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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2001
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
804 LAS CIMAS PARKWAY, SUITE 200
AUSTIN, TEXAS 78746
(Address of principal executive offices) (Zip Code)
(512) 328-2300
(Registrant's 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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at February 14, 2002
----- --------------------------------
Common Stock 1,000 shares
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COOPERATIVE COMPUTING, INC.
INDEX
<Table>
<Caption>
PAGE
----
FORWARD-LOOKING STATEMENTS 3
PART I - FINANCIAL INFORMATION 4
ITEM 1. - FINANCIAL STATEMENTS 4
COOPERATIVE COMPUTING HOLDING COMPANY, INC.
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2001 4
Consolidated Statements of Operations for the three months ended December 31, 2000 and
December 31, 2001 5
Consolidated Statements of Cash Flows for the three months ended December 31, 2000 and
December 31, 2001 6
Notes to Consolidated Financial Statements 7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS 14
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. - OTHER INFORMATION 14
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE 15
</Table>
2
FORWARD-LOOKING STATEMENTS
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
COMPANY'S 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 "MANAGEMENT'S 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
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
COOPERATIVE COMPUTING HOLDING COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<Table>
<Caption>
September 30, December 31,
2001 2001
------------- ------------
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 3,897 $ 1,606
Trade accounts receivable, net of allowance for doubtful
accounts of $4,353 and $6,517 at September 30, 2001 and 35,679 35,503
December 31, 2001, respectively
Inventories 2,391 2,758
Investment in leases 3,735 3,532
Deferred income taxes 5,991 5,991
Prepaid expenses and other current assets 5,126 4,891
--------- ---------
Total current assets 56,819 54,281
Service parts 2,868 2,425
Property and equipment, net 6,504 6,547
Long-term investment in leases 8,621 7,108
Capitalized computer software costs, net 12,927 13,070
Databases, net 12,350 12,204
Goodwill 100,572 87,159
Other assets 22,126 21,081
--------- ---------
Total assets $ 222,787 $ 203,875
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 9,458 $ 8,588
Payroll related accruals 12,923 11,916
Deferred revenue 12,153 13,276
Current portion of long-term debt 10,737 11,202
Accrued expenses and other current liabilities 8,791 12,338
--------- ---------
Total current liabilities 54,062 57,320
Long-term debt 166,020 155,848
Deferred income taxes and other liabilities 27,416 13,807
--------- ---------
Total liabilities 247,498 226,975
Redeemable Class A Common Stock, including $26,104 and $30,126 in
accumulated accretion at September 30, 2001
And December 31, 2001, respectively 51,104 55,126
Commitments and contingencies -- --
Stockholders' deficit:
Common Stock:
Par value $.000125, authorized 50,000,000 shares,
issued and outstanding 35,220,000 at
September 30, 2001 and December 31, 2001 4 4
Additional paid-in capital 87,934 87,934
Retained deficit (162,490) (165,181)
Other accumulated comprehensive income:
Cumulative translation adjustment (1,263) (983)
--------- ---------
Total stockholders' deficit (75,815) (78,226)
--------- ---------
Total liabilities and stockholders' deficit $ 222,787 $ 203,875
========= =========
</Table>
See accompanying notes
4
COOPERATIVE COMPUTING HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands)
<Table>
<Caption>
Three Months Ended
December 31,
---------------------
2000 2001
-------- --------
Revenues:
Systems $ 12,852 $ 14,545
Services and finance 39,606 40,074
-------- --------
Total revenues 52,458 54,619
Cost of revenues:
Systems 8,791 8,717
Services and finance 20,068 19,696
-------- --------
Total cost of revenues 28,859 28,413
-------- --------
Gross margin 23,599 26,206
Operating expenses:
Sales and marketing 10,398 9,038
Product development 4,316 3,649
General and administrative 10,129 7,069
-------- --------
Total operating expenses 24,843 19,756
-------- --------
Operating income (loss) (1,244) 6,450
Interest expense (4,870) (4,057)
Foreign exchange gain (loss) 38 (142)
Equity loss in affiliate -- (200)
Other income, net 57 337
-------- --------
Income (loss) before income taxes (6,019) 2,388
Income tax (benefit) expense (746) 1,058
-------- --------
Net income (loss) (5,273) 1,330
Accretion of redeemable stock (2,980) (4,022)
-------- --------
Net loss attributable to common stock $ (8,253) $ (2,692)
======== ========
Comprehensive loss:
Net income (loss) $ (5,273) $ 1,330
Foreign currency translation adjustment 209 280
-------- --------
Comprehensive income (loss) $ (5,064) $ 1,610
======== ========
</Table>
See accompanying notes
5
COOPERATIVE COMPUTING HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<Table>
<Caption>
Three Months Ended
December 31,
---------------------
2000 2001
-------- --------
OPERATING ACTIVITIES
Net income (loss) $ (5,273) $ 1,330
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 2,230 1,845
Amortization 6,091 2,820
Equity from partnerships (69) (79)
Lease loss provision 1,675 925
Provision for doubtful accounts 940 3,216
Equity loss in affiliate -- 200
Other, net 65 (103)
Cumulative translation adjustment 209 280
Changes in assets and liabilities
Trade accounts receivable (3,896) (3,040)
Inventories (1,011) (367)
Investment in leases 287 791
Prepaid expenses and other assets 658 583
Accounts payable (2,795) (870)
Deferred revenue 63 1,123
Accrued expenses and other current liabilities 1,853 2,340
-------- --------
Net cash provided by operating activities 1,027 10,994
INVESTING ACTIVITIES
Purchase of property and equipment (1,061) (975)
Capitalized computer software costs and databases (2,216) (2,254)
Purchase of service parts (512) (390)
Equity distributions from partnerships 104 40
-------- --------
Net cash used in investing activities (3,685) (3,579)
FINANCING ACTIVITIES
Proceeds from debt facility 12,800 --
Payment on long-term debt facilities (10,600) (9,706)
-------- --------
Net cash provided by (used in) financing activities 2,200 (9,706)
-------- --------
Net decrease in cash and cash equivalents (458) (2,291)
Cash and cash equivalents, beginning of period 679 3,897
-------- --------
Cash and cash equivalents, end of period $ 221 $ 1,606
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 2,025 $ 1,375
======== ========
Income taxes $ 174 $ 317
======== ========
Non cash financing activity:
Accretion of Class A Common Stock $ 2,980 $ 4,022
======== ========
</Table>
See accompanying notes
6
COOPERATIVE COMPUTING HOLDING COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Cooperative
Computing Holding Company, Inc. ("Holding", "CCITRIAD" or the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
December 31, 2001 may not be indicative of the results for the full fiscal year
ending September 30, 2002. Holding has no assets or liabilities other than (1)
its investment in its wholly owned subsidiary, Cooperative Computing, Inc.
("CCI") and (2) its Redeemable Class A Common Stock, the net proceeds of which
were contributed in full to a subsidiary; accordingly, these consolidated
financial statements represent the operations of CCI and its subsidiaries.
Certain amounts have been reclassified to conform to the current presentation.
2. LEASE RECEIVABLES
Activity in the following servicing liability accounts (recorded in other
liabilities in the Company's balance sheet) was as follows (in thousands):
<Table>
<Caption>
LEASE SERVICING RECOURSE
OBLIGATION OBLIGATION
--------------- ----------
Balance at September 30, 2001 $ 833 $ 5,950
Newly-created liabilities -- 1,002
Charges and lease write-offs (102) (297)
------- -------
Balance at December 31, 2001 $ 731 $ 6,655
======= =======
</Table>
3. INCOME TAXES
The Company recorded income tax expense for the three months ended December 31,
2001 at an effective rate of 44%, which is based on the Company's anticipated
results for the full fiscal year. The Company's income tax expense differs from
the amount computed by applying the statutory rate to income before income taxes
due to the impact of permanent differences.
An examination on the 1997 federal income tax returns was concluded during the
first quarter. As a result, certain income tax uncertainties were resolved and
the Company adjusted its tax liabilities by $13.5 million. As these
uncertainties related to the Triad Systems acquisition in 1997 the associated
goodwill was also reduced.
4. GOODWILL AND OTHER INTANGIBLES
The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective October 1, 2001. SFAS No. 142 discontinues the amortization of
goodwill and requires future periodic testing of goodwill for impairment. In
addition, SFAS 142 requires reassessment of the useful lives of previously
recognized intangible assets.
7
With the adoption of the Statement, the Company ceased amortization of goodwill
as of October 1, 2001. The following table presents the consolidated quarterly
results of the Company on a comparable basis (in thousands):
<Table>
<Caption>
Three Months Ended
December 31,
--------------------
2000 2001
------- -------
Reported net income (loss) $(5,273) $ 1,330
Goodwill amortization, net of tax 2,814 --
------- -------
Adjusted net income (loss) $(2,459) $ 1,330
======= =======
</Table>
Prior to March 31, 2002, the Company will complete a preliminary goodwill
impairment test as required. This test will involve the use of estimates related
to the fair market value of the business with which the goodwill is associated.
In the event an impairment loss resulting from the transitional impairment test
needs to be recorded, the charge would be shown as a cumulative effect of a
change in accounting principle. Subsequent impairment losses, if necessary,
would be reflected in operating income (loss) in the statement of operations.
In addition, the intangible asset established for trademarks and tradenames is
subject to amortization in accordance with SFAS No. 142. The gross carrying
amount related to trademarks and tradenames was $14,991,000 while the associated
accumulated amortization balance at September 30, 2001 and December 31, 2001 was
$6,834,000 and $7,058,000, respectively. The aggregate amortization expense was
$224,000 for the three months ended December 31, 2000 and 2001, respectively.
Estimated amortization expense for the next five fiscal years is approximately
$900,000 in 2002 and 2003, $860,000 in 2004 and $790,000 in 2005.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. The statement is effective for fiscal years beginning after June
15, 2002. The new statement establishes accounting standards for recognition of
a liability for an asset retirement obligation and the associated asset
retirement cost. The Company does not anticipate any material impact from this
statement on its financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The statement broadens the presentation of
discontinued operations to include more disposal transactions, and establishes a
single accounting model for long-lived assets to be disposed of by sale. FAS 144
is effective for financial statements for fiscal years beginning after December
15, 2001. Management does not expect any material impact from adoption of this
statement on the Company's financial position or results of operations.
8
6. SEGMENT REPORTING
The Company's business operations are organized into two divisions, the
automotive division and the hardlines and lumber division, as shown below.
Additionally, a breakdown by geographic area of total revenues and total assets
is disclosed. The Americas geographic area covers the United States and Canada.
The Europe geographic area covers the United Kingdom, Ireland and France.
<Table>
<Caption>
(Amounts in thousands)
Three Months Ended
December 31,
------------------------
2000 2001
--------- ---------
Systems revenues:
Automotive $ 4,843 $ 5,354
Hardlines and lumber 8,009 9,191
--------- ---------
Total systems revenues: 12,852 14,545
Services and finance revenues:
Automotive 25,451 24,991
Hardlines and lumber 14,155 15,083
--------- ---------
Total services and finance revenues: 39,606 40,074
Systems costs of revenues:
Automotive 3,598 3,599
Hardlines and lumber 5,193 5,118
--------- ---------
Total systems costs of revenues: 8,791 8,717
Services and finance cost of revenues:
Automotive 12,535 11,835
Hardlines and lumber 7,533 7,861
--------- ---------
Total services and finance cost of revenues: 20,068 19,696
Sales and marketing:
Automotive 5,997 4,166
Hardlines and lumber 4,401 4,872
--------- ---------
Total sales and marketing: 10,398 9,038
Product development:
Automotive 3,222 2,766
Hardlines and lumber 1,094 883
--------- ---------
Total product development: 4,316 3,649
General and administrative 10,129 7,069
Interest expense (4,870) (4,057)
Other income (expense), net 95 (5)
--------- ---------
Income (loss) before income taxes $ (6,019) $ 2,388
========= =========
Revenues:
Americas $ 51,143 $ 53,253
Europe 1,315 1,366
--------- ---------
Total revenues $ 52,458 $ 54,619
========= =========
Assets:
Americas $ 236,287 $ 198,991
Europe 5,154 5,108
--------- ---------
Total assets $ 241,441 $ 204,099
========= =========
</Table>
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the unaudited historical
consolidated financial statements and notes thereto, which are included
elsewhere herein.
General
CCITRIAD designs and provides management information systems and services for
the automotive parts aftermarket and the hardlines and lumber industry. The
automotive parts aftermarket consists of the production, sale and installation
of both new and remanufactured parts used in the maintenance and repair of
automobiles and light trucks. The hardlines and lumber industry consists of the
sale of products for residential and commercial building construction,
maintenance and repair, lawn and garden and agribusiness.
Historical Results of Operations
Three Months Ended December 31, 2001 Compared to Three Months Ended December 31,
2000
Revenues for the three months ended December 31, 2001 were $54.6 million, an
increase of $2.2 million, or 4%, from the $52.5 million recorded in the prior
year's period. The increase was primarily attributable to the hardlines and
lumber division, which had revenue growth of $2.1 million.
Systems revenues for the three months ended December 31, 2001 were $14.5
million, compared to $12.9 million for the three months ended December 31, 2000,
an increase of $1.6 million, or 13%. Systems revenues for the automotive
division for the three months ended December 31, 2001 increased $0.5 million to
$5.4 million, as compared to last year, an increase of 11%. The revenue increase
is primarily due to current customers upgrading their systems. Systems revenues
for the hardlines and lumber division for the three months ended December 31,
2001 increased $1.2 million to $9.2 million, or 15%, as compared to the three
months ended December 31, 2000. The increase is primarily due to increased
systems distributed through national accounts.
Services and finance revenues were $40.1 million for the three months ended
December 31, 2001, compared to $39.6 million for the three months ended December
31, 2000, an increase of $0.5 million, or 1%. For the three months ended
December 31, 2001, services and finance revenues for the automotive division
decreased $0.5 million from $25.5 million to $25.0 million, while the hardlines
and lumber division increased $0.9 million from $14.2 million to $15.1 million,
as compared to the three months ended December 30, 2001. The decrease in the
automotive division is primarily due to lower financing revenue. The hardlines
and lumber increase is primarily due to increased customer service revenue.
Cost of revenues was $28.4 million for the three months ended December 31, 2001,
compared to $28.9 million for the three months ended December 31, 2000, a
decrease of $0.5 million, or 2%. For the three months ended December 31, 2001,
cost of revenues for the automotive division decreased $0.2 million, or 1%, to
$15.9 million. Cost of revenues for the hardlines and lumber division decreased
$0.2 million, or 2%, to $12.5 million, respectively, as compared to the three
months ended December 31, 2000.
Cost of systems revenues was $8.7 million for the three months ended December
31, 2001, compared to $8.8 million for the three months ended December 31, 2000,
a decrease of $0.1 million, or 1%. Cost of systems revenues for the automotive
division for the three months ended December 31, 2001 remained constant at $3.6
million, as compared to the three months ended December 31, 2000. Cost of
systems revenues for the hardlines and lumber division for the three months
ended December 31, 2001 decreased $0.1 million to $5.1 million compared to the
three months ended December 31, 2000. Even though systems revenue increased, as
noted above, cost of systems sales remained comparable to last year due to cost
savings from outsourcing systems assembly.
10
Cost of systems revenues as a percentage of systems revenues for the automotive
division was 67% and 74% for the three months ended December 31, 2001 and 2000,
respectively. Cost of systems revenues as a percentage of systems revenues for
the hardlines and lumber division was 56% and 65% for the three months ended
December 31, 2001 and 2000, respectively. The percentage fluctuations are
primarily due to the factors described above.
Cost of revenues for services and finance was $19.7 million for the three months
ended December 31, 2001, compared to $20.1 million for the three months ended
December 31, 2000, a decrease of $0.4 million, or 2%. Cost of revenues for
services and finance for the automotive division for the three months ended
December 31, 2001 decreased $0.7 million to $11.8 million, compared to the three
months ended December 31, 2000. The decrease was due primarily to lower
personnel costs. Cost of revenues for services and finance for the hardlines and
lumber division for the three months ended December 31, 2001 increased $0.4
million to $7.9 million, compared to the three months ended December 31, 2000.
As a percentage of automotive services revenues, cost of revenues for services
and finance for the automotive division was 47% and 49% for the three months
ended December 31, 2001 and 2000, respectively. As a percentage of hardlines and
lumber services revenues, cost of revenues for services and finance for the
hardlines and lumber division was 52% and 53% for the three months ended
December 31, 2001 and 2000, respectively. The percentage fluctuations are
primarily due to the factors mentioned above.
Sales and marketing expense for the three months ended December 31, 2001
decreased $1.4 million to $9.0 million, as compared to the three months ended
December 31, 2000. Sales and marketing expense for the automotive division for
the three months ended December 31, 2001 decreased $1.8 million to $4.2 million,
as compared to the three months ended December 31, 2000. As a percentage of
automotive revenue, sales and marketing expense for the automotive division was
14% and 20% for the three months ended December 31, 2001 and 2000, respectively.
The decrease in the sales and marketing expense for the automotive division is
primarily due to lower personnel and travel costs. Sales and marketing expense
for the hardlines and lumber division for the three months ended December 31,
2001 increased $0.5 million to $4.9 million, as compared to the three months
ended December 31, 2000 primarily due to a higher provision for bad debt. As a
percentage of hardlines and lumber revenue, sales and marketing expense for the
hardlines and lumber division remained constant at 20% for the three months
ended December 31, 2001 and 2000, respectively.
Product development expenses for the three months ended December 31, 2001
decreased $0.7 million to $3.6 million, a decrease of 15%, as compared to the
three months ended December 31, 2000. As a percentage of revenue, product
development expenses were 7% and 8% for the three months ended December 31, 2001
and 2000, respectively. Product development expenses for the automotive division
for the three months ended December 31, 2001 decreased $0.5 million to $2.8
million. The decrease is primarily due to lower personnel costs. As a percentage
of automotive division revenue, product development expenses for the automotive
division were 9% and 11% for the three months ended December 31, 2001 and 2000,
respectively. Product development expenses for the hardlines and lumber division
for the three months ended December 31, 2001 decreased $0.2 million to $0.9
million mainly because of lower personnel costs. As a percentage of hardlines
and lumber revenue, product development expenses for the hardlines and lumber
division were 4% and 5% for the three months ended December 31, 2001 and 2000,
respectively.
General and administrative expenses for the three months ended December 31, 2001
were $7.1 million compared to $10.1 million for the three months ended December
31, 2000, a decrease of $3.0 million, or 30%. As a percentage of revenues,
general and administrative expense was 13% and 19% for the three months ended
December 31, 2001 and 2000, respectively. The decrease in general and
administrative expenses is primarily due to the adoption of the new accounting
guidance regarding amortization of goodwill.
Interest expense for the three months ended December 31, 2001 decreased $0.8
million to $4.1 million compared to the three months ended December 31, 2000.
See "Liquidity and Capital Resources."
As a result of the above factors, the Company experienced net income of $1.3
million for the three months ended December 31, 2001, compared to a net loss of
$5.3 million for the three months ended December 31, 2000, an improvement of
$6.6 million.
11
Liquidity and Capital Resources
As of December 31, 2001, the Company had $167.1 million in outstanding
indebtedness, a decrease of $9.6 million from September 30, 2001. The Company's
outstanding indebtedness under its Restated Senior Credit Facilities at December
31, 2001 included $23.0 million borrowed on the Company's $47.5 million senior
secured revolving credit facility under its Restated Senior Credit Facilities
and $42.6 million of senior secured term loans. Remaining indebtedness consists
of $100.0 million of Senior Subordinated Notes, due 2008, bearing interest at
9%, and $1.5 million that matures in varying amounts over the next five years.
The Company's Restated Senior Credit Facilities impose certain restrictions on
the Company, the most significant of which include limitations on additional
indebtedness, liens, guarantees, payment or declaration of dividends, sale of
assets, investments, capital expenditures, and transactions with affiliates. At
December 31, 2001, the Company was in compliance with these restrictions.
The $42.6 million term loan facility requires repayment of $2.6 million per
quarter in fiscal year 2002. The revolving credit facility is due on March 31,
2003. The Company anticipates refinancing its revolving credit facility prior to
maturity, although there can be no assurances that the Company will be
successful in refinancing its revolving credit facility on acceptable terms, if
at all. In total, all borrowings under the Restated Senior Credit Facilities are
scheduled to be repaid by March 31, 2004. A portion of the Company's debt bears
interest at floating rates; therefore, its financial condition is and will be
affected by changes in prevailing rates.
In addition to servicing its debt obligations, the Company requires substantial
liquidity for capital expenditures and working capital needs. The Company also
requires working capital as it funds its customer leasing operations and then
periodically produces working capital as it liquidates its lease portfolio
through discounting arrangements with banks and lending institutions. For the
three months ended December 31, 2001, the Company's capital expenditures were
$3.6 million, which includes $2.3 million for capitalized computer software
costs and databases. Additionally, the Company is obligated to pay a minimum
royalty of $1.0 million through 2011 for a software license that the Company
sublicenses to customers in the automotive industry.
The Company believes that cash flows from operations, together with the amounts
available under the Company's Restated Senior Credit Facilities, will be
sufficient to fund its working capital and debt service requirements (including
the funding of the customer leasing operations). The Company's ability to meet
its working capital and debt service requirements, however, is subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control. If the Company is not able to meet such
requirements, it may be required to seek additional financing. There can be no
assurance that the Company will be able to obtain financing from other sources
on terms acceptable to the Company, if at all.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Reference is made to Part II, Item 7A, "Quantitative and Qualitative Disclosures
About Market Risk" in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2001. There have been no material changes in the
quarter ended December 31, 2001.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in litigation arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
although there can be no assurances, the Company does not anticipate that the
resolution of these matters will have a material adverse effect on the Company's
results of operation or financial position.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
By consent of the sole shareholder of the Company in lieu of an
annual meeting, the following persons were elected as directors of
the Company on December 7, 2001: Thomas O. Hicks, Jack D. Furst,
Joe Colonnetta, A. Laurence Jones, James R. Porter, Glenn E.
Staats, Preston W. Staats, and Michael A. Aviles.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the three
months ended December 31, 2001.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 14th day of February 2002.
COOPERATIVE COMPUTING, INC.
By: /s/ GREG PETERSEN
--------------------------------------------
Greg Petersen
Senior Vice President, Finance and Administration
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