SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2003
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 333-49389
Cooperative Computing, Inc.
(Exact name of Registrant as specified in its charter)
| Delaware |
94-2160013 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 804 Las Cimas Parkway, Suite 200 |
||
| Austin, Texas |
78746 | |
| (Address of principal executive offices) |
(Zip Code) |
(512) 328-2300
(Registrants telephone number, including area code)
Indicate by check 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 þ No ¨
Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
| Class |
Outstanding at May 14, 2003 | |
| Common Stock |
1,000 shares |
INDEX
| PAGE | ||
| 3 | ||
| 4 | ||
| 4 | ||
| 5 | ||
| Consolidated Balance Sheets as of September 30, 2002 and March 31, 2003 |
5 | |
| 6 | ||
| Consolidated Statements of Cash Flows for the six months ended March 31, 2002 and March 31, 2003 |
7 | |
| 8 | ||
| ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
12 | |
| ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
17 | |
| 17 | ||
| PART IIOTHER INFORMATION |
||
| 18 | ||
| 18 | ||
| 18 | ||
| 18 | ||
| 18 | ||
| 18 | ||
| 19 | ||
| 20 |
2
INFORMATION SET FORTH IN THIS QUARTERLY REPORT ON FORM 10-Q REGARDING EXPECTED OR POSSIBLE FUTURE EVENTS, INCLUDING STATEMENTS OF THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE GROWTH, OPERATIONS, PRODUCTS AND SERVICES AND STATEMENTS RELATING TO FUTURE ECONOMIC PERFORMANCE, IS FORWARD-LOOKING AND SUBJECT TO RISKS AND UNCERTAINTIES. FOR THOSE STATEMENTS, THE COMPANY CLAIMS THE PROTECTION OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS PROVIDED FOR BY SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY, WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES OR STATEMENTS WILL BE REALIZED, AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE THE FOLLOWING: (1) INCREASED COMPETITION; (2) RAPID TECHNOLOGICAL CHANGE; (3) INCREASED COSTS; (4) RISKS ASSOCIATED WITH THE INTRODUCTION OF NEW PRODUCTS AND PRODUCT UPGRADES AND DEPENDENCE ON PROPRIETARY TECHNOLOGY; (5) THE LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (6) THE INABILITY OF THE COMPANY TO SUCCESSFULLY INTEGRATE BUSINESSES ACQUIRED IN THE FUTURE AND TO REALIZE ANTICIPATED REVENUE AND COST SAVINGS OPPORTUNITIES; (7) INCREASES IN THE COMPANYS COST OF BORROWINGS OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; AND (8) CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. IN ADDITION, OTHER FACTORS THAT COULD AFFECT THE FUTURE RESULTS OF THE COMPANY AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS ARE DISCUSSED AT GREATER LENGTH UNDER MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND APPEAR ELSEWHERE IN THIS QUARTERLY REPORT. THESE RISKS, UNCERTAINTIES AND OTHER FACTORS SHOULD NOT BE CONSTRUED AS EXHAUSTIVE, AND THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION TO UPDATE, ANY FORWARD-LOOKING STATEMENTS TO REFLECT OCCURRENCES OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.
3
The consolidated financial statements filed on Form 10-K and Form 10-Q prior to September 30, 2002 included the accounts of Cooperative Computing Holding Company, Inc. (Holding) and its wholly owned subsidiary Cooperative Computing, Inc. (CCITRIAD or the Company). Holding has no assets or liabilities other than (1) its wholly owned subsidiary CCITRIAD and (2) its Redeemable Class A Common Stock, the net proceeds of which were contributed in full to CCITRIAD. The difference between the financial statements of Holding and those of CCITRIAD relate solely to the Class A Common Stock. The Class A Common Stock is an obligation of Holding and not of the registrant and the registrant does not guarantee the Class A Common Stock. Prior years financial presentation resulted in the inclusion of the accretion of Holdings Redeemable Common Stock of $3.9 million and $8.0 million for the three and six months ended March 31, 2002, respectively, as well as its net loss to shareholders of $1.3 million and $3.9 million for the three and six months ended March 31, 2002, respectively. Additionally, Holdings balances for the Redeemable Class A Common Stock of $59.1 million as of March 31, 2002, and for stockholders deficit of $79.7 million as of March 31, 2002 were depicted. The cash flow for both companies was identical in each year presented. CCITRIAD, as the registrant, is presented in the following unaudited interim financial statements.
4
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| September 30, 2002 |
March 31, 2003 |
|||||||
| (Unaudited) |
||||||||
| ASSETS: |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
398 |
|
$ |
7,733 |
| ||
| Trade accounts receivable, net of allowance for doubtful accounts of $6,751 and $6,657 at September 30, 2002 and March 31, 2003, respectively |
|
29,013 |
|
|
28,073 |
| ||
| Inventories, net |
|
2,380 |
|
|
2,643 |
| ||
| Investment in leases, net |
|
2,820 |
|
|
2,415 |
| ||
| Deferred income taxes |
|
8,303 |
|
|
9,003 |
| ||
| Prepaid expenses and other current assets |
|
4,122 |
|
|
3,452 |
| ||
| Total current assets |
|
47,036 |
|
|
53,319 |
| ||
| Service parts, net |
|
1,780 |
|
|
1,553 |
| ||
| Property and equipment, net |
|
6,480 |
|
|
6,550 |
| ||
| Long-term investment in leases |
|
4,468 |
|
|
3,458 |
| ||
| Capitalized computer software costs, net |
|
10,257 |
|
|
9,460 |
| ||
| Databases, net |
|
12,094 |
|
|
10,785 |
| ||
| Goodwill |
|
87,159 |
|
|
87,159 |
| ||
| Other assets |
|
16,513 |
|
|
16,201 |
| ||
| Total assets |
$ |
185,787 |
|
$ |
188,485 |
| ||
| LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT): |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
8,095 |
|
$ |
7,821 |
| ||
| Payroll related accruals |
|
13,564 |
|
|
13,012 |
| ||
| Deferred revenue |
|
12,529 |
|
|
12,911 |
| ||
| Current portion of long-term debt |
|
8,828 |
|
|
9,084 |
| ||
| Accrued income taxes |
|
3,969 |
|
|
1,218 |
| ||
| Accrued expenses and other current liabilities |
|
8,940 |
|
|
8,866 |
| ||
| Total current liabilities |
|
55,925 |
|
|
52,912 |
| ||
| Long-term debt |
|
129,169 |
|
|
124,920 |
| ||
| Deferred income taxes and other liabilities |
|
15,546 |
|
|
16,082 |
| ||
| Total liabilities |
|
200,640 |
|
|
193,914 |
| ||
| Stockholders equity (deficit): |
||||||||
| Common Stock: |
||||||||
| Par value $0.01; authorized, issued and outstanding 1,000 shares at September 30, 2002 and March 31, 2003 |
|
|
|
|
|
| ||
| Additional paid-in capital |
|
113,155 |
|
|
113,155 |
| ||
| Retained deficit |
|
(127,236 |
) |
|
(118,038 |
) | ||
| Other accumulated comprehensive income: |
||||||||
| Cumulative translation adjustment |
|
(772 |
) |
|
(546 |
) | ||
| Total stockholders equity (deficit) |
|
(14,853 |
) |
|
(5,429 |
) | ||
| Total liabilities and stockholders deficit |
$ |
185,787 |
|
$ |
188,485 |
| ||
See accompanying notes
5
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands)
| Three Months Ended March 31, |
Six months Ended March 31, |
|||||||||||||||
| 2002 |
2003 |
2002 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Systems |
$ |
16,934 |
|
$ |
17,392 |
|
$ |
31,515 |
|
$ |
35,105 |
| ||||
| Services and finance |
|
40,025 |
|
|
38,668 |
|
|
80,063 |
|
|
78,607 |
| ||||
| Total revenues |
|
56,959 |
|
|
56,060 |
|
|
111,578 |
|
|
113,712 |
| ||||
| Cost of revenues: |
||||||||||||||||
| Systems |
|
11,097 |
|
|
9,859 |
|
|
20,184 |
|
|
19,884 |
| ||||
| Services and finance |
|
17,795 |
|
|
17,911 |
|
|
37,120 |
|
|
35,456 |
| ||||
| Total cost of revenues |
|
28,892 |
|
|
27,770 |
|
|
57,304 |
|
|
55,340 |
| ||||
| Gross margin |
|
28,067 |
|
|
28,290 |
|
|
54,274 |
|
|
58,372 |
| ||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
|
8,487 |
|
|
8,237 |
|
|
17,525 |
|
|
15,537 |
| ||||
| Product development |
|
4,602 |
|
|
4,090 |
|
|
8,251 |
|
|
7,816 |
| ||||
| General and administrative |
|
7,170 |
|
|
6,586 |
|
|
14,239 |
|
|
13,343 |
| ||||
| Total operating expenses |
|
20,259 |
|
|
18,913 |
|
|
40,015 |
|
|
36,696 |
| ||||
| Operating income |
|
7,808 |
|
|
9,377 |
|
|
14,259 |
|
|
21,676 |
| ||||
| Interest expense |
|
(3,506 |
) |
|
(3,339 |
) |
|
(7,563 |
) |
|
(6,798 |
) | ||||
| Equity gain (loss) in affiliate |
|
(200 |
) |
|
67 |
|
|
(400 |
) |
|
59 |
| ||||
| Foreign exchange gain (loss) |
|
44 |
|
|
12 |
|
|
(98 |
) |
|
13 |
| ||||
| Other income, net |
|
54 |
|
|
||||||||||||