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 September 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 November 3, 1999 was 18,156,560.
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PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
PEAPOD, INC.
BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
1999 1998
----------------- -----------------
Assets (unaudited)
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Current assets:
Cash and cash equivalents.......................................... $ 3,549 $ 4,341
Marketable securities.............................................. 9,260 15,836
Receivables, net of bad debt allowance of $203 and $287 as
of September 30, 1999 and December 31, 1998...................... 1,629 2,516
Merchandise inventories............................................ 268 --
Prepaid expenses................................................... 1,235 186
Other current assets............................................... 727 974
----------------- -----------------
Total current assets.......................................... 16,668 23,853
Property and equipment:
Computer equipment and software.................................... 5,134 4,010
Service equipment and other........................................ 4,127 2,147
----------------- -----------------
Property and equipment, at cost......................................... 9,261 6,157
Accumulated depreciation........................................... (3,739) (2,252)
----------------- -----------------
Net property and equipment.............................................. 5,522 3,905
Non-current marketable securities....................................... 3,562 15,213
----------------- -----------------
Total assets.................................................. $25,752 $42,971
================= =================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable................................................... $ 4,104 $ 3,442
Accrued compensation............................................... 989 802
Other accrued liabilities.......................................... 2,096 2,688
Current deferred revenue........................................... 809 1,000
Current obligations under capital lease............................ 630 590
----------------- -----------------
Total current liabilities..................................... 8,628 8,522
Deferred revenue........................................................ 152 448
Obligations under capital lease, less current portion................... 1,058 395
----------------- -----------------
Total liabilities............................................. 9,838 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,
17,982,317 and 17,245,828 shares issued at September 30, 1999
and December 31, 1998....................................... 180 172
Additional paid-in capital......................................... 69,056 64,319
Note receivable from officer....................................... (2,494) --
Accumulated other comprehensive income -
unrealized gain (loss) on available-for-sale securities....... (250) 83
Accumulated deficit................................................ (49,407) (30,060)
Treasury stock, at cost, 141,749 and 117,476 shares at September 30,
1999 and December 31, 1998..................................... (1,171) (908)
----------------- -----------------
Total stockholders' equity.................................... 15,914 33,606
================= =================
Total liabilities and stockholders' equity.................... $25,752 $42,971
================= =================
</TABLE>
See accompanying notes to financial statements.
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<CAPTION>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three months ended September 30,
-------------------------------------------
------------------ ------------------
1999 1998
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Net sales .................................................. $ 16,493 $ 15,676
Cost of sales.................................................. 12,241 12,295
------------------ ------------------
Gross profit ................................................. 4,252 3,381
Operating expenses:
Fulfillment operations.................................... 5,571 4,019
General and administrative................................ 4,956 1,925
Marketing and selling..................................... 1,665 1,462
System development and maintenance........................ 916 999
Depreciation and amortization............................. 525 529
Pre-opening costs......................................... 188 95
------------------ ------------------
Total operating expenses............................. 13,821 9,029
------------------ ------------------
Operating loss................................................. (9,569) (5,648)
Other income (expense):
Investment income......................................... 321 609
Interest expense.......................................... (104) (44)
================== ==================
Net loss....................................................... $ (9,352) $ (5,083)
================== ==================
Net loss per share:
Basic..................................................... $ (0.53) $ (0.30)
Diluted................................................... $ (0.53) $ (0.30)
Shares used to compute net loss per share:
Basic..................................................... 17,498,863 17,074,771
Diluted................................................... 17,498,863 17,074,771
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Nine months ended September 30,
-------------------------------------------
------------------ ------------------
1999 1998
------------------ ------------------
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Net sales .................................................. $ 51,574 $ 52,070
Cost of sales.................................................. 39,509 40,454
------------------ ------------------
Gross profit ................................................. 12,065 11,616
Operating expenses:
Fulfillment operations.................................... 15,460 12,758
General and administrative................................ 8,146 5,794
Marketing and selling..................................... 4,093 4,589
System development and maintenance........................ 2,427 2,430
Depreciation and amortization............................. 1,603 1,501
Pre-opening costs......................................... 828 136
------------------ ------------------
Total operating expenses............................. 32,557 27,208
------------------ ------------------
Operating loss................................................. (20,492) (15,592)
Other income (expense):
Investment income......................................... 1,385 2,144
Interest expense.......................................... (239) (133)
================== ==================
Net loss....................................................... $ (19,346) $ (13,581)
================== ==================
Net loss per share:
Basic..................................................... $ (1.11) $ (0.80)
Diluted................................................... $ (1.11) $ (0.80)
Shares used to compute net loss per share:
Basic..................................................... 17,364,721 16,954,079
Diluted................................................... 17,364,721 16,954,079
</TABLE>
See accompanying notes to financial statements.
<PAGE>
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<CAPTION>
PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended September 30,
----------------------------------
1999 1998
--------------- --------------
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Net loss................................................................ $ (9,352) $ (5,083)
Other comprehensive income:
Unrealized gain/(loss) on available-for-sale securities........... 13 176
--------------- --------------
Comprehensive income (loss)............................................. $ (9,339) $ (4,907)
=============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PEAPOD, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------------
1999 1998
--------------- -----------------
<S> <C> <C>
Net loss................................................................ $ (19,346) $ (13,581)
Other comprehensive income:
Unrealized gain/(loss) on available-for-sale securities............ (333) 151
--------------- -----------------
Comprehensive income (loss).......................................... $ (19,679) $ (13,430)
=============== =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
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PEAPOD, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) Nine Months Ended September 30,
--------------------------------------
1999 1998
---------------- -----------------
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Cash flows from operating activities:
Net loss....................................................... $ (19,346) $ (13,581)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.............................. 1,603 1,501
Stock issued for services rendered......................... 146 45
Loss on disposition of fixed assets........................ 22 --
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net................ 887 (220)
(Increase) decrease in merchandise inventories......... (268) --
(Increase) decrease in prepaid expenses................ (1,049) (177)
(Increase) decrease in other current assets............ 247 (583)
Increase (decrease) in accounts payable................ 662 (4,561)
Increase (decrease) in accrued compensation............ 187 (285)
Increase (decrease) in other accrued liabilities....... (592) 278
Increase (decrease) in deferred revenue................ (488) (708)
---------------- -----------------
Net cash used in operating activities.............. (17,989) (18,291)
Cash flows from investing activities:
Property and equipment purchased............................... (1,967) (1,637)
Capitalized software development costs......................... -- (514)
Purchases of marketable securities............................. (7,383) (24,369)
Sales of marketable securities................................. 25,276 --
Proceeds from sale of property and equipment................... 12 --
---------------- -----------------
Net cash provided by (used in) investing activities 15,938 (26,520)
Cash flows from financing activities:
Proceeds from issuance of stock upon exercise of options and warrants
and employee stock purchase plan............................ 2,105 715
Stock purchased for treasury................................... (262) (608)
Payments on capital lease obligations.......................... (584) (592)
---------------- -----------------
Net cash provided by (used in) financing activities 1,259 (485)
---------------- -----------------
Net increase (decrease) in cash and cash equivalents............... (792) (45,296)
Cash and cash equivalents at beginning of period................... 4,341 54,079
================ =================
Cash and cash equivalents at end of period......................... $ 3,549 $ 8,783
================ =================
Supplemental disclosure of cash flows information--interest paid...... $ 236 $ 117
Supplemental disclosures of noncash investing and financing activity:
Issuance of common stock for note........................ 2,500 --
Common stock issued for professional services............ 140 45
Options exercised by sale of stock to the Company........ 262 608
Equipment on capital leases.............................. 1,287 126
================ =================
</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 September 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.
3. Note Receivable from Officer. The Company issued 311,891 shares of common
stock to an officer pursuant to a note receivable over 5 years at an
interest rate of 5.82%.
<PAGE>
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 Nine months Ended
September 30, September 30,
-------------------------- ---------------------------
------------ ----------- ------------ ------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
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Net sales.................................. 100 % 100 % 100 % 100 %
Cost of sales.............................. 74 78 77 78
------------ ----------- ------------ ------------
Gross profit .............................. 26 22 23 22
Operating expenses:
Fulfillment operations................ 34 26 30 24
General and administrative............ 30 13 16 11
Marketing and selling................. 10 9 8 9
System development and maintenance.... 6 6 5 5
Depreciation and amortization......... 3 3 3 3
Pre-opening expenses.................. 1 1 1 *
------------ ----------- ------------ ------------
Total costs and expenses......... 84 58 63 52
------------ ----------- ------------ ------------
Operating loss............................. (58) (36) (40) (30)
Other income (expense):
Investment income..................... 2 4 2 4
Interest expense...................... (1) * * *
============ =========== ============ ============
Net loss................................... (57) % (32) % (38) % (26) %
============ =========== ============ ============
* - Less than 1%
</TABLE>
Comparison of Three Months Ended September 30, 1999 and September 30, 1998
Net sales. Net sales include (i) revenue from the sale of groceries and
related products, (ii)fees paid by customers and retail supply 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 increased by 5%
from $15,676,000 in the quarter ended September 30, 1998 to $16,493,000 in the
quarter ended September 30, 1999.
Revenues from the sale of groceries and related products increased from
$13,057,000 in the quarter ended September 30, 1998 to $14,574,000 in the
quarter ended September 30, 1999. Orders increased from 112,300 in the quarter
ended September 30, 1998 to 130,200 in the quarter ended September 30, 1999.
Average order sizes tended to be slightly lower in centralized markets as
customers shifted to the reduced SKU mix. Fees paid by customers and retail
supply partners decreased from $2,306,000 in the quarter ended September 30,
1998 to $1,488,000 in the quarter ended September 30, 1999. This decrease is
attributable to (i) reduced customer fees and (ii) lower fees paid by retail
supply partners as we conduct more of our business from our centralized
fulfillment centers versus retail stores. Customers, measured as customers
transacting within the last 12 months, decreased 6% from 99,000 at September
30, 1998 to 92,900 at September 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 increased from $263,000 in the quarter ended September
30, 1998 to $431,000 in the quarter ended September 30, 1999 as new business was
cultivated from new and existing clients. Licensing revenues were $50,000 in the
quarter ended September 30, 1998 compared to no such licensing revenues for the
quarter ended September 30, 1999.
Cost of sales. Cost of sales are the cost of groceries and related
products. Cost of sales decreased from $12,295,000 in the quarter ended
September 30, 1998 to $12,241,000 in the quarter ended September 30, 1999. This
decrease occurred in spite of a 12% increase in grocery and related product
sales and is attributed to an increasing percentage of company volumes operating
through centralized fulfillment centers which generate higher margins on
products sold. Specifically, gross margins improved from 22% in the quarter
ended September 30, 1998 to 26% in the quarter ended September 30, 1999. We
anticipate gross margins to increase in the future as volumes continue to shift
from retail stores to centralized fulfillment centers.
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 from $4,019,000 for
the quarter ended September 30, 1998 to $5,571,000 for the quarter ended
September 30, 1999. The increase is primarily attributable to higher grocery
fulfillment costs while we build scale, gain expertise, and incur duplicative
costs during the initial months of warehouse operations.
At September 30, 1999, the Company fulfilled customer orders from 22
fulfillment centers across eight metropolitan markets covering 8,023,500
households. This compares to 36 fulfillment centers across seven metropolitan
markets at September 30, 1998 covering 6,400,400 households
General and administrative. General and administrative expenses, which
include corporate staff, accounting and human resources, occupancy and other
fixed expenses, increased from $1,925,000 in the quarter ended September 30,
1998 to $4,956,000 in the quarter ended September 30, 1999. A one-time charge of
$2,830,000 is attributable to investments in senior management in support of our
centralized fulfillment model.
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. Marketing and selling expenses increased by 14% from $1,462,000 for
the quarter ended September 30, 1998 to $1,665,000 for the quarter ended
September 30, 1999. The increase is primarily the result of greater spending in
centralized markets that are now fully operational and focused on growing
customers and building scale.
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 9% from $999,000 for the quarter
ended September 30, 1998 to $916,000 for the quarter ended September 30, 1999.
The decrease is attributable to the elimination of expenses related to the
licensing division that was spun-off as a separate entity on December 31, 1998.
No development costs were capitalized in the third quarter of 1999 while $51,000
of development costs was capitalized in the third quarter of 1998.
Depreciation and amortization. Depreciation and amortization of
$529,000 for the quarter ended September 30, 1998 decreased slightly to $525,000
for the quarter ended September 30, 1999.
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 of $95,000 in the quarter ended September
30, 1998 increased to $188,000 in the quarter ended September 30, 1999. The
increase results from investments in current and new markets.
Other income (expense). Other income (expense) includes interest from
investment earnings and interest paid on capital leases. Investment income
decreased from $609,000 in the quarter ended September 30, 1998 to $321,000 in
the quarter ended September 30, 1999 due primarily to a reduction in invested
principal. Interest expense increased from $44,000 for the quarter ended
September 30, 1998 to $104,000 in the quarter ended September 30, 1999 as a
result of greater leasing activity utilized in the new centralized distribution
facilities.
Comparison of Nine months Ended September 30, 1999 and September 30, 1998
Net sales. Net sales decreased by 1% from $52,070,000 for the nine
month period ended September 30, 1998 to $51,574,000 for the nine month period
ended September 30, 1999.
Revenues from the sale of groceries and related products increased 5%
from $42,999,000 for the nine month period ended September 30, 1998 to
$45,103,000 for the nine month period ended September 30, 1999. Orders increased
6% from 372,700 for the nine month period ended September 30, 1998 to 393,600
for the nine month period ended September 30, 1999 and average order size
remained unchanged. Fees paid by customers and retail supply partners decreased
from $7,703,000 for the nine month period ended September 30, 1998 to $5,470,000
for the nine month period ended September 30, 1999. This decrease is
attributable to (i) reduced customer fees and (ii) lower fees paid by retail
supply partners as we conduct more of our business from our centralized
fulfillment centers versus retail stores.
Fees from consumer goods companies for interactive advertising,
promotion and research decreased from $1,225,000 for the nine month period ended
September 30, 1998 to $1,001,000 for the nine month period ended September 30,
1999. Licensing revenues were $150,000 for the nine month period ended September
30, 1998 compared to no such licensing revenue for the nine month period ended
September 30, 1999.
Cost of sales. Cost of sales decreased 2% from $40,454,000 for the nine
month period ended September 30, 1998 compared to $39,509,000 for the nine month
period ended September 30, 1999. This decrease occurred in spite of a 5%
increase in grocery and related product sales and is attributed to an increasing
percentage of company volumes operating through centralized fulfillment centers
which generates higher margins on products sold. Specifically, gross margins
improved from 22% in the nine month period ended September 30, 1998 to 23% in
the nine month period ended September 30, 1999. Despite the decrease in fees
paid by customers and retailers we anticipate gross margins to increase in the
future as volumes continue to shift from retail stores to centralized
fulfillment centers.
Fulfillment operations. Fulfillment operations expenses increased 21%
from $12,758,000 for the nine month period ended September 30, 1998 to
$15,460,000 for the nine month period ended September 30, 1999. The increase is
primarily attributable to higher grocery fulfillment costs while we build scale,
gain expertise, and incur duplicative costs during the initial months of
warehouse operations.
General and administrative. General and administrative expenses
increased from $5,794,000 for the nine month period ended September 30, 1998 to
$8,146,000 for the nine month period ended September 30, 1999. A one-time charge
of $2,830,000 is attributable to investments in senior management in support of
the centralized fulfillment model.
Marketing and selling. Marketing and selling expenses decreased by 11%
from $4,589,000 for the nine month period ended September 30, 1998 to $4,093,000
for the nine month period ended September 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 of $2,430,000 for the nine month period ended September 30, 1998
decreased slightly to $2,427,000 for the nine month period ended September 30,
1999. No development costs were capitalized during the first nine months of 1999
while $514,000 of development costs was capitalized during the first nine months
of 1998.
Depreciation and amortization. Depreciation and amortization increased
7% from $1,501,000 for the nine month period ended September 30, 1998 to
$1,603,000 for the nine month period ended September 30, 1999. This increase is
the result of equipment added to support new centralized distribution facilities
and information technology equipment necessary to increase the capacity of the
Company's website.
Pre-opening Expense. Pre-opening expenses increased from $136,000 in
the nine month period ended September 30, 1998 to $828,000 in the nine month
period ended September 30, 1999. The increase primarily 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 $2,144,000 for the nine month period ended September 30, 1998 to
$1,385,000 for the nine month period ended September 30, 1999 due primarily to a
reduction in invested principal. Interest expense increased from $133,000 for
the nine month period ended September 30, 1998 to $239,000 for the nine month
period ended September 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 $18,291,000 in the
first nine months of 1998 to $17,989,000 in the first nine months of 1999. As of
September 30, 1999, the Company had $3,549,000 in cash and cash equivalents and
$12,822,000 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
may be insufficient to fund the Company's operations and capital requirements
for the next year and is currently evaluating financing opportunities. There can
be no assurance that capital will 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, the Year 2000 issue will
not 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 continues to communicate 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 vendor systems and equipment and
critical non-information technology systems and equipment are adequately
addressing the Year 2000 issue. The Company has completed the process of
installing all recommended upgrades and is currently running Year 2000
compliant versions. 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 operations 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.
<PAGE>
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 September 30,
1999. However, a Form 8-K was filed on October 7, 1999
detailing the terms of employment of the new CEO and
president, William Malloy.
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)
/s/ Dan Rabinowitz
November 4, 1999 _________________________
Dan Rabinowitz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<MULTIPLIER> 1,000
<CIK> 0001036992
<NAME> PEAPOD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 3,549
<SECURITIES> 9,260
<RECEIVABLES> 1,629
<ALLOWANCES> (203)
<INVENTORY> 268
<CURRENT-ASSETS> 16,668
<PP&E> 9,261
<DEPRECIATION> (3,739)
<TOTAL-ASSETS> 25,752
<CURRENT-LIABILITIES> 8,628
<BONDS> 0
0
0
<COMMON> 180
<OTHER-SE> 15,734
<TOTAL-LIABILITY-AND-EQUITY> 25,752
<SALES> 51,574
<TOTAL-REVENUES> 51,574
<CGS> 39,509
<TOTAL-COSTS> 32,557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> (19,346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,346)
<EPS-BASIC> (1.11)
<EPS-DILUTED> (1.11)
<FN>
This schedule contains summary financial information extracted from the
balance sheet as of September 30, 1999 and the statement of operations for the
nine months ended September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</FN>
</TABLE>
