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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-22557
PEAPOD, INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-4118175
- ----------------------------------- ------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
9933 Woods Drive, Skokie, Illinois 60077
(Address of principal executive offices) (ZIP Code)
(847) 583-9400
(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 such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of the registrant's common stock,
$0.01 par value ("Common Stock") as of July 22, 1999 was 17,469,521.
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PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
PEAPOD, INC.
BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
1999 1998
----------------- ------------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 3,087 $ 4,341
Marketable securities.............................................. 17,182 15,836
Receivables, net of bad debt allowance of $310 and $287 as
of June 30, 1999 and December 31, 1998........................... 1,555 2,516
Merchandise inventories............................................ 219 --
Prepaid expenses................................................... 488 186
Other current assets............................................... 837 974
----------------- ------------------
Total current assets.......................................... 23,368 23,853
Property and equipment:
Computer equipment and software.................................... 4,634 4,010
Service equipment and other........................................ 4,549 2,147
----------------- ------------------
Property and equipment, at cost......................................... 9,183 6,157
Accumulated depreciation........................................... (3,259) (2,252)
----------------- ------------------
Net property and equipment.............................................. 5,924 3,905
Non-current marketable securities 5,166 15,213
----------------- ------------------
Total assets.................................................. $34,458 $42,971
================= ==================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable................................................... $ 3,519 $ 3,442
Accrued compensation............................................... 1,361 802
Other accrued liabilities.......................................... 1,631 2,688
Current deferred revenue........................................... 995 1,000
Current obligations under capital lease............................ 723 590
----------------- ------------------
Total current liabilities..................................... 8,229 8,522
Deferred revenue........................................................ 217 448
Obligations under capital lease, less current portion................... 1,146 395
----------------- ------------------
Total liabilities............................................. 9,592 9,365
Stockholders' equity:
Preferred stock, $.01 par value, authorized 5,000,000
shares, none issued and outstanding............................. -- --
Common stock, $.01 par value, 50,000,000 shares authorized,
17,609,559 and 17,245,828 shares issued at June 30, 1999
and December 31, 1998....................................... 176 172
Additional paid-in capital......................................... 66,178 64,319
Accumulated other comprehensive income -
unrealized gain (loss) on available-for-sale securities....... (263) 83
Accumulated deficit................................................ (40,054) (30,060)
Treasury stock, at cost, 141,749 and 117,476 shares at June 30,
1999 and December 31, 1998..................................... (1,171) (908)
----------------- ------------------
Total stockholders' equity.................................... 24,866 33,606
================= ==================
Total liabilities and stockholders' equity.................... $34,458 $42,971
================= ==================
</TABLE>
See accompanying notes to financial statements.
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<CAPTION>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
(unaudited)
Three months ended June 30,
-------------------------------------------
------------------ ------------------
1999 1998
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Net sales .................................................. $ 17,073 $ 17,530
Cost of sales.................................................. 12,903 13,586
------------------ ------------------
Gross profit ................................................. 4,170 3,944
Operating expenses:
Fulfillment operations.................................... 5,017 4,221
General and administrative................................ 1,636 2,091
Marketing and selling..................................... 1,190 1,455
System development and maintenance........................ 787 821
Depreciation and amortization............................. 604 509
Pre-opening costs......................................... 360 41
------------------ ------------------
Total operating expenses............................. 9,594 9,138
------------------ ------------------
Operating loss................................................. (5,424) (5,194)
Other income (expense):
Investment income......................................... 586 752
Interest expense.......................................... (87) (33)
================== ==================
Net loss....................................................... $ (4,925) $ (4,475)
================== ==================
Net loss per share:
Basic..................................................... $ (0.28) $ (0.26)
Diluted................................................... $ (0.28) $ (0.26)
Shares used to compute net loss per share:
Basic..................................................... 17,403,382 16,925,120
Diluted................................................... 17,403,382 16,925,120
</TABLE>
See accompanying notes to financial statements.
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<CAPTION>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
(unaudited)
Six months ended June 30,
-------------------------------------------
------------------ ------------------
1999 1998
------------------ ------------------
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Net sales .................................................. $ 35,081 $ 36,394
Cost of sales.................................................. 27,269 28,159
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Gross profit ................................................. 7,812 8,235
Operating expenses:
Fulfillment operations.................................... 9,889 8,739
General and administrative................................ 3,190 3,828
Marketing and selling..................................... 2,428 3,127
System development and maintenance........................ 1,510 1,431
Depreciation and amortization............................. 1,078 972
Pre-opening costs......................................... 640 41
------------------ ------------------
Total operating expenses............................. 18,735 18,138
------------------ ------------------
Operating loss................................................. (10,923) (9,903)
Other income (expense):
Investment income......................................... 1,064 1,535
Interest expense.......................................... (135) (89)
================== ==================
Net loss....................................................... $ (9,994) $ (8,457)
================== ==================
Net loss per share:
Basic..................................................... $ (0.58) $ (0.50)
Diluted................................................... $ (0.58) $ (0.50)
Shares used to compute net loss per share:
Basic..................................................... 17,296,539 16,892,460
Diluted................................................... 17,296,539 16,892,460
</TABLE>
See accompanying notes to financial statements.
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PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended June 30,
----------------------------------
1999 1998
--------------- --------------
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Net loss............................................................. $ (4,925) $ (4,475)
Other comprehensive income:
Unrealized gain/(loss) on available-for-sale securities........ (247) 46
--------------- --------------
Comprehensive income (loss).......................................... $ (5,172) $ (4,429)
=============== ==============
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See accompanying notes to financial statements.
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<CAPTION>
PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Six Months Ended June 30,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Net loss........................................................ $ (9,994) $ (8,457)
Other comprehensive income:
Unrealized loss on available-for-sale securities.......... (346) (25)
--------------- ---------------
Comprehensive income (loss)..................................... $ (10,340) $ (8,482)
=============== ===============
</TABLE>
See accompanying notes to financial statements.
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PEAPOD, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30,
(unaudited)
---------------------------------------
1999 1998
----------------- ----------------
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Cash flows from operating activities:
Net loss....................................................... $ (9,994) $ (8,457)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................. 1,078 972
Stock issued for services rendered......................... -- 45
Loss on disposition of fixed assets........................ 28 --
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net................ 960 259
(Increase) decrease in merchandise inventories......... (219) --
(Increase) decrease in prepaid expenses................ (302) (11)
(Increase) decrease in other current assets............ 137 (638)
Increase (decrease) in accounts payable................ 76 (4,298)
Increase (decrease) in accrued compensation............ 559 (779)
Increase (decrease) in other accrued liabilities....... (1,056) 6
Increase (decrease) in deferred revenue................ (236) (741)
----------------- ----------------
Net cash used in operating activities.............. (8,969) (13,642)
Cash flows from investing activities:
Property and equipment purchased............................... (1,843) (1,155)
Capitalized software development costs......................... -- (463)
Purchases of marketable securities............................. (7,275) (34,173)
Sales of marketable securities................................. 15,629 --
Proceeds from sale of property and equipment................... 5 --
----------------- ----------------
Net cash provided by (used in) investing activities 6,516 (35,791)
Cash flows from financing activities:
Proceeds from issuance of stock upon exercise of warrants...... 50 --
Proceeds from issuance of stock upon exercise of options and
employee stock purchase plan................................ 1,551 269
Payments on capital lease obligations.......................... (402) (404)
----------------- ----------------
Net cash provided by (used in) financing activities 1,199 (135)
----------------- ----------------
Net increase (decrease) in cash and cash equivalents............... (1,254) (49,568)
Cash and cash equivalents at beginning of period................... 4,341 54,079
================= ================
Cash and cash equivalents at end of period......................... $ 3,087 $ 4,511
================= ================
Supplemental disclosure of cash flows information--interest paid... $ 135 $ 85
Supplemental disclosures of noncash investing and financing activity:
Options exercised by sale of stock to the Company........ 262 150
Equipment on capital leases.............................. 1,287 40
================= ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PEAPOD, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation. The unaudited interim financial statements included
herein have been prepared by the Company, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain notes and
other information normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted from the interim financial statements presented in
this quarterly report on Form 10-Q in accordance with such rules and
regulations. In the opinion of the Company's management, the accompanying
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to state fairly the financial position of
the Company as of June 30, 1999, and the results of its operations,
comprehensive income and cash flows for the periods indicated. The results
of operations for the periods covered are not necessarily indicative of the
results to be expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto of the Company for the year ended
December 31, 1998, which are included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
2. Reclassifications. Certain prior year balances have been reclassified to
conform with the current year presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
The following table sets forth certain unaudited financial information
from the Statements of Operations as a percentage of total revenues:
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Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
------------ ----------- ------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.................................. 100 % 100 % 100 % 100 %
Cost of sales.............................. 76 78 78 77
------------ ----------- ------------ ------------
Gross profit .............................. 24 22 22 23
Operating expenses:
Fulfillment operations................ 29 24 28 24
General and administrative............ 9 12 9 10
Marketing and selling................. 7 8 7 9
System development and maintenance.... 5 5 4 4
Depreciation and amortization......... 4 3 3 3
Pre-opening costs .................... 2 * 2 *
------------ ----------- ------------ ------------
Total costs and expenses......... 56 52 53 50
------------ ----------- ------------ ------------
Operating loss............................. (32) (30) (31) (27)
Other income (expense):
Investment income..................... 3 4 3 4
Interest expense...................... * * * *
============ =========== ============ ============
Net loss................................... (29) % (26) % (28) % (23) %
============ =========== ============ ============
* - Less than 1%
</TABLE>
Comparison of Three Months Ended June 30, 1999 and June 30, 1998
Net sales. Net sales include (i) revenue from the sale of groceries and
related products, (ii) fees paid by customers and retail partners, (iii) fees
from consumer goods companies for interactive advertising, promotion and
research, and (iv) revenues from maintenance and licensing fees relating to
licensing of the Company's software to Coles Myer Ltd. Net sales decreased by 3%
from $17,530,000 in the quarter ended June 30, 1998 to $17,073,000 in the
quarter ended June 30, 1999.
Revenues from the sale of groceries and related products increased from
$14,438,000 in the quarter ended June 30, 1998 to $14,787,000 in the quarter
ended June 30,1999. Orders increased from 123,800 in the quarter ended June 30,
1998 to 128,200 in the quarter ended June 30, 1999, while average order size
experienced a slight decrease of 1%. Fees paid by customers and retail partners
decreased from $2,606,000 in the quarter ended June 30, 1998 to $1,922,000 in
the quarter ended June 30, 1999. This decrease is attributable to (i) reduced
shopping and delivery fees, (ii) lower contractual fees due to less reliance on
retailers in centralized markets, and (iii) lower subscription fees resulting
from reduced customer pricing in centralized markets. Customers, measured as
customers transacting within the last 12 months, decreased 14% from 104,000 at
June 30, 1998 to 89,900 at June 30, 1999. Reductions in the Company's customer
base resulted largely from a mid-1998 decision to scale back marketing programs
in order to focus resources on the new service model and on initiatives to
centralize fulfillment operations in a number of markets.
Fees from consumer goods companies for interactive advertising,
promotion and research decreased from $436,000 in the quarter ended June 30,
1998 to $364,000 in the quarter ended June 30, 1999. This reduction is largely
the result of the Company's temporarily cutting back on marketing and new
customer initiatives while transitioning its fulfillment model to centralized
distribution.
Licensing revenues were $50,000 in the quarter ended June 30, 1998. The
licensing division was spun-off as a separate entity on December 31, 1998 and no
such revenues are anticipated in the future.
Cost of sales. Cost of sales are the cost of groceries and related
products. Cost of sales decreased from $13,586,000 in the quarter ended June 30,
1998 to $12,903,000 in the quarter ended June 30, 1999. Gross margins improved
from 22% in the quarter ended June 30, 1998 to 24% in the quarter ended June 30,
1999. The improvement resulted from increased volumes filled through our
centralized fulfillment centers that generate higher margins on products sold.
These improvements more than offset decreases in fees charged to customers and
for interactive advertising, promotion and research.
Fulfillment operations. Fulfillment operations expenses include (i) the
direct costs relating to the shopping, packing and delivery of customer orders,
(ii) salaries and overhead expenses of each fulfillment center, (iii) salaries
and overhead expenses for each metropolitan market and (iv) salaries and
overhead expenses for certain field support functions such as recruiting and
customer support. Fulfillment operations expenses increased 19% from $4,221,000
for the quarter ended June 30, 1998 to $5,017,000 for the quarter ended June 30,
1999. The increase is primarily attributable to higher grocery delivery costs
while we build scale, gain expertise, and incur duplicative costs during the
initial months of warehouse operations in Chicago, Long Island and San
Francisco. These increases were offset, in part, by decreases in customer
support and fulfillment center overhead functions.
At June 30, 1999, the Company fulfilled customer orders from 24
fulfillment centers across eight metropolitan markets covering 7,392,100
households. This compares to 39 fulfillment centers across seven metropolitan
markets at June 30, 1998 covering 6,273,000 households. While the Company has
incurred start-up costs related to opening the centralized fulfillment centers,
the evolution of its fulfillment model has resulted in certain economies of
scale as fulfillment centers have been consolidated into more centralized or
dedicated facilities.
General and administrative. General and administrative expenses, which
include corporate staff, accounting and human resources, occupancy and other
fixed expenses, decreased 22% from $2,091,000 in the quarter ended June 30, 1998
to $1,636,000 in the quarter ended June 30, 1999. The decrease is primarily
attributable to a smaller corporate staff during 1999, resulting from a
reorganization in the second half of 1998.
Marketing and selling. Marketing and selling expenses include the cost
of customer marketing, such as radio advertising and direct mail, as well as
certain costs relating to public relations and the sale of interactive marketing
products. The Company expenses all such costs as incurred. Marketing and selling
expenses decreased by 18% from $1,455,000 for the quarter ended June 30, 1998 to
$1,190,000 for the quarter ended June 30, 1999. The decrease is primarily
attributable to the Company's mid-1998 decision to limit marketing expenditures
in order to focus on modifying its service model and centralizing fulfillment
operations in a number of markets.
System development and maintenance. System development and maintenance
expenses, which include new product development as well as the maintenance and
enhancement of existing systems, decreased 4% from $821,000 for the quarter
ended June 30, 1998 to $787,000 for the quarter ended June 30, 1999. The
decrease is attributable to the absence of expenses related to the licensing
division which was spun-off as a separate entity on December 31, 1998. Partially
offsetting this decrease were expenses related to additional resources needed to
support the Company's new website technology, its proprietary warehouse
technologies, and additional resources necessary to support 24/7 warehouse
operations. No development costs were capitalized in the second quarter of 1999
while development costs of $155,000 were capitalized in the second quarter of
1998.
Depreciation and amortization. Depreciation and amortization increased
19% from $509,000 for the quarter ended June 30, 1998 to $604,000 for the
quarter ended June 30, 1999. This increase is the result of equipment added to
support new centralized distribution facilities as well as additional equipment
needed to update certain hardware and software in the data center.
Pre-opening Expense. Pre-opening expense includes costs incurred prior
to a centralized fulfillment center becoming operational and certain one-time
expenditures to support these initiatives. These costs include building and
equipment lease expense, utilities, supplies, permits, licenses, and staffing
related expenses. Pre-opening expenses increased from $41,000 in the quarter
ended June 30, 1998 to $360,000 in the quarter ended June 30, 1999. The increase
results primarily from the opening of the San Francisco warehouse during the
second quarter of 1999 while no warehouses were opened during the same period in
1998.
Other income (expense). Other income (expense) includes interest from
investment earnings and interest paid on capital leases. Investment income
decreased from $752,000 in the quarter ended June 30, 1998 to $586,000 in the
quarter ended June 30, 1999 due primarily to a reduction in invested principal.
Interest expense increased from $33,000 for the quarter ended June 30, 1998 to
$87,000 in the quarter ended June 30, 1999 as a result of greater leasing
activity utilized in the new centralized distribution facilities.
Comparison of Six Months Ended June 30, 1999 and June 30, 1998
Net sales. Net sales decreased by 4% from $36,394,000 for the six
month period ended June 30, 1998 to $35,081,000 for the six month period ended
June 30, 1999.
Revenues from the sale of groceries and related products increased from
$29,933,000 for the six month period ended June 30, 1998 to $30,529,000 for the
six month period ended June 30, 1999. Orders increased from 260,400 for the six
month period ended June 30, 1998 to 263,400 for the six month period ended June
30, 1999 and average order size increased 1%. Fees paid by customers and retail
partners decreased from $5,398,000 for the six month period ended June 30, 1998
to $3,981,000 for the six month period ended June 30, 1999. This decrease is
attributable to (i) reduced shopping and delivery fees, (ii) lower contractual
fees due to less reliance on retailers in centralized markets, and (iii) lower
subscription fees resulting from reduced customer pricing in centralized
markets. Customers, measured as customers transacting within the last 12 months,
decreased 14% from 104,000 at June 30, 1998 to 89,900 at June 30, 1999.
Reductions in the Company's customer base resulted largely from a mid-1998
decision to scale back marketing programs in order to focus resources on the new
service model and on initiatives to centralize fulfillment operations in a
number of markets.
Fees from consumer goods companies for interactive advertising,
promotion and research decreased from $962,000 for the six month period ended
June 30, 1998 to $570,000 for the six month period ended June 30, 1999. This
reduction is largely the result of the Company's temporarily cutting back on
marketing and new customer initiatives while transitioning its fulfillment model
to centralized distribution.
Licensing revenues were $100,000 for the six month period ended June
30, 1998. The licensing division was spun-off as a separate entity on December
31, 1998 and no such revenues are anticipated in the future.
Cost of sales. Cost of sales decreased 3% from $28,159,000 for the six
month period ended June 30, 1998 to $27,269,000 for the six month period ended
June 30, 1999. This decrease occurred in spite of an increase of 2% in grocery
and related product sales and was achieved due to increasing profit margins in
markets with centralized distribution.
Fulfillment operations. Fulfillment operations expenses increased 13%
from $8,739,000 for the six month period ended June 30, 1998 to $9,889,000 for
the six month period ended June 30, 1999. The increase is primarily attributable
to higher grocery delivery costs while we build scale, gain expertise, and incur
duplicative costs during the initial months of warehouse operations in Chicago,
Long Island and San Francisco. These increases were offset, in part, by
decreases in customer support and fulfillment center overhead functions.
General and administrative. General and administrative expenses
decreased 17% from 3,828,000 for the six month period ended June 30, 1998 to
$3,190,000 for the six month period ended June 30, 1999. The decrease is
primarily attributable to a smaller corporate staff in 1999.
Marketing and selling. Marketing and selling expenses decreased by 22%
from $3,127,000 for the six month period ended June 30, 1998 to $2,428,000 for
the six month period ended June 30, 1999. The decrease is primarily attributable
to the Company's mid-1998 decision to limit marketing expenditures in order to
focus on modifying its service model and centralizing fulfillment operations in
a number of markets. The Company expenses all such costs as incurred.
System development and maintenance. System development and maintenance
expenses increased 6% from $1,431,000 for the six month period ended June
30,1998 to $1,510,000 for the six month period ended June 30, 1999. The increase
is primarily attributable to additional resources to support the Company's new
website technology, its proprietary warehouse technologies, and additional
resources necessary to support 24/7 warehouse operations. No development costs
were capitalized during the first six months of 1999 while development costs of
$463,000 were capitalized during the first six months of 1998.
Depreciation and amortization. Depreciation and amortization increased
11% from $972,000 for the six month period ended June 30, 1998 to $1,078,000 for
the six month period ended June 30, 1999. This increase is the result of
equipment added to support new centralized distribution facilities and equipment
necessary to update the data center.
Pre-opening Expense. Pre-opening expenses increased from $41,000 in the
six month period ended June 30, 1998 to $640,000 in the six month period ended
June 30, 1999. The increase results from expenses incurred related to the
opening of the San Francisco warehouse in May and June of 1999 and the Chicago
warehouse in December 1998 and January 1999. In comparison, no warehouses were
opened during the same period in 1998.
Other income (expense). Other income (expense) includes interest from
investment earnings and interest paid on capital leases. Investment income
decreased from $1,535,000 for the six month period ended June 30, 1998 to
$1,064,000 for the six month period ended June 30, 1999 due primarily to a
reduction in invested principal. Interest expense increased from $89,000 for the
six month period ended June 30, 1998 to $135,000 for the six month period ended
June 30, 1999 as a result of greater leasing activity utilized in the new
centralized distribution facilities.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities decreased from $13,642,000 in the
first six months of 1998 to $8,969,000 in the first six months of 1999. The
decrease in cash used in operating activities was primarily attributable to a
$4,298,000 decrease in accounts payable in 1998. As of June 30, 1999, the
Company had $3,087,000 in cash and cash equivalents and $22,348,000 in
marketable securities. The Company uses its working capital to fund ongoing
operations, marketing programs, geographic expansion and to further develop its
products and services.
The Company anticipates that existing cash and marketable securities
will be sufficient to fund the Company's operations and capital requirements for
at least the next year. However, no assurance can be given that changing
business circumstances will not require additional capital for reasons that are
not currently anticipated or that the necessary capital will then be available
to the Company on favorable terms, or at all.
The Company believes that inflation has not had a material effect on
its operations.
YEAR 2000 DISCLOSURE
The "Year 2000" problem concerns the inability of information systems
to properly recognize and process date-sensitive information beyond December 31,
1999. The Company has evaluated the impact of the Year 2000 issue on its
business and believes the costs associated with its own Year 2000 compliance and
internal Year 2000 issues will be comprised of software and hardware
expenditures totaling less than $500,000. Therefore, it is not anticipated that
the Year 2000 issue will have a material impact on the Company's business,
results of operations or financial condition. The Company believes its internal
software systems and applications are currently Year 2000 compliant and are
currently being recompiled on Y2K compliant operation systems.
Nonetheless, failure of certain third party systems could have a
material adverse impact on the Company. Because of the range of possible issues
and the large number of variables involved, it is impossible to quantify the
potential cost of problems should remediation efforts of third parties with whom
the Company does business not be successful. For example, the Company relies on
its retail partners and on other third party vendors for inventory that the
Company sells. The Company is addressing whether these third parties in its
supply chain are adequately addressing their Year 2000 compliance issues. The
Company is communicating with its significant suppliers and other vendors to
monitor the Year 2000 issue and evaluate the impact on the Company. Failure by
such parties to timely address the Year 2000 issue could impact the Company's
ability to obtain inventory, among other things, which could have a material
adverse impact on the Company's business, financial condition or results of
operations. With respect to the Company's ability to obtain product information,
to the extent that any of the Company's retail partners' computer systems are
not Year 2000 compliant, the Company has established alternative procedures for
obtaining relevant retailer information at a minimal cost to the Company. The
Company has not incurred to date, and does not expect to incur, material costs
with respect to its initiatives mentioned above.
Furthermore, the Company utilizes third party equipment, software and
content, including non-information technology systems (such as building
equipment and security systems) that may not be Year 2000 compliant. The Company
has assessed whether critical third-party systems and equipment and critical
non-information technology systems and equipment are adequately addressing the
Year 2000 issue. For example, certain operating systems of third party vendors
on which certain Company software resides are not yet Year 2000 compliant.
Several of these vendors have indicated to the Company that Year 2000 compliant
upgrades are available and the Company is in the process of installing these
upgrades. Failure of third-party equipment, software or content to operate
properly with regard to the Year 2000 issue could require the Company to incur
unanticipated expense to remedy problems, which could have a material adverse
effect on the Company's business, results of operation and financial condition.
PART II
OTHER INFORMATION
Item 5. Other Information
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995.
Certain statements in this report relative to markets for the
Company's products and trends in the Company's operations or
financial results, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect,"
"intend" or other similar expressions, constitute
"forward-looking statements" under The Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
are contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in other
portions of this report. Such forward-looking statements are
subject to known and unknown risks, uncertainties and other
factors which may cause actual results to be materially
different from those contemplated by the forward-looking
statements. Such factors include, among other things: (1) the
developing nature of the markets for the Company's services
and the rapid technological change relating thereto; (2) the
Company's relationship with its retail partners and its
interactive marketing services and research customers; (3) the
Company's ability to execute its growth strategies, including
effectively implementing a centralized fulfillment
distribution model; (4) the extent to which the Company is
able to attract and retain key personnel; (5) competition; (6)
general economic conditions; (7) regulations; and (8) the risk
factors or uncertainties listed from time to time in the
Company's filings with the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - The following exhibits are filed herewith or are incorporated
herein:
Exhibit
No. Description
27 -- Financial Data Schedule
(b) Reports on Form 8-K - The Registrant filed no Current Reports on
Form 8-K during the quarter ended June 30, 1999.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Peapod, Inc.
(Registrant)
July 29, 1999 /s/ Dan Rabinowitz
------------------------------------
Dan Rabinowitz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<MULTIPLIER> 1,000
<CIK> 0001036992
<NAME> PEAPOD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,087
<SECURITIES> 17,182
<RECEIVABLES> 1,555
<ALLOWANCES> (310)
<INVENTORY> 219
<CURRENT-ASSETS> 23,368
<PP&E> 9,183
<DEPRECIATION> (3,259)
<TOTAL-ASSETS> 34,458
<CURRENT-LIABILITIES> 8,229
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> 24,690
<TOTAL-LIABILITY-AND-EQUITY> 34,458
<SALES> 35,081
<TOTAL-REVENUES> 35,081
<CGS> 27,269
<TOTAL-COSTS> 18,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> (9,994)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,994)
<EPS-BASIC> (0.58)
<EPS-DILUTED> (0.58)
<FN>
This schedule contains summary financial information extracted from the
balance sheet as of June 30, 1999 and the statement of operations for the six
months ended June 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</FN>
</TABLE>
