the Year 2000 issue along with a
questionnaire to its customers in March 1998 to assist them in preparations for
the century change as well as to help the Company assess its customer service
demands. Based upon the number of responses received and the number of customers
that originally licensed recent product versions, the Company estimated that
over 80% of its customer base is currently operating with a version of its
software applications that is Year 2000 ready. However, the Company could be
faced with an inability to meet the demand for services to upgrade its existing
installed base of customers or to meet increased demand from potential customers
who still need to address their Year 2000 issues.
 
     Factors outside the Company's control could also cause significant
disruptions of business activities and affect the Company's ability to be ready
for the Year 2000 such as the failure of its third-party business
 
                                       35
<PAGE>   37
 
partners, suppliers, government entities, customers, and others to adequately
prepare. Additionally, third-party software and computer technology used
internally may materially impact the Company if not Year 2000 compliant. The
Company's operations may be at risk and a material adverse impact to the
Company's results of operations, liquidity and financial condition could result
if any third-parties fail to adequately address the problem or if software
conversions result in system incompatibilities with these third-parties.
 
     Contingency Plans. As part of the six-step process outlined above, specific
contingency plans are being developed in connection with the assessment and
resolution to the mission critical risks identified. Such planning is
complicated by the risk of multiple Year 2000 problems and the fact that many of
the Company's risks reside with third parties who may not successfully address
their own risks. However, the Company has currently established certain
contingency plans for both IT and non-IT systems, and it is continuing to
develop such plans regarding all its specific mission critical functions. Such
plans include backup power generators for the Company's facilities, explicit
manual "workaround" procedures and the identification of key contacts worldwide
who will be responsible for addressing specific issues and implementing such
plans.
 
EURO
 
     In January 1999, a new currency called the ECU or the "euro" was introduced
in certain Economic and Monetary Union ("EMU") countries. During 2002, all EMU
countries are expected to be operating with the euro as their single currency.
During the next three years, business in EMU member states will be conducted in
both the existing national currency and the euro. As a result, companies
operating in or conducting business in EMU member states will need to ensure
that their financial and other software systems are capable of processing
transactions and properly handling these currencies, including the euro.
Although the Company currently offers software products that are designed to be
euro currency enabled and management believes it will be able to accommodate any
required euro currency changes, there can be no assurance that the software will
contain all the necessary changes or meet all of the euro currency requirements.
If the Company's software does not meet all the euro currency requirements of
our business, operating results and financial condition would be materially
adversely affected. The Company has not had and does not expect a material
impact on its results of operations from foreign currency gains or losses as a
result of its transition to the euro as the functional currency for its
subsidiaries based in EMU countries.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     The Company will be required to apply recently issued accounting standards
in its future consolidated financial statements. Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income,"
establishes standards for reporting comprehensive income in financial
statements. SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-Retirement Benefits,"
revises employers' disclosures about pension and other postretirement benefit
plans, but does not change the measurement or recognition of those plans. SFAS
No. 133 "Accounting for Derivative Instruments and for Hedging Activities" will
require companies to value derivative financial instruments, including those
used for hedging foreign currency exposures, at current market value with the
impact of any change in market value being charged against earnings in each
period. SOP 97-2, "Software Revenue Recognition," SOP 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, Software Revenue Recognition," and
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect
to Certain Transactions" provide additional guidance regarding software revenue
recognition. The Company has determined that the adoption of these recently
issued standards will not have a material impact on its financial condition or
results of operations. SOPs 97-2 and 98-4 and SFAS Nos. 130, 131 and 132 are
effective for fiscal 1999. SOP 98-9 and SFAS No. 133 will be effective for the
Company's first quarter of fiscal 2000.
 
                                       36
<PAGE>   38
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
     In the ordinary course of its operations, the Company is exposed to certain
market risks, primarily changes in foreign currency exchange rates and interest
rates. Uncertainties that are either nonfinancial or nonquantifiable, such as
political, economic, tax, other regulatory or credit risks are not included in
the following assessment of the Company's market risks.
 
     Foreign currency exchange rates. Operations outside of the U.S. expose the
Company to foreign currency exchange rate changes and could impact translations
of foreign denominated assets and liabilities into U.S. dollars and future
earnings and cash flows from transactions denominated in different currencies.
During fiscal 1998, 37% of the Company's total revenue was generated from its
international operations, and the net assets of the Company's foreign
subsidiaries totaled 2% of consolidated net assets as of October 31, 1998. The
Company's exposure to currency exchange rate changes is diversified due to the
number of different countries in which it conducts business. The Company
operates outside the U.S. primarily through wholly-owned subsidiaries in Europe,
Africa, Asia, Canada and Latin America. These foreign subsidiaries use the local
currency or, more recently, the euro as their functional currency as sales are
generated and expenses are incurred in such currencies.
 
     The Company enters into forward foreign exchange contracts to hedge the
effects of exchange rate changes on cash exposures from receivables and payables
denominated in foreign currencies. Such hedging activities cannot completely
protect the Company from the risk of foreign currency losses due to the number
of currencies in which the Company conducts business, the volatility of currency
rates, and the constantly changing currency exposures. Foreign currency gains
and losses will continue to result from fluctuations in the value of the
currencies in which the Company conducts its operations as compared to the U.S.
dollar, and future operating results will be affected to some extent by gains
and losses from foreign currency exposure.
 
     The Company prepared sensitivity analyses of its exposures from foreign net
asset and forward foreign exchange contracts as of October 31, 1998 and its
exposure from anticipated foreign revenue in fiscal 1999 to assess the impact of
hypothetical changes in foreign currency rates. Based upon the results of these
analyses, a 10% adverse change in foreign currency rates from the 1998 fiscal
year end rates would not have a material adverse effect on the Company's results
of operations, cash flows or financial condition for the next fiscal year.
 
     Interest rates. Investments, including cash equivalents, consist of U.S.,
state and municipal bonds, as well as domestic corporate bonds, with maturities
of up to thirty months. All investments are classified as held-to-maturity as
defined in SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" and accordingly are carried at amortized cost. Additionally, the
Company has lease obligations calculated as a return on the lessor's costs of
funding based on LIBOR and adjusted from time to time to reflect any changes in
the Company's leverage ratio. Changes in interest rates could impact the
Company's anticipated interest income and lease obligations or could impact the
fair market value of its investments.
 
     The Company prepared sensitivity analyses of its interest rate exposures
and its exposure from anticipated investment and borrowing levels for fiscal
1999 to assess the impact of hypothetical changes in interest rates. Based upon
the results of these analyses, a 10% adverse change in interest rates from the
1998 fiscal year end rates would not have a material adverse effect on the fair
value of investments and would not materially impact the Company's results of
operations, cash flows or financial condition for the next fiscal year.
 
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The financial statements required pursuant to this item are included in
Item 14 of this Annual Report on Form 10-K and are presented beginning on page
F-1. The supplementary financial information required by this item is included
in "Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations" under the subsection entitled "Quarterly Results of
Operations/Supplementary Financial Information."
 
                                       37
<PAGE>   39
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     Not applicable.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
     The information required by this item concerning the Company's directors is
incorporated by reference to the information set forth in the sections entitled
"Information About Nominees and Other Directors and Directors' Compensation" and
"Section 16(a) Beneficial Ownership Compliance" in the Company's Proxy Statement
for the 1999 Annual Meeting of Stockholders (the "1999 Proxy Statement") to be
filed with the Commission within 120 days after the end of the Company's fiscal
year ended October 31, 1998, except that the information required by this item
concerning the executive officers of the Company is incorporated by reference to
the information set forth in the section entitled "Executive Officers of the
Company" at the end of Part I of this Annual Report on Form 10-K.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
     The information required by this item regarding executive compensation is
incorporated by reference to the information set forth in the section entitled
"Compensation of Executive Officers" in the Company's 1999 Proxy Statement.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information required by this item regarding security ownership of
certain beneficial owners and management is incorporated by reference to the
information set forth in the section entitled "Beneficial Owners and
Management's Ownership of J.D. Edwards' Stock" in the Company's 1999 Proxy
Statement.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information required by this item regarding certain relationships and
related transactions is incorporated by reference to the information set forth
in the section entitled "Certain Relationships and Related Transactions" in the
Company's 1999 Proxy Statement.
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
     (a) The following documents are filed as part of this Annual Report on Form
10-K:
 
          1. Consolidated Financial Statements.
 
          The following consolidated financial statements of J.D. Edwards &
     Company are filed as part of this report:
 
<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Accountants...........................   F-1
Consolidated Balance Sheets.................................   F-2
Consolidated Statements of Income...........................   F-3
Consolidated Statements of Changes in Stockholders'
  Equity....................................................   F-4
Consolidated Statements of Cash Flows.......................   F-5
Notes to Consolidated Financial Statements..................   F-6
</TABLE>
 
                                       38
<PAGE>   40
 
          2. Consolidated Financial Statements Schedules.
 
          The following financial statement schedule of the Company for each of
     the years ended October 31, 1998, 1997 and 1996 is filed as part of this
     Form 10-K and should be read in conjunction with the Consolidated Financial
     Statements, and the related notes thereto, of the Company.
 
<TABLE>
<CAPTION>
                                                               PAGE NUMBER
                                                               -----------
<S>                                                            <C>
Schedule II -- Valuation and Qualifying Accounts............       S-1
</TABLE>
 
          Schedules other than those listed above have been omitted since they
     are either not required, not applicable or the information is otherwise
     included.
 
          3. Exhibits. The exhibits listed on the accompanying index to exhibits
     immediately following the financial statement schedule are filed as part
     of, or incorporated by reference into, this Form 10-K.
 
     (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed by the
Company in the fourth quarter ended October 31, 1998.
 
                                       39
<PAGE>   41
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized on this
26 day of January 1999.
 
                                            J.D. EDWARDS & COMPANY
 
                                            By:  /s/ RICHARD G. SNOW, JR.
                                              ----------------------------------
                                                  Name: Richard G. Snow, Jr.
                                                Title: Vice President, General
                                                            Counsel
                                                        and Secretary
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on January 26, 1999 on
behalf of the Registrant and in the capacities indicated.
 
<TABLE>
<CAPTION>
                        NAME                                               TITLE
                        ----                                               -----
<C>                                                    <S>
 
              /s/ DOUGLAS S. MASSINGILL                President, Chief Executive Officer and
-----------------------------------------------------  Director (principal executive officer)
                Douglas S. Massingill
 
                /s/ RICHARD E. ALLEN                   Chief Financial Officer, Senior Vice
-----------------------------------------------------  President, Finance and Administration and
                  Richard E. Allen                     Director (principal financial officer)
 
                /s/ PAMELA L. SAXTON                   Vice President of Finance, Controller and
-----------------------------------------------------  Chief Accounting Officer (principal accounting
                  Pamela L. Saxton                     officer)
 
                /s/ C. EDWARD MCVANEY                  Chairman of the Board
-----------------------------------------------------
                  C. Edward McVaney
 
                /s/ ROBERT C. NEWMAN                   Director
-----------------------------------------------------
                  Robert C. Newman
 
                /s/ JACK L. THOMPSON                   Director
-----------------------------------------------------
                  Jack L. Thompson
 
                 /s/ GERALD HARRISON                   Director
-----------------------------------------------------
                   Gerald Harrison
 
                 /s/ DELWIN D. HOCK                    Director
-----------------------------------------------------
                   Delwin D. Hock
 
               /s/ HARRY T. LEWIS, JR.                 Director
-----------------------------------------------------
                 Harry T. Lewis, Jr.
 
                /s/ MICHAEL J. MAPLES                  Director
-----------------------------------------------------
                  Michael J. Maples
 
                /s/ TRYGVE E. MYHREN                   Director
-----------------------------------------------------
                  Trygve E. Myhren
</TABLE>
 
                                       40
<PAGE>   42
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors of
J.D. Edwards & Company
 
     In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)1. and 2. on page 38 present fairly, in all material
respects, the financial position of J.D. Edwards & Company and its subsidiaries
at October 31, 1997 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended October 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
 
PRICEWATERHOUSECOOPERS LLP
 
Broomfield, Colorado
November 30, 1998
 
                                       F-1
<PAGE>   43
 
                             J.D. EDWARDS & COMPANY
 
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                  OCTOBER 31,
                                                              -------------------
                                                                1997       1998
                                                              --------   --------
<S>                                                           <C>        <C>
 
Current assets:
  Cash and cash equivalents.................................  $224,437   $183,115
  Short-term investments....................................    30,464     28,667
  Accounts receivable, net of allowance for doubtful
     accounts of $9,800 and $12,900 at October 31, 1997 and
     1998, respectively.....................................   174,532    265,704
  Prepaid and other current assets..........................    21,436     32,823
                                                              --------   --------
          Total current assets..............................   450,869    510,309
Long-term investments.......................................   108,096    322,527
Property and equipment, net.................................    55,705     60,689
Software development costs, net.............................    11,879      5,821
Non-current portion of deferred income taxes................    10,646     43,658
Deposits and other assets...................................     5,842      7,469
                                                              --------   --------
                                                              $643,037   $950,473
                                                              ========   ========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable..........................................  $ 34,915   $ 60,366
  Unearned revenue and customer deposits....................    67,104    121,092
  Accrued liabilities.......................................   110,565    157,473
                                                              --------   --------
          Total current liabilities.........................   212,584    338,931
Unearned revenue, net of current portion, and other.........    33,592     27,546
                                                              --------   --------
          Total liabilities.................................   246,176    366,477
Commitments and contingencies (Note 7)......................        --         --
Stockholders' equity:
  Preferred stock, $.001 par value; 5,000,000 shares
     authorized; none outstanding...........................        --         --
  Common stock, $.001 par value; 300,000,000 shares
     authorized; 92,822,186 and 102,681,608 issued and
     outstanding as of October 31, 1997 and 1998,
     respectively...........................................        93        103
  Additional paid-in capital................................   294,278    406,886
  Retained earnings.........................................   102,856    177,324
  Cumulative translation adjustments and other, net.........      (366)      (317)
                                                              --------   --------
          Total stockholders' equity........................   396,861    583,996
                                                              --------   --------
                                                              $643,037   $950,473
                                                              ========   ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-2
<PAGE>   44
 
                             J.D. EDWARDS & COMPANY
 
                       CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED OCTOBER 31,
                                                              ------------------------------
                                                                1996       1997       1998
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenue:
  License fees..............................................  $180,366   $248,707   $386,081
  Services..................................................   297,682    399,105    547,901
                                                              --------   --------   --------
          Total revenue.....................................   478,048    647,812    933,982
Costs and expenses:
  Cost of license fees......................................    27,443     36,444     43,404
  Cost of services..........................................   184,846    244,640    349,689
  Sales and marketing.......................................   128,759    176,031    261,400
  General and administrative................................    53,052     69,850     83,450
  Research and development..................................    40,321     60,591     89,401
                                                              --------   --------   --------
          Total costs and expenses..........................   434,421    587,556    827,344
Operating income............................................    43,627     60,256    106,638
Other income (expense):
  Interest income...........................................       629      1,686     15,294
  Interest expense..........................................      (899)      (829)      (843)
  Foreign currency losses and other, net....................    (1,403)    (1,787)    (2,886)
                                                              --------   --------   --------
Income before income taxes..................................    41,954     59,326    118,203
  Provision for income taxes................................    15,628     22,098     43,735
                                                              --------   --------   --------
Net income..................................................  $ 26,326   $ 37,228   $ 74,468
                                                              ========   ========   ========
Net income per common share:
  Basic.....................................................  $   0.33   $   0.46   $   0.76
                                                              ========   ========   ========
  Diluted...................................................  $   0.30   $   0.39   $   0.68
                                                              ========   ========   ========
Shares used in computing per share amounts:
  Basic.....................................................    79,044     80,546     98,264
  Diluted...................................................    87,667     96,500    109,993
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-3
<PAGE>   45
 
                             J.D. EDWARDS & COMPANY
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                    COMMON STOCK
                               (INCLUDING MANDATORILY                                   ADJUSTMENT FOR
                                 REDEEMABLE SHARES)     ADDITIONAL                       MANDATORILY
                               ----------------------    PAID-IN     RETAINED             REDEEMABLE
                                  SHARES      AMOUNT     CAPITAL     EARNINGS   OTHER       SHARES
                               ------------   -------   ----------   --------   -----   --------------
<S>                            <C>            <C>       <C>          <C>        <C>     <C>
Balance, October 31, 1995....   79,038,820     $ 79      $  3,593    $ 39,302   $ (29)     $(19,973)
Purchase of common stock.....      (25,200)      --          (152)         --      --           152
Increase in share redemption
  value of mandatorily
  redeemable ESOP shares.....           --       --            --          --      --       (23,903)
Increase in founders' stock
  purchase obligation........           --       --            --          --      --        (3,300)
Stock option exercises.......       79,450       --           228          --      --            --
Net income...................           --       --            --      26,326      --            --
Change in cumulative
  translation adjustment and
  other, net.................           --       --            --          --     579            --
                               -----------     ----      --------    --------   -----      --------
Balance, October 31, 1996....   79,093,070       79         3,669      65,628     550       (47,024)
Purchase of common stock.....       (1,403)      --           (15)         --      --            --
Issuance of shares in public
  offering, net..............   12,790,004       13       276,452          --      --            --
Lapse of mandatorily
  redeemable provision on
  ESOP shares................           --       --            --          --      --        47,024
Tax benefit from stock
  compensation...............           --       --        10,137          --      --            --
Stock option exercises.......      940,515        1         3,230          --      --            --
Net income...................           --       --            --      37,228      --            --
Change in cumulative
  translation adjustment and
  other, net.................           --       --           805          --    (916)           --
                               -----------     ----      --------    --------   -----      --------
Balance, October 31, 1997....   92,822,186       93       294,278     102,856    (366)            0
Stock options exercises and
  issuances under employee
  stock purchase plan........    9,853,606       10        53,096          --      --            --
Tax benefit from stock
  compensation...............           --       --        58,262          --      --            --
Other stock issuances, net of
  shares acquired............        5,816       --         1,250          --      --            --
Net income...................           --       --            --      74,468      --            --
Change in cumulative
  translation adjustment and
  other, net.................           --       --            --          --      49            --
                               -----------     ----      --------    --------   -----      --------
Balance, October 31, 1998....  102,681,608     $103      $406,886    $177,324   $(317)     $      0
                               ===========     ====      ========    ========   =====      ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-4
<PAGE>   46
 
                             J.D. EDWARDS & COMPANY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED OCTOBER 31,
                                                             --------------------------------
                                                               1996       1997        1998
                                                             --------   ---------   ---------
<S>                                                          <C>        <C>         <C>
Operating activities:
Net income.................................................  $ 26,326   $  37,228   $  74,468
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation.............................................    13,166      15,649      22,701
  Amortization of software development costs...............     2,568       6,022       6,058
  Benefit from deferred income taxes.......................    (1,854)     (6,554)     (1,933)
  Other....................................................     2,216       1,692       3,433
Changes in operating assets and liabilities:
  Accounts receivable, net.................................   (35,164)    (59,398)    (93,096)
  Prepaid and other current assets.........................    (2,876)     (2,790)    (11,744)
  Accounts payable.........................................    12,138       2,830      25,361
  Unearned revenue and customer deposits...................    13,655      29,669      48,471
  Accrued liabilities......................................    12,185      49,882      77,119
                                                             --------   ---------   ---------
          Net cash provided by operating activities........    42,360      74,230     150,838
Investing activities:
  Purchase of investments..................................        --    (138,560)   (286,116)
  Proceeds from maturities of investments..................        --          --      73,481
  Purchase of property and equipment.......................   (41,135)    (22,436)    (36,270)
  Proceeds from sale of assets.............................        --       8,661       7,728
  Capitalized software development costs...................    (7,320)     (2,244)         --
  Other....................................................    (2,695)         --          --
                                                             --------   ---------   ---------
          Net cash used for investing activities...........   (51,150)   (154,579)   (241,177)
Financing activities:
  Proceeds from issuance of common stock, net..............        --     279,696      47,824
  Proceeds from bank line of credit........................    85,100      81,950          --
  Repayment of bank line of credit.........................   (85,100)    (81,950)         --
  Purchase of common stock and other, net..................       (69)        (15)         --
                                                             --------   ---------   ---------
          Net cash provided by (used for) financing
            activities.....................................       (69)    279,681      47,824
Effect of exchange rate changes on cash....................      (484)       (449)      1,193
                                                             --------   ---------   ---------
Net increase (decrease) in cash and cash equivalents.......    (9,343)    198,883     (41,322)
Cash and cash equivalents at beginning of period...........    34,897      25,554     224,437
                                                             --------   ---------   ---------
Cash and cash equivalents at end of period.................  $ 25,554   $ 224,437   $ 183,115
                                                             ========   =========   =========
Supplemental disclosure of other cash and non-cash
  investing and financing transactions
  Interest paid............................................  $    899   $     829   $     843
  Income taxes paid........................................     8,061      17,168      12,447
  ESOP contribution funded with common stock...............        --          --       6,050
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-5
<PAGE>   47
 
                             J.D. EDWARDS & COMPANY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Operations
 
     J.D. Edwards develops, markets and supports highly functional Enterprise
Resource Planning ("ERP") software for managing the supply chain. The Company
provides the core software products to run an entire business. These software
solutions operate on multiple computing platforms and are designed to deliver
the solutions that organizations need to maintain control of their businesses as
circumstances, technologies and market environments change. The Company provides
implementation, training and support services designed to enable customers to
rapidly achieve the benefits of the Company's ERP solutions. The Company has
developed and marketed ERP solutions for over 20 years, principally for
operation on AS/400 and other IBM mid-range systems and, more recently, on
leading Windows NT and UNIX servers using Windows- and Internet browser-enabled
desktop clients. The Company operates primarily in the United States, Canada,
Europe, Asia, Latin America and Africa.
 
  Principles of Consolidation and Basis of Presentation
 
     The accounts of the Company have been consolidated. All intercompany
accounts and transactions have been eliminated. The consolidated financial
statements are stated in U.S. dollars and are prepared under U.S. generally
accepted accounting principles.
 
  Initial Public Offering
 
     In September 1997, the Company completed an initial public offering
("IPO"). Of the 18.2 million shares of common stock sold to the public at $23.00
per share, the Company issued 12.8 million shares and selling shareholders sold
5.4 million shares. The Company realized $276.5 million from the offering after
deducting expenses of the offering of approximately $17.7 million.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
  Revenue Recognition
 
     The Company licenses software under non-cancelable license agreements and
provides related services, including consulting, implementation, support and
training. Revenue is recognized in accordance with Statement of Position ("SOP")
91-1, "Software Revenue Recognition." Consulting, implementation and training
services are not essential to the functionality of the Company's software
products, are separately priced and are available from a number of suppliers.
Accordingly, revenue from these services is recorded separately from the license
fee. License fee revenue is recognized when a non-cancelable license agreement
has been signed, the product has been delivered, collection is probable and all
significant contractual obligations relating to this license have been
satisfied. Revenue on all software license transactions in which there are
significant outstanding obligations is deferred and recognized once such
obligations are fulfilled. Typically, the Company's software licenses do not
include significant post-delivery obligations to be fulfilled by the Company and
payments are due within a twelve-month period from date of delivery. Where
software license contracts call for payment terms in excess of twelve months
from date of delivery, revenue is recognized as payments become due and all
other conditions for revenue recognition have been satisfied. Revenue from
consulting, implementation and training services is recognized as services are
performed. Revenue from agreements for supporting and providing periodic
upgrades to the licensed software is recorded
 
                                       F-6
<PAGE>   48
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
as unearned revenue and is recognized ratably over the support service period,
and includes a portion of the related license fee equal to the fair value of any
bundled support services. The Company does not require collateral for its
receivables and reserves are maintained for potential losses.
 
     In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued SOP 97-2, "Software Revenue Recognition," which provides
guidance on recognizing revenue on software transactions and supersedes SOP
91-1. Further guidance was published during 1998 in SOP 98-4, "Software Revenue
Recognition" and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions." Additionally, the AICPA
issued technical questions and answers on financial reporting issues related to
SOP 97-2 in January 1999. The Company will apply the provisions of SOP 97-2 on a
prospective basis for new software transactions entered into beginning in the
first quarter of fiscal 1999. Management believes that the adoption of this
guidance will not have a material impact on its financial condition or results
of operations and will not have a significant impact on its current licensing or
revenue recognition practices. However, comprehensive interpretations and
commonly accepted business practices for these statements have not yet been
established. Unexpected modifications to the Company's current revenue
recognition practices resulting from such clarifications of the new standards
could cause its future license fee revenue, results of operations and net income
to be materially adversely impacted.
 
  Software Research and Development Costs
 
     The Company capitalizes internally developed software costs in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed."
Capitalization of development costs of software products begins once the
technological feasibility of the product is established. Based on the Company's
product development process, technological feasibility is established upon
completion of a detailed program design. Capitalization ceases when such
software is ready for general release, at which time amortization of the
capitalized costs begins.
 
     Amortization of capitalized internally developed software costs is computed
as the greater of: (a) the amount determined by ratio of the product's current
revenue to its total expected future revenue or (b) the straight-line method
over the product's estimated useful life, generally three years. During all
periods presented herein, the Company has used the straight-line method to
amortize such capitalized costs.
 
     Research and development costs relating principally to the design and
development of products (exclusive of costs capitalized under SFAS No. 86) are
expensed as incurred. The cost of developing routine enhancements are expensed
as research and development costs as incurred because of the short time between
the determination of technological feasibility and the date of general release
of related products.
 
  Foreign Currency Translation
 
     The functional currency of each subsidiary is the local currency.
Translation of balance sheet amounts to U.S. dollars is based on exchange rates
as of each balance sheet date. Income statement and cash flow statement amounts
are translated at the average exchange rates for the period. Cumulative currency
translation adjustments, net of related deferred taxes, are presented as a
separate component of stockholders' equity. Transaction gains and losses and
unrealized gains and losses on short-term intercompany receivables and payables
are included in income as incurred. Accumulated foreign currency translation
losses were $23,000 and $360,000, at October 31, 1997 and 1998, respectively.
 
  Accounting for Derivative Instruments and Hedging Activities
 
     During late fiscal 1998, the Company broadened its foreign exchange hedging
activities. The Company uses hedging instruments to mitigate certain foreign
currency risk of foreign denominated assets and liabilities. The primary hedging
instruments are forward foreign exchange contracts with maturities of generally
three months or less in term, and all contracts are entered into with major
financial institutions. Gains and losses on
 
                                       F-7
<PAGE>   49
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
these contracts are netted with foreign currency gains and losses and recognized
as other income or expense in the current period, consistent with the period in
which the gain or loss of the underlying transaction is recognized. All gains
and losses related to foreign exchange contracts are included in cash flows from
operating activities in the consolidated statements of cash flows.
 
     At October 31, 1998, the Company had approximately $71.9 million of gross
U.S. dollar equivalent forward foreign exchange contracts outstanding as hedges
of monetary assets and liabilities held in foreign currency. The fair value of
foreign currency contracts is estimated based on the spot rate of the various
hedged currencies as of the end of the period. Included in other income and
expense are net foreign exchange transaction losses and expenses of $1.7
million, $2.0 million and $2.8 million in fiscal 1996, 1997, and 1998,
respectively.
 
     SFAS No. 133 "Accounting for Derivative Instruments and for Hedging
Activities" was issued in June 1998 and will require companies to value
derivative financial instruments, including those used for hedging foreign
currency exposures, at current market value with the impact of any change in
market value being charged against earnings in each period. SFAS No. 133 will be
effective for the Company in the first quarter of fiscal 2000. The Company
anticipates that the adoption of SFAS No. 133 will not have a material impact on
its consolidated financial statements.
 
  Cash and Cash Equivalents, Short-term Investments and Long-term Investments
 
     All highly liquid investments with an original maturity of three months or
less when purchased are considered to be cash equivalents. All cash equivalents
are carried at cost, which approximates fair value. Investments consist of U.S.,
state and municipal bonds, as well as domestic corporate bonds, with maturities
of up to thirty months. All investments are classified as held-to-maturity as
defined in SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" and accordingly are carried at amortized cost.
 
     At October 31, 1997 and 1998, the amortized cost basis, aggregate fair
value and gross unrealized holding gains and losses by major security type were
as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                 GROSS        GROSS
                                                     AMORTIZED    AGGREGATE    UNREALIZED   UNREALIZED
                                                     COST BASIS   FAIR VALUE     GAINS        LOSSES
                                                     ----------   ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>          <C>
FISCAL 1997:
Debt securities issued by states of the U.S. and
  political subdivisions of the states.............   $260,272     $260,255      $   49        $66
Corporate debt securities..........................     65,588       65,577           1         12
Other debt securities..............................      9,500        9,500           0          0
                                                      --------     --------      ------        ---
          Total cash investments...................   $335,360     $335,332      $   50        $78
                                                      ========     ========      ======        ===
FISCAL 1998:
Debt securities issued by the U.S. Treasury and
  other U.S. government corporations and
  agencies.........................................   $ 14,178     $ 14,178      $    0        $ 0
Debt securities issued by states of the U.S. and
  political subdivisions of the states.............    382,751      384,800       2,078         29
Corporate debt securities..........................     61,825       61,819          34         40
Other debt securities..............................     17,000       17,000           0          0
                                                      --------     --------      ------        ---
          Total cash investments...................   $475,754     $477,797      $2,112        $69
                                                      ========     ========      ======        ===
</TABLE>
 
                                       F-8
<PAGE>   50
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In connection with certain lease transactions discussed in Note 7,
management has elected to reduce the interest rate used to calculate lease
expense by collateralizing up to 97% of the financing arrangements with
investments consistent with the Company's investment policy. The Company may
withdraw the funds used as collateral at its sole discretion, provided it is not
in default under the lease agreement. At October 31, 1998, long-term marketable
securities totaling $66.6 million were designated as collateral for these
leases.
 
  Concentration of Credit Risk
 
     Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
investment grade securities. Management believes the risk with respect to trade
receivables is mitigated to some extent by the fact that the Company's customer
base is widespread geographically and is highly diversified. No single customer
accounted for ten percent or more of revenue for fiscal 1996, 1997 or 1998 or of
accounts receivable at October 31, 1997 or 1998.
 
  Property and Equipment
 
     Property and equipment are stated at cost and are depreciated over their
estimated useful lives using the straight-line method. The estimated useful
lives are as follows:
 
<TABLE>
<S>                                                            <C>
Furniture and fixtures......................................   5-7 years
Computer equipment..........................................     2 years
</TABLE>
 
  Stock-based Compensation
 
     SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October 1995. This accounting standard permits the use of either a fair value
based method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") to account for
stock-based compensation arrangements. Companies that elect to use the method
provided in APB No. 25 are required to disclose the pro forma net income and
earnings per share that would have resulted from the use of the fair value based
method. The Company has elected to continue to determine the value of
stock-based compensation arrangements under the provisions of APB No. 25 and,
accordingly, has included the pro forma disclosures required under SFAS No. 123
in Note 5.
 
  Income Taxes
 
     Deferred tax assets and liabilities are recorded for the estimated future
tax effects of temporary differences between the tax bases of assets and
liabilities and amounts reported in the accompanying consolidated balance
sheets, as well as operating loss and tax credit carryforwards. Deferred tax
assets may be reduced by a valuation allowance if current evidence indicates
that it is likely that these benefits will not be realized.
 
  Reclassifications
 
     Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the fiscal 1998 presentation.
 
  Earnings Per Common Share
 
     The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share," beginning in the first quarter of fiscal 1998.
Prior period earnings per common share ("EPS") were restated to conform with the
new statement. This pronouncement established new standards for computing
 
                                       F-9
<PAGE>   51
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
and presenting EPS on a basis that is more comparable to international standards
and provides for the presentation of basic and diluted EPS, replacing the
previously required primary and fully-diluted EPS. The basic EPS is computed by
dividing net income by the weighted average number of shares outstanding during
the period. Diluted EPS is computed using the weighted average number of common
and common equivalent shares outstanding during the period. Common equivalent
shares consist of stock options, and the weighted average shares outstanding for
each period have been adjusted to include all common shares issuable under stock
options using the treasury stock method. All shares owned by the J.D. Edwards &
Company Employee Stock Ownership Plan ("ESOP") were included in the weighted
average common shares outstanding. Anti-dilutive stock options that were
excluded from the denominator of diluted EPS were immaterial.
 
     The computation of basic and diluted net income per share was as follows
(in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31,
                                                          ---------------------------
                                                           1996      1997      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Numerator:
  Net income............................................  $26,326   $37,228   $74,468
                                                          =======   =======   =======
Denominator:
  Basic income per share -- weighted average shares
     outstanding........................................   79,044    80,546    98,264
  Dilutive effect of common stock equivalents...........    8,623    15,954    11,729
                                                          -------   -------   -------
  Diluted net income per share -- adjusted weighted
     average shares outstanding, assuming conversion of
     common stock equivalents...........................   87,667    96,500   109,993
                                                          =======   =======   =======
Basic net income per common share.......................  $  0.33   $  0.46   $  0.76
Diluted net income per common share.....................  $  0.30   $  0.39   $  0.68
</TABLE>
 
  Other Recently Issued Accounting Pronouncements
 
     The Company will be required to apply recently issued standards in its
future consolidated financial statements. SFAS No. 130, "Reporting Comprehensive
Income," establishes standards for reporting comprehensive income in financial
statements. SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-Retirement Benefits,"
revises employers' disclosures about pension and other postretirement benefit
plans, but does not change the measurement or recognition of those plans.
 
                                      F-10
<PAGE>   52
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(2) BALANCE SHEET COMPONENTS
 
     Certain balance sheet components are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                  OCTOBER 31,
                                                              -------------------
                                                                1997       1998
                                                              --------   --------
<S>                                                           <C>        <C>
PROPERTY AND EQUIPMENT:
  Furniture and fixtures....................................  $ 44,220   $ 66,094
  Computer equipment........................................    38,778     49,359
  Land......................................................    16,559      8,990
                                                              --------   --------
                                                                99,557    124,443
  Less: accumulated depreciation............................   (43,852)   (63,754)
                                                              --------   --------
                                                              $ 55,705   $ 60,689
                                                              ========   ========
SOFTWARE DEVELOPMENT COSTS:
  Software development costs................................  $ 26,636   $ 26,636
  Less: accumulated amortization............................   (14,757)   (20,815)
                                                              --------   --------
                                                              $ 11,879   $  5,821
                                                              ========   ========
ACCRUED LIABILITIES:
  Accrued compensation and related expenses.................  $ 68,803   $ 97,377
  Income taxes payable......................................    15,261     19,780
  Other accrued expenses....................................    26,501     40,316
                                                              --------   --------
                                                              $110,565   $157,473
                                                              ========   ========
</TABLE>
 
(3) BANK LINE OF CREDIT
 
     The Company has a $50 million, unsecured, revolving line of credit (the
"Revolver") with a syndication of banks. The Revolver expires on July 31, 1999.
Borrowings under the Revolver are for working capital requirements and other
general corporate purposes and bear tiered interest rates as determined by the
Company's defined leverage ratio. The maximum rate of interest is the bank's
prime rate plus .50% or LIBOR plus 1.75% at the option of the Company. The
credit agreement associated with the Revolver requires that the Company remain
in compliance with certain affirmative and negative covenants and
representations and warranties. The financial covenants include liquidity,
leverage, and coverage ratios, capital expenditure limitations and profitability
requirements. Non-financial covenants include, but are not limited to, certain
restrictions on additional indebtedness, contingent liabilities, mergers and
acquisitions and investments. At October 31, 1997 and 1998, the Company was in
full compliance with all covenants under the credit agreement, and there were no
borrowings outstanding.
 
(4) STOCKHOLDERS' EQUITY
 
  Founders' Stock
 
     The founders of the Company currently own or control a majority of the
Company's issued and outstanding common stock. Under the terms of a shareholder
agreement (the "Original Shareholder Agreement"), the Company had certain
redemption obligations prior to the completion of the Company's IPO. The
Original Shareholder Agreement provided for the Company's repurchase of a
limited amount of the founders' stock in the event of their deaths. In
accordance with the requirements of the SEC, the share redemption obligations
under the Original Shareholder Agreement were reflected in the balance sheets
prior to the IPO as mandatorily redeemable shares with the offsetting adjustment
included as a reduction of stockholders' equity. In August 1997, the founders of
the Company entered into an agreement which replaced
 
                                      F-11
<PAGE>   53
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the Original Shareholder Agreement effective upon the completion of the IPO (the
"New Shareholder Agreement"). The New Shareholder Agreement has no provisions
which obligate the Company to purchase any shares of the founders' stock, and,
accordingly, the mandatorily redeemable amounts were reclassified to
stockholders' equity.
 
     During the year ended October 31, 1996, the Company was notified of a
contractual arrangement whereby two founders would sell 3.5 million shares of
stock to certain identified third parties. Under the terms of the Original
Shareholder Agreement, such stock was required to be offered to the Company at
the pending sales price prior to the sale to the third parties. The Company
assigned its right-to-purchase these shares to the ESOP, which purchased the 3.5
million shares of common stock from the founders for $10.4 million.
 
  Other Stock Transactions
 
     In September 1998, the Company purchased substantially all of the assets of
a privately-held company, which included 2.7 million shares of the Company's
common stock and cash, through the issuance of a slightly greater number of
shares of the Company's common stock. The treasury shares acquired through this
purchase were immediately retired, and the Company received a total of $1.25
million in cash for a net issuance of 5,816 shares of common stock.
 
(5) EMPLOYEE RETIREMENT SAVINGS PLAN AND STOCK-BASED BENEFIT PLANS
 
  Employee Retirement Savings Plan
 
     The Company established the J.D. Edwards & Company Retirement Savings Plan
(the "401(k) Plan") subject to the provisions of ERISA in 1988 and made certain
amendments during fiscal 1998. The 401(k) Plan is an Internal Revenue Code
Section 401(k) plan, commonly known as a salary reduction retirement plan.
Employees are eligible to participate in the 401(k) Plan on the first day of the
calendar quarter following one complete calendar month of service effective in
calendar 1999. The 401(k) Plan allows for both matching and discretionary
contributions. Generally, the Company matches 50% of an employee's eligible
contributions to the 401(k) Plan, up to a maximum match of 3% of eligible
compensation for each calendar year. The Company's matching contributions are
fully vested when made for all participants. Employees must complete 1,000 hours
of service and be employed by the Company on the last day of the calendar year
to receive the matching contribution. Discretionary contributions to the 401(k)
Plan are subject to a five-year vesting schedule based on number of years of
service with the Company. No discretionary contributions have been made to the
401(k) Plan. The Company recognized expense for matching contributions of
$200,000, $2.1 million and $5.4 million for fiscal 1996, 1997 and 1998,
respectively. In August 1998, the Company merged the U.S. employee portion of
its ESOP into the 401(k) Plan.
 
  ESOP and Mandatorily Redeemable ESOP Shares
 
     The Company established the ESOP effective January 1, 1989, subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). The
Company made discretionary contributions of cash and/or shares of common stock
of the Company to the ESOP trust fund maintained in the form of individual
participant accounts that vest over a seven-year period. Allocations to these
accounts were made on the basis of each participant's proportionate share of
total compensation paid by the Company to all ESOP participants during each
calendar year. At the discretion of the Company, unvested shares forfeited by a
terminated participant could be used to offset future Company contributions to
the ESOP or be reallocated to the remaining participants of the ESOP. With
certain limitations, Company employees in the United States who were at least 21
years old and had completed one year of service were eligible ESOP participants.
 
     Upon termination of employment, the ESOP provided that a terminating
employee would receive his or her vested shares. Prior to the Company's IPO, a
terminating employee could elect to receive a distribution of
 
                                      F-12
<PAGE>   54
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Company common stock for shares vested or require the Company to purchase such
vested shares. In the event the Company was required to purchase such shares
from a terminating employee, the Company would purchase the vested shares at the
fair value determined by independent appraiser annually. In accordance with the
requirements of the SEC, the redemption value of shares held by the ESOP was
reflected in the balance sheets prior to completion of the IPO as mandatorily
redeemable shares with the offsetting adjustments included as a reduction of
stockholders' equity. Upon completion of the IPO, the Company's obligation to
purchase the ESOP shares terminated, and the amount related to the mandatorily
redeemable shares was reclassified to stockholders' equity.
 
     Compensation cost was measured as the estimated fair value of shares
contributed to or committed to be contributed to the ESOP plus the cash
contributed to or committed to be contributed to the ESOP. For the years ended
October 31, 1996, 1997 and 1998, the Company recognized as compensation cost
$5.9 million, $5.3 million, and $7.3 million, respectively. The ESOP owned
8,558,270 and 7,888,494 shares of common stock at October 31, 1997 and 1998,
respectively. All shares owned by the ESOP had been allocated to participants.
In August 1998, a total of 8,108,373 shares owned by the ESOP were transferred
to individual frozen accounts in the 401(k) Plan for all U.S. participants.
Remaining shares in the Plan for non-U.S. participants may be maintained in the
account up to the end of calendar year 2000.
 
  Equity Incentive Plans
 
     In August 1997, the Company established an Equity Incentive Plan (the "1997
Plan"). A total of 10,000,000 shares of common stock are reserved for issuance
under the 1997 Plan, of which 5,430,410 were available for grant as of October
31, 1998. The number of shares of common stock reserved for issuance is
increased on each anniversary date of the adoption of the 1997 Plan by a number
of shares equal to the number of shares needed to restore the maximum aggregate
number of shares to 10,000,000 or a lesser amount determined by the Company's
Board of Directors. The 1997 Plan provides for the granting of incentive stock
options to employees and the granting of nonstatutory stock options and stock
purchase rights to employees, directors and consultants.
 
     In November 1992, the Company established an Incentive Stock Option Plan
and a Nonqualified Stock Option Plan (the "1992 Option Plans"). A total of
35,000,000 shares of common stock are authorized for issuance under the 1992
Option Plans, of which 12,783,350 and 12,982,200 shares were available for grant
as of October 31, 1997 and 1998, respectively. The Company does not anticipate
granting additional options under the 1992 Option Plans. Options granted vest
over a period of time ranging from four to five years with a term of not more
than ten years.
 
  Employee Stock Purchase Plans
 
     In August 1997, the Company established employee stock purchase plans (the
"Employee Stock Purchase Plans") which took effect upon completion of the IPO. A
total of 2,000,000 shares of common stock were reserved for issuance under the
Employee Stock Purchase Plans. An annual increase will be made to the Employee
Stock Purchase Plans on each anniversary date of the plans in an amount equal to
the number of shares of common stock required to restore the maximum number of
shares reserved for issuance to 2,000,000, or a lesser amount determined by the
Company's Board of Directors. The Employee Stock Purchase Plans permit eligible
employees to purchase common stock totaling up to 10% of an employee's
compensation through payroll deductions. The Employee Stock Purchase Plan for
U.S. employees is intended to qualify under Section 423 of the Internal Revenue
Code. The price of common stock to be purchased will be 85% of the lower of the
fair market value of the common stock on the first or last day of each purchase
period. During the year ended October 31, 1998, a total of 864,000 shares were
issued under the Employee Stock Purchase Plans, generating total proceeds to the
Company of $16,995,000. At October 31, 1998, a total of $6.8 million
 
                                      F-13
<PAGE>   55
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
had been withheld from employees' payroll for the purchase offering periods
ending on December 31, 1998. Subsequent six-month purchase offering periods will
commence on January 1, 1999 and June 1, 1999.
 
  Stock-based Compensation
 
     The Company records compensation expense related to its stock plans using
the intrinsic value based method and includes a pro forma disclosure in the
footnotes for compensation value measured using the fair value accounting
treatment. Generally, stock options are granted with an exercise price equal to
the fair value at the date of grant. For the fair value disclosure below,
compensation value is estimated for each option grant under the 1992 and 1997
Option Plans on the date of grant using a Black-Scholes option pricing model.
The following assumptions were used for grants in fiscal 1996, 1997 and 1998:
risk-free rates corresponding to government securities with original maturities
similar to the expected option lives of 5.1% to 5.8% in fiscal 1996, 5.8% to
6.1% in fiscal 1997, and 4.7% to 5.7% in fiscal 1998; expected dividend yield of
0% for all periods; volatility factor of zero in fiscal 1996 and the period in
fiscal 1997 prior to the Company's IPO, 46% for the period in fiscal 1997
following the IPO, and 50% in fiscal 1998; and expected lives of approximately
one year beyond vest dates for all periods. Each share issued through the
Employee Stock Purchase Plans during fiscal 1998 was valued with a minimum value
pricing model using the following assumptions: risk-free rates ranging from 5.1%
to 5.4%, expected dividend yield of 0% and lives ranging from 3.2 to 9.2 months,
corresponding with the appropriate purchase period.
 
     Based on calculations using a Black-Scholes option pricing model, the
weighted-average grant date fair value of options was $1.12, $2.67 and $16.24 in
fiscal 1996, 1997 and 1998, respectively. The weighted-average grant date fair
value of shares issued through the Employee Stock Purchase Plans in fiscal 1998
was $3.52. The pro forma impact on the Company's net income and net income per
share had compensation cost been recorded as determined under the fair value
method is shown below (in thousands, except per share data).
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31,
                                                          ---------------------------
                                                           1996      1997      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Net income:
  As reported...........................................  $26,326   $37,228   $74,468
  Pro forma.............................................   25,328    35,058    58,183
Basic net income per share:
  As reported...........................................     0.33      0.46      0.76
  Pro forma.............................................     0.32      0.44      0.59
Diluted net income per share:
  As reported...........................................     0.30      0.39      0.68
  Pro forma.............................................     0.29      0.36      0.53
</TABLE>
 
                                      F-14
<PAGE>   56
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The status of total stock options outstanding and exercisable under the
1992 and 1997 Option Plans as of October 31, 1998 follows:
 
<TABLE>
<CAPTION>
             STOCK OPTIONS OUTSTANDING                 STOCK OPTIONS EXERCISABLE
----------------------------------------------------   --------------------------
                               WEIGHTED
                               AVERAGE      WEIGHTED                   WEIGHTED
   RANGE OF                   REMAINING     AVERAGE                     AVERAGE
   EXERCISE     NUMBER OF    CONTRACTUAL    EXERCISE    NUMBER OF      EXERCISE
    PRICES        SHARES     LIFE (YEARS)    PRICE        SHARES         PRICE
   --------     ----------   ------------   --------   ------------   -----------
<S>             <C>          <C>            <C>        <C>            <C>
$ 2.66 -  3.44   6,122,431       5.6         $ 2.97     3,211,191       $ 2.89
     6.24        3,987,660       7.3           6.24     1,003,560         6.24
    10.71        2,106,235       8.1          10.71       247,035        10.71
 23.00 - 34.13     209,607       7.4          31.99        16,400        30.32
 34.75 - 46.25   4,366,983       7.4          38.81            --           --
                ----------                              ---------
$ 2.66 - 46.25  16,792,916       6.8         $14.40     4,478,186       $ 4.17
                ==========                              =========
</TABLE>
 
     Activity of the 1992 and 1997 Option Plans is summarized in the following
table:
 
<TABLE>
<CAPTION>
                                                              WEIGHTED                       WEIGHTED
                                              NUMBER OF       AVERAGE         OPTIONS        AVERAGE
                                                SHARES     EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
                                              ----------   --------------   -----------   --------------
<S>                                           <C>          <C>              <C>           <C>
Options outstanding, October 31, 1995.......  15,140,370       $ 2.89        3,046,750        $2.70
  Options granted...........................   5,572,560         6.18
  Less: options exercised...................     (79,450)        2.87
  Less: options forfeited...................    (698,600)        4.01
                                              ----------
Options outstanding, October 31, 1996.......  19,934,880         3.77        5,895,960         2.79
  Options granted...........................   2,506,500        11.40
  Less: options exercised...................    (940,515)        3.44
  Less: options forfeited...................    (249,340)        6.15
                                              ----------
Options outstanding, October 31, 1997.......  21,251,525         4.66        8,964,695         3.15
  Options granted...........................   4,648,590        38.57
  Less: options exercised...................  (8,769,329)        3.37
  Less: options forfeited...................    (337,870)       19.11
                                              ----------
Options outstanding, October 31, 1998.......  16,792,916        14.40        4,478,186         4.17
                                              ==========
</TABLE>
 
(6) INCOME TAXES
 
     Income before income taxes consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31,
                                                         ----------------------------
                                                          1996      1997       1998
                                                         -------   -------   --------
<S>                                                      <C>       <C>       <C>
Domestic...............................................  $24,770   $34,667   $ 89,624
Foreign................................................   17,184    24,659     28,579
                                                         -------   -------   --------
                                                         $41,954   $59,326   $118,203
                                                         =======   =======   ========
</TABLE>
 
                                      F-15
<PAGE>   57
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Components of the provision for income taxes are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31,
                                                          ---------------------------
                                                           1996      1997      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Current provision:
  U.S. Federal..........................................  $ 8,737   $ 9,342   $24,146
  State.................................................    1,259     1,798     4,417
  Foreign...............................................    7,486    17,512    17,105
                                                          -------   -------   -------
                                                           17,482    28,652    45,668
                                                          -------   -------   -------
Deferred provision (benefit):
  U.S. Federal..........................................   (4,951)   (6,292)     (324)
  State.................................................       --      (715)      (36)
  Foreign...............................................    3,097       453    (1,573)
                                                          -------   -------   -------
                                                           (1,854)   (6,554)   (1,933)
                                                          -------   -------   -------
          Total provision for income taxes..............  $15,628   $22,098   $43,735
                                                          =======   =======   =======
</TABLE>
 
     The provisions for income taxes are different from the amounts computed by
applying the federal statutory rate to income before income taxes. The amounts
are reconciled as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OCTOBER 31,
                                                          ---------------------------
                                                           1996      1997      1998
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Statutory rate..........................................  $14,684   $20,764   $41,371
Foreign income taxed at higher rates....................    3,018     3,915     7,119
Non-deductible expenses/non-taxable income..............    1,676       563    (1,067)
State income taxes, net of federal benefit..............      818     1,431     2,847
Income tax credits......................................   (3,844)   (5,796)   (5,590)
Other...................................................     (724)    1,221      (945)
                                                          -------   -------   -------
Provision for income taxes..............................  $15,628   $22,098   $43,735
                                                          =======   =======   =======
</TABLE>
 
                                      F-16
<PAGE>   58
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Deferred tax assets and liabilities are comprised of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                                  OCTOBER 31,
                                                              -------------------
                                                                1997       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets:
  Revenue deferred for book purposes........................  $  9,403   $ 10,219
  Foreign tax credit carryforwards..........................    14,290     15,818
  Allowance for doubtful accounts...........................     3,638      3,388
  Vacation and other accruals...............................     2,587      4,499
  Fixed assets..............................................     1,440      4,560
  Unrealized currency losses................................       536        278
  Foreign income currently subject to U.S. tax..............     2,815        515
  Research and development credit carryforward..............     2,636      6,591
  Net operating loss carryforward...........................     3,400     28,241
  Other.....................................................       809      1,254
                                                              --------   --------
          Total deferred tax assets.........................    41,554     75,363
                                                              --------   --------
Deferred tax liabilities:
  Capitalized software development costs....................    (4,425)    (2,168)
  Revenue deferred for tax..................................    (7,258)    (8,610)
  Other.....................................................      (877)        --
                                                              --------   --------
          Total deferred tax liabilities....................   (12,560)   (10,778)
                                                              --------   --------
Less -- valuation allowance for foreign tax credits.........    (9,651)    (9,651)
                                                              --------   --------
Net deferred tax asset......................................  $ 19,343   $ 54,934
                                                              ========   ========
Current portion of deferred taxes...........................  $  8,697   $ 11,276
Non-current portion of deferred taxes.......................    10,646     43,658
                                                              --------   --------
Net deferred tax asset......................................  $ 19,343   $ 54,934
                                                              ========   ========
</TABLE>
 
     The Company has available approximately $15.8 million of foreign tax credit
carryforwards of which $4.6 million will expire in 2001, $6.3 million will
expire in 2002 and $4.9 million will expire in 2003. The Company has a net
operating loss carryforward of approximately $75.5 million of which $6.2 million
will expire in 2012 and $69.3 will expire in 2013. Additionally, a research and
development credit carryforward of approximately $6.6 million is available, of
which $2.4 million will expire in 2012 and $4.2 million will expire in 2013.
 
     At October 31, 1997 and 1998, unremitted earnings of foreign subsidiaries
totaled $10.3 million and $17.7 million, respectively, and were deemed to be
permanently invested. The unrecognized deferred tax liability for such earnings
is immaterial.
 
     The Company has provided a valuation allowance of $9.7 million relating to
foreign tax credits due to the fact that the Company could not utilize such
credits in the current year and there is uncertainty that the credits will be
utilized prior to expiration in 2002 and 2003. The valuation allowance may be
adjusted in future periods to the extent evidence becomes available that these
foreign tax credits will be utilized before they expire.
 
                                      F-17
<PAGE>   59
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) COMMITMENTS AND CONTINGENCIES
 
  Leases
 
     The Company leases equipment and office space under various operating
leases. Rent expense on these leases for fiscal 1996, 1997 and 1998 was $21.6
million, $27.9 million, and $42.8 million respectively.
 
     Minimum future non-cancelable commitments under these leases as of October
31, 1998, are as follows (in thousands):
 
<TABLE>
<CAPTION>
FISCAL YEAR                                                    AMOUNT
-----------                                                   --------
<S>                                                           <C>
1999........................................................  $ 42,787
2000........................................................    28,758
2001........................................................    18,862
2002........................................................    14,963
2003........................................................    12,786
Thereafter..................................................    40,035
                                                              --------
                                                              $158,191
                                                              ========
</TABLE>
 
     The Company leases its corporate headquarters office buildings, of which
two are currently being constructed on land owned by the Company. The Company is
acting as construction agent for the lessor. The lessor, a wholly-owned
subsidiary of a bank, and a syndication of banks are collectively financing up
to $94.5 million in purchase and construction costs through a combination of
equity and debt. In the event any of the buildings are sold, the Company will
guarantee a residual value of each building up to approximately 85% of its
original cost. The Company's lease obligations are based on a return on the
lessor's costs. In connection with the lease transactions, the Company is
collateralizing up to 97% of the financing with investments as discussed in Note
1.
 
  Legal Matters
 
     The Company is involved in certain disputes and legal actions as a result
of its normal operations. In management's opinion, none of these disputes and
legal actions are expected to have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
 
(8) GEOGRAPHICAL INFORMATION
 
     The following is an analysis of the Company's operations by geographical
region (in thousands):
 
<TABLE>
<CAPTION>
                                                                             ASIA, LATIN
                                                                 EUROPE,       AMERICA
                                                               MIDDLE EAST       AND
                                                    DOMESTIC   AND AFRICA      CANADA       TOTAL
                                                    --------   -----------   -----------   --------
<S>                                                 <C>        <C>           <C>           <C>
YEAR ENDED OCTOBER 31, 1996
  Total revenue...................................  $311,238    $ 99,021      $ 67,789     $478,048
  Operating income................................    22,307      14,123         7,197       43,627
  Total assets....................................   199,489      23,354        20,943      243,786
YEAR ENDED OCTOBER 31, 1997
  Total revenue...................................   406,521     128,878       112,413      647,812
  Operating income................................    41,171      11,196         7,889       60,256
  Total assets....................................   584,713      26,376        31,948      643,037
YEAR ENDED OCTOBER 31, 1998
  Total revenue...................................   591,887     206,922       135,173      933,982
  Operating income................................    86,380      14,584         5,674      106,638
  Total assets....................................   870,249      42,643        37,581      950,473
</TABLE>
 
                                      F-18
<PAGE>   60
                             J.D. EDWARDS & COMPANY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Total revenue for each geographic region represents revenue from
unaffiliated customers only. Operating income includes intercompany royalty and
cost allocation arrangements that were in effect for each year. Total revenue
shown above for the Company's foreign regions includes software that was shipped
from the United States. The total amount of these export sales was $36.9
million, $50.9 million and $84.1 million for Europe, Middle East, and Africa
and, $27.2 million, $59.4 million and $61.9 million for Asia, Latin America, and
Canada for fiscal 1996, 1997 and 1998, respectively.
 
(9) SUBSEQUENT EVENTS
 
  Commitments
 
     In November 1998, the Company entered into a six-year agreement to lease an
office building to be constructed on a portion of land owned by the Company. The
lessor, a wholly-owned subsidiary of a bank, and the bank collectively committed
to finance up to $34.0 million in construction costs through a combination of
equity and debt financing. The Company is acting as agent for the lessor to
design and undertake construction of the building and land improvements. The
Company's lease obligation will be calculated as a return on the lessor's costs
of funding and will be based on a spread over LIBOR, adjusted from time to time
to reflect any changes in the Company's leverage ratio. At any time during the
lease term, in the event the building is sold, the Company will guarantee a
residual value of the building up to approximately 85% of the building's
original cost.
 
     In connection with the above lease transaction, management intends to
collateralize up to 97% of the financing with investments. The Company may
withdraw the funds used as collateral at its sole discretion, provided it is not
in default under the lease agreement.
 
(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     The Company's quarterly financial information for fiscal 1997 and 1998 is
as follows (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                      FIRST      SECOND     THIRD      FOURTH
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
YEAR ENDED OCTOBER 31, 1997:
Total revenue......................................  $122,821   $145,854   $162,534   $216,603
  Less: costs and expenses.........................   118,811    136,934    151,006    180,805
                                                     --------   --------   --------   --------
Operating income...................................     4,010      8,920     11,528     35,798
                                                     --------   --------   --------   --------
Income before income taxes.........................     3,697      7,742     11,506     36,381
Net income.........................................     2,329      4,849      7,220     22,830
Net income per common share:
  Basic............................................  $   0.03   $   0.06   $   0.09   $   0.27
  Diluted..........................................  $   0.02   $   0.05   $   0.07   $   0.23
YEAR ENDED OCTOBER 31, 1998:
Total revenue......................................  $178,256   $208,991   $239,602   $307,133
  Less: costs and expenses.........................   170,505    193,035    213,854    249,950
                                                     --------   --------   --------   --------
Operating income...................................     7,751     15,956     25,748     57,183
                                                     --------   --------   --------   --------
Income before income taxes.........................    10,200     19,576     28,655     59,772
Net income.........................................     6,426     12,333     18,053     37,656
Net income per common share:
  Basic............................................  $   0.07   $   0.13   $   0.18   $   0.37
  Diluted..........................................  $   0.06   $   0.11   $   0.16   $   0.34
</TABLE>
 
                                      F-19
<PAGE>   61
 
                                                                     SCHEDULE II
 
                             J.D. EDWARDS & COMPANY
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                      BALANCE AT    ADDITIONS                                BALANCE AT
                                     BEGINNING OF   CHARGED TO                TRANSLATION        END
          CLASSIFICATION                PERIOD      OPERATIONS   WRITE-OFFS   ADJUSTMENTS     OF PERIOD
          --------------             ------------   ----------   ----------   -----------   -------------
<S>                                  <C>            <C>          <C>          <C>           <C>
Allowance For Doubtful Accounts
Fiscal Year Ended:
  October 31, 1996.................     $5,700        $1,387      $(1,496)       $   9         $5,600
  October 31, 1997.................      5,600         8,434       (4,078)        (156)         9,800
  October 31, 1998.................      9,800         7,211       (4,527)         416         12,900
</TABLE>
 
                                       S-1
<PAGE>   62
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                              EXHIBIT DESCRIPTION
        -------                              -------------------
<C>                      <S>
         3.1(i)          -- Amended and Restated Certificate of Incorporation of
                            Registrant, which is incorporated herein by reference to
                            Exhibit 3.1(i) to the Registrant's Statement on Form S-1,
                            Registration No. 333-30701, as amended ("Registrant's
                            Form S-1").
         3.1(ii)         -- Bylaws of Registrant which, is incorporated herein by
                            reference to Exhibit 3.1(ii) to the Registrant's Form
                            S-1.
         4.1             -- Specimen stock certificate of Registrant's Common Stock,
                            which is incorporated herein by reference to Exhibit 4.1
                            to the Registrant's Form S-1.
        10.1             -- Original Software Vendor Marketing and License Agreement
                            between Seagull Business Software and J.D. Edwards &
                            Company dated August 19, 1994, which is incorporated
                            herein by reference to Exhibit 10.1 to the Registrant's
                            Form S-1.
        10.2             -- Amended and Restated Credit Agreement by and Between
                            Wells Fargo Bank (Colorado), N.A., as Lender and as Agent
                            Bank, Harris Trust and Savings Bank, as Lender, Key Bank
                            of Colorado, as Lender, and J.D. Edwards & Company, as a
                            Borrower, J.D. Edwards World Solutions Company, as a
                            Borrower, J.D. Edwards World Source Company, as a
                            Borrower dated as of July 25, 1997, which is incorporated
                            herein by reference to Exhibit 10.2 to the Registrant's
                            Form S-1.
        10.3             -- Form of Indemnification Agreement entered into between
                            the Registrant and each of its officers and directors,
                            which is incorporated herein by reference to Exhibit
                            10.13 to the Registrant's Form S-1.
        10.4             -- J.D. Edwards & Company Retirement Savings Plan, Amended
                            and Restated as of January 1, 1997
        10.5             -- J.D. Edwards & Company 1992 Incentive Stock Option Plan,
                            which is incorporated herein by reference to Exhibit
                            10.16 to the Registrant's Form S-1.
        10.6             -- J.D. Edwards & Company 1992 Nonqualified Stock Option
                            Plan, which is incorporated herein by reference to
                            Exhibit 10.17 to the Registrant's Form S-1.
        10.7             -- Restricted Stock Grant Plan for employees of J.D. Edwards
                            & Company, which is incorporated herein by reference to
                            Exhibit 10.18 to the Registrant's Form S-1.
        10.8             -- Stock Plan for Employees of J.D. Edwards & Company, which
                            is incorporated herein by reference to Exhibit 10.19 to
                            the Registrant's Form S-1.
        10.9             -- J.D. Edwards & Company 1997 Employee Stock Purchase Plan,
                            which is incorporated herein by reference to Exhibit
                            10.20 to the Registrant's Form S-1.
        10.10            -- J.D. Edwards & Company 1997 Equity Incentive Plan, which
                            is incorporated herein by reference to Exhibit 10.21 to
                            the Registrant's Form S-1.
        10.11            -- Amended and Restated Stockholders Agreement between C.
                            Edward McVaney, Jack L. Thompson, Robert C. Newman and
                            the Registrant dated as of August 20, 1997, which is
                            incorporated herein by reference to Exhibit 10.22 to the
                            Registrant's Form S-1.
        10.12            -- J.D. Edwards & Company 1997 Employee Stock Purchase Plan
                            for Non-U.S. Employees, which is incorporated herein by
                            reference to Exhibit 10.23 to the Registrant's Form S-1.
        21.1             -- Subsidiaries of Registrant
        23.1             -- Consent of PricewaterhouseCoopers LLP
        27.1             -- Financial Data Schedule for fiscal year ended October 31,
                            1998
        27.2             -- Financial Data Schedule for fiscal year ended October 31,
                            1997
        27.3             -- Financial Data Schedule for fiscal year ended October 31,
                            1996
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