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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 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-19349
SOFTWARE SPECTRUM, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1878002
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2140 MERRITT DRIVE, GARLAND, TEXAS 75041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 840-6600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (l) 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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. [ ]
The aggregate market value on June 26, 1996 of the Registrant's voting
securities held by non-affiliates was $84,437,370.
At June 26, 1996, the Registrant had outstanding 4,357,441 shares of its Common
Stock, par value $.01 per share.
Documents Incorporated by Reference
There is incorporated by reference in Part III of this Annual Report on Form
10-K the information contained in the registrants' proxy statement for its
annual meeting of shareholders to be held August 15, 1996 and in Part II of
this Annual Report the registrants' annual report to shareholders for the 1996
fiscal year.
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FORWARD
Software Spectrum, Inc. (the "Company") or its representatives from
time to time may make or may have made certain forward-looking statements,
whether orally or in writing, including without limitation any such statements
made or to be made in the Management's Discussion and Analysis of Financial
Condition and Results of Operations, press releases and other information
contained in its various filings with the Securities and Exchange Commission.
The Company wishes to ensure that such statements are accompanied by meaningful
cautionary statements, so as to ensure to the fullest extent possible the
protections of the safe harbor established in the Private Securities Litigation
Reform Act of 1995. Accordingly, such statements are qualified in their
entirety by reference to and are accompanied by the following discussion of
certain important factors that could cause actual results to differ materially
from those projected in such forward-looking statements.
The Company cautions the reader that this list of factors may not be
exhaustive. The Company operates in a rapidly changing business, and new risk
factors emerge from time to time. Management cannot predict every risk factor,
nor can it assess the impact, if any, of all such risk factors on the Company's
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those projected in any forward-
looking statements. Accordingly, forward-looking statements should not be
relied upon as a prediction of actual results.
HIGHLY COMPETITIVE ENVIRONMENT
The desktop technology marketplace is intensely competitive. The
Company faces competition from a wide variety of sources including other
software suppliers, hardware manufacturers and resellers, technology service
providers, personal computer retail stores (including superstores), mail order
and other discount business suppliers and software publishers. Certain of the
Company's competitors, particularly software publishers, have substantially
greater financial resources than the Company. Because of the intense
competition within the microcomputer software channel, companies that compete
in this market, including the Company, are characterized by low gross and
operating margins. Consequently, the Company's profitability, particularly
during periods of rapid growth, is highly dependent upon effective cost and
management controls.
NEW DEVELOPMENTS AND RAPID TECHNOLOGICAL CHANGE
The market for the Company's products and services is characterized by
rapidly changing technology, evolving industry standards and frequent
introductions of new products and services. The Company's future success will
depend in part on its ability to enhance existing technology services and to
offer new services on a timely basis as well as its ability to attract and
retain skilled technical professionals required to deliver these services.
Additionally, the Company's business results can be adversely affected by
disruptions in customer ordering patterns and the impact of new product
releases.
CHANGING METHODS OF SOFTWARE DISTRIBUTION
The manner in which microcomputer software products are distributed
and sold is continually changing, and new methods of distribution may emerge or
expand. Software publishers may intensify their efforts to sell their products
directly to end-users, including current and potential customers of the
Company. Other products and methodologies for distributing software to users
may be introduced by publishers, present competitors or other third parties.
If microcomputer software suppliers' participation in these programs is reduced
or eliminated or if other methods of distribution of software, which exclude
the microcomputer software channel become common, the Company's business and
financial results could be materially adversely affected.
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RELIANCE ON FINANCIAL INCENTIVES, MARKETING FUNDS AND VOLUME DISCOUNTS
As part of its supply agreements with certain publishers and
distributors, the Company receives substantial incentives in the form of
rebates, cooperative advertising funds, market development funds and volume
purchase discounts. A reduction or discontinuance of these incentives,
discounts or advertising allowances could have a material adverse effect on the
Company's business and financial results.
DEPENDENCE ON VENDORS
A large percentage of the Company's sales are represented by popular
microcomputer business software products from a small number of vendors. In
fiscal 1996, approximately 55% of the Company's net sales were derived from
products published by Microsoft and Lotus. The Company has direct
relationships with these publishers. Most of the Company's contracts with
vendors are terminable by either party, without cause, upon 30 to 60 days'
notice. The loss or significant change of the Company's relationship with
these vendors could have a material adverse effect on the Company's business
and financial results. Although the Company believes the software products
would be available from other parties, the Company may have to obtain such
products on terms that would adversely affect its financial results.
VOLUME LICENSING AND MAINTENANCE AGREEMENTS
The Company serves as a designated services provider for volume
licensing and maintenance ("VLM") agreements between many of its customers and
major publishers of microcomputer software. VLM agreements are typically used
by customers seeking to standardize desktop software applications and
consequently involve significant quantities of unit sales for each customer.
Although unit volume sales are increased by sales through VLM agreements, lower
gross margins are generally realized on such sales as compared to sales of
full-packaged software products. If the Company were to continue to experience
an increase in the percentage of sales made pursuant to VLM agreements, gross
margins on the sale of software products are likely to decline.
ACQUISITION RISK
Between October 1995 and May 1996, the Company has completed three
acquisitions. Because these acquisitions have been made only recently, there
can be no assurance that the acquired businesses will achieve results
anticipated at the time of the acquisitions or be successfully assimilated by
the Company.
ECONOMIC CONDITIONS AND GEOGRAPHIC EXPANSION
The Company's business is sensitive to the spending patterns of its
customers, which in turn are subject to prevailing economic and business
conditions. Further, sales to large corporations have been important to the
Company's growth and its ability to continue its historic rate of growth is
dependent on its continued success in such market. The Company's recent
geographic expansion outside the United States involves currency exchange
risks, political risks and other risks of doing business abroad.
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PART I
ITEM 1. BUSINESS
The Company is a leading worldwide supplier of microcomputer business
software and technology services to organizations. The Company's customers are
primarily large entities including many multinational organizations with a
significant number of microcomputers. The Company also sells products and
services to mid-tier businesses through its telephone and catalog sales
efforts. The Company provides its customers with a wide variety of business
software products, volume software licensing services and technology support
and assists them in the implementation, deployment and ongoing support of their
personal computing strategies. The Company has established supply arrangements
with major microcomputer software publishers, including Microsoft, IBM/Lotus,
Novell, Attachmate, Symantec, and Corel. The Company markets software titles
for IBM, IBM-compatible and Macintosh microcomputers, including software for
all major operating systems such as Windows, Windows 95, OS/2, DOS, Novell
NetWare and Microsoft Windows NT.
The Company was incorporated under the laws of the State of Texas in
April 1983. The Company's principal facilities and its executive offices are
located at 2140 Merritt Drive, Garland, Texas 75041, and its telephone number
at that location is (214) 840-6600. Except where the context otherwise
requires, the term "Company" as used herein includes Software Spectrum, Inc.
and its subsidiaries.
OVERVIEW
The Company plays a major role in the microcomputer business software
industry as a leader in desktop technology focusing on providing microcomputer
business software and technology services to organizations. The Company's
strategy is to invest in its infrastructure, both in terms of people and
systems, to provide a high level of customer service while maintaining a
cost-efficient operating structure to enable the Company to competitively price
its products. The Company controls its costs in part by centralizing its
administrative support and customer service operations while utilizing a
geographically dispersed field sales force and technology services staff
strategically located in major business markets. The majority of the Company's
revenues are derived from sales to large organizations, including a significant
number of multinational entities.
The Company derives revenues from three primary areas including sales
of PC software to large organizations ("Large Account Sales"), sales to
mid-tier accounts ("TeleSales and Catalog Sales") and sales of technology
services through its Technology Services Group (the "Technology Services
Group").
The largest component of the Company's business is providing
microcomputer software, licenses and related services to large organizations
with over 1,000 PCs, including a majority of the companies in the Fortune 500.
Large Account Sales concentrates on building and expanding relationships
through face to face calling efforts throughout major global desktop technology
markets. The Company's field sales representatives market not only
microcomputer software products, but also the fee-based services available to
customers through the Company's Technology Services Group. Through its
strategically located, centralized operations centers in North America, Europe
and Asia/Pacific, the Company supports the global marketing efforts of the
Large Account Sales group.
TeleSales and Catalog Sales serves mid-tier businesses that have less
than 1,000 PCs through the Company's outbound calling and catalog sales
efforts. At March 31, 1996, this group consisted of approximately 70 people
located in Garland, Texas that market Software Spectrum's products and services
by phone to organizations throughout North America. In the fiscal year ended
March 31, 1996, revenues derived from the Telesales and Catalog Sales groups
accounted for approximately 17% of the Company's revenues.
The Company's Technology Services Group provides fee-based services,
including consulting, training and support for a number of specific
technologies including advanced networking infrastructure, enterprise messaging
and groupware, distributed client/server application development, enterprise
software management services, and Internet/Intranet services. Technology
Services Group's strategy is to focus on a limited number of technologies to
allow its personnel to develop in depth knowledge to support complex customer
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requirements. The Technology Services Group also provides fee-based telephone
support services. This service, known as SmartLine, is utilized by
organizations that choose to outsource their internal help desk function, as
well as by software publishers that desire to outsource their technical support
services. As of March 31, 1996, the Company had ten Technology Service Group
offices in North America and Europe. For the year ended March 31, 1996, the
Technology Service Group represented approximately 4% of the Company's
revenues. Following its recent acquisitions, the Company has increased the
number of Technology Service Group offices to twenty, including locations on
three continents. See "Customer Services--Global Operations" and "Fee-Based
Services--Technology Services Group" below.
The Company adapts its services to specific customer requests,
consults with customers on developing strategies to efficiently manage the
customer's investment in PC software and hardware and provides accurate and
timely delivery of products. The Company provides its customers with
information, advice and assistance through its marketing, sales and technical
staff on the wide range of procurement choices available. For customers
electing to standardize desktop software applications or otherwise take
advantage of right-to-copy arrangements, the Company provides volume licensing
and maintenance ("VLM") agreement services and support. Under VLM agreements,
the Company acts as a designated service provider to sell licensing rights
to software that permit customers to make copies of a publisher's software
program from a master diskette and distribute this software within a customer's
organization for a fee for each copy made. Maintenance agreements entitle
customers to all upgrades of certain products during a specified period of
time, typically two years. By utilizing VLM agreements, customers are able to
consolidate their worldwide purchases and acquire software under a single
master agreement for a given publisher from a global supplier such as the
Company. Among its other services, the Company offers on-site consultants for
large corporations, training and support of complex technologies, strategic
planning for information systems departments, software selection assistance and
determination of price and availability of hard to find software products.
The Company serves an important role in the software industry by
providing a service-oriented and cost-effective means for microcomputer
software publishers to market, sell, distribute and provide support for their
products. The services provided by the Company assist publishers by building
product awareness, marketing products directly on behalf of publishers to
businesses and other organizations, and providing additional technical support
and services for software products. The Company is also instrumental in the
selection, design and implementation of VLM programs for its customers. The
Company believes that maintaining its relationships with major publishers is
important to the Company's future growth and profitability. The Company will
often coordinate product introductions and marketing programs with publishers,
which may involve joint regional product seminars and cross-selling of selected
complementary products. Due to its volume of purchases, the Company believes
it is able to obtain favorable pricing, avail itself of marketing funds
provided by major publishers and work closely with publisher personnel on
various marketing and selling matters such as the introduction of new products,
programs and related service opportunities. As in prior years, certain major
publishers have continued to restrict the number of direct relationships
maintained with this channel, limiting such relationships to those entities,
such as the Company, with significant product sales, technology service
capabilities and marketing capabilities.
The Company has continued to experience significant growth in the sale
of software to its customers through VLM agreements. For fiscal 1996, sales
through VLM agreements represented approximately 46% of net sales of the
Company, compared to 35% and 15% of net sales for fiscal years 1995 and 1994,
respectively. Prior to fiscal 1994, sales pursuant to VLM agreements were not
significant. Since individual software packages and documentation may not be
provided to each user, and due to volume pricing incentives and lower
distribution costs, customers utilizing VLM agreements can purchase licenses
for software at a lower cost than by purchasing individual shrink-wrapped
software packages. In general, the Company receives lower gross margins on
sales made through VLM agreements.
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ACQUISITIONS
In October 1995, the Company acquired Software Alternatives, Inc., a
leading microcomputer software supplier to business organizations in Canada for
approximately $2.5 million. This acquisition significantly increased the
Company's market presence in Canada.
On April 2, 1996, the Company acquired The Essentially Group Limited
("Essentially Group"), a leading information technology company in Australia
and New Zealand that sells microcomputer software, hardware and related
technology services to organizations. Under the terms of the agreement, the
Company purchased Essentially Group for approximately $9 million, including a
combination of cash and Company stock. The acquisition provides the Company
with operations in Australia and New Zealand and a foundation from which to
expand throughout the Asia/Pacific region. The acquisition of Essentially
Group completes the Company's global operations strategy which is to have
centralized operations centers in North America, Europe and Asia/Pacific to
serve major desktop technology markets in key worldwide markets and provides
the Company with an immediate presence in the Asia/Pacific market.
On May 13, 1996, the Company acquired from Egghead, Inc., certain
operating assets of Egghead's corporate, government and education division
("CGE"). CGE is a leading supplier of microcomputer business software to
corporations, government agencies and educational institutions in North
America. Under the terms of the agreement, the Company purchased the CGE
division for $45 million. The purchase was funded with existing cash and bank
financing. In connection with the transaction, the Company assumed control of
CGE's North American sales force and leased Egghead's call center facility
located in Spokane, Washington, which serves several thousand customers.
Egghead retained all existing inventory, accounts receivable, and substantially
all of the liabilities of the CGE division.
With these acquisitions, the Company has become one of the world's
largest providers of microcomputer business software and technology services to
organizations. The Company's customer base includes an expanded group of
multinational customers which should enhance the Company's global growth.
Also, the larger customer base provides additional opportunities for growth of
the Technology Services Group. CGE's base of government and educational
customers creates a significantly larger presence in these two specific
customer segments for the Company, as well.
CUSTOMER SERVICES
Licensing, Procurement, Distribution and Deployment Services
The Company's customers can purchase software applications in a number
of different ways. VLM agreements, or right-to-copy agreements, allow a
customer to either purchase a license for each user in a transaction-based
process or track and periodically report its software copies, paying a license
fee for each copy made. The Company sells, supports and services the various
VLM arrangements currently utilized by software publishers. For customers, the
overall cost of using one of these methods of acquiring microcomputer software
is likely to be substantially less than the option of purchasing shrink-wrapped
full packaged software products.
Since each major publisher has chosen a different set of procedures
for implementing VLM agreements, businesses are faced with a significant
challenge to sort through all such alternatives and procedures to ensure that
they are utilizing the appropriate agreements, complying with the publishers'
licensing terms and properly reporting and paying for their software licenses.
In order to address the wide range of procurement choices available to its
customers, the Company provides information, advice and assistance to its
customers relating to their procurement decisions through the Company's
marketing, sales and technical staff and through its publications. See
"- World Wide Web Site, Publications and Software Library" and "Sales and
Marketing."
Increasingly, large corporate customers are electing to standardize
desktop applications and coordinate their enterprise-wide microcomputer
management responsibilities. To help these customers develop or improve
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their microcomputer software management programs, the Company developed a
software management process that is called the Assurance Process. The Assurance
Process and corresponding implementation services allow these customers to
effectively utilize the benefits associated with VLM programs. Assurance
provides the Company's customers with a methodology for evaluating the
individual customer's microcomputer software management process and analyzing
issues in implementing VLM programs offered by various publishers. The service
options available from the Company are designed to assist the customer in
implementing its software management plan, including internal distribution
services, communication with end users, telephone support and reporting and
compliance under VLM arrangements.
The Company's licensing consultants are Software Publishing
Association (SPA) certified software managers that are trained to provide
customers with advice in the evaluation of various VLM programs offered by
publishers and customer activity analysis. In addition to the Company's
extensive experience dealing with VLM agreements, it has continued to invest in
technology based systems to support the special requirements necessary to
service VLM agreements for its customers. In fiscal 1996, the Company
developed SOLO 95, a custom, client/server based system which provides
individualized customer contract management data, assists customers in
complying with VLM agreements, and provides customers with necessary reporting
mechanisms.
The Company provides disk duplication services for a number of
customers that have purchased software through VLM agreements. The Company
will duplicate diskettes for software purchased through VLM agreements on
behalf of customers, may bundle this software with a customer's internal
documentation and software packages and third party software manuals and will
distribute these diskettes and bundles to a customer's various sites and
locations.
A component of the Company's procurement services is its ability to
provide timely delivery of its products to customers by maintaining a
sufficient inventory of the most popular software products. In May 1996, the
Company relocated its Chicago product fulfillment operations to Louisville,
Kentucky, and the Company plans to consolidate the remainder of its United
States distribution operations in Louisville during July 1996. Stocked
products are generally shipped the same day that the Company receives a
customer order. Most of the Company's products are ordered by the customer's
procurement or information systems department and often are billed to the
department of the end-user, which may be located at a different site than the
procurement or information systems department. The Company provides customers,
upon request, open-order status and purchase activity reports formatted to each
customer's specifications. Also, the Company's electronic data interchange
("EDI") capabilities allow customers to submit orders (or other data) from
their computer systems to the Company via modem. EDI improves order accuracy
and reduces administrative costs for corporate customers and the Company.
Global Operations
Under VLM agreements, multinational customers can consolidate their
worldwide volume purchases of software under a single master agreement for a
given publisher. The Company is able to sell software through these VLM
programs globally. To address this opportunity, as well as the international
growth in the demand for microcomputer software and technology services, the
Company began its global expansion in 1993.
In 1993, the Company opened a Canadian office in Toronto and in 1994
established a European headquarters in The Hague and an operations center in
Dublin. The Company augmented European operations by establishing a Technology
Services Group office in London in 1996.
The Company's acquisition of Essentially Group in April 1996
significantly extends Software Spectrum's global reach by providing an
immediate presence in the Asia/Pacific region. Essentially Group's established
customer base, management team and services capabilities provide the Company
with many of the key resources needed to permit further expansion throughout
the Asia/Pacific region. The Essentially Group acquisition completes the
Company's strategy to provide operations centers in North America, Europe and
Asia/Pacific. Today, Software Spectrum does business in over 40 countries,
provides support services in 15
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languages, invoices customers in many local currencies, and can provide
consolidated worldwide reporting to customers.
Fee-Based Services
Technology Services Group
Through its Technology Services Group, the Company provides fee-based
technical services including consulting, training and support services. The
Company's service offerings are centered around a number of specific
technologies including advanced networking infrastructure, enterprise messaging
and groupware, distributed client/server application development, enterprise
software management ("ESM") services and Internet/Intranet services. These
technologies address customers' needs (i) to provide access to information at
sites throughout the world within their organizations; (ii) to enable employees
at different locations to communicate with each other in a cost-efficient
manner; (iii) to provide more flexible access to mission critical information;
and (iv) to provide strategies for controlling the rising cost of supporting
distributed computing.
As of March 31, 1996, the Company had established Technology Services
Group offices in Dallas, Chicago, Atlanta, Houston, San Francisco, Los Angeles,
Minneapolis, New York City, Toronto and London. The Company has also entered
into an agreement with Delfin Systems, Inc., a Washington DC-based, privately
held developer and supplier of information systems, products and services for
government and commercial markets, to provide technology services on behalf of
the Company to the Company's customers in the Mid-Atlantic region of the United
States. Following its recent acquisitions, the Company has increased the
number of Technology Services Group offices to twenty, and in addition to North
America and Europe, it now has locations in Australia and New Zealand. The
Company provides messaging and information-sharing solutions to provide a
stable communications platform for enterprise-wide connectivity.
The Company is a Microsoft Solutions Provider, Lotus Notes Business
Partner and Novell Platinum Reseller and is authorized to sell, support, train
and develop applications in many complex products. The Company's advanced
networking infrastructure design capabilities cover a broad range of topologies
and protocols including local area and wide area networks and the ability to
design interfaces to many mainframes and minicomputers. The Company provides
messaging and information-sharing solutions to provide a stable communications
platform for enterprise-wide connectivity.
The Company's ESM services are designed to help customers with the
evaluation, implementation, operation, and support of electronic desktop
management solutions, such as Microsoft's Systems Management Server and
Symantec's Norton Administrator for Networks. These services help customers
manage and support their software assets at various sites from a single
location. Utilizing these electronic software distribution products and ESM
services, customers can inventory hardware and software assets, perform
software product distribution, and provide electronic help desk services.
In addition, the Company offers education and technical training
opportunities for information technology professionals in the various
technologies supported by the Company, with such seminars and training provided
at the customer's or the Company's location.
The Company also provides fee-based telephone support services on
behalf of software publishers and to end users of business customers that
choose to fully or partially outsource their internal help desk function on a
number of technologies, including client/server applications and network
operating systems. The Company's SmartLine personnel utilize resources and
capabilities equivalent to those described under the caption "Technology
Support Center" below.
Fulfillment Services
During fiscal 1995 and 1996, the Company provided fulfillment services
to a major customer. In February 1996, the Company discontinued its
fulfillment services.
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Electronic Services and Capabilities
The Company offers a number of services and is implementing systems to
support its customers' gradual migration toward electronic commerce and
electronic software distribution ("ESD").
ESD takes two forms; the first is distributing software within an
organization, via a company's internal network. ESD technology within the
large organization is a means to permit an organization to reduce the total
cost of ownership of desktop computing assets. ESD can provide hardware and
software asset management, remote desktop support and automatic installation of
operating systems, packaged and customer applications, and their related
upgrades, to the desktop.
Through its Technology Services Group, the Company supplies enterprise
software management services for customers who adopt ESD within their
organizations. These services help manage distributed PC environments through
use of products such as the Microsoft Systems Management Server and Symantec's
Norton Administrator for Networks.
The second form of ESD is between businesses via electronic links such
as the Internet. This form of ESD supports the fast, convenient delivery of
software products. The Company strongly endorses recent announcements allowing
software applications to be made available for ESD. The Company intends to
participate in this method of distribution as communication technology
improvements enable this form of ESD to become more widely used.
The Company opened its World Wide Web site on the Internet in 1995 to
provide customers with links to useful information about the Company, its
products and services and publishers the Company represents. The Company also
offers an Internet online catalog that includes thousands of products. This
electronic catalog provides a wide range of products for customers to choose
from. The Internet catalog provides information about products through a
comprehensive search engine, extensive product descriptions, and third-party
reviews.
The Company has invested in new technologies throughout the years.
The Company's continuing investment in electronic software distribution and
electronic commerce evidences its commitment to meeting the changing needs of
customers.
Maintenance and Upgrade Services
A number of customers who have elected to purchase software licenses
through VLM agreements have also purchased maintenance which allows customers
to receive new versions, upgrades or updates of software products during the
maintenance period in exchange for a specified annual fee, often paid to the
Company in quarterly installments. Upgrades and updates are revisions to
previously published software that improve or enhance certain features of the
software and correct any errors found in previous versions.
The Company believes it offers several advantages to its customers in
the upgrade process. Customers that have not elected to purchase maintenance
agreements are still able to upgrade multiple units of specific products, often
bypassing cumbersome publisher requirements. The Company stocks a number of
upgrade products and provides detailed tracking and reporting of customer
upgrade purchases. Upgrades are sold on the same basis and with the same
payment terms as other products sold by the Company.
Seminars
Seminars are an important means by which the Company markets and sells
products and services. Through these seminars, businesses are able to acquaint
members of their organizations with new product offerings and upgrades and
receive information concerning trends in microcomputer technology and the
industry in general. The Company's seminar series includes events addressing
VLM arrangements and electronic distribution, as well as strategic
implementation of client/server and other advanced
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product technologies and solutions. A portion of the marketing funds
the Company receives from various publishers is used to defray the costs of
presenting these seminars that generally are conducted in conjunction with
publisher representatives. Members of the Company's marketing and support
staff present and coordinate all aspects of these seminars. In fiscal 1996, the
Company presented 160 seminars in over 65 major metropolitan areas throughout
North America and in Western Europe.
World Wide Web Site, Publications and Software Library
The Company's World Wide Web Site on the Internet provides customers
with information concerning the Company, its products and services, and the
publishers represented by the Company. The Company also provides information
through various Company publications. A portion of the marketing funds
provided to the Company by publishers is used to offset the Company's cost of
producing these publications. The Company publishes newsletters, service and
product brochures, product catalogs, and also provides other timely information
coincident with major product releases. The Company's "Micronews" is a monthly
newsletter distributed, both electronically via the Internet and in hard copy,
that features new product announcements and news articles on current industry
topics and technical white papers.
The Company distributes a semi-annual publication which includes more
in-depth analyses of various product offerings called the "Licensing and
Software Management Guide." This publication provides comprehensive
information on the many facets of software licensing. The Guide provides the
purchasing requirements and qualification restrictions of the numerous VLM
publisher programs. Issues such as concurrent licensing and copying software
on home or portable computers are identified. Because of the potential savings
a corporation can realize by utilizing alternative procurement methods,
customers have displayed a significant amount of interest in this publication.
In addition, the Software Publishers Association utilizes this publication in
connection with its certified software manager course curriculum.
The Company offers a software evaluation library which enables a
customer to evaluate software programs without charge or obligation. The
Company's software evaluation library consists of many popular software
packages marketed by the Company, which are provided as demonstration copies.
Upon request, customers may use the demonstration copies in order to assist
them in making a purchasing decision.
The Company also markets to mid-tier businesses by publishing
merchandising catalogs which offer a large range of software and peripheral
products. In addition to its Internet catalog described above, the Company's
catalog operations include plans to publish over 5 million catalogs in fiscal
1997. See "Electronic Services and Capabilities" above.
Technology Support Center
The Company's Technology Support Center in Garland, Texas provides
support for customers in three principal business categories. First, technical
support personnel handle support calls from customers' technical personnel for
escalation services. The staff in the Company's Technology Support Center is
experienced in all major microcomputer software titles and can provide support
for software products running on most major microcomputer operating systems and
environments, including Windows, Windows 95, DOS, Macintosh, OS/2, Microsoft
Windows NT, Novell Netware and other network operating systems. Second, the
Company provides technical support to large organizations to augment or replace
the customer's internal help desk capabilities for the customer's employees.
This service has various support options from desktop application products to
advanced technical products to enterprise software solutions. The Company's
SmartLine service is designated as a Microsoft Authorized Support Center (one
of eight in the United States), a Lotus Premium Business Partner and a Novell
Authorized Service Center. Third, the Technology Support Center contracts with
software publishers, hardware providers and OEM manufacturers to provide
telephone support on their behalf to customers. The Technology Support Center
includes large capacity file servers, multiple CD ROM databases and other
sources that enable the Company's support personnel to recreate a customer's
individual problem, develop a solution and guide the customer through the
solution in a step-by-step basis.
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The Company's software evaluation library and demonstration equipment
allow the Company's staff to test applications before recommending a solution
or product. The Company's Technology Support Center operates an electronic
bulletin board that allows customers to download patch disk information.
Customers may also utilize the Internet as the electronic means to forward
support questions and receive answers from the Company.
SALES AND MARKETING
The Company performs sales and marketing activities for its large
account customers through its account executives, customer service
representatives and its marketing and support staff. The Company organizes
account management teams to service and support each of its major customers.
Generally each team consists of one account executive and a team of customer
service representatives. These teams are supported by technical, marketing and
sales support personnel located at one of the Company's operations centers.
Account executives are assigned a specific territory and/or specific
accounts by the Company, which generally includes major metropolitan areas in
one or more countries, states or provinces. Account executives market the
overall service and price advantages of using the Company as the customer's
preferred software and services supplier. The account executive concentrates on
generating new customer relationships, maintaining and improving existing
customer relationships and increasing the volume of software and services
provided to large corporate customers.
Account executives work directly with procurement managers, management
information system managers and computer support managers of existing and
potential customers to identify the specific needs of each customer and to
facilitate the purchase of software products and services by the customer's
organization. Account executives maintain close contact with customers in
order to provide them with timely communications and assistance with any
special or strategic requests. Account executives' responsibilities include
providing customers with useful and relevant product information to assist the
customer in its selection of software available for the desired application,
providing customers with information and guidance on software procurement
options including VLM agreements, implementation and deployment of software
under VLM agreements, assisting customers in identifying and defining technical
service needs, and planning product presentations and seminars by
representatives of the Company and publishers. For national and international
accounts, there may be several account executives working with the customer in
different parts of North America, Europe and Asia/Pacific with all efforts
being coordinated by a designated national or international account executive.
The number of accounts handled by each account executive depends on the
relative size of the accounts and the level of service required by each
customer within the territory assigned to the account executive.
The Company's licensing consultants work with the Company's customers
to provide advice and consultation on VLM programs and to complete detailed
customer account analysis and reporting. The Company also assigns a team of
customer service representatives to each account. Customer service
representatives, who are based primarily at the Company's operations centers
located in Garland, Spokane, Toronto, Dublin and Sydney handle all aspects of
the day-to-day customer account servicing, including common presale technical
questions, customer order placement, order status inquiries, requests for a
demonstration product for evaluation and searches for hard-to-find products.
This enables customer service representatives to develop close relationships
with individuals within the customer's organization and to better service them
by being familiar with their account. By assigning a specific team of customer
service representatives to specific customers, the Company adds additional
direct contacts that reinforce customer relationships.
To solicit business from mid-tier organizations, the Company utilizes
its TeleSales and Catalog Sales group. While product price and delivery terms
are key factors in mid-tier organization markets, the Company also provides a
broad range of VLM agreement support and services and technical services to
this category of customers. Initial contact and sales are made typically
through telephone inquiries.
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SUPPORT SYSTEMS
The Company has been converting its operating and financial reporting
systems to the client/server environment. The conversion is expected to be
substantially completed during fiscal 1997. The Company has developed certain
proprietary support systems that facilitate the delivery of product and
services to its customers. The Company has invested in technology based
systems to support the special requirements necessary to service VLM agreements
for its customers. SOLO 95, a custom, client/server-based system, provides
individualized contract management data, assists customers in complying with
the terms of their VLM agreements and provides customers with necessary
reporting mechanisms. Using individualized data in SOLO 95 in conjunction with
the Company's contract management database, the Company representatives can
guide a customer through the various purchasing options and assist in
administering VLM agreements. SOLO 95 also provides the Company's customer
service representatives with customer profile and account status, order status
information, and product pricing and availability details. The Company's
on-line purchase order entry system provides its purchasing department with a
daily queue of orders to be placed based on current inventory levels, daily
sales orders, and pre-established minimum and maximum levels of inventory for
each part number. Once purchase orders are placed with a vendor, the Company's
accounting records are automatically updated and orders are held pending
on-line receipt, using a bar code receiving system.
PRODUCTS
In addition to selling, supporting and servicing the various VLM
arrangements available from software publishers, the Company offers and
maintains an inventory of approximately 1,600 business software titles, ranging
in price from approximately $10 to $35,000. The Company also stocks a variety
of peripheral products and accessories. Although the Company maintains an
inventory of only the most popular products, the Company offers more than
38,000 different software and peripheral products.
The software applications offered by the Company include major
business programs such as spreadsheet, word processing, electronic mail,
groupware, database, and graphics, as well as operating systems, utilities and
languages. For the fiscal year ended March 31, 1996, the top 20 software
titles sold by the Company represented approximately 50% of the Company's net
sales.
The Company maintains a database of hard-to-find software required by
customers as well as software available from the Company's major publishers and
vendors. The Company continually adds to its database, information on these
types of products and their sources of supply in order to expedite customer
requests.
The Company also sells hardware, peripheral products and accessories,
such as modems, expansion cards and keyboards. The Company expects that for the
foreseeable future, sales from software products will continue to be its
primary source of revenues.
DISTRIBUTION AND INVENTORY CONTROL
In May 1996, the Company relocated its Chicago distribution operations
to Louisville, Kentucky. The Company plans to consolidate the remainder of its
United States distribution operations to Louisville in July 1996. The Company
generally ships products that it carries in inventory the same day the Company
receives the customer order utilizing independent carriers. During its fiscal
year ended March 31, 1996, the Company shipped an average of 1,500 orders per
day. The Company bar codes every product in its inventory in order to reduce
the risk of shipping errors and to provide better inventory control. The
Company conducts a physical inventory three to four times each year and seeks
to maintain strict control of inventories to minimize the risk of product
obsolescence and to maximize inventory turns. As of March 31, 1996, the Company
held approximately 25 days of anticipated sales of shippable products in
inventory, based on data from the immediately preceding monthly period. On
average, the Company turns its inventory twelve times per year. The Company
has exchange and return privileges with the major vendors with which it does
business. These arrangements reduce the risk of loss resulting from obsolete
goods and damaged merchandise. As of March 31, 1996, the Company did not have a
significant order backlog.
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CUSTOMERS
In fiscal 1996, the Company handled more than 6300 active customer
accounts. Following its recent acquisitions, the Company's customer base has
approximately doubled. The Company's customer base includes corporations,
government agencies, non-profit institutions and other business entities.
Fortune 1000 companies and other large organizations in foreign countries
comprise the Company's primary customer base. The Company's recent
acquisitions greatly increased the government agency segment of the Company's
business and established a presence for the Company in the educational market.
The Company also sells software to mid-tier organizations through its TeleSales
and Catalog Sales group. Sales contracts with large customers for the
procurement of products generally cover a one to three year period subject to
the customers' rights to terminate the contract upon notice. These contracts
usually include provisions regarding price, availability, payment terms and
return policy. Contracts covering technology services vary in length depending
on the services to be provided and are generally terminable upon 30 days'
notice. Standard payment terms with the Company's customers are net 30 days
from the date of invoice or net 10 days in the case of summary periodic
billings to customers. Although customer arrangements vary, the Company
generally affords its customers with product return and exchange privileges,
which are typically limited to 30 to 60 days following shipment, with respect
to unopened stocked products and defective or damaged products. In the fiscal
year ended March 31, 1996, no single customer represented more than 3% of the
Company's revenues. The Company does not believe that the loss of any single
customer would have a material adverse effect on its business.
The Company recognizes revenue from products sold at the time the
product is shipped to or a license is purchased by the customer. The Company
believes that returns of products by customers are not, and have not
historically been, material. Maintenance and services revenue is recognized
ratably over the contractual period or as the services are provided.
VENDORS
Substantially all of the Company's sales from software are derived
from products purchased from publishers and distributors. The decision whether
to buy products directly from publishers or through distributors is determined
on a vendor-by-vendor basis based on cost, availability, return privileges,
demand for a particular product and the benefits of a close strategic
relationship. For the fiscal year ended March 31, 1996, approximately 75% of
the Company's sales represented products purchased from its ten largest
vendors. For the fiscal years ended March 31, 1996 and 1995, products from
Microsoft accounted for approximately 44% and 39% of net sales, respectively,
and products from Lotus accounted for approximately 10% of net sales in each
year. In fiscal 1996, Microsoft and Lotus were the Company's two largest
vendors.
The Company has contractual relationships with all its major vendors
covering price, payment terms and return privileges. These contracts are
non-exclusive and non-territorial and are generally terminable by either party
without cause upon 30 to 60 days' notice. The Company's contracts with its
major vendors are generally for one or two year terms, and the majority contain
no provision for automatic renewal.
Publisher contracts generally permit the Company to return or dispose
of products in exchange for credit against future purchases in the event that a
product is defective or made obsolete, whether through the development of
upgrades or new releases or otherwise. In addition, such contracts permit the
Company to stock balance its inventory, generally on a quarterly basis, by
allowing returns for credit against future purchases of a limited portion
(usually 3% to 15%) of the products previously purchased by the Company. The
agreements also typically provide that the Company may obtain credit against
future purchases if the vendor subsequently lowers its prices on products that
have been purchased by the Company within a 30 to 90 day period prior to such
price decrease. The purpose of the foregoing stock balancing and price
protection provisions is to permit the Company to maintain an inventory of
products that is sufficient to meet its customers' needs while reducing the
obsolescence risks associated therewith. Such contracts do not typically
require the Company to ensure end-user compliance with its publishers'
licensing and copyright or patent right protection provisions. Certain of the
Company's contracts with vendors provide for early payment discounts.
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Under the terms of its vendor contracts, the Company is not generally required
to meet any minimum purchase or sales requirements, except to the extent that
the Company's level of purchases or sales may affect the amount or availability
of financial incentives, advertising allowances and marketing funds. The
reduction in amount, discontinuance of or the Company's inability to meet
requirements established by vendors for achieving financial incentives,
advertising allowances and marketing funds could have an adverse effect on the
Company's business and financial results. The material terms of the Company's
contracts with Microsoft and Lotus do not differ in any material respect from
the comparable terms of the Company's arrangements with other major publishers.
COMPETITION
The microcomputer software market is intensely competitive. The
Company faces competition from a wide variety of sources, including traditional
software resellers, hardware dealers and aggregators and large systems
integrators. Current competitors from the software reseller category would
include Stream International, Inc. The Company believes that it possesses a
number of significant differentiating features from this group. These features
include the Company's operations presence in major global microcomputer
business markets, its extensive technology services capabilities and offerings,
extensive VLM services, and custom computer systems that support the Company's
business and knowledgeable, industry-experienced personnel.
Newer competitors include hardware dealers and aggregators such as
VanStar and Entex. These companies are also competing in the large
organization market with marketing efforts to provide customers with complete
software and hardware services. Other competitors include large systems
integrators such as DEC and EDS. These companies do have a global presence and
technology services. The Company believes its VLM services, custom computing
systems specifically designed to support the Company's business and
knowledgeable industry-experienced personnel are differentiating factors in
this group of competitors.
The manner in which microcomputer software products are distributed
and sold is continually changing and new methods of distribution may emerge or
expand. Software publishers may intensify their efforts to sell their products
directly to end-users, including current and potential customers of the
Company. In the past, direct sales from software publishers to end-users have
not been significant, although end-users have traditionally been able to
purchase upgrades directly from publishers. From time to time some publishers
have instituted programs for the direct sale of single large order quantities
of software to major corporate accounts, and the Company anticipates that these
types of transactions will continue to be used by various publishers from time
to time in the future. The Company could be adversely affected if major
software publishers successfully implement programs for the direct sale of
software through volume purchase agreements or other arrangements intended to
exclude the channel. The Company believes that the total range of services it
provides to its customers cannot be easily substituted by publishers,
particularly because publishers do not offer the scope of services or product
offerings required by most of the Company's customers. However, there can be no
assurance that publishers will not increase their efforts to sell substantial
quantities of software directly to end users. In addition, the acceptance of
VLM agreements by organizations as a method to purchase software has continued
to expand over the past year. With a few exceptions for small licensing
transactions, publishers generally permit VLM agreements to be offered only by
large suppliers such as the Company, who have the capability to service and
support these volume programs. Should publishers permit others to sell VLM
agreements for higher volume transactions, or should additional competitors
develop the capabilities required to service and support large licensing
programs, the Company's competitive advantage could be negatively impacted. If
the channel's participation in VLM agreements is reduced or eliminated or if
other methods of distribution of software become common, the Company's business
and financial results could be materially adversely affected. Management
believes that greater acceptance of VLM agreements will be one of the factors
that over time will lead to electronic distribution of software. Microsoft
recently announced that it would allow desktop software applications to be made
available through electronic distribution by certain selected channel partners.
The Company intends to participate in this method of software distribution as
communications technology improvements permit electronic software distribution
to be made efficiently. The Company's continuing investment in electronic
software distribution and electronic commerce reflects the Company's commitment
to meeting the changing needs of its customers. There
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continues to be an increase in the sale of microcomputers to home and small
businesses with many popular software application programs bundled with the
hardware. If bundling of software with hardware becomes accepted by large
corporate customers in the future, such bundling could have an adverse effect
on the Company's business.
EMPLOYEES
As of March 31, 1996, the Company had approximately 835 employees in
North America and Europe. The Company has entered into non-competition
agreements and/or non-solicitation agreements with substantially all of its
sales and Technology Services Group personnel. None of the Company's employees
is represented by a union. Following its recent acquisitions, at June 15,
1996, the Company had approximately 1,400 permanent and temporary employees
worldwide.
ITEM 2. PROPERTIES
The Company currently leases approximately 130,000 square feet of
space in Garland, Texas (a suburb of Dallas) for its corporate headquarters.
As of March 31, 1996, the Garland leases had a remaining term of 48 months with
monthly payments of approximately $44,000. In connection with its acquisition
of the CG&E division, the Company entered into a three year lease at an initial
monthly rental of $32,500 increasing to $40,000 in the third year for its call
center operations (approximately 54,000 square feet) in Spokane, Washington.
The Company has recently relocated its Chicago distribution facility to
Louisville, Kentucky where the Company leases approximately 62,500 square feet
of space for approximately $18,000 per month. The term of the Louisville lease
is three years. Within North America, the Company also leases office space in
various markets for its Technology Services Group.
With respect to its European-based operations, the Company currently
leases space in Dublin, The Hague and London. In Asia/Pacific, the Company
leases office space in seven markets.
ITEM 3. LEGAL PROCEEDINGS
On March 4, 1994, a lawsuit was filed in the United States District
Court for the Northern District of Texas against the Company and Judy O. Sims
by Rebecca Lovelace and Ira Newman. The suit was filed as a class action on
behalf of all persons who purchased common stock of the Company from June 21,
1993 to January 26, 1994. On July 5, 1994, a lawsuit was filed against the
Company and Ms. Sims by Gerald Klein as a class action on behalf of all persons
who purchased the Company's common stock from June 21, 1993 through June 13,
1994. Each of these lawsuits alleged that the defendants violated the Federal
securities laws in connection with the Company's quarterly earnings
announcement on January 26, 1994, and the events and circumstances surrounding
the Company's dismissal of Coopers & Lybrand LLP as its Independent Auditor in
June 1994.
On February 23, 1995, the District Court entered an order
consolidating the two cases. On March 10, 1995, the District Court entered an
order granting the Company's and Ms. Sims' motions to dismiss. On April 2,
1996, the United States Court of Appeals for the Fifth Circuit affirmed the
District Court's order dismissing the plaintiffs' claims with prejudice.
The Company is involved in various claims and legal actions arising in
the ordinary course of business. The ultimate disposition of these matters
will not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended March 31, 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over the counter and is listed on
the Nasdaq National Market System under the symbol SSPE. The information
appearing on page 31 of the Company's 1996 Annual Report to Shareholders under
the caption "Quarterly Financial Data and Market Information" is incorporated
herein by reference.
On June 18, 1996 there were 162 holders of record (representing
approximately 2,000 beneficial owners) of the Company's common stock. The
Company has never paid cash dividends on its common stock. The Board of
Directors presently intends to retain all earnings for use in the Company's
business and does not anticipate paying cash dividends in the near term.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears on page 17 of the
Company's 1996 Annual Report to Shareholders under the caption "Selected
Consolidated Financial Data", which information is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information appearing on pages 18 through 21 of the Company's 1996
Annual Report to Shareholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information appearing on pages 22 through 31 of the Company's 1996
Annual Report to Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective June 11, 1994, the Company dismissed its prior independent
accountants, Coopers & Lybrand LLP ("C&L") and retained Grant Thornton LLP
("Grant Thornton") as its new independent accountants. C&L's reports on the
Company's financial statements for the fiscal years ended March 31, 1993 and
March 31, 1992 contained no adverse opinion or a disclaimer of opinion, and
were not qualified or modified in any respect. The decision to change
accountants was approved by the Company's Audit Committee and its Board of
Directors.
The Company was notified by C&L on the evening of May 16, 1994, that
C&L needed additional time to complete its audit procedures. At that time, C&L
also requested an attorney's letter concerning legal release of liabilities.
As a result, the Company's scheduled May 17, 1994 announcement of its financial
results for the fiscal year ended March 31, 1994 was delayed. During the
subsequent weeks, C&L continued to work on completing its audit and had been in
discussions with the Company concerning the appropriate accounting treatment
relating to certain credits recorded primarily to sales and cost of sales
during the fiscal year ended March 31, 1994. At a meeting between the Company
and C&L on May 31, 1994, C&L suggested that the Company might want to review
with another independent accounting firm the appropriate accounting treatment
for these credits. On June 1, 1994, the Company retained Grant Thornton to
analyze the accounting issues relating to these credit items. On June 2, 1994,
Grant Thornton met privately with C&L to ensure there
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was a mutual understanding of the facts and circumstances relative to the
credit items. On June 6, 1994, Grant Thornton met again with C&L to review and
discuss the appropriate accounting treatment for these items. After further
research, discussion and consultation, the Company determined that it disagreed
with C&L's position. On June 11, 1994, the Company's Audit Committee met with
C&L to review the accounting issues relating to these credit items. Following
this meeting, C&L was dismissed from its engagement as the auditors for the
Company and the Company engaged Grant Thornton. The Company authorized C&L to
respond fully to all inquiries of Grant Thornton including those related to the
subject matter of the disagreement.
The Company disagreed with the position C&L took regarding the proper
accounting treatment for certain credit items arising from inventory and
receivables activity. C&L took the position that certain credit items recorded
on the Company's balance sheet represented liabilities and could therefore not
be removed from the balance sheet and recorded to the income statement until
the statute of limitations expires or there is a legal release, regardless of
the remote possibility that the Company would be required to utilize its assets
to pay future claims. C&L indicated that it had relied on SFAS No. 76 to
determine the appropriate accounting treatment of these credits arising from
inventory and receivable activity. While C&L did not complete its audit
procedures, C&L indicated that application of its approach to accounting for
these credit items would result in an estimated reduction of net income for the
nine months ended December 31, 1993 of approximately $300,000 - $600,000 and
might require restatement of quarterly financial information as well as changes
in disclosure.
The Company's accounting practice has been to record these credit
items as payables at the time they arise. The Company's experience has been
that when these items reach a certain age, they will not result in a probable
future transfer or use of assets and therefore do not represent liabilities.
Accordingly, the Company has concluded the excess credits should be removed
from the balance sheet. During the quarter ended June 30, 1993, the Company
refined its methodology and applied a more objective, systematic approach to
eliminating these excess credits from the balance sheet and recording them to
the income statement. Previously, the Company made periodic determinations to
take these excess credit items into income.
Grant Thornton advised the Company orally that it was of the opinion
that the Company's treatment of these items was in accordance with generally
accepted accounting principles. Grant Thornton reviewed the information
provided in response to this item and has advised the Company that it does not
have any new information or clarification of the Company's views and it agrees
with the statements made by the Company under this Item.
C&L's letter responding to the Company's request pursuant to Item
304(a)(3) of Regulation S-K is incorporated by reference to this Report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the current directors of the Company, and the
persons nominated for election as directors of the Company at its Annual
Meeting of Shareholders to be held on August 15, 1996, appears in the Company's
Proxy Statement relating to the Annual Meeting under the caption "Election of
Directors". Such information is incorporated herein by reference.
EXECUTIVE OFFICERS
Officers are elected annually by the Board of Directors and serve
until their successors are elected and qualified. The current executive
officers of the Company are as follows:
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Officer
Name Position Since Age
---- -------- ------- ---
Judy O. Sims Chief Executive Officer and President 1988 43
Richard G. Sims Senior Vice President 1983 42
Keith R. Coogan Executive Vice President, Chief 1990 44
Operating Officer
Roger J. King Vice President of Sales and Marketing 1990 43
Robert B. Mercer Vice President, Chief 1994 44
Information Officer
Deborah A. Nugent Vice President of Finance, 1992 42
Treasurer and Secretary
Lisa M. Stewart Vice President of Customer Operations 1996 33
Judy O. Sims has served as Chief Executive Officer of the Company
since April 1988 and Chairman of the Board since July 1992. In April 1996, she
also assumed the title of President. Ms. Sims is a co-founder of the Company
and has been a director of the Company since its inception in 1983. Ms. Sims
served as Treasurer of the Company from 1983 to October 1990 and as Vice
President from April 1987 to April 1988. Ms. Sims was employed by the national
accounting firm of Grant Thornton LLP from 1977 to 1985, where she last served
as an audit partner. Prior to joining Grant Thornton LLP, Ms. Sims was
employed by the national accounting firm of Coopers & Lybrand LLP. Ms. Sims is
a Certified Public Accountant. Ms. Sims is married to Richard Sims.
Richard G. Sims is a co-founder of the Company and has been a director
of the Company since 1983. In April 1996, Mr. Sims assumed the title of Senior
Vice President with responsibility for the Company's Asia/Pacific expansion and
operations. He is also integrally involved with internal information systems
design. From 1983 to March 1996, Mr. Sims served as President of the Company.
From 1980 to 1983, Mr. Sims served as controller for International Power
Machines ("IPM"), a publicly-held manufacturer of uninterruptable power supply
systems for mainframe computers. Prior to joining IPM, Mr. Sims served as
controller for Sue Ann, Inc., a publicly-held women's sportswear manufacturer,
and a staff accountant for Coopers and Lybrand LLP. Mr. Sims is a Certified
Public Accountant. Mr. Sims is married to Judy Sims.
Keith R. Coogan was promoted to Executive Vice President and Chief
Operating Officer in April 1996. Mr. Coogan has been a Vice President of the
Company since October 1990 and was Secretary of the Company from May 1991
through July 1992. From October 1990 to March 1992, Mr. Coogan also served as
Treasurer of the Company. From May 1989 until joining the Company, Mr. Coogan
served as Vice President of Finance for Leather Center Holdings, Inc. a
privately-held manufacturer and retailer of leather furniture. From January
1986 to May 1989, he was Vice President and Chief Financial Officer of Trinity
Texas Corporation and Ward Hunt Investments, both of which were privately-held
real estate sales and development organizations. Mr. Coogan is a Certified
Public Accountant.
Roger J. King has been Vice President of Sales and Marketing since
April 1996. From September 1990 to March 1996, Mr. King served as Vice
President of Sales of the Company. Mr. King was employed by Lotus Development
Corporation from September 1987 to September 1990, where he last served as
Regional Manager for the software business group and was responsible for
product sales in a 14-state region. From July 1985 to September 1987, Mr. King
was a Vice President of the banking software group of Sterling Software,
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Inc., a software development company. Prior thereto, he spent nine years with
IBM in various sales and sales management positions.
Robert B. Mercer has been a Vice President and the Chief Information
Officer of the Company since January 1994. Mr. Mercer is responsible for
internal software application development and information systems processing
for the Company. From March 1992 until joining the Company, Mr. Mercer was the
Vice President and Chief Information Officer of Lechters, Inc., a publicly-held
specialty retailer. From 1988 to March 1992, he served as Senior Vice
President and Chief Information Officer of KG Men's Store, a privately-held
clothing store chain.
Deborah A. Nugent has been Vice President of Finance and Treasurer
since March 1992 and Secretary of the Company since July 1992. From July 1991
until joining the Company, Ms. Nugent served as Assistant Treasurer and Chief
Financial Officer of Mothers Against Drunk Driving. From April 1988 to April
1991, she served as Vice President, Treasurer and Chief Financial Officer of
USF&G Capital Investors, Inc., a capital investments subsidiary of USF&G
Corporation. From July 1986 to April 1988, she was Chief Financial Officer of
The Tower Group, Inc., a privately-held real estate sales and development
company. Prior thereto, Ms. Nugent was employed by the national accounting
firms of Grant Thornton LLP and Coopers & Lybrand LLP. Ms. Nugent is a
Certified Public Accountant.
Lisa M. Stewart was promoted to Vice President of Customer Operations
in April 1996. From January 1994 through March 1996, Ms. Stewart served as
Director of Customer Operations for the Company after having served in various
sales and sales management and operations positions. Prior to joining the
Company in 1988, Ms. Stewart was employed by Fox T.V. and Hilton Services
Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Company's Proxy
Statement for its Annual Meeting of Shareholders to be held on August 15, 1996,
under the caption "Executive Compensation", which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears in the Company's Proxy
Statement for its Annual Meeting of Shareholders to be held on August 15, 1996,
under the captions "Stock Ownership of Principal Shareholders" and "Stock
Ownership of Management", which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert D. Graham, a member of the Company's Board of Directors, is a
shareholder of the law firm of Locke Purnell Rain Harrell (A Professional
Corporation), counsel to the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(1) and (2) - Index to Financial Statements and Schedules - The
information required by this portion of Item 14 is set forth in a
separate section following Part IV of this Report.
(3) - The following documents are filed or incorporated by reference
as exhibits to this Report:
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2 Asset Purchase Agreement dated as of March 23, 1996 by and among Software Spectrum, Inc., Egghead,
Inc. and DJ&J Software Corporation, as amended by First Amendment to Asset Purchase Agreement dated
May 13, 1996 (incorporated by reference to the Company's Current Report on Form 8-K dated March 26,
1996 and the Company's Current Report on Form 8-K dated May 23, 1996).
3.1 Restated Articles of Incorporation of the Company, filed with the Secretary of State of Texas on May
12, 1989, as amended (incorporated by reference to the Company's Registration Statement No. 33-40794
on Form S-1).
3.2 Restated Bylaws of the Company, as amended (incorporated by reference to the Company's Registration
Statement No. 33-40794 on Form S-1).
10.1(a) House Account Agreement (U.S.), dated as of September 4, 1986, as amended, between Lotus Development
Corporation and the Company (incorporated by reference to the Company's Registration Statement
No. 33-40794 on Form S-1).
10.1(b) Amendment to House Account Agreements dated as of June 25, 1992, between Lotus Development
Corporation and the Company (incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1993).
10.1(c) Educational House Account Agreement Addendum dated as of March 23, 1994 between Lotus Development
Corporation and the Company (incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
10.2 Lotus Passport Reseller Authorization Agreement dated March 31, 1994 between Lotus Development
Corporation and the Company (incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994).
10.3(a) Microsoft 1995/1996 Channel Agreement dated July 1, 1995 between Microsoft Corporation and the
Company, including Addenda dated July 1, 1995 (Appointment as a Direct Reseller) and Addenda dated
July 1, 1995 (Appointment as a Large Account Reseller).
10.3(b) Large Account Reseller Rebate Addendum to the 1995/1996 Microsoft Channel Agreement dated July 1,
1995, as amended by Amendment No.1 dated January 1, 1996.
10.3(c) Microsoft Government Select Government Contractor Addendum to the 1995/1996 Microsoft Channel
Agreement dated as of July 1, 1995.
10.3(d) Rebate and Marketing Fund Addendum to the 1995/1996 Microsoft Channel Agreement dated as of July 1,
1995, as amended by Amendment No. 1 dated January 1, 1996.
10.4 Microsoft Corporation 1995/1996 Authorized Government Large Account Reseller Agreement dated April
1, 1995 between Microsoft Corporation and the Company.
10.5(a) Commercial Lease Agreement, dated May 1, 1990, between CIIF Associates II Limited Partnership and
the Company (incorporated by reference to the Company's Registration Statement No. 33-40794 on Form
S-1).
10.5(b) Amendment to Lease Agreement dated March 31, 1995 between CIIF Associates II Limited Partnership and
the Company (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
-17-
21
10.6(a) Commercial Lease Agreement dated as of April 19, 1993, between Kancro, L.P. and the Company
(incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1993).
10.6(b) Amendment #2 - Expansion Agreement to Lease Agreement dated as of June 20, 1994 between Kancro, L.P.
and the Company (incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994).
10.6(c) Third Amendment to Commercial Lease Agreement dated effective April 1, 1995 between Kancro, L.P. and
the Company (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995).
10.7 Industrial Building Lease dated as of June 7, 1993 between LaSalle National Trust, N.A. and the
Company (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993).
10.8 Form of Call Center Lease (Spokane) (incorporated by reference to the Company's Current Report on
Form 8-K dated March 26, 1996).
10.9 Loan Agreement dated as of September 30, 1994 between the Company and NationsBank of Texas, N.A. as
amended by First Amendment for Loan Agreement dated November 6, 1995. (incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 and the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995).
10.10 Promissory Note dated September 30, 1994 executed by the Company in favor of NationsBank of Texas,
N.A. (incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995).
10.11 Credit Agreement dated as of May 3, 1996 between the Company and Texas Commerce Bank, National
Association, as Agent (incorporated by reference to the Company's Current Report on Form 8-K dated
May 23, 1996).
10.12 1989 Stock Option Plan of the Company, as amended (incorporated by reference to the Company's
Registration Statement No. 33-40794 on Form S-1).
10.13 Software Spectrum, Inc. Employee Stock Purchase Plan (incorporated by reference to the Company's
Registration Statement No. 33-53284 on Form S-1).
10.14 The Software Spectrum, Inc. 1993 Long Term Incentive Plan (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).
10.15 Employees' Profit Sharing Plan of the Company, Adoption Agreement dated December 14, 1994
(incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995).
10.16 Lease Agreement dated March 8, 1996 by and between Riverport Commerce Center, Inc. and the Company.
10.17 Lease Agreement dated April 26, 1996 by and between Beneficiaries of American National Bank Trust
Number 104601-03 and the Company.
10.18 Non-Employee Directors' Retainer Stock Plan (incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the Quarter ended December 31, 1995.)
11.1 Statement regarding Computation of Primary Earnings Per Share.
11.2 Statement regarding Computation of Fully Diluted Earnings Per Share.
-18-
22
13 Software Spectrum, Inc.'s 1996 Annual Report to Shareholders.
16 Letter dated June 29, 1994 from Coopers & Lybrand LLP addressed to the Securities and Exchange
Commission (incorporated by reference to the Company's Current Report on Form 8-K/A dated June 11,
1994).
23 Consent of Grant Thornton LLP, Independent Accountants
24 Power of Attorney (included on the signature page of this Form 10-K).
27 Financial Data Schedule
99 Purchase and Sale Agreement dated as of April 2, 1996 by and among Software Spectrum, Inc., Software
Spectrum (NZ) Limited and Essentially Group Limited, Essentially Group (NZ) Limited, Essentially
Software (Wellington) Limited, The McNabb Family Trust, McNabb No. 2 Family Trust, McNabb No. 3
Family Trust, RMAD Trust, David Colvin and Gary McNabb.
(B) REPORTS ON FORM 8-K
During the three months ended March 31, 1996, a report on Form 8-K was
filed by the Company on March 26, 1996, reporting the Company's entry
into an Asset Purchase Agreement with Egghead, Inc. and DJ&J Software
Corporation.
-19-
23
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of Software Spectrum, Inc., a
Texas corporation, and the undersigned directors and officers of Software
Spectrum, Inc., hereby constitutes and appoints Judy O. Sims its or his true
and lawful attorney-in-fact and agent, for it or him and in its or his name,
place and stead, in any and all capacities, with full power to act alone, to
sign any and all amendments to this Report, and to file each such amendment to
this Report, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorney-in-fact and agent full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises as fully to all intents and purposes as it or he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SOFTWARE SPECTRUM, INC.
By /s/ Judy O. Sims
-------------------------------
Judy O. Sims, Chief Executive
Officer and President
Date: June 27, 1996
-20-
24
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/ Judy O. Sims Chief Executive Officer, President and June 27, 1996
- - ----------------------------------
Judy O. Sims Director (Principal Executive Officer)
/s/ Richard G. Sims Senior Vice President and Director June 27, 1996
- - ----------------------------------
Richard G. Sims
/s/ Deborah A. Nugent Vice President of Finance, Treasurer June 27, 1996
- - ----------------------------------
Deborah A. Nugent and Secretary (Principal Financial
Officer and Principal Accounting Officer)
/s/ Mellon C. Baird Director June 27, 1996
- - ----------------------------------
Mellon C. Baird
/s/ Robert D. Graham Director June 27, 1996
- - ----------------------------------
Robert D. Graham
/s/ Frank Tindle Director June 27, 1996
- - ----------------------------------
Frank Tindle
-21-
25
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of Software Spectrum,
Inc. and subsidiaries appearing on pages 22 through 31 of the Company's 1996
Annual Report to Shareholders have been incorporated herein by reference under
Item 8 of Part II of this report.
Report of Grant Thornton LLP
Consolidated Balance Sheets as of March 31, 1996 and 1995
Consolidated Statements of Income for the three years ended
March 31, 1996
Consolidated Statements of Shareholders' Equity for the three years
ended March 31, 1996
Consolidated Statements of Cash Flows for the three years ended
March 31, 1996
Notes to Consolidated Financial Statements
The following financial schedule of Software Spectrum, Inc. and
subsidiaries for the three years ended March 31, 1996, is filed herewith:
Schedule II Valuation and Qualifying Accounts and Reserves S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required or are inapplicable and therefore have been omitted. Individual
financial statements of Software Spectrum, Inc. have been omitted since
consolidated financial statements are being filed and no significant amount of
the assets of the subsidiaries included in the consolidated financial
statements being filed are restricted as to transfer to Software Spectrum, Inc.
-22-
26
Report of Independent Certified Public Accountants on Schedule
Board of Directors
Software Spectrum, Inc.
In connection with our audit of the consolidated financial statements of
Software Spectrum, Inc. and Subsidiaries referred to in our report dated June
6, 1996, which is included in the annual report to shareholders and
incorporated by reference in Part II of this form, we have also audited
Schedule II for each of the three years in the period ended March 31, 1996. In
our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
June 6, 1996
27
SOFTWARE SPECTRUM, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ADDITIONS
BALANCE AT CHARGED TO WRITE-OFFS BALANCE
BEGINNING COSTS AND NET OF AT END
OF YEAR EXPENSES RECOVERIES OF YEAR
----------- ---------- ---------- -----------
Allowance for Doubtful Accounts:
- - -------------------------------
Fiscal year ended March 31, 1996: $1,371,000 $ 633,000 ($803,000) $1,201,000
Fiscal year ended March 31, 1995: $1,662,000 $ 244,000 ($535,000) $1,371,000
Fiscal year ended March 31, 1994: $1,688,000 $ 194,000 ($220,000) $1,662,000
Inventory Valuation Account:
- - ---------------------------
Fiscal year ended March 31, 1996: $1,123,000 $1,249,000 ($1,375,000) $ 997,000
Fiscal year ended March 31, 1995: $ 985,000 $1,173,000 ($1,035,000) $1,123,000
Fiscal year ended March 31, 1994: $ 852,000 $ 755,000 ($ 622,000) $ 985,000
S-1
28
EXHIBIT INDEX
EXHIBIT
- - -------
2 Asset Purchase Agreement dated as of March 23, 1996 by and among Software
Spectrum, Inc., Egghead, Inc. and DJ&J Software Corporation, as amended by First
Amended to Asset Purchase Agreement dated May 13, 1996 (incorporated by reference
to the Company's Current Report on Form 8-K dated March 26, 1996 and the Company's
Current Report on Form 8-K dated May 23, 1996).
3.1 Restated Articles of Incorporation of the Company, filed with the Secretary of
State of Texas on May 12, 1989, as amended (incorporated by reference to the
Company's Registration Statement No. 33-40794 on Form S-1).
3.2 Restated Bylaws of the Company, as amended (incorporated by reference to the
Company's Registration Statement No. 33-40794 on Form S-1).
10.1(a) House Account Agreement (U.S.), dated as of September 4, 1986, as amended,
between Lotus Development Corporation and the Company (incorporated by reference
to the Company's Registration Statement No. 33-40794 on Form S-1).
10.1(b) Amendment to House Account Agreements dated as of June 25, 1992, between Lotus
Development Corporation and the Company (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.1(c) Educational House Account Agreement Addendum dated as of March 23, 1994 between
Lotus Development Corporation and the Company (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).
10.2 Lotus Passport Reseller Authorization Agreement dated March 31, 1994 between
Lotus Development Corporation and the Company (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).
10.3(a) Microsoft 1995/1996 Channel Agreement dated July 1, 1995 between Microsoft
Corporation and the Company, including Addenda dated July 1, 1995 (Appointment as
a Direct Reseller) and Addenda dated July 1, 1995 (Appointment as a Large Account
Reseller).
10.3(b) Large Account Reseller Rebate Addendum to the 1995/1996 Microsoft Channel
Agreement dated July 1, 1995, as amended by Amendment No.1 dated January 1, 1996.
10.3(c) Microsoft Government Select Government Contractor Addendum to the 1995/1996
Microsoft Channel Agreement dated as of July 1, 1995.
-23-
29
EXHIBIT
- - -------
10.3(d) Rebate and Marketing Fund Addendum to the 1995/1996 Microsoft Channel Agreement
dated as of July 1, 1995, as amended by Amendment No. 1 dated January 1, 1996.
10.4 Microsoft Corporation 1995/1996 Authorized Government Large Account Reseller
Agreement dated April 1, 1995 between Microsoft Corporation and the Company.
10.5(a) Commercial Lease Agreement, dated May 1, 1990, between CIIF Associates II Limited
Partnership and the Company (incorporated by reference to the Company's
Registration Statement No. 33-40794 on Form S-1).
10.5(b) Amendment to Lease Agreement dated March 31, 1995 between CIIF Associates II
Limited Partnership and the Company (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1995).
10.6(a) Commercial Lease Agreement dated as of April 19, 1993, between Kancro, L.P. and
the Company (incorporated by reference to the Company's Annual Report on Form 10-
K for the fiscal year ended March 31, 1993).
10.6(b) Amendment #2 - Expansion Agreement to Lease Agreement dated as of June 20, 1994
between Kancro, L.P. and the Company (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1994).
10.6(c) Third Amendment to Commercial Lease Agreement dated effective April 1, 1995
between Kancro, L.P. and the Company (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1995).
10.7 Industrial Building Lease dated as of June 7, 1993 between LaSalle National
Trust, N.A. and the Company (incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993).
10.8 Form of Call Center Lease (Spokane) (incorporated by reference to the Company's
Current Report on Form 8-K dated March 26, 1996).
10.9 Loan Agreement dated as of September 30, 1994 between the Company and NationsBank
of Texas, N.A. as amended by First Amendment to Loan Agreement dated November 6, 1995
(incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 and the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995).
10.10 Promissory Note dated September 30, 1994 executed by the Company in favor of
NationsBank of Texas, N.A. (incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995).
-24-
30
EXHIBIT
- - -------
10.11 Credit Agreement dated as of May 3, 1996 between the Company and Texas Commerce
Bank, National Association, as Agent (incorporated by reference to the Company's
Current Report on Form 8-K dated May 23, 1996).
10.12 1989 Stock Option Plan of the Company, as amended (incorporated by reference to
the Company's Registration Statement No. 33-40794 on Form S-1).
10.13 Software Spectrum, Inc. Employee Stock Purchase Plan (incorporated by reference
to the Company's Registration Statement No. 33-53284 on Form S-1).
10.14 The Software Spectrum, Inc. 1993 Long Term Incentive Plan (incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1994).
10.15 Employees' Profit Sharing Plan of the Company, Adoption Agreement dated December
14, 1994 (incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995).
10.16 Lease Agreement dated March 8, 1996 by and between Riverport Commerce Center,
Inc. and the Company.
10.17 Lease Agreement dated April 26, 1996 by and between Beneficiaries of American
National Bank Trust Number 104601-03 and the Company.
10.18 Non-Employer Directors' Retainer Stock Plan (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the Quarter ended December 31, 1995).
11.1 Statement regarding Computation of Primary Earnings Per Share.
11.2 Statement regarding Computation of Fully Diluted Earnings Per Share.
13 Software Spectrum, Inc.'s 1996 Annual Report to Shareholders.
16 Letter dated June 29, 1994 from Coopers & Lybrand LLP addressed to the Securities
and Exchange Commission (incorporated by reference to the Company's Current
Report on Form 8-K/A dated June 11, 1994).
23 Consent of Grant Thornton LLP, Independent Accountants
24 Power of Attorney (included on the signature page of this Form 10-K).
27 Financial Data Schedule
99 Purchase and Sale Agreement dated as of April 2, 1996 by and among Software
Spectrum, Inc., Software Spectrum (NZ) Limited and Essentially Group Limited,
Essentially Group (NZ) Limited, Essentially Software (Wellington) Limited, The
McNabb Family Trust, McNabb
-25-
31
No. 2 Family Trust, McNabb No. 3 Family Trust, RMAD Trust,
David Colvin and Gary McNabb.
-26-