<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 31, 2000
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from ____________________ to _________________________
Commission File Number 0-22823
-------
QAD Inc.
(Exact name of registrant as specified in its charter)
Delaware 77-0105228
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6450 Via Real, Carpinteria, California 93013
(Address of principal executive offices)
(805) 684-6614
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes X No
--- ---.
The number of shares outstanding of the issuer's common stock as of the close of
business on November 30, 2000 was 33,561,960.
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QAD INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
PART I
FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of
October 31, 2000 and January 31, 2000 1
Condensed Consolidated Statements of Operations 2
for the Three and Nine Months Ended October 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows 3
for the Nine Months Ended October 31, 2000 and 1999
Notes to Condensed Consolidated Financial
Statements 4
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
ITEM 3 Quantitative and Qualitative Disclosures
About Market Risk 10
PART II
OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
QAD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
--------------- --------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 31,746 $ 35,936
Accounts receivable, net 61,681 98,567
Other current assets 11,333 15,523
---------------- ---------------
Total current assets 104,760 150,026
Property and equipment, net 27,111 32,729
Capitalized software development costs, net 7,571 8,233
Other assets, net 20,908 23,383
---------------- ---------------
Total assets $ 160,350 $ 214,371
================ ===============
Liabilities and stockholders' equity
Current liabilities:
Notes payable and capital lease obligations $ 844 $ 1,240
Accounts payable 13,996 17,671
Accrued expenses 27,525 34,647
Deferred revenue and deposits 50,299 64,731
---------------- ---------------
Total current liabilities 92,664 118,289
Notes payable and capital lease obligations, less current portion 20,096 21,890
Other liabilities 192 200
Minority interest 467 563
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000
shares; none issued or outstanding - -
Common stock, $0.001 par value. Authorized 150,000,000
shares; issued and outstanding 33,561,570 and 33,012,210
shares at October 31, 2000 and January 31, 2000, respectively 34 33
Additional paid-in-capital 113,199 111,553
Accumulated deficit (62,649) (34,876)
Unearned compensation - restricted stock (112) (146)
Accumulated other comprehensive loss (3,541) (3,135)
---------------- ---------------
Total stockholders' equity 46,931 73,429
---------------- ---------------
Total liabilities and stockholders' equity $ 160,350 $ 214,371
================ ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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QAD INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------------- -----------------------------
2000 1999 2000 1999
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
License fees $ 14,050 $ 20,634 $ 47,370 $ 61,657
Maintenance and other 24,355 22,118 72,132 66,402
Services 11,619 13,976 35,367 40,321
---------- ----------- ----------- ----------
Total revenue 50,024 56,728 154,869 168,380
Costs and expenses:
Cost of license fees 3,206 3,013 9,632 12,913
Other cost of revenue 21,516 21,308 65,695 62,882
Sales and marketing 15,681 18,847 49,751 58,926
Research and development 7,974 8,528 26,818 25,991
General and administrative 5,308 5,422 16,827 17,031
Amortization of intangibles from acquisitions 1,228 1,086 3,572 2,987
Restructuring charge 5,076 - 5,076 1,152
---------- ----------- ----------- ----------
Total costs and expenses 59,989 58,204 177,371 181,882
---------- ----------- ----------- ----------
Operating loss (9,965) (1,476) (22,502) (13,502)
Other (income) expense:
Interest income (399) (82) (1,157) (294)
Interest expense 607 548 1,794 1,341
Other (income) expense (622) (114) (324) 49
---------- ----------- ----------- ----------
Total other (income) expense (414) 352 313 1,096
---------- ----------- ----------- ----------
Loss before income taxes (9,551) (1,828) (22,815) (14,598)
Income tax expense 600 2,681 4,957 3,823
---------- ----------- ----------- ----------
Net loss $ (10,151) $ (4,509) $ (27,772) $ (18,421)
========== =========== =========== ==========
Basic and diluted net loss per share $ (.30) $ (.15) $ (.83) $ (.61)
========== =========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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QAD INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 6,809 $ (3,068)
Cash flows from investing activities:
Purchase of property and equipment (4,344) (4,747)
Investment in software development (1,818) (2,126)
Proceeds from sale of short-term investments - 3,000
Investment in equity securities - (500)
Acquisition of business, net of cash acquired (574) (81)
Other, net 5 86
----------- -----------
Net cash used in investing activities (6,731) (4,368)
Cash flows from financing activities:
Proceeds from notes payable 15,000 17,109
Reduction of notes payable (18,018) (12,720)
Issuance of common stock for cash 1,529 1,162
Other, net (40) (51)
----------- -----------
Net cash provided by (used in) financing activities (1,529) 5,500
Effect of exchange rates on cash and equivalents (2,739) (815)
----------- -----------
Net decrease in cash and equivalents (4,190) (2,751)
Cash and equivalents at beginning of period 35,936 16,078
----------- -----------
Cash and equivalents at end of period $ 31,746 $ 13,327
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
QAD INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments necessary (consisting only of
reclassifications and normal recurring adjustments) to present fairly the
financial information contained therein. These statements do not include all
disclosures required by generally accepted accounting principles and should be
read in conjunction with the audited financial statements and related notes
included in our Form 10-K for the year ended January 31, 2000. The results of
operations for the nine months ended October 31, 2000 are not necessarily
indicative of the results to be expected for the year ending January 31, 2001.
Certain prior period financial statement items have been reclassified to conform
to current period presentation.
2. COMPREHENSIVE LOSS
Comprehensive loss includes changes in the balances of items that are reported
directly in a separate component of stockholders' equity on the Condensed
Consolidated Balance Sheets. The components of comprehensive loss are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------------- -----------------------------
2000 1999 2000 1999
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
(In thousands)
Net loss $ (10,151) $ (4,509) $ (27,772) $ (18,421)
Foreign currency translation adjustments (562) (139) (407) (815)
----------- --------- ----------- ----------
Comprehensive loss $ (10,713) $ (4,648) $ (28,179) $ (19,236)
=========== ========= =========== ==========
</TABLE>
3. PER SHARE INFORMATION
Net income (loss) per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Basic income (loss)
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted income (loss) per share is computed using
the weighted average number of common and dilutive common stock equivalents
outstanding during the period. Common stock equivalents consist of the shares
issuable upon the exercise of warrants and stock options using the treasury
stock method. The following table sets forth the computation of basic and
diluted income (loss) per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
--------------------------- -----------------------------
2000 1999 2000 1999
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
Numerator:
Net loss $ (10,151) $ (4,509) $ (27,772) $ (18,421)
=========== ========= =========== ==========
Denominator:
Weighted average basic shares outstanding 33,504 30,272 33,359 30,126
Effect of dilutive common stock equivalents - - - -
----------- --------- ----------- ----------
Weighted average diluted shares outstanding 33,504 30,272 33,359 30,126
=========== ========= =========== ==========
Basic and diluted loss per share $ (.30) $ (.15) $ (.83) $ (.61)
=========== ========= =========== ==========
</TABLE>
4
<PAGE>
Common stock equivalent shares of approximately 232,000 and 756,000 for the
three months and nine months ended October 31, 2000, and 143,000 and 160,000 for
the three months and nine months ended October 31, 1999, respectively, were not
included in the diluted calculations because, due to the net loss positions,
they were anti-dilutive.
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
---------- ------------
(in thousands)
<S> <C> <C>
Line of credit $ - $ 16,980
Term loan 15,000 -
Promissory note 4,760 4,940
Capital leases 248 527
Other 932 683
---------- ------------
20,940 23,130
Less current maturities 844 1,240
---------- ------------
$ 20,096 $ 21,890
========== ============
</TABLE>
On September 8, 2000, we entered into a five-year senior credit facility with
Foothill Capital Corporation, "the facility." The maximum available amount of
borrowings under the facility is $30.0 million. The facility is secured by
certain assets of QAD Inc. The facility includes a $15.0 million term loan
with a five-year amortization schedule. The term loan may be re-loaded to
$15.0 million on an annual basis. Borrowings under the term loan portion of
the facility bear interest at prime plus 3.75 percent. The maximum borrowings
under the revolving portion of the facility are subject to a borrowing base
calculation. Borrowings under the revolving potion of the credit facility
bear interest on a floating rate based on either LIBOR or prime plus the
corresponding applicable margins ranging from 2.50 percent to 3.75 percent
for the LIBOR option or 0.25 percent to 1.25 percent for the prime option
depending on the trailing twelve month earnings before interest, taxes,
depreciation and amortization. We pay an annual commitment fee of 0.375
percent calculated on the average unused portion of the $30.0 million
facility. As of October 31, 2000, approximately $5.9 million was available
and unused on the revolving portion of the Foothill credit facility.
On September 11, 2000, we drew $15.0 million on the term portion of the
facility and $10.0 million of these proceeds were used to retire the existing
debt with Bank One in its entirety.
5. RESTRUCTURING CHARGE
In the third quarter of fiscal year 2001, QAD undertook several initiatives to
strengthen operating and financial performance by sharpening the focus of our
e-business and business intelligence solutions for multi-national customers. The
related actions included facility consolidations, a reduction of approximately
150 employees, contractors and consultants across most regions and functions and
associated asset write-downs. These actions resulted in a $5.1 million charge
taken in the third quarter of fiscal year 2001. As of October 31, 2000, $2.4
million of this charge was utilized, and we expect to pay the remaining balance
by the end of fiscal year 2003. The restructuring charge and related utilization
as of October 31, 2000 are detailed by category as follows:
<TABLE>
<CAPTION>
RESTRUCTURING
CHARGE UTILIZATION
------------- ------------
<S> <C> <C>
Lease obligations $ 1,033 $ 76
Employee termination costs 2,192 490
Asset write-downs 1,851 1,851
------------- ------------
$ 5,076 $ 2,417
============= ============
</TABLE>
5
<PAGE>
In response to changes in customers' manufacturing capital software spending
patterns during fiscal year 1999, we undertook a restructuring program that
more closely aligned costs with sales expectations. The program included the
consolidation of certain facilities and an approximate reduction of 230
positions across a broad cross-section of QAD. This program was continued in
fiscal year 2000 with a $1.2 million charge recorded in the second quarter.
As of October 31, 2000, $5.4 million of the total $5.5 million restructuring
charge was utilized, and we expect to pay the remaining balance by January
31, 2001. The restructuring charge and related utilization as of October 31,
2000 are detailed by category as follows:
<TABLE>
<CAPTION>
RESTRUCTURING
CHARGE UTILIZATION
------------- ------------
<S> <C> <C>
Lease obligations $ 1,236 $ 1,176
Employee termination costs 1,940 1,897
Asset write-downs 2,290 2,290
------------- ------------
$ 5,466 $ 5,363
============= ============
</TABLE>
6. BUSINESS SEGMENT INFORMATION
QAD operates in geographic regions. The North America region includes the United
States and Canada. The EMEA region includes Europe, the Middle East and Africa.
The Asia Pacific region includes Asia and Australia. The Latin America region
includes South America, Central America and Mexico.
Operating income attributable to each business segment is based upon the
management assignment of revenue and costs. Regional cost of revenue includes
the cost of goods produced by QAD's manufacturing operations at the transfer
price charged to the distribution operation. Income from manufacturing
operations is included in the Corporate operating segment. Research and
development costs are also included in the Corporate operating segment.
Identifiable assets are assigned by region based upon the location of each legal
entity.
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------------------------- ----------------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
North America $ 22,214 $ 27,736 $ 63,615 $ 73,638
EMEA 16,792 18,349 58,873 60,466
Asia Pacific 8,475 7,752 25,757 24,988
Latin America 2,543 2,891 6,624 9,288
----------- ---------- ---------- ----------
$ 50,024 $ 56,728 $ 154,869 $ 168,380
=========== ========== ========== ==========
OPERATING INCOME (LOSS):
North America $ 2,986 $ 791 $ 6,027 $ (2,649)
EMEA (4,102) (1,525) (5,492) (2,472)
Asia Pacific (1,670) (1,209) (5,674) (1,893)
Latin America (1,127) (451) (3,789) (860)
Corporate (976) 918 (8,498) (4,476)
Restructuring charge (5,076) - (5,076) (1,152)
----------- ---------- ---------- ----------
$ (9,965) $ (1,476) $ (22,502) $ (13,502)
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
---------- ------------
<S> <C> <C>
IDENTIFIABLE ASSETS:
North America $ 64,110 $ 96,853
EMEA 61,701 84,233
Asia Pacific 26,310 24,575
Latin America 8,229 8,710
---------- ------------
$ 160,350 $ 214,371
========== ============
</TABLE>
6
<PAGE>
7. BUSINESS ACQUISITIONS
In July 2000, we acquired certain assets and liabilities of an Italy-based
distributor, Atos Italy S.p.A. The cost of the acquisition totaled $1.7 million.
The acquisition was accounted for using the purchase method. Goodwill related to
the acquisition of $1.1 million is being amortized over ten years.
Results of operations have been included in the financial statements since the
acquisition date. The historical operations of the acquired company are not
material to our consolidated operations or financial position. Therefore,
supplemental pro forma information has not been presented.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENT
In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements. These statements typically are preceded or
accompanied by words like "believe," "anticipate," "expect" and words of similar
meaning. These statements are also contained in the Outlook section. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in these
forward-looking statements. Important factors that might cause such a difference
include, but are not limited to, those discussed in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as other factors detailed in our Annual Report on Form 10-K
for the year ended January 31, 2000. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
opinions only as of the date hereof. QAD undertakes no obligation to revise,
update or publicly release the results of any revision or update to these
forward-looking statements. Readers should carefully review the risk factors
described in other documents QAD files from time to time with the Securities and
Exchange Commission.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by certain items reflected in our statements of
operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------------- ---------------------------
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
License fees 28% 36% 31% 37%
Maintenance and other 49 39 46 39
Services 23 25 23 24
------------ ----------- ----------- -----------
Total revenue 100 100 100 100
Costs and expenses:
Cost of license fees 6 5 6 8
Other cost of revenue 43 38 43 37
Sales and marketing 31 33 32 35
Research and development 16 15 18 15
General and administrative 11 9 11 10
Amortization of intangibles from acquisitions 3 2 2 2
Restructuring charge 10 0 3 1
------------ ----------- ----------- -----------
Total costs and expenses 120 102 115 108
------------ ----------- ----------- -----------
Operating loss (20) (2) (15) (8)
Other (income)/expense (1) 1 - 1
------------ ----------- ----------- -----------
Loss before income taxes (19) (3) (15) (9)
Income tax expense 1 5 3 2
------------ ----------- ----------- -----------
Net loss (20)% (8)% (18)% (11)%
============ =========== =========== ===========
</TABLE>
TOTAL REVENUE. Total revenue for the third quarter of fiscal year 2001 was $50.0
million, a decline of $6.7 million, or 12% from $56.7 million in the third
quarter of fiscal year 2000. Total revenue for the nine months ended October 31,
2000 was $154.9 million, a decline of 8% or $13.5 million from $168.4 million in
the comparable prior year period. This decrease in total revenue on both a
quarter-to-quarter and year-to-year basis was primarily due to declines in
license fee and services revenue, partially offset by continued growth in
maintenance revenue.
Although we believe the Year 2000 capital spending lock-down is over, customers
have not yet resumed former buying levels. They are instead taking the time to
evaluate their e-business strategies before investing in associated
8
<PAGE>
software, resulting in our license revenue decline. The decrease in services
revenue relates to decreased utilization of our service consultants in
conjunction with lower license sales. Maintenance and other revenue continue to
grow due to expansion of our installed base.
As a result of these factors, our revenue mix has shifted away from higher
margin license revenue, from 37% of total revenue in the first nine months of
fiscal year 2000 to 31% in the first nine months of fiscal year 2001, toward
lower margin maintenance and other revenue.
TOTAL COST OF REVENUE. Total cost of revenue (combined cost of license fees and
other cost of revenue) as a percentage of total revenue increased from 43% in
the third quarter of fiscal year 2000 to 49% in the third quarter of fiscal year
2001. Total cost of revenue also increased from 45% in the first nine months of
fiscal year 2000 to 49% in the first nine months of fiscal year 2001. These
increases were primarily due to the shift in revenue mix away from the higher
margin license business and toward lower margin maintenance and other revenue,
as well as lower service margins due to decreased utilization rates of service
consultants in conjunction with the lower license sales.
SALES AND MARKETING. Sales and marketing expense decreased 17% to $15.7
million for the third quarter of fiscal year 2001 from $18.8 million in the
comparable prior year period. On a year-to-date basis, sales and marketing
expense declined $9.2 million or 16% to $49.8 million compared to the first
nine months of fiscal year 2000. The decline in spending was primarily due to
continued cost control measures, including a partial quarter benefit of the
recently announced restructuring program as well as lower commission expense
on decreased revenue.
RESEARCH AND DEVELOPMENT. Research and development expense decreased slightly to
$8.0 million for the third quarter of fiscal 2001 from $8.5 million in the third
quarter of fiscal 2000. During the nine months ended October 31, 2000, research
and development expense increased slightly to $26.8 million from $26.0 million
in the same prior year period. The year-to-date increase primarily relates to
increased investment in QAD eQ and our web-enabled ERP products, partly
offset by a partial quarter benefit of the recently announced restructuring
program.
GENERAL AND ADMINISTRATIVE. General and administrative expense remained
relatively flat for both the three-month and nine-month periods of fiscal years
2001 and 2000 at $5.3 million and $5.4 million for the quarter ended October 31,
2000 and 1999 and $16.8 million and $17.0 million for the nine-month period
ended October 31, 2000 and 1999, respectively.
RESTRUCTURING CHARGE. On August 22, 2000, we announced an initiative to
sharpen the focus of our e-business and business intelligence solutions for
multi-national customers. In connection with this shift, we took a $5.1
million restructuring charge in the third quarter of the fiscal year 2001
related to facilities consolidations, including two office closures, employee
termination costs and associated asset write-downs.
In response to changes in customers' manufacturing capital software spending
patterns, we undertook a restructuring program in fiscal year 1999 that more
closely aligned costs with sales expectations. This program was continued in
fiscal year 2000 with an additional charge of $1.2 million.
INCOME TAXES. We recorded income tax expense of $5.0 million for the nine months
ended October 31, 2000. This includes $1.8 million for taxes in the
jurisdictions that were profitable for the first nine months and a $3.2 million
valuation allowance on U.S. deferred tax assets. Income tax expense for the
first nine months of fiscal year 2000 was $3.8 million. This included $2.5
million for taxes in jurisdictions that were profitable during this period and
$1.3 million in tax charges related to a valuation allowance and an IRS audit of
the years 1995 and 1996. We have not provided benefit for the jurisdictions in
loss positions due to management's determination regarding the uncertainty of
the realization of these benefits.
OUTLOOK
We expect total revenue for the fourth quarter of fiscal year 2001 of this
fiscal year to range from $54.0 to $57.0 million, with the increase over the
third quarter of fiscal year 2001 coming primarily in license revenue. In
line with the expected increase in license revenue, gross margin should
improve by a few percentage points. Operating expenses should also improve
slightly due to a full quarter impact of the restructuring actions
implemented in the third quarter of fiscal year 2001. Based on these factors,
EPS should range between a small profit and a small loss.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations and met our capital expenditure
requirements through cash flows from operations, sale of equity securities and
borrowings. We had working capital of $12.1 million and $31.7 million as of
October 31, 2000 and January 31, 2000, respectively. Cash and equivalents were
$31.7 million and $35.9 million at October 31, 2000 and January 31, 2000,
respectively.
Accounts receivable, net of allowances, decreased to $61.7 million at October
31, 2000 from $98.6 million at January 31, 2000. Accounts receivable days sales
outstanding decreased to 111 days at October 31, 2000 from 125 days at January
31, 2000, partially due to the recent implementation of an automated collection
system.
Net cash provided by (used in) operating activities was $6.8 million and $(3.1)
million for the nine months ended October 31, 2000 and 1999, respectively. The
year-over-year improvement relates primarily to higher accounts receivable
collections.
Net cash used in investing activities, which aggregated to $6.7 million and
$4.4 million in the nine months ended October 31, 2000 and 1999,
respectively, primarily relates to the purchase of property and equipment in
fiscal years 2000 and 1999 and the sale of short-term cash investments in the
nine months ended October 31, 1999. At October 31, 2000 we had no material
commitments for capital expenditures.
Net cash provided by (used in) financing activities totaled $(1.5) million and
$5.5 million for the nine months ended October 31, 2000 and 1999, respectively,
and was composed of net proceeds and repayments of borrowings and issuance of
common stock.
We believe that the cash on hand, net cash provided by operating activities and
the available borrowings under our credit facility will provide us with
sufficient resources to meet our current and long-term working capital
requirements, debt service and other cash needs.
RECENT ACCOUNTING STANDARDS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44). FIN 44 provides guidance for issues arising in applying
APB Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44 applies
specifically to new awards, exchanges of awards in a business combination,
modification to outstanding awards, and changes in grantee status that occur on
or after July 1, 2000, except for the provisions related to repricings and the
definition of an employee, which apply to awards issued after December 15, 1998.
Application of FIN 44 did not have an effect on our financial reporting.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk is contained on Page 26 of our annual report
on Form 10-K for the year ended January 31, 2000 and is incorporated by
reference to such annual report.
10
<PAGE>
PART II
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Tenth Amendment to the office lease between the Registrant and
MATCO Enterprises, Inc. for Suites G and E located at 5464
Carpinteria Avenue, Carpinteria, California dated August 1,
2000.
10.2 Eleventh Amendment to the office lease between the Registrant
and MATCO Enterprises, Inc. for Suites I, J, K and L located
at 5464 Carpinteria Avenue, Carpinteria, California dated
November 16, 2000.
10.3 Loan and Security Agreement between the Registrant and
Foothill Capital Corporation dated September 8, 2000.
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
October 31, 2000.
11
<PAGE>
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.
QAD INC.
(Registrant)
Date: December 15, 2000 By /s/ KATHLEEN M. FISHER
------------------------------
Kathleen M. Fisher
Chief Financial Officer
(on behalf of the registrant)
By /s/ CHERYL M. SLOMANN
-----------------------------
Cheryl M. Slomann
Chief Accounting Officer
(Principal Accounting Officer)
12
