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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
Mark One Quarterly Report Pursuant to Section 13 or 15(d) of the
[ X ] Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number 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 Identification No.)
incorporation or organization)
2140 MERRITT DRIVE
GARLAND, TEXAS
75041
(Address of principal executive offices)
(Zip Code)
972-840-6600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
At December 9, 1998, the Registrant had outstanding 4,463,570 shares of
its Common Stock, par value $.01 per share.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at October 31, 1998
and April 30, 1998 1
Consolidated Statements of Income for the
Three and Six Months Ended
October 31, 1998 and 1997 2
Consolidated Statements of Cash Flows
for the Six Months Ended
October 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6 - 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
October 31, April 30,
1998 1998
----------- ----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 3,945 $ 7,129
Trade accounts receivable, net of allowance for doubtful
accounts of $3,343 at October 31 and $3,050 at April 30 145,212 171,460
Inventories 3,086 4,564
Prepaid expenses 3,064 2,279
Other current assets 652 1,024
---------- ----------
Total current assets 155,959 186,456
Furniture, equipment and leasehold improvements, at cost 45,232 37,951
Less accumulated depreciation and amortization 21,418 17,538
---------- ----------
23,814 20,413
Other assets, consisting primarily of goodwill, net of accumulated
amortization of $6,942 at October 31 and $5,661 at April 30 50,294 51,762
---------- ----------
$ 230,067 $ 258,631
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 448 $ 393
Trade accounts payable 113,904 160,331
Other current liabilities 11,734 13,824
---------- ----------
Total current liabilities 126,086 174,548
Long-term debt, less current maturities 26,647 7,813
Shareholders' equity
Preferred stock, par value $.01; authorized, 1,000,000
shares; issued and outstanding, none -- --
Common stock, par value $.01; authorized, 20,000,000
shares; issued 4,460,076 shares at October 31 and
4,397,678 shares at April 30 44 44
Additional paid-in capital 40,425 39,496
Retained earnings 43,354 40,765
Currency translation adjustments (2,781) (2,627)
---------- ----------
81,042 77,678
Less treasury stock at cost; 225,801 shares at October 31
and 92,111 shares at April 30 3,708 1,408
---------- ----------
Total shareholders' equity 77,334 76,270
---------- ----------
$ 230,067 $ 258,631
========== ==========
See notes to consolidated financial statements.
1
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
--------------------------- ----------------------------
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
----------- ----------- ------------ ------------
Net sales
Software $ 173,450 $ 181,705 $ 379,125 $ 382,399
Technology services 26,525 13,320 45,116 24,584
---------- ---------- ----------- -----------
199,975 195,025 424,241 406,983
---------- ---------- ----------- -----------
Cost of sales
Software 156,703 163,356 343,842 344,875
Technology services 15,827 7,940 27,754 14,667
---------- ---------- ----------- -----------
172,530 171,296 371,596 359,542
---------- ---------- ----------- -----------
Gross margin 27,445 23,729 52,645 47,441
Selling, general and administrative expenses 22,013 18,942 42,068 38,307
Depreciation and amortization 2,753 2,397 5,325 4,661
---------- ---------- ----------- -----------
Operating income 2,679 2,390 5,252 4,473
Interest expense (income)
Interest expense 461 1,006 759 1,963
Interest income (112) (59) (212) (98)
---------- ---------- ----------- -----------
349 947 547 1,865
---------- ---------- ----------- -----------
Income before income taxes 2,330 1,443 4,705 2,608
Income tax expense 1,042 815 2,117 1,439
---------- ---------- ----------- -----------
Net income $ 1,288 $ 628 $ 2,588 $ 1,169
========== ========== =========== ===========
Earnings per share - basic and diluted $ 0.30 $ 0.14 $ 0.60 $ 0.27
========== ========== =========== ===========
Weighted average shares outstanding
Basic 4,267 4,331 4,279 4,332
========== ========== ========== ==========
Diluted 4,288 4,388 4,321 4,365
========== ========== ========== ==========
See notes to consolidated financial statements.
2
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended
October 31,
---------------------------
1998 1997
----------- -----------
Operating activities
Net income $ 2,588 $ 1,169
Adjustments to reconcile net income to net cash
used in operating activities
Provision for bad debts 450 715
Depreciation and amortization 5,325 4,661
Deferred income taxes 241 632
Changes in operating assets and liabilities
Trade accounts receivable 26,223 2,622
Inventories 1,473 4,470
Prepaid expenses and other assets (583) 3,575
Trade accounts payable and other current
liabilities (48,586) (22,199)
---------- ----------
Net cash used in operating activities (12,869) (4,355)
---------- ----------
Investing activities
Purchase of furniture, equipment and leasehold
improvements (7,255) (5,224)
---------- ----------
Net cash used in investing activities (7,255) (5,224)
---------- ----------
Financing activities
Borrowings on long-term debt 128,727 173,559
Repayments of long-term debt (109,869) (167,890)
Proceeds from stock issuance including tax benefit
related to stock options exercised 930 211
Purchase of treasury stock (2,300) (363)
Other 4 (51)
---------- ----------
Net cash provided by financing activities 17,492 5,466
---------- ----------
Effect of exchange rate changes on cash (552) (10)
---------- ----------
Decrease in cash and cash equivalents (3,184) (4,123)
Cash and cash equivalents at beginning of period 7,129 7,440
---------- ----------
Cash and cash equivalents at end of period $ 3,945 $ 3,317
========== ==========
Supplemental disclosure of cash paid during the period
Income taxes $ 3,268 $ 113
Interest 558 2,143
See notes to consolidated financial statements.
3
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Software
Spectrum, Inc. (the "Company") and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
The consolidated financial statements contained herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments necessary
for a fair presentation of the consolidated financial position as of October 31,
1998, the consolidated results of operations for the three and six months
ended October 31, 1998 and 1997 and the consolidated cash flows for the six
months ended October 31, 1998 and 1997 have been made. In addition, all such
adjustments made, in the opinion of management, are of a normal recurring
nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the interim reporting
rules of the Securities and Exchange Commission. The interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and related notes for the year ended April
30, 1998, included in the Company's 1998 Annual Report on Form 10-K.
NOTE B -- OTHER COMPREHENSIVE INCOME
Effective May 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income",
which addresses the manner in which certain adjustments to shareholders'
equity are displayed in the financial statements. Adoption of this statement
had no effect on the Company's financial position or operating results. The
components of comprehensive income are as follows (in thousands):
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net income $ 1,288 $ 628 $ 2,588 $ 1,169
Currency translation adjustments 46 (376) (154) (647)
---------- ---------- ---------- ----------
Comprehensive income $ 1,334 $ 252 $ 2,434 $ 522
========== ========== ========== ==========
4
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE C -- EARNINGS PER SHARE
The following table (in thousands, except per share amounts) sets forth the
computation of basic and diluted earnings per share. Outstanding options
that were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market price
of the common shares totaled approximately 304,000 and 266,000 shares for the
three and six months ended October 31, 1998 and 252,000 and 254,000 shares
for the three and six months ended October 31, 1997, respectively.
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net income $ 1,288 $ 628 $ 2,588 $ 1,169
---------- ---------- ---------- ----------
Weighted average shares outstanding (basic) 4,267 4,331 4,279 4,332
Effect of dilutive employee and director
stock options 21 57 42 33
---------- ---------- ---------- ----------
Weighted average shares outstanding (diluted) 4,288 4,388 4,321 4,365
---------- ---------- ---------- ----------
Earnings per share - basic and diluted $ 0.30 $ 0.14 $ 0.60 $ 0.27
========== ========== ========== ==========
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues are derived primarily from the sale of personal
computer ("PC") software products and technology services in North America,
Europe and Asia/Pacific.
The following table sets forth certain items from the Company's Consolidated
Statements of Income expressed as a percentage of net sales.
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 86.3 87.8 87.6 88.3
---------- ---------- ---------- ----------
Gross margin 13.7 12.2 12.4 11.7
Selling, general and administrative expenses 11.0 9.7 9.9 9.4
Depreciation and amortization 1.4 1.3 1.3 1.2
---------- ---------- ---------- ----------
Operating income 1.3 1.2 1.2 1.1
Interest expense, net 0.2 0.5 0.1 0.5
---------- ---------- ---------- ----------
Income before income taxes 1.1 0.7 1.1 0.6
Income tax expense 0.5 0.4 0.5 0.3
---------- ---------- ---------- ----------
Net income 0.6% 0.3% 0.6% 0.3%
========== ========== ========== ==========
NET SALES
The Company sells PC software applications through volume licensing and
maintenance ("VLM") agreements, or right to copy arrangements, and
full-packaged PC software products either from its distribution centers or
through third-party distributors. In addition, the Company provides
fee-based services, including consulting and technical support, through its
Technology Services Group ("TSG").
For the three and six months ended October 31, 1998, software sales decreased
5% and 1% from sales for the three and six months ended October 31, 1997.
Publishers have recently introduced enterprise-wide licensing arrangements
which simplify the administration of VLM agreements for customers who elect
to standardize desktop applications across their organizations. The Company
believes the introduction of these programs has delayed sales to certain
large customers, who are evaluating their options under the new programs.
The Company serves as a designated service provider for VLM agreements which
are frequently used by customers seeking to standardize desktop software
applications and, consequently, may involve significant quantities of unit
sales for each customer at lower per-unit prices than full-packaged software
products. The increased popularity of VLM agreements has contributed to the
reduction in average unit prices of desktop software in recent years. Sales
of software through VLM agreements represented approximately 69% and 72% of
sales for the three and six months ended October 31, 1998 and approximately
65% for both the three and six months ended October 31, 1997.
For the three and six months ended October 31, 1998, revenue from TSG
increased by 99% and 84% as compared to the three and six months ended
October 31, 1997. The sales increases are primarily due to services provided
under a large technical support contract that began in the July 1998 quarter.
6
As of October 31, 1998, the Company had 26 TSG offices worldwide. Fee-based
services represented approximately 10% of the Company's overall sales for the
six months ended October 31, 1998 as compared to 6% for the six months ended
October 31, 1997. However, such revenue generated approximately 33% and 21%,
respectively, of the Company's gross margin dollars. The Company expects
that the percentage of gross margin dollars provided by fee-based services
will increase as the Company continues to develop and expand its technology
services business.
The Company believes future increases in sales will depend upon its ability
to maintain and increase its customer base, to develop and expand its
technology services and to capitalize on continued growth in desktop
technology markets around the world.
INTERNATIONAL OPERATIONS
For the three and six months ended October 31, 1998, sales outside of the
United States increased 39% and 31% to $35 million and $72 million,
respectively, as compared to $25 million and $55 million for the three and
six months ended October 31, 1997.
Sales in Europe increased 32% and 27% to $14.3 million and $27.2 million for
the three and six months ended October 31, 1998, primarily due to increased
sales of software under VLM agreements.
Sales in Asia/Pacific were $14.0 million and $28.4 million for the three and
six months ended October 31, 1998, an increase of 64% and 36% over sales of
$8.5 million and $20.9 million for the three and six months ended October 31,
1997. The increase in sales is primarily due to increased sales of software
under VLM agreements.
For the three and six months ended October 31, 1998, fluctuations in foreign
currencies against the U.S. dollar did not have a material effect on the
Company's financial results.
GROSS MARGIN
Overall gross margin as a percentage of net sales was 13.7% and 12.4% for the
three and six months ended October 31, 1998, respectively, as compared to
12.2% and 11.7% for the comparable periods of the prior year. The increase
in overall gross margin as a percentage of net sales is primarily due to the
increasing percentage of gross margin provided by fee-based services, which
have higher gross margins as a percentage of net sales than sales of
software.
For the three and six months ended October 31, 1998, gross margin on the sale
of PC software declined to 9.7% and 9.3%, respectively, as compared to 10.1%
and 9.8% for the three and six months ended October 31, 1997, reflecting the
increasing percentage of sales of software through VLM agreements and lower
levels of financial incentives from suppliers. The Company generally
realizes lower gross margins as a percentage of net sales on sales of
software through VLM agreements, as compared to sales of full-packaged
software products. The decline in software margins as a percentage of net
sales for the three and six months ended October 31, 1998 was offset by an
increase in gross margin dollars from technology services. Gross margin
percentages on sales of technology services were 40% and 38% for the three
and six months ended October 31, 1998, respectively, as compared to 40% for
both the three and six months ended October 31, 1997.
The Company believes that gross margin percentages on sales of software may
continue to decline if the volume of software product sales by the Company
through VLM agreements continues or if publishers respond to continued market
pressures by reducing financial incentives to resellers. This potential
decrease in product gross margin percentages may be offset by anticipated
increases in gross margin dollars generated by technology services.
7
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses include the costs of
the Company's sales and marketing organization as well as purchasing,
distribution and administration costs. For the three and six months ended
October 31, 1998, SG&A expenses, as a percentage of net sales, increased to
11.0% and 9.9% respectively, as compared to 9.7% and 9.4% for the three and
six months ended October 31, 1997. The increase is due to growth in the
technology services business, which has higher levels of SG&A expenses as a
percentage of net sales than the Company's software product business. The
Company remains focused on controlling operating costs in both the services
and product businesses.
DEPRECIATION AND AMORTIZATION
The increase in depreciation and amortization for the three and six months
ended October 31, 1998, as compared to the three and six months ended October
31, 1997, reflects additional depreciation on the higher level of fixed
assets utilized in the Company's services business in 1998.
INCOME TAX EXPENSE
The Company's effective tax rate for both the three and six months ended
October 31, 1998 was approximately 45% as compared to approximately 56% and
55% for the three and six months ended October 31, 1997, respectively. This
decrease in the Company's effective tax rate primarily reflects the impact of
its improved international operations.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1998, the Company had approximately $3.9 million in cash and
cash equivalents and had $25.8 million outstanding under its $100 million
revolving credit facility. The credit facility, which is secured by accounts
receivable, inventory and a pledge of the stock of certain of the Company's
subsidiaries, permits the Company to borrow up to $100 million, subject to
availability under its borrowing base. As of October 31, 1998, the Company
had approximately $49 million of additional borrowing availability under its
credit facility. The facility expires in March 2001.
The decrease in trade accounts receivable and trade accounts payable from
April 30, 1998 to October 31, 1998 is due to collection of the receivables
associated with large sales at the end of fiscal 1998 and payment of the
related liabilities. At October 31, 1998 and April 30, 1998, accounts
receivable represented approximately 60 and 61 days of historical sales,
respectively.
For the six months ended October 31, 1998, the Company used $12.9 million of
cash in its operations compared to $4.4 million of cash used in operations in
the six months ended October 31, 1997. The increase in cash used in
operations is primarily due to the timing of large payments to the Company's
vendors.
The increase in furniture, equipment and leasehold improvements from April
30, 1998 to October 31, 1998 reflects approximately $7.3 million of capital
expenditures related primarily to the ongoing upgrade of the Company's computer
systems and expansion of its technical support centers in Garland, Texas and
Spokane, Washington.
The Company expects that its cash requirements for fiscal 1999 will be
satisfied from cash flow from operations and borrowings under its credit
facility.
In 1997, the Company implemented a stock repurchase program which, upon
amendment in July 1998, allows the Company to purchase up to $5 million of
the Company's Common Stock from time to time in the open market or through
privately negotiated transactions. The Company funds such purchases with
8
cash or borrowings under the Company's credit facility. As of December 9,
1998, the Company had repurchased 178,800 shares of Common Stock, for a total
of $3 million, under the stock repurchase program.
YEAR 2000
The Company has developed an overall plan outlining the tasks, resources and
target dates necessary to ensure the ongoing operation of the Company's
business through the turn of the century and beyond. Over the last three
years, the Company has replaced substantially all of the core management
information systems used in the Company's business, and the platforms upon
which these systems were developed are designed to process dates accurately
beyond the Year 2000. The Company plans to update its third-party software
tools, database engines and applications to the most current release during
the first two quarters of calendar 1999. Based on the Company's ongoing
assessment of these core systems and the representations received from third
parties, the Company believes that following the planned updates, its Year
2000 remediation of these systems will be substantially complete. In
addition, the Company has conducted an inventory, review and assessment of
its personal computers, networks and servers, desktop software applications
and non-IT embedded systems to determine whether they support Year 2000 date
codes.
The Company has begun remediation of the systems that are not in compliance
and plans to complete remediation and to test all of its systems by the third
quarter of calendar 1999. Based on its review and assessment, the Company
expects that any required modifications will be made on a timely basis. In
the event of an unexpected failure in one of the Company's systems, the
Company's employees would be able to continue operations on a manual basis
until such systems have been restored to full operating capacity.
The Company's Year 2000 initiative also provides for contacting key software
vendors and other business partners to determine whether they have effective
plans to address their Year 2000 issues. In the event that the Company's key
vendors cannot provide the Company with software products and services that
meet Year 2000 requirements on a timely basis, or if customers delay, forego
or return software purchases based upon Year 2000 related issues, the
Company's operating results could be materially adversely affected. Based on
the Company's evaluation of the information received to date, the Company
does not believe that such an occurrence is likely. However, the Company
cannot control the Year 2000 readiness of third parties and therefore, such a
risk remains possible.
The Company believes that its most reasonably-likely worst case scenario
involves a temporary business disruption caused by the failure of a supplier
to provide needed products or services. The most significant potential
disruption would be a telecommunications failure at one of the Company's
facilities, which could render the Company unable to accept sales orders or
to perform under its technical support contracts. To the extent that a
potential failure is deemed likely and the risk to the Company is
significant, the Company's contingency plans would include rerouting calls to
alternate operations centers, identifying substitute or second-source
suppliers and outlining revised business processes.
The Company estimates that the total cost of the Year 2000 project will not
exceed $1 million. The majority of the costs will involve reallocation of
existing resources rather than incremental costs. This reallocation of
resources is not anticipated to have a material impact on the implementation
of any significant internal systems projects.
In general, as a reseller of software products, the Company only passes
through to its customers the applicable vendors' warranties. The Company's
operating results could be materially adversely affected, however, if it were
held liable for the failure of software products resold by the Company to be
Year 2000 compliant despite its disclaimer of software product warranties.
With respect to the Company's consulting services, the failure of client
systems or processes could subject the Company to claims regardless of
whether the failure is related to services provided by the Company. Such
claims, or the defense thereof, could have a material adverse effect on the
Company's operating results.
9
EURO CURRENCY ISSUES
On January 1, 1999, eleven of the fifteen member countries of the European
Union are scheduled to introduce a common legal currency called the Euro,
which is intended to replace the currently existing currencies of the
participating countries by January 2002. The Company believes that its
internal systems are Euro capable and does not expect introduction and use of
the Euro to materially impact its financial condition, operating results or
use of derivative instruments.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Other than statements of historical fact, this Management's Discussion and
Analysis of Financial Condition and Results of Operations includes certain
statements of the Company that may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements include future market trends, estimates regarding the
economy and the software industry in general, key performance indicators that
impact the Company and statements included in the Year 2000 discussion above.
In developing any forward-looking statements, the Company makes a number of
assumptions, including expectations for continued market growth, anticipated
revenue and gross margin levels, and cost savings and efficiencies, which
include the ability of the Company to develop electronic strategies.
Although the Company believes these assumptions are reasonable, no assurance
can be given that they will prove correct. The Company's ability to continue
to grow product sales and develop its technology services practice, improve
its operating results in international markets and improve operational
efficiencies will be key to its success in the future. If the industry's or
the Company's performance differs materially from these assumptions or
estimates, Software Spectrum's actual results could vary significantly from
the estimated performance reflected in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results. The Company's Form 10-K for its fiscal year
ended April 30, 1998 contains certain cautionary statements under
"Forward-Looking Information" that identify factors that could cause the
Company's actual results to differ materially from those in the
forward-looking statements in this discussion. All forward-looking
statements in this discussion are expressly qualified in their entirety by
the cautionary statements in this paragraph and under "Forward-Looking
Information" in the Company's Form 10-K.
INFLATION
The Company believes that inflation has not had a material impact on its
operations or liquidity to date.
10
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
On September 17, 1998, the Company held its Annual Meeting of Shareholders
(the "Meeting"). At the Meeting, Mellon Baird and Keith Coogan were elected
as directors to serve three-year terms expiring at the Company's Annual
Meeting of Shareholders to be held in the year 2001. In addition, adoption
of the Company's 1998 Long-Term Incentive Plan was approved.
The following table sets forth the number of shares of Common Stock that were
voted for or against or abstained from each matter:
For Against Abstained
--------- ------- ---------
Election of Mellon Baird to the Board of Directors 3,727,976 -- 19,435
Election of Keith Coogan to the Board of Directors 3,727,150 -- 20,261
Adoption of the Company's
1998 Long-Term Incentive Plan 3,409,468 306,370 31,572
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.2(b) - Articles of Amendment to Article 8 of
Software Spectrum, Inc.'s Amended and Restated Bylaws
effective September 17, 1998.
Exhibit 10.17 - The Software Spectrum, Inc. 1998 Long-Term
Incentive Plan
Exhibit 10.18 - First Amendment to Amended and Restated Credit
Agreement, dated as of August 15, 1998, among the Company, the
Chase Manhattan Bank, as Administrative Agent, Chase Bank of
Texas, National Association, as Collateral Agent, and other
participating financial institutions.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three month
period ended October 31, 1998.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOFTWARE SPECTRUM, INC.
Date: December 14, 1998 By: /s/ James W. Brown
-----------------------------------------------
James W. Brown
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
EXHIBIT INDEX
Exhibit 3.2(b) Articles of Amendment to Article 8 of Software Spectrum, Inc.'s
Amended and Restated Bylaws effective September 17, 1998.
Exhibit 10.17 The Software Spectrum, Inc. 1998 Long-Term Incentive Plan
Exhibit 10.18 First Amendment to Amended and Restated Credit Agreement,
dated as of August 15, 1998, among the Company, the Chase
Manhattan Bank, as Administrative Agent, Chase Bank of
Texas, National Association, as Collateral Agent, and other
participating financial institutions.
Exhibit 27 Financial Data Schedule