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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 April 30, 1997
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 _________________
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: (972) 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 [ ]
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 July 18, 1997 of the Registrant's voting
securities held by non-affiliates was $50,703,247.
At July 18, 1997, the Registrant had outstanding 4,362,314 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 certain of the information contained in the registrant's proxy statement
for its annual meeting of shareholders to be held September 18, 1997, which
will be filed by the registrant within 120 days after April 30, 1997 and in
Part II of this Annual Report certain of the information contained in the
registrant's annual report to shareholders for the fiscal year ended April 30,
1997.
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PART I
ITEM 1. BUSINESS
Software Spectrum, Inc. (the "Company") is a leading worldwide
supplier of personal computer business software and technology services to
organizations. The Company's customers are primarily large entities including
many multinational organizations with a significant number of personal
computers. The Company also sells products and services to mid-tier and small
businesses through its outbound telephone sales organization. The Company
provides its customers with a wide variety of business software products,
volume software licensing services and technology and assists them in the
implementation, deployment and ongoing support of their personal computing
strategies. The Company has established supply arrangements with major personal
computer software publishers, including Microsoft, IBM/Lotus, Novell, Netscape,
Attachmate, Symantec, and Corel. The Company markets software titles for IBM,
IBM-compatible and Macintosh personal computers, 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 (972) 840-6600. Except where the context otherwise
requires, the term "Company" as used herein includes Software Spectrum, Inc.
and its subsidiaries.
FORWARD LOOKING INFORMATION
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.
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
personal computer business software products from a small number of vendors.
In fiscal 1997, approximately 64% of the Company's net sales were derived from
products published by Microsoft and IBM/Lotus. 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.
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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 personal computer 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 continues to experience an
increase in the percentage of sales made pursuant to VLM agreements, overall
gross margin percentages on the sale of software products are likely to
decline.
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 geographic
expansion outside the United States in the past few years involves currency
exchange risks, political risks and other risks of conducting business abroad.
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. Many of the
Company's competitors, particularly software publishers, have substantially
greater financial resources than the Company. Because of the intense
competition within the personal computer 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 personal computer 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 personal computer software suppliers' participation in these
programs is reduced or eliminated or if other methods of distribution of
software, which exclude the personal computer software channel become common,
the Company's business and financial results could be materially adversely
affected.
OVERVIEW
The Company is a leader in the personal computer business software
industry focusing on providing personal computer 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
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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 personal computer and client/server software to large organizations ("Large
Account Sales"), sales of software to mid-tier and small accounts ("Mid-Tier
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 personal
computer software, licenses and related services to large organizations with
over 1,000 desktop computers, including a majority of the companies in the
Fortune 500 ("Large Account Sales"). Large Account Sales concentrates on
building and expanding relationships through personal sales contacts made
throughout major global desktop technology markets. The Company's field sales
representatives market not only personal computer 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.
Mid-Tier Sales serves mid-tier and small businesses that have less
than 1,000 desktop computers through the Company's outbound calling and catalog
sales efforts. At April 30, 1997, this group consisted of approximately 95
people located in Garland, Texas and Spokane, Washington which markets Software
Spectrum's products and services by phone to organizations throughout North
America. In the fiscal year ended April 30, 1997, revenues derived from the
Mid-Tier Sales group accounted for approximately 14% of the Company's revenues.
The Company's home page on the Internet also has an electronic catalog
which can be used by customers to purchase products. For certain large
customers, the Company is currently developing customer specific catalogs which
contain products and prices unique to that customer's purchasing requirements.
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
requirements. In fiscal 1997, the Technology Services Group introduced
services to assist customers in determining where and how technology and
products can be implemented to reduce the cost of managing and supporting
enterprise networks. The Technology Services Group also provides fee-based
telephone support services in North America, Europe and Australia. This
service, provided by the Company's Technology Support Center, 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. In fiscal 1997, the Company's Technology Support Center business
continued to expand and the Company recently was awarded a contract to support
complex client server products for one of the Company's major suppliers. As of
April 30, 1997, the Company had over 600 consultants and 23 Technology Services
Group offices in North America, Asia/Pacific and Europe. For the year ended
April 30, 1997, the Technology Services Group represented approximately 4% of
the Company's revenues. See "Global Operations" and "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 desktop 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 software 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
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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 personal computer
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.
The Company has continued to experience significant growth in the sale
of software to its customers through VLM agreements. For fiscal 1997, sales
through VLM agreements represented approximately 59% of net sales of the
Company, compared to 46% and 36% of net sales for fiscal years 1996 and 1995,
respectively. 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, as a
percent of sales, on sales made through VLM agreements. The lower gross
margins on sales made pursuant to VLM agreements are partially offset by lower
operating costs associated with such agreements.
In May 1996, the Company acquired from Egghead, Inc., certain
operating assets of Egghead's corporate, government and education division
("CG&E"). During the fiscal year ended April 30, 1997, the Company integrated
the North American sales force of the two organizations, stabilized CG&E's
customer base and expanded its operations to include a call center facility
located in Spokane, Washington, which serves several thousand customers and
also provides Technology Support Center services.
The Company is one of the world's largest providers of personal
computer 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.
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 and this ability has been a key factor that has led to the
Company's global expansion.
The Company's North American operations are based in Garland, Texas
and Spokane, Washington. The Company's European sales headquarters is located
in The Hague, The Netherlands and its operations center is located in Dublin,
Ireland. The Company augmented European operations by establishing a
Technology Services Group office in London, England in 1996 and another
Technology Services Group office in Frankfurt, Germany in early 1997. The
Company's acquisition of The Essentially Group Limited ("Essentially Group") a
leading information technology company in Australia and New Zealand in April
1996 significantly extended Software Spectrum's geographic coverage by
providing an immediate presence in the Asia/Pacific region. With this
acquisition, the Company obtained an established customer base, management team
and services capabilities to provide the Company with many of the key resources
needed to permit further expansion throughout the Asia/Pacific region and in
fiscal 1997 the Company established sales offices in Hong Kong and Singapore.
During fiscal 1997, the Company implemented its plan to consolidate the
administrative and support functions of its Asia/Pacific operations in Sydney
to more closely align with the centralized structure and operations of the
Company's North American operations and has recently installed information
systems which should become fully operational during the first half of fiscal
1998. Due to these and other factors, including lower sales than expected, the
Company's operations in Asia/Pacific incurred operating losses of approximately
$4.9 million in the fiscal year ended April 30, 1997.
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In fiscal 1997, the Company entered into a joint venture in Japan with
Uchida-Yoko Co., Ltd. Through this joint venture, the Company now has the
ability to sell software products and technology services to customers in
Japan.
With centralized operations centers in North America, Europe and
Asia/Pacific, the Company is able to serve the major desktop technology markets
around the world. Today, Software Spectrum provides software or fulfillment
services to customers located in over 50 countries, provides support services
in 13 languages, invoices customers in many local currencies, and can provide
consolidated worldwide reporting to customers.
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.
To support these service offerings, the Company developed the
Institute for Microsoft Technology and the Institute for IBM/Lotus Technology.
The institutes provide advanced training for technical certification, as well
as service delivery methodology and advanced consulting skills, enabling
consultants to develop and deploy complex solutions.
The Company is an industry leader in assisting customers implementing
Microsoft's Systems Management Server ("SMS"). The Company founded the
Software Spectrum SMS Alliance several years ago in cooperation with Microsoft
and is its managing member. Members of the SMS Alliance collectively represent
more than one million desktops, and meet regularly to share SMS deployment and
management solutions.
As of April 30, 1997, the Company had Technology Services Group
offices in Chicago, Dallas, Atlanta, Boston, Houston, San Antonio, San
Francisco, Seattle, Denver, Detroit, Los Angeles, Minneapolis, New York,
Sydney, Melbourne, Auckland, Wellington, Toronto, London and Frankfurt. TSG
also has established satellite offices in Raleigh-Durham, and Phoenix.
Through its joint venture in Japan, Uchida Spectrum, the Company has the
ability to offer TSG services to its customers in Japan.
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
provide 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. 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 advanced
technologies supported by the Company, with such seminars and training provided
at the customer's or the Company's location.
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Technology Support Center
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. In fiscal 1997, the Company's telephone technical support
business conducted by the Technology Support Center continued to grow, and in
the first quarter of fiscal 1998, the Company was awarded a contract to support
complex client server products for one of the Company's major suppliers.
The Company's Technology Support Center provides support for
organizations in three principal business categories. First, the Technology
Support Center contracts with software publishers, hardware providers and OEM
manufacturers to provide telephone support on their behalf to customers.
Second, 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 over 150 major personal computer
software titles and can provide support for software products running on most
major personal computer operating systems and environments, including Windows,
Windows 95, DOS, Macintosh, Microsoft Windows NT, Novell Netware and other
network operating systems. Third, 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 Technology Support Center 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. 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.
The Company's software evaluation library and demonstration equipment
allow the Company's staff to test applications before recommending a solution
or product. Customers may also utilize the Internet as an electronic means to
forward support questions and receive answers from the Company.
The Company's Technology Support Center services business grew rapidly
in the 1997 fiscal year. The growth in the Technology Support Center has been
primarily in providing help desk services under contracts with software
publishers, although the Company also provides end user and professional
support to organizations. The Technology Support Center maintains offices in
Garland, Texas; Spokane, Washington; Dublin, Ireland and Sydney, Australia.
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 personal computer
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 its licensing
consultants as well as by means of the Company's marketing and sales 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 personal computer
management responsibilities. To help these customers develop or improve their
personal computer software management programs, the Company developed a
software management process that is
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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 personal
computer 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. The Company has developed a custom,
client/server based system called SOLO 95, 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 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. The Company's
United States distribution operations are located in Louisville, Kentucky. In
Australia and New Zealand, the Company also operates distribution facilities
for customers located in those countries. In countries where the Company does
not operate warehouses, products are ordered through distributors and are
shipped directly to customers. Products stocked by the Company or its
distributors 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.
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, which may be paid in
monthly, quarterly or annual 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.
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
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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.
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 has entered into agreements to permit the
electronic distribution of software from the Company's World Wide Web site.
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's World Wide Web site on the Internet contains an on-line
catalog of thousands of products that can be purchased over the Internet and
provides customers with links to useful information about the Company, its
products and services and publishers the Company represents. The Internet
catalog provides information about products through a comprehensive search
engine, extensive product descriptions, and third-party reviews. For certain
large customers the Company is developing specific catalog offerings available
over the Internet to that customer's employees. These specialized electronic
catalogs will contain specific products and pricing unique to that customer and
will contain information particular to the VLM agreements in which that
customer is enrolled. The Company also plans to develop government and
education specific electronic catalogs.
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 personal computer 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 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 1997, the Company presented 247 seminars in over
47 major metropolitan areas throughout North America, in Western Europe and in
Asia/Pacific.
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
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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 and small businesses by
publishing merchandising catalogs which offer a large range of software and
peripheral products. In addition to its Internet on-line catalog described
above, the Company plans to publish and distribute over 1,700,000 catalogs
during the 1998 fiscal year. See "Electronic Services and Capabilities" above.
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 global 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, 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 and small organizations, the Company
utilizes its Mid-Tier 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
In fiscal 1997 the Company substantially completed conversion of its
operating and financial reporting systems to the client/server environment.
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 inventories
approximately 2,200 business software titles, ranging in price from
approximately $10 to $35,000. In certain international markets, the Company
also sells hardware, peripheral products and accessories, such as modems,
expansion cards and keyboards. Although the Company maintains an inventory of
only the most popular products in locations where it maintains warehouse
facilities, the Company offers more than 38,000 different software and
peripheral products to its customers.
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 April 30, 1997, the top 20 software
titles sold by the Company represented approximately 50% of the Company's net
sales.
The Company maintains an extensive 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 expects that for the foreseeable future, sales from
software products will continue to be its primary source of revenues.
DISTRIBUTION AND INVENTORY CONTROL
In the United States and Asia/Pacific, the Company generally ships
products that it carries in inventory the same day the Company receives the
customer order utilizing independent carriers. In addition, the Company also
utilizes the services of publishers and distributors to ship products directly
to its customers, both in the United States and other countries. During its
fiscal year ended April 30, 1997, the Company shipped an average of 1,600
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 April 30, 1997, the
Company held approximately 25 days of anticipated sales of shippable products
in inventory. 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 April 30, 1997,
the Company did not have a significant order backlog.
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CUSTOMERS
In fiscal 1997, the Company handled more than 6,300 active customer
accounts. The Company's customer base includes corporations, government
agencies, educational institutions, non-profit institutions and other business
entities. The Company's acquisitions during fiscal 1997 significantly
increased the North American government sales segment of the Company's business
to federal, state, provincial and local government agencies. The Company also
has established a presence in the educational market and the Company has
authorizations from all major educational product publishers. The Company also
sells software to mid-tier and small organizations through its Mid-Tier 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 or invoicing, with respect to unopened stocked products
and defective or damaged products. With respect to VLM transactions, generally
returns are either not permitted or are very limited for maintenance purchased,
and licenses may be returned only for a limited period following invoicing,
depending upon specific publisher requirements. In the fiscal year ended April
30, 1997, no single customer represented more than 3% of the Company's revenues
and the Company's customer base included 340 of the 1996 Fortune 500 companies
and 225 of the Fortune Global 500 companies. 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 full packaged products by customers are not, and have
not historically been, material. Due to the complexity of licensing programs,
adjustments arising from the invoicing pursuant to VLM agreements have
increased in the past year and have resulted in increased credits and
reinvoicing of customers. The Company is currently upgrading its systems and
procedures to reduce the number of adjustments required. 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 publisher requirements, cost,
availability, return privileges, demand for a particular product and the
benefits of a close strategic relationship. For the fiscal year ended April
30, 1997, approximately 75% of the Company's sales represented products
purchased from its ten largest vendors. For the fiscal years ended April 30,
1997 and March 31, 1996, products from Microsoft accounted for approximately
55% and 44% of net sales, respectively, and products from IBM/Lotus accounted
for approximately 10% of net sales in each year. In fiscal 1997, products
published by Microsoft and IBM/Lotus represented the largest concentration of
products sold by the Company.
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 within certain specified time periods 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. Publisher contracts also
generally permit the Company to submit adjustment reports for license and
maintenance transactions within a certain time period after the transaction is
reported. 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
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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. 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 IBM/Lotus do not differ in any
material respect from the comparable terms of the Company's arrangements with
other major publishers.
COMPETITION
The personal computer 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 Corporate Software and Technology, Inc., ASAP Corporate Express,
Softmart and Softwarehouse International. 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
personal computer business markets, its extensive technology services
capabilities and offerings, extensive VLM services and systems that support
the Company's business and knowledgeable, industry-experienced personnel.
Competitors also include hardware dealers and aggregators. These
companies also compete 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 Digital Equipment
Corporation and Electronic Data Systems. 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.
In the technology services market, there are a significant number of
competitors, ranging from small local consulting services practices to large
companies such as Corporate Software and Technology, Inc., the technology
services divisions of major hardware resellers such as VanStar Corporation,
ENTEX Information Services, Inc. and Compucom Systems, Inc. and the consulting
divisions of national accounting firms such as Anderson Consulting. The
Company believes that its concentration on high-end enterprise architectural
planning and consultation covering multiple key specific technologies helps to
differentiate the Company from other competitors in the technology services
area of its business.
The manner in which personal computer 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
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. Should publishers permit others to sell VLM
agreements, 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
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over time will lead to electronic distribution of software. The Company
intends to participate in this method of software distribution as demand for
this service by large organizations emerge and as communications technology
improvements permit electronic software distribution to be made securely and
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 continues to be an increase
in the sale of personal computers 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 April 30, 1997, the Company had approximately 1,600 employees in
North America, Europe and Asia/Pacific. 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 are represented by a union.
ITEM 2. PROPERTIES
The Company currently leases approximately 160,000 square feet of
space in Garland, Texas (a suburb of Dallas) for its corporate headquarters.
As of April 30, 1997, the Garland leases had a remaining term of 36 months with
monthly payments of approximately $64,000. The Company leases approximately
54,000 square feet of office space in Spokane, Washington at a monthly rental
of approximately $32,500 in fiscal 1997 increasing to approximately $40,000 in
fiscal 1998. The Company's distribution facility in Louisville, Kentucky
consists of approximately 62,500 square feet of space which is leased for
approximately $18,000 per month. The remaining term of the Louisville lease is
approximately four 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, Ireland, The Hague, The Netherlands and London,
England. In Asia/Pacific, the Company occupies leased office space in seven
markets.
ITEM 3. LEGAL PROCEEDINGS
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 April 30, 1997.
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 32 of the Company's 1997 Annual Report to Shareholders under
the caption "Quarterly Financial Data and Market Information" is incorporated
herein by reference.
On July 18, 1997 there were 150 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.
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears on page 17 of the
Company's 1997 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 1997
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 30 of the Company's 1997
Annual Report to Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
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 September 18, 1997, will appear in the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders under the caption "Election of Directors" to be filed pursuant to
Regulation 14A. 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:
Officer
Name Position Since Age
---- -------- ------- ---
Judy O. Sims Chief Executive Officer and President 1988 44
Richard G. Sims Senior Vice President 1983 43
Keith R. Coogan Executive Vice President, Chief 1990 45
Operating Officer
Robert D. Graham Vice President Strategic Relationships 1997 42
and General Counsel, Secretary
Roger J. King Vice President of Sales and Marketing 1990 44
Robert B. Mercer Vice President, Chief 1994 45
Information Officer
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Deborah A. Nugent Vice President of Finance and 1992 43
Treasurer
Lisa M. Stewart Vice President of Customer Operations 1996 35
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. 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.
Prior to 1983, Mr. Sims served as controller for various companies. Mr. Sims
is a Certified Public Accountant. Mr. Sims is married to Judy Sims.
Keith R. Coogan has been Executive Vice President and Chief Operating
Officer since 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.
Robert D. Graham was elected Vice President Strategic Relationships
and General Counsel in January 1997 and Secretary in February 1997. Mr. Graham
served on the Board of Directors of the Company from 1991 until February 1997.
From 1980 through January 1997, Mr. Graham was in private practice of law with
the law firm of Locke Purnell Rain Harrell, P.C. (and its predecessor) in
Dallas, Texas.
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, 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 from July 1992 to February 1997.
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 has been Vice President of Customer Operations since
April 1996. From January 1994 through March 1996, Ms. Stewart served as
Director of Customer Operations for the Company after having served in
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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 will appear in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on September
18, 1997, 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 will appear in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on September
18, 1997, 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 was until January 1997 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:
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(a) 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).
3.1(b) Statement of Designation of Series A Junior Participating
Preferred Stock (incorporated by reference to the Company's
Current Report on Form 8-K dated December 13, 1996).
3.1(c) Articles of Amendment to Restated Articles of
Incorporation, filed with the Secretary of State of Texas
on November 25, 1996.
3.1(d) Statement of Cancellation of Treasury Shares, filed with
the Secretary of State of Texas on March 21, 1997.
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).
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3.3 Rights Agreement between the Company and KeyCorp Shareholder
Services, Inc. dated December 13, 1996, (incorporated by
reference to the Company's Current Report on Form 8-K dated
December 13, 1996).
10.1 IBM Business Partner Agreement between the Company, IBM
Corporation and Lotus Development Corporation dated June 30,
1997.
10.2(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) (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996).
10.2(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 ("LAR Addendum")
(incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996).
10.2(c) Amendment No. 2 to LAR Addendum dated August 2, 1996
between Microsoft Corporation and the Company.
10.2(d) Amendment No. 3 to the LAR Addendum dated January 17, 1997
between Microsoft Corporation and the Company.
10.2(e) Microsoft Government Select Government Contractor Addendum
to the 1995/1996 Microsoft Channel Agreement dated as of
July 1, 1995 (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March
31, 1996).
10.2(f) 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 (the
"Rebate and Marketing Fund Addendum") (incorporated by
reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996).
10.2(g) Amendment No. 2 to the Rebate and Marketing Fund Addendum
dated August 2, 1996 between Microsoft Corporation and the
Company.
10.2(h) Amendment No. 3 to the Rebate and Marketing Fund Addendum
dated January 17, 1997 between Microsoft Corporation and
the Company.
10.3 Microsoft Corporation 1995/1996 Authorized Government Large
Account Reseller Agreement dated April 1, 1995 between
Microsoft Corporation and the Company (incorporated by
reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996)
10.4(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).
10.4(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).
10.5(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).
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19
10.5(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).
10.5(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).
10.5(d) Fourth Amendment to Commercial Lease Agreement dated
effective as November 25, 1996 between Kranco, L.P. and the
Company.
10.6 Form of Call Center Lease (Spokane) between DD&J Software
Corporation and the Company (incorporated by reference to
the Company's Current Report on Form 8-K dated March 26,
1996).
10.7 Lease Agreement dated March 8, 1996 by and between Riverport
Commerce Center, Inc. and the Company (incorporated by
reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996).
10.8 Lease Agreement dated April 26, 1996 by and between
Beneficiaries of American National Bank Trust Number
104601-03 and the Company (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996).
10.8(a) Credit Agreement dated as of May 3, 1996 among the Company,
Texas Commerce Bank, National Association, as Agent and
other participating financial institutions (the "Credit
Agreement") (incorporated by reference to the Company's
Current Report on Form 8-K dated May 23, 1996).
10.8(b) First Amendment and Second Amendment to Credit Agreement
dated as of June 28, 1996 (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996).
10.8(c) Amendment Letter to Credit Agreement dated as of September
30, 1996 (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1996).
10.8(d) Fourth Amendment to Credit Agreement (incorporated by
reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1996).
10.8(e) Fifth Amendment to Credit Agreement dated as of March 31,
1997.
10.9 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).
10.10 Software Spectrum, Inc. Employee Stock Purchase Plan, as
amended.
10.11 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).
10.12 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).
10.13 Form of Management Continuity Agreement between the Company
and certain executive officers dated as of January 10,
1997.
-18-
20
10.14 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.
13 Software Spectrum, Inc.'s 1997 Annual Report to
Shareholders.
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
("Purchase and Sale Agreement") (incorporated by reference
to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1996).
99.1 First Amendment to Purchase and Sale Agreement dated
September 1996 (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the period ended
September 30, 1996).
(b) REPORTS ON FORM 8-K
During the three months ended April 30, 1997, a Current Report on Form
8-K dated March 26, 1997 was filed by the Company on April 9, 1997,
reporting the Company's change in its fiscal year end to April 30 of
each year.
-19-
21
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: July 28, 1997
-20-
22
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 July 28, 1997
- ---------------------------------- Director (Principal Executive Officer)
Judy O. Sims
/s/ Richard G. Sims Senior Vice President and Director July 28, 1997
- ----------------------------------
Richard G. Sims
/s/ Deborah A. Nugent Vice President of Finance and Treasurer July 28, 1997
- ---------------------------------- (Principal Financial Officer and
Deborah A. Nugent Principal Accounting Officer)
/s/ Mellon C. Baird Director July 25, 1997
- ----------------------------------
Mellon C. Baird
/s/ Carl S. Ledbetter Director July 25, 1997
- ----------------------------------
Carl S. Ledbetter
/s/ Frank Tindle Director July 28, 1997
- ----------------------------------
Frank Tindle
-21-
23
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 1997
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 April 30, 1997 and March 31, 1996
Consolidated Statements of Operations for the year ended April 30,
1997, the month ended April 30, 1996 and the two years ended March 31,
1996
Consolidated Statements of Shareholders' Equity for the year ended
April 30, 1997, the month ended April 30, 1996 and the two years
ended March 31, 1996
Consolidated Statements of Cash Flows for the year ended April 30,
1997, the month ended April 30, 1996 and the two years ended March
31, 1996
Notes to Consolidated Financial Statements
The following financial schedule of Software Spectrum, Inc. and
subsidiaries for the year ended April 30, 1997 and the two years ended March
31, 1996, is filed herewith:
Report of Grant Thornton LLP S-1
Schedule II Valuation and Qualifying Accounts and Reserves S-2
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-
24
Report of Independent Certified Public Accountants on Schedules
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 July
7, 1997, 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 the year ended April 30, 1997, the month ended April 30, 1996 and the
years ended March 31, 1996 and 1995. In our opinion, this schedule presents
fairly, in all material respects, the information required to be set forth
therein.
Dallas, Texas
July 7, 1997
S-1
25
SOFTWARE SPECTRUM, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
DEDUCTIONS-
BALANCE AT CHARGED TO WRITE-OFFS BALANCE
BEGINNING COSTS AND NET OF AT END
OF YEAR EXPENSES RECOVERIES OF YEAR
----------- ---------- ---------- -----------
Allowance for Doubtful Accounts:
- -------------------------------
Year ended April 30, 1997: $1,488,000 $2,001,000 ($ 827,000) $2,421,000
Month ended April 30, 1996 $1,201,000 $ 46,000 -- $1,247,000
Year ended March 31, 1996: $1,371,000 $ 633,000 ($803,000) $1,201,000
Year ended March 31, 1995: $1,662,000 $ 244,000 ($535,000) $1,371,000
Inventory Valuation Account:
- ---------------------------
Year ended April 30, 1997: $ 805,000 $2,219,000 ($1,121,000) $1,903,000
Month ended April 30, 1996 $ 997,000 $ 57,000 ($ 249,000) $ 805,000
Year ended March 31, 1996: $ 1,123,000 $1,249,000 ($1,375,000) $ 997,000
Year ended March 31, 1995: $ 985,000 $1,173,000 ($1,035,000) $1,123,000
S-2
26
EXHIBIT INDEX
SEQUENTIAL
NUMBERING
EXHIBIT PAGE NO.
- ------- ----------
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(a) 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).
3.1(b) Statement of Designation of Series A Junior Participating Preferred Stock
(incorporated by reference to the Company's Current Report on Form 8-K dated
December 13, 1996).
3.1(c) Articles of Amendment to Restated Articles of Incorporation, filed with the
Secretary of State of Texas on November 25, 1996. 30
3.1(d) Statement of Cancellation of Treasury Shares, filed with the Secretary of State
of Texas on March 21, 1997. 32
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).
3.3 Rights Agreement between the Company and KeyCorp Shareholder Services, Inc.
dated December 1996, (incorporated by reference to the Company's Current Report
on Form 8-K dated December 13, 1996).
10.1 IBM Business Partner Agreement between the Company, IBM Corporation and Lotus
Development Corporation dated June 30, 1997. 33
10.2(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) (incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996).
10.2(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
("LAR Addendum") (incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996).
10.2(c) Amendment No. 2 to LAR Addendum dated August 2, 1996 between Microsoft
Corporation and the Company. 59
10.2(d) Amendment No. 3 to the LAR Addendum dated January 17, 1997 between Microsoft
Corporation and the Company. 64
27
Sequential
Numbering
Exhibit Page No.
- ------- ----------
10.2(e) Microsoft Government Select Government Contractor Addendum to the 1995/1996
Microsoft Channel Agreement dated as of July 1, 1995 (incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996).
10.2(f) 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 (the
"Rebate and Marketing Fund Addendum") (incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996).
10.2(g) Amendment No. 2 to the Rebate and Marketing Fund Addendum dated
August 2,1 996 between Microsoft Corporation and the Company. 69
10.2(h) Amendment No. 3 to the Rebate and Marketing Fund Addendum dated
January 17, 199 between Microsoft Corporation and the Company. 79
10.3 Microsoft Corporation 1995/1996 Authorized Government Large Account Reseller
Agreement dated April 1, 1995 between Microsoft Corporation and the Company
(incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996).
10.4(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).
10.4(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).
10.5(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).
10.5(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).
10.5(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).
10.5(d) Fourth Amendment to Commercial Lease Agreement dated effective as of November 25,
1996 between Kranco, L.P. and the Company. 90
28
Sequential
Numbering
Exhibit Page No.
- ------- ----------
10.6 Form of Call Center Lease (Spokane) between DD&J Software corporation
and the Company (incorporated by reference to the Company's Current
Report on Form 8-K dated March 26, 1996).
10.7 Lease Agreement dated March 8, 1996 by and between Riverport Commerce Center, Inc.
and the Company (incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996).
10.8 Lease Agreement dated April 26, 1996 by and between Beneficiaries of American
National Bank Trust Number 104601-03 and the Company (incorporated by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996).
10.8(a) Credit Agreement dated as of May 3, 1996 among the Company, Texas
Commerce Bank, National Association, as Agent and other participating
financial institutions (the "Credit Agreement") (incorporated by reference to
the Company's Current Report on Form 8-K dated May 23, 1996).
10.8(b) First Amendment and Second Amendment to Credit Agreement dated as of
June 28, 1996 (incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1996).
10.8(c) Amendment Letter to Credit Agreement dated as of September 30, 1996
(incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1996).
10.8(c) Fourth Amendment to Credit Agreement dated as of December 31, 1996
(incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1996).
10.8(e) Fifth Amendment to Credit Agreement dated as of March 31, 1997. 97
10.9 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).
10.10 Software Spectrum, Inc. Employee Stock Purchase Plan, as amended. 109
10.11 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).
10.12 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).
10.13 Form of Management Continuity Agreement between the Company and certain 120
executive officers dated as of January 10, 1997.
-25-
29
Sequential
Numbering
Exhibit Page No.
- ------- ----------
10.14 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. 137
11.2 Statement regarding Computation of Fully Diluted Earnings Per Share. 138
13 Software Spectrum, Inc.'s 1997 Annual Report to Shareholders. 139
23 Consent of Grant Thornton LLP, Independent Accountants 178
24 Power of Attorney (included on the signature page of this Form 10-K).
27 Financial Data Schedule 179
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 ("Purchase and Sale Agreement")
(incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996).
99.1 First Amendment to Purchase and Sale Agreement dated September 1996 (incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1996).