<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
Mark One Quarterly Report Pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number 0-19349
SOFTWARE SPECTRUM, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1878002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2140 MERRITT DRIVE
GARLAND, TEXAS
75041
(Address of principal executive offices)
(Zip Code)
972-840-6600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
At March 10, 2000, the Registrant had outstanding 3,727,328 shares of its
Common Stock, par value $.01 per share.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at January 31, 2000
and April 30, 1999 1
Consolidated Statements of Income for the
Three and Nine Months Ended
January 31, 2000 and 1999 2
Consolidated Statements of Cash Flows
for the Nine Months Ended
January 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
January 31, April 30,
2000 1999
----------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 7,561 $ 20,084
Trade accounts receivable, net of allowance for doubtful
accounts of $3,371 at January 31 and $2,687 at April 30 154,706 142,714
Inventories 457 370
Prepaid expenses 1,230 1,753
Other current assets 856 696
---------- ----------
Total current assets 164,810 165,617
Furniture, equipment and leasehold improvements, at cost 55,085 47,448
Less accumulated depreciation and amortization 31,450 25,410
---------- ----------
23,635 22,038
Other assets, consisting primarily of goodwill, net of accumulated
amortization of $10,495 at January 31 and $8,431 at April 30 47,708 48,799
---------- ----------
$ 236,153 $ 236,454
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 216 $ 763
Trade accounts payable 128,024 134,353
Other current liabilities 18,556 14,550
---------- ----------
Total current liabilities 146,796 149,666
Long-term debt, less current maturities 12,300 7,863
Shareholders' equity
Preferred stock, par value $.01; authorized, 1,000,000 shares;
issued and outstanding, none -- --
Common stock, par value $.01; authorized, 20,000,000 shares;
issued 4,553,532 shares at January 31 and 4,491,542 shares
at April 30 46 45
Additional paid-in capital 41,717 40,833
Retained earnings 51,202 46,896
Currency translation adjustments (3,519) (3,092)
---------- ----------
89,446 84,682
Less treasury stock at cost; 806,201 shares at January 31 and
384,901 shares at April 30 12,389 5,757
---------- ----------
Total shareholders' equity 77,057 78,925
---------- ----------
$ 236,153 $ 236,454
========== ==========
</TABLE>
See notes to consolidated financial statements.
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
January 31, January 31, January 31, January 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales
Software $ 279,452 $ 236,483 $ 705,061 $ 615,608
Technology services 33,696 25,439 89,150 70,555
------------ ------------ ------------ ------------
313,148 261,922 794,211 686,163
------------ ------------ ------------ ------------
Cost of sales
Software 257,077 215,398 642,248 559,240
Technology services 23,983 17,260 63,571 45,014
------------ ------------ ------------ ------------
281,060 232,658 705,819 604,254
------------ ------------ ------------ ------------
Gross margin 32,088 29,264 88,392 81,909
Selling, general and administrative expenses 24,252 22,416 71,038 64,484
Depreciation and amortization 3,058 2,857 8,773 8,182
------------ ------------ ------------ ------------
Operating income 4,778 3,991 8,581 9,243
Interest expense (income)
Interest expense 600 510 1,113 1,269
Interest income (120) (130) (504) (342)
------------ ------------ ------------ ------------
480 380 609 927
------------ ------------ ------------ ------------
Income before income taxes 4,298 3,611 7,972 8,316
Income tax expense 2,123 1,500 3,666 3,617
------------ ------------ ------------ ------------
Net income $ 2,175 $ 2,111 $ 4,306 $ 4,699
============ ============ ============ ============
Earnings per share
Basic $ 0.56 $ 0.50 $ 1.08 $ 1.10
============ ============ ============ ============
Diluted $ 0.54 $ 0.49 $ 1.06 $ 1.09
============ ============ ============ ============
Weighted average shares outstanding
Basic 3,859 4,243 3,998 4,261
============ ============ ============ ============
Diluted
4,019 4,272 4,066 4,299
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
2
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SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
------------------------
2000 1999
---------- ----------
<S> <C> <C>
Operating activities
Net income $ 4,306 $ 4,699
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for bad debts 1,298 766
Depreciation and amortization 8,773 8,182
Deferred income taxes (601) 284
Changes in operating assets and liabilities
Trade accounts receivable (14,172) 3,256
Inventories (73) 1,591
Prepaid expenses and other assets 879 236
Trade accounts payable and other current
liabilities (569) (13,325)
---------- ----------
Net cash provided by (used in) operating activities (159) 5,689
---------- ----------
Investing activities
Purchase of subsidiary, net of cash acquired (1,916) --
Purchase of furniture, equipment and leasehold
improvements (8,286) (8,523)
---------- ----------
Net cash used in investing activities (10,202) (8,523)
---------- ----------
Financing activities
Borrowings on long-term debt 132,870 154,309
Repayments of long-term debt (129,094) (148,132)
Proceeds from stock issuance including tax benefit
related to stock options exercised 585 1,201
Purchase of treasury stock (6,632) (2,300)
Other 1 (10)
---------- ----------
Net cash provided by (used in) financing activities (2,270) 5,068
---------- ----------
Effect of exchange rate changes on cash 108 (292)
---------- ----------
Increase (decrease) in cash and cash equivalents (12,523) 1,942
Cash and cash equivalents at beginning of period 20,084 7,129
---------- ----------
Cash and cash equivalents at end of period $ 7,561 $ 9,071
========== ==========
Supplemental disclosure of cash paid during the period
Income taxes $ 1,847 $ 3,274
Interest 823 937
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Software Spectrum,
Inc. (the "Company") and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform to the current period
presentation.
The consolidated financial statements contained herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position as of January 31, 2000, the
consolidated results of operations for the three and nine months ended January
31, 2000 and 1999 and the consolidated cash flows for the nine months ended
January 31, 2000 and 1999 have been made. In addition, all such adjustments
made, in the opinion of management, are of a normal recurring nature. The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes for the year ended April 30, 1999, included in the
Company's 1999 Annual Report on Form 10-K.
NOTE B -- OTHER COMPREHENSIVE INCOME
The components of comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 2,175 $ 2,111 $ 4,306 $ 4,699
Currency translation adjustments (101) 30 (427) (124)
-------- -------- -------- --------
Comprehensive income $ 2,074 $ 2,141 $ 3,879 $ 4,575
======== ======== ======== ========
</TABLE>
NOTE C -- EARNINGS PER SHARE
The following table (in thousands, except per share amounts) sets forth the
computation of basic and diluted earnings per share. Outstanding options that
were not included in the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of the
common shares totaled approximately 455,000 and 354,000 shares for the three and
nine months ended January 31, 2000 and 289,000 and 273,000 shares for the three
and nine months ended January 31, 1999, respectively.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
--------------------- ---------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 2,175 $ 2,111 $ 4,306 $ 4,699
-------- -------- -------- --------
Weighted average shares outstanding - basic 3,859 4,243 3,998 4,261
Effect of dilutive employee and director stock
options 160 29 68 38
-------- -------- -------- --------
Weighted average shares outstanding - diluted 4,019 4,272 4,066 4,299
-------- -------- -------- --------
Earnings per share - basic $ 0.56 $ 0.50 $ 1.08 $ 1.10
======== ======== ======== ========
Earnings per share - diluted $ 0.54 $ 0.49 $ 1.06 $ 1.09
======== ======== ======== ========
</TABLE>
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<PAGE> 7
NOTE D -- BUSINESS SEGMENTS
Information for the Company's reportable segments for the three and nine months
ended January 31, 2000 and 1999 is presented below (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales
Software $ 279,452 $ 236,483 $ 705,061 $ 615,608
Professional services 11,943 10,544 38,269 30,298
Support services 21,753 14,895 50,881 40,257
---------- ---------- ---------- ----------
$ 313,148 $ 261,922 $ 794,211 $ 686,163
========== ========== ========== ==========
Operating income (loss)
Software $ 13,667 $ 12,625 $ 38,708 $ 31,389
Professional services (1,522) (1,397) (1,908) (2,460)
Support services 2,638 1,713 2,756 6,782
Unallocated corporate overhead (10,005) (8,950) (30,975) (26,468)
---------- ---------- ---------- ----------
$ 4,778 $ 3,991 $ 8,581 $ 9,243
========== ========== ========== ==========
</TABLE>
NOTE E -- BUSINESS ACQUISITION
On September 2, 1999, the Company acquired all of the outstanding shares of
common stock of Comptroller Technology, Inc., d/b/a/ Quinn, Reeder and
Associates, a privately-held technology company which specializes in providing
customer relationship management solutions. The purchase price was $2.3 million,
including cash of $2 million and the issuance of 16,904 shares of the Company's
Common Stock. In addition, the purchase agreement provides for the payment of
additional cash consideration during the two years following the closing date if
certain earnings targets are met. The acquisition has been accounted for using
the purchase method of accounting. The estimated fair values of the assets
acquired, liabilities assumed and stock issued in connection with the purchase
were $2.9 million, $631,000 and $300,000, respectively. Goodwill is $2.2 million
and is being amortized using the straight-line method over 10 years. The
operating results of the acquired business have been included in the
consolidated statements of income from the date of acquisition. Pro forma
operating results, giving effect to the acquisition as though it had occurred at
the beginning of fiscal 1999, are not presented because they are not materially
different than the Company's actual results.
NOTE F -- CONTINGENCY
In March 2000, the Company received notice from the Internal Revenue Service
("IRS") alleging a tax deficiency for the year ended March 31, 1996. The amount
of income adjustment asserted in the notice is approximately $1.3 million. The
Company believes that it has a meritorious position with respect to this matter
and intends to contest vigorously any attempt by the IRS to assert a tax
deficiency for the period in question. The Company does not believe that the
resolution of this matter will have a material effect on its results of
operations.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is a global business-to-business software licensing and services
provider that delivers comprehensive information technology solutions to
organizations throughout North America, Europe and Asia/Pacific. The Company
sells personal computer ("PC") software through volume licensing and maintenance
("VLM") agreements or right-to-copy arrangements, and full-packaged PC software
products, primarily through third-party distributors. In addition, the Company
provides infrastructure design, enterprise software management, application
development and technical support services to help organizations maximize
business value from information technology.
The following table sets forth certain items from the Company's Consolidated
Statements of Income expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 89.8 88.8 88.9 88.1
-------- -------- -------- --------
Gross margin 10.2 11.2 11.1 11.9
Selling, general and administrative expenses 7.7 8.6 8.9 9.4
Depreciation and amortization 1.0 1.1 1.1 1.2
-------- -------- -------- --------
Operating income 1.5 1.5 1.1 1.3
Interest expense, net 0.1 0.1 0.1 0.1
-------- -------- -------- --------
Income before income taxes 1.4 1.4 1.0 1.2
Income tax expense 0.7 0.6 0.5 0.5
-------- -------- -------- --------
Net income 0.7% 0.8% 0.5% 0.7%
======== ======== ======== ========
</TABLE>
NET SALES
Software sales for the three and nine months ended January 31, 2000 increased
approximately 18% and 15%, respectively, over those for the three and nine
months ended January 31, 1999, primarily due to higher software sales in North
America. Sales of software through VLM agreements represented approximately 89%
and 87%, respectively, of software sales for the three and nine months ended
January 31, 2000 compared to approximately 85% and 82% for the three and nine
months ended January 31, 1999.
For the three and nine months ended January 31, 2000, service revenues increased
by 32% and 26%, respectively, as compared to the three and nine months ended
January 31, 1999. Support services revenues increased 46% and 26% for the three
and nine months ended January 31, 2000, respectively, due primarily to increased
business in the Company's Tampa call center which opened in June 1999.
Professional services revenues grew by 13% and 26% for the three and nine months
ended January 31, 2000, respectively, despite the closure of six smaller sites
in late fiscal 1999. As of January 31, 2000, the Company had 17 professional
services sites worldwide compared to 26 offices at January 31, 1999.
Professional and support services represented approximately 11% of the Company's
overall sales for both the three and nine months ended January 31, 2000 as
compared to 10% for both the three and nine months ended January 31, 1999. Such
revenue generated approximately 30% and 29%, respectively, of the Company's
gross margin dollars during the three and nine months ended January 31, 2000
compared to 28% and 29%, respectively, for the three and nine months ended
January 31, 1999. The Company expects
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that the percentage of gross margin dollars provided by professional and support
services will increase as the Company continues to develop and expand this
aspect of its business.
The Company believes future increases in sales will depend upon its ability to
maintain and increase its customer base, to develop and expand its professional
and support services and to capitalize on continued growth in desktop technology
markets around the world.
INTERNATIONAL OPERATIONS
For the three and nine months ended January 31, 2000, sales outside of the
United States increased 24% and 18% to $56 million and $138 million,
respectively, as compared to $45 million and $117 million for the three and nine
months ended January 31, 1999.
Sales in Europe decreased 25% and 9% to $18 million and $47 million for the
three and nine months ended January 31, 2000, primarily due to decreased sales
of software under VLM agreements. Sales in Asia/Pacific increased 22% to $9
million and $44 million for each of the three and nine months ended January 31,
2000, due primarily to increased sales of software under VLM agreements.
For the three and nine months ended January 31, 2000, fluctuations in foreign
currencies against the U.S. dollar reduced operating income by approximately
$617,000 and $870,000, respectively.
GROSS MARGIN
Overall gross margin as a percentage of net sales was 10.2% and 11.1% for the
three and nine months ended January 31, 2000, as compared to 11.2% and 11.9% for
the comparable periods of the prior year. The decline in overall gross margin as
a percentage of net sales for the three months ended January 31, 2000 primarily
reflects declines in gross margins on software sales. For the three months ended
January 31, 2000 gross margin on the sale of PC software decreased to 8.0%, as
compared to 8.9% for the three months ended January 31, 1999, primarily due to
price competition, the increasing percentage of sales of software through VLM
agreements and the level of financial incentives from suppliers. The decline in
overall gross margin as a percentage of sales for the nine months ended January
31, 2000 primarily reflects declines in gross margins on software and support
services. For the nine months ended January 31, 2000, gross margin on the sale
of PC software decreased to 8.9%, as compared to 9.2% for the nine months ended
January 31, 1999, primarily due to price competition and the increasing
percentage of sales of software through VLM agreements. In July 1998, the
Company began providing support services under a large contract with a software
publisher involving the introduction of a new product. Initial high call volumes
and customer incentives related to the implementation of this contract caused
gross margins on support services to be high during the nine months ended
January 31, 1999.
The Company generally realizes lower gross margins as a percentage of net sales
on sales of software through VLM agreements, as compared to sales of
full-packaged software products. Therefore, the Company believes that gross
margin percentages on sales of software may continue to decline if the current
volume of software product sales by the Company through VLM agreements,
particularly enterprise-wide agreements, continues or if publishers respond to
continued market pressures by reducing financial incentives to resellers. This
potential decrease in product gross margin percentages may be offset by
anticipated increases in gross margin dollars generated by technology services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses include the costs of the
Company's sales and marketing organization as well as purchasing, distribution
and administration costs. For the three and nine months ended January 31, 2000,
SG&A expenses, as a percentage of net sales, decreased to 7.7% and 8.9%
respectively, as compared to 8.6% and 9.4% for the three and nine months ended
January 31, 1999. The decrease is due to operating efficiencies realized in the
product services area due to increased sales and
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more frequent customer use of the Company's electronic offerings. The Company
continues to focus on controlling operating costs in both the services and
product businesses.
DEPRECIATION AND AMORTIZATION
The increase in depreciation and amortization for the three and nine months
ended January 31, 2000, as compared to the three and nine months ended January
31, 1999, reflects additional depreciation on the higher level of fixed assets
utilized in the Company's services business in fiscal 2000.
INCOME TAX EXPENSE
The Company's effective tax rate for the three and nine months ended January 31,
2000 was approximately 49% and 46% as compared to approximately 42% and 43% for
the three and nine months ended January 31, 1999, respectively. The fluctuations
in the Company's effective tax rate primarily reflect the impact of its
international operations.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2000, the Company had approximately $7.6 million in cash and cash
equivalents and had $12.3 million outstanding under its $100 million revolving
credit facility. The credit facility, which is secured by accounts receivable,
inventory and a pledge of the stock of certain of the Company's subsidiaries,
permits the Company to borrow up to $100 million, subject to availability under
its borrowing base. As of January 31, 2000, the Company had approximately $69
million of additional borrowing availability under its credit facility. The
facility expires in March 2002.
The increase in trade accounts receivable from April 30, 1999 to January 31,
2000 reflects the Company's seasonally high sales in the third fiscal quarter.
At January 31, 2000 and April 30, 1999, accounts receivable represented
approximately 52 and 55 days of historical sales, respectively.
For the nine months ended January 31, 2000, the Company's operating activities
used $159,000 of cash compared to $5.7 million of cash provided by operations in
the nine months ended January 31, 1999. The decrease in cash provided by
operations is primarily due to the timing of certain payments to the Company's
vendors.
The increase in furniture, equipment and leasehold improvements from April 30,
1999 to January 31, 2000 reflects approximately $8.3 million of capital
expenditures related primarily to the ongoing upgrade of the Company's computer
systems and expansion of its technical support center in Tampa, Florida.
The Company expects that its cash requirements for fiscal 2000 will be satisfied
from cash flow from operations and borrowings under its credit facility.
The Company has a stock repurchase program which allows for the purchase of the
Company's Common Stock from time to time in the open market or through privately
negotiated transactions. The Company funds such purchases with cash or
borrowings under the Company's credit facility. As of March 10, 2000 the Company
had repurchased 789,200 shares of Common Stock, for a total of $12 million,
under the stock repurchase program and has been authorized by its Board of
Directors to repurchase up to an additional $2.8 million of its Common Stock.
YEAR 2000
In preparation for the transition into the Year 2000, the Company developed and
implemented a plan to ensure the ongoing operation of the Company's business
through the turn of the century and beyond. The Company did not experience any
material disruptions in its operations resulting from the transition into the
Year 2000.
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The total cost of the Company's Year 2000 project was less than $1 million and
was expensed as incurred. The majority of the costs involved reallocation of
existing resources rather than incremental costs. This reallocation of resources
did not have a material impact on the implementation of any significant internal
systems projects.
In general, as a reseller of software products, the Company only passes through
to its customers the applicable vendors' warranties. The Company's operating
results could be materially adversely affected, however, if it were held liable
for the failure of software products resold by the Company to be Year 2000
compliant despite its disclaimer of software product warranties. With respect to
the Company's consulting services, the failure of client systems or processes
could subject the Company to claims. Such claims, or the defense thereof, could
have a material adverse effect on the Company's operating results. No such
claims have been asserted against the Company with respect to software products
or consulting services.
EURO CURRENCY ISSUES
On January 1, 1999, eleven of the fifteen member countries of the European Union
introduced a common legal currency called the Euro, which is intended to replace
the currently existing currencies of the participating countries by January
2002. The initial introduction of the Euro did not have a significant effect on
the Company's operations or financial results. The Company believes that its
internal systems are Euro capable and does not expect increased use of the Euro
to materially impact its financial condition, operating results or use of
derivative instruments.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Other than statements of historical fact, this Management's Discussion and
Analysis of Financial Condition and Results of Operations includes certain
statements of the Company that may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements include future market trends, expectations concerning the
Company's growth, estimates regarding the economy and the software industry in
general, key performance indicators that impact the Company, statements
regarding market risk and statements included in the Year 2000 and Euro Currency
discussions above. In developing any forward-looking statements, the Company
makes a number of assumptions, including expectations for continued market
growth, anticipated revenue and gross margin levels, and cost savings and
efficiencies that include the ability of the Company to develop electronic
strategies. Although the Company believes these assumptions are reasonable, no
assurance can be given that they will prove correct. The Company's ability to
continue to grow product sales and develop its professional and support services
practices, improve its operating results in international markets and improve
operational efficiencies will be key to its success in the future. If the
industry's or the Company's performance differs materially from these
assumptions or estimates, Software Spectrum's actual results could vary
significantly from the estimated performance reflected in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results. The Company's Form 10-K for its fiscal year
ended April 30, 1999 contains certain cautionary statements under
"Forward-Looking Information" that identify factors that could cause the
Company's actual results to differ materially from those in the forward-looking
statements in this discussion. All forward-looking statements in this discussion
are expressly qualified in their entirety by the cautionary statements in this
paragraph and under "Forward-Looking Information" in the Company's Form 10-K.
INFLATION
The Company believes that inflation has not had a material impact on its
operations or liquidity to date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about market risks for the three and nine months ended January 31,
2000 does not differ materially from that discussed in Item 7 of the Company's
Annual Report on Form 10-K for its fiscal year ended April 30, 1999.
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.20 - Second Amendment to Amended and Restated Credit
Agreement, dated as of June 23, 1999 among the Company, the Chase
Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
National Association, as Collateral Agent, and other participating
financial institutions.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three month period
ended January 31, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOFTWARE SPECTRUM, INC.
Date: March 16, 2000 By: /s/ James W. Brown
----------------------------------------------
James W. Brown
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 10.20 Second Amendment to Amended and Restated Credit Agreement,
dated as of June 23, 1999 among the Company, the Chase
Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
National Association, as Collateral Agent, and other
participating financial institutions.
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.20
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of June 23, 1999, is among SOFTWARE SPECTRUM, INC., a
corporation duly organized and validly existing under the laws of the State of
Texas (the "Borrower"), each of the banks or other lending institutions which is
a signatory hereto (individually, a "Bank" and, collectively, the "Banks"), THE
CHASE MANHATTAN BANK, individually as a Bank and as administrative agent for
itself and the other Banks (in its capacity as administrative agent, together
with its successors in such capacity "Administrative Agent") and CHASE BANK OF
TEXAS, NATIONAL ASSOCIATION (formerly known as Texas Commerce Bank National
Association), individually as a Bank and as collateral agent for itself and the
other Banks (in its capacity as collateral agent, together with its successors
in such capacity, the "Collateral Agent").
RECITALS:
Borrower, the Banks, the Administrative Agent and the Collateral Agent
have entered into that certain Amended and Restated Credit Agreement dated as of
March 11, 1998 (as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 15, 1998, the "Agreement").
Borrower, the Banks, the Administrative Agent and the Collateral Agent now
desire to amend the Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE 2
Amendment
Section 2.1 Amendment to definition of "Revolving Termination Date".
Effective as of the date hereof, the definition of "Revolving Termination Date"
in Section 1.1 of the Agreement is amended in its entirety to read as follows:
"Revolving Termination Date" means March 11, 2002, or such
earlier date on which the Revolving Commitments terminate as provided
in this Agreement.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 1
<PAGE> 2
Section 2.2 Amendment to Section 9.4. Effective as of the date hereof,
clause (ii) of Section 9.4 of the Agreement is amended in its entirety to read
as follows:
(ii) Borrower may repurchase its capital stock as follows: (A)
prior to January 31, 1999, in one or more transactions pursuant to its
stock repurchase program in existence on the Closing Date if at the
time of each such purchase and after giving effect thereto no Default
exists or would result therefrom and the aggregate purchase price paid
for all such repurchases under this clause (A) since the Closing Date
(including the repurchase in question) shall not exceed One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000; (B) prior to June 23,
1999, in one or more transactions pursuant to a stock repurchase
program approved by its board of directors in July of 1998 if at the
time of each such purchase and after giving effect thereto no Default
exists or would result therefrom and the aggregate purchase price paid
for all such repurchases under this clause (B) (including the
repurchase in question but excluding those made pursuant to clause (A)
of this clause (ii)) shall not exceed Two Million Five Hundred Thousand
Dollars ($2,500,000); (C) on or after June 23, 1999, but prior to
December 31, 2000, Borrower may repurchase its capital stock if at the
time of each such purchase and after giving effect thereto no Default
exists or would result therefrom, the aggregate purchase price paid for
all such repurchases under this clause (C) (including the repurchase in
question) is less than or equal to Ten Million Dollars ($10,000,000)
and, after giving effect to the repurchase in question, the average
amount of the Borrowing Availability as of the end of each Business Day
during the 30 day period ending on the date of the repurchase in
question (the "Average Availability") is equal to or greater than
Thirty Million Dollars ($30,000,000); (D) on or after January 1, 2001,
but prior to December 31, 2001, Borrower may repurchase its capital
stock if at the time of each such purchase and after giving effect
thereto no Default exists or would result therefrom and the aggregate
purchase price paid for all such repurchases under this clause (D)
(including the repurchase in question) is less than or equal to Five
Million Dollars ($5,000,000) and the Average Availability, after giving
effect to the repurchase in question, is equal to or greater than
Thirty Million Dollars ($30,000,000); and (E) on or after January 1,
2002, Borrower may purchase its capital stock if at the time of each
such purchase and after giving effect thereto no Default exists or
would result therefrom, the aggregate purchase price paid for all such
repurchases under this clause (E) (including the repurchase in
question) is less than or equal to Five Million Dollars ($5,000,000)
and the Average Availability, after giving effect to the repurchase in
question, is equal to or greater than Thirty-Five Million Dollars
($35,000,000); and
Section 2.3 Amendment to Exhibit "D". Effective as of the date hereof,
Exhibit "D" of the Agreement is amended to read in its entirety as set forth on
Exhibit "D" of this Amendment.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 2
<PAGE> 3
ARTICLE 3
Miscellaneous
Section 3.1 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, the Banks and the Agents agree that the Agreement as amended
hereby and the other Loan Documents shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms.
Section 3.2 Representations and Warranties. Borrower hereby represents
and warrants to Administrative Agent and the Banks as follows: (a) after giving
effect to this Amendment, no Default has occurred and is continuing; (b) after
giving effect to this Amendment, the representations and warranties set forth in
the Loan Documents are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and as of such date
except with respect to any representations and warranties limited by their terms
to a specific date; (c) the execution, delivery and performance of this
Amendment has been duly authorized by all necessary action on the part of
Borrower and each Obligated Party and does not and will not: (1) violate any
provision of law applicable to Borrower or any Obligated Party, the certificate
of incorporation, bylaws, partnership agreement, membership agreement, or other
applicable governing document of Borrower or any Obligated Party or any order,
judgment, or decree of any court or agency of government binding upon Borrower
or any Obligated Party; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation of Borrower or any Obligated Party; (3) result in or
require the creation or imposition of any material lien upon any of the assets
of Borrower or any Obligated Party; or (4) require any approval or consent of
any Person under any material contractual obligation of Borrower or any
Obligated Party; and (d) except as previously disclosed to Administrative Agent,
the articles of incorporation, bylaws, partnership agreement, certificate of
limited partnership, membership agreement, articles of organization or other
applicable governing document of the Borrower and each Obligated Party,
resolutions of the Borrower attached as Exhibit B to its Secretary's Certificate
dated as of March 6, 1998, and resolutions of Spectrum Integrated Services, Inc.
attached as Exhibit B to its Secretary's Certificate dated as of March 6, 1998,
have not been modified or rescinded since March 6, 1998, and remain in full
force and effect, and the officers identified in each such Secretary's
Certificate continue to hold the offices set forth in such certificate.
IN ADDITION, TO INDUCE THE ADMINISTRATIVE AGENT AND THE BANKS TO AGREE
TO THE TERMS OF THIS AMENDMENT, BORROWER AND EACH OBLIGATED PARTY (BY ITS
EXECUTION BELOW) REPRESENT AND WARRANT THAT AS OF THE DATE OF ITS EXECUTION OF
THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS AND IN ACCORDANCE
THEREWITH IT WAIVES
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 3
<PAGE> 4
ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR
UNKNOWN, ARISING PRIOR TO THE DATE OF ITS EXECUTION OF THIS AMENDMENT.
Section 3.3 Reference to Agreement. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 3.4 Expenses of Agents. As provided in the Agreement, Borrower
agrees to pay on demand all costs and expenses incurred by Administrative Agent
or Collateral Agent in connection with the preparation, negotiation, and
execution of this Amendment and the other Loan Documents executed pursuant
hereto, including without limitation, the costs and fees of Administrative
Agent's legal counsel.
Section 3.5 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 3.6 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.
Section 3.7 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Banks, the Agents and Borrower and their
respective successors and assigns, except Borrower may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
the Banks.
Section 3.8 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
agreement.
Section 3.9 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 3.10 ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 4
<PAGE> 5
Executed as of the date first written above.
BORROWER:
SOFTWARE SPECTRUM, INC.
By: /s/ ROBERT D. GRAHAM
------------------------------------
Robert D. Graham
Vice President & General Counsel
ADMINISTRATIVE AGENT:
THE CHASE MANHATTAN BANK, individually
as a Bank and as the Administrative Agent
By: /s/ KANAK KAPUR
------------------------------------
Kanak Kapur
Vice President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 5
<PAGE> 6
COLLATERAL AGENT:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(formerly known as Texas Commerce Bank
National Association), individually as a
Bank and as the Collateral Agent
By: /s/ JOHN P. DEAN
------------------------------------
John P. Dean,
Sr. Vice President
OTHER BANKS:
NATIONAL CITY BANK, KENTUCKY
By: /s/ GLENN E. NORD
------------------------------------
Name: Glenn E. Nord
----------------------------
Title: Vice President
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JAMES M. STEFF
-----------------------------------
Name: James M. Steff
-----------------------------
Title: Vice President
-----------------------------
FOOTHILL CAPITAL CORPORATION
By: /s/ MICHAEL P. BARANOWSKI
-----------------------------------
Name: Michael P. Baranowski
-----------------------------
Title: Vice President
-----------------------------
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 6
<PAGE> 7
ACKNOWLEDGMENT
The undersigned hereby consents and agrees to this Amendment,
including, without limitation, the extension of the Revolving Termination Date
as provided herein, and hereby ratifies and confirms each of the Loan Document
to which it is a party and agrees that such Loan Documents continue to be legal,
valid, binding and enforceable in accordance with their respective terms.
Witness due execution hereof by the undersigned as of the date first
written above.
SPECTRUM INTEGRATED SERVICES, INC.
By: /s/ ROBERT D. GRAHAM
--------------------------------------
Robert D. Graham, Vice President &
General Counsel
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT- Page 7
<PAGE> 8
EXHIBIT "D"
to
SOFTWARE SPECTRUM, INC.
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
Compliance Certificate
EXHIBIT D, Cover Page
<PAGE> 9
COMPLIANCE CERTIFICATE
for the
quarter ending _________ __, _____
To: The Chase Manhattan Bank,
as administrative agent
600 Fifth Avenue, 4th Floor
New York, New York 10020
and each Bank
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 8.1(c) of that certain Amended and Restated Credit Agreement
(as amended, the "Agreement") dated as of March 11, 1998 among SOFTWARE
SPECTRUM, INC. (the "Borrower"), THE CHASE MANHATTAN BANK, as administrative
agent, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as collateral agent and the
Banks named therein. All capitalized terms, unless otherwise defined herein,
shall have the same meanings as in the Agreement. All the calculations set forth
below shall be made pursuant to the terms of the Agreement.
The undersigned, an authorized financial officer of the Borrower, does
hereby certify to the Agent and the Banks that:
1. DEFAULT.
No Default has occurred and is continuing or if a Default has occurred
and is continuing, I have described on the attached Exhibit "A" the
nature thereof and the steps taken or proposed to remedy such Default.
<TABLE>
<CAPTION>
Compliance
----------
<S> <C> <C> <C> <C>
2. SECTION 8.1 - FINANCIAL STATEMENTS AND RECORDS
(a) Annual audited financial statements of Borrower on or before 91 Yes No N/A
days after the end of each Fiscal Year.
(b) Quarterly unaudited financial statements of Borrower on a Yes No N/A
consolidated and consolidating basis within 46 days of each
Fiscal Quarter end.
(c) Borrowing Base Report together with the Receivables Reports Yes No N/A
within 20 days of each month end or within 20 days of any other
date required by the Administrative Agent.
</TABLE>
EXHIBIT "D" - Compliance Certificate - Page 1
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C>
(d) If Daily Collection Event occurs, Receivable Reports Yes No N/A
(i) weekly or
(ii) daily
(e) Projections within 30 days before the start of each Fiscal Yes No N/A
Year.
3. SECTION 8.10 - COLLATERAL MATTERS
(a) Aggregate book value of inventory held by third parties $___________
(b) Limit $ 2,500,000
(c) Collateral perfection/protection required Yes No
(d) Material Subsidiary created or acquired? Yes No
(e) If line (d) is yes, have 8.10(b) and (c) collateral measures Yes No
been taken?
4. SECTION 9.1 - DEBT
No Additional Debt except:
(a) Purchase money not to exceed: $ 5,000,000
Actual Outstanding: $___________ Yes No
(b) Guaranties of surety and other bonds not to exceed: $ 4,000,000
Actual Outstanding: $___________ Yes No
(c) Outstanding Guaranties of permitted Debt of Foreign Subs
and Foreign Ventures $___________ Yes No
(d) Outstanding Loans, advances, other extensions of credit,
investments and contributions to Foreign Subs (excluding
Software Spectrum Canada in an amount up to the gross
Dollar amount of receivables of Software Spectrum
Canada) and Foreign Ventures $___________ Yes No
(e) Total Foreign Subsidiary Obligations (line 4(c) plus 4(d)) $___________
(f) Foreign Subsidiary Limit Yes No
(i) $30,000,000 plus
(ii) if 9.1(e)(ii) test satisfied $10,000,000 $___________
(g) Acquisition Debt incurred in any Fiscal Year not to Yes No
exceed $ 10,000,000
Actual incurred in current Fiscal Year $___________ Yes No
(note: Incurrence Test must also be met)
(h) Unsecured Vendor Debt not to exceed $ 20,000,000
Actual Outstanding $___________ Yes No
(note: Incurrence Test must also be met)
(i) Unsecured Short Term Bank Debt not to exceed $ 5,000,000
Actual Outstanding $___________ Yes No
</TABLE>
EXHIBIT "D" - Compliance Certificate - Page 2
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C> <C>
5. SECTION 9.3 - MERGERS, ETC.
(a) Has acquisition been consummated since last Compliance Yes No
Certificate?
(b) If line (a) yes, Purchase Price $___________
(c) Aggregate Purchase Prices from prior acquisitions under $___________
9.3 in current Fiscal Year
(d) Purchase Price Limit per transaction $ 5,000,000 Yes No N/A
(e) Aggregate Purchase Price Limit per Fiscal Year $10,000,000 Yes No N/A
(f) Were the conditions in clauses (a) through (e) of Section
9.3(iv) satisfied with respect to each acquisition? Yes No N/A
6. SECTION 9.4 - DIVIDENDS
(a) Stock repurchases pursuant to stock repurchase program
in existence at closing date not to exceed (note: no further
stock repurchases permitted under this clause (a) after
1/31/99) $ 1,750,000
Actual such repurchases since Closing Date: $___________ Yes No N/A
(b) Stock repurchases pursuant to 7/98 stock repurchase
program not to exceed (note: no further stock repurchases
permitted under this clause (b) after _______________)
Actual such repurchases since 8/31/98 (excluding those
included in clause (a) $___________ Yes No
(c) Stock repurchases for applicable period not to exceed: $___________
Actual repurchases during the applicable period: $___________ Yes No
(d) Attach as schedule evidence of compliance with Section
9.4(iii) with respect to dividends and other stock
repurchases Yes No N/A
7. SECTION 9.8 - DISPOSITION ASSETS
(a) Book Value of asset disposed of in sale leaseback
transaction within the last 12 months $___________
Actual not to exceed: $ 500,000 Yes No N/A
(b) Book value of assets disposed of within the last 12 months $___________
Actual not to exceed: $ 500,000 Yes No N/A
8. SECTION 9.10 - PREPAYMENT OF DEBT
No prepayment of Debt except:
(a) Obligations
(b) Foreign Sub Debt Guaranteed
(c) Prepayment of other Debt limited in any Fiscal Year to: $ 500,000
(d) Aggregate amount of other Debt so prepaid in current
Fiscal Year $___________ Yes No N/A
9. SECTION 10.1 - CONSOLIDATED NET WORTH
(a) Required Consolidated Net Worth $ 72,000,000
(b) Actual Consolidated Net Worth
(i) shareholders equity $___________
(ii) treasury stock $___________
(iii) 9(a) minus 9(b) $___________ Yes No N/A
</TABLE>
EXHIBIT "D" - Compliance Certificate - Page 3
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
10. SECTION 10.2 - INTEREST COVERAGE
(a) Net Income for applicable period $___________
(b) Plus net provisions for tax $___________
(c) Plus Interest Expense $___________
(d) Plus amortization and depreciation $___________
(e) Borrower EBITDA: 10(a) plus 10(b), 10(c) and 10(d) $___________
(f) Unfinanced Capital Expenditures $___________
(g) (line 10(e) minus line 10(f)) $___________
(h) Interest Expense $___________
(i) Interest Coverage (line 10(g) divided by line 10(h)) ___:1.00
(j) Minimum Interest Coverage ___:1.00 Yes No
11. SECTION 10.3 - CAPITAL EXPENDITURE LIMITS
(a) Capital Expenditure limit for the period $___________
(b) Actual Capital Expenditures $___________ Yes No
12. SECTION 10.4 - NET INCOME
(a) Net Income (most recent Fiscal Quarter) $___________ Yes No
(b) less than -$2,500,000?
(c) Net Income (previous Fiscal Quarter) $___________ Yes No
(d) 12(a) plus 12(c) less than -$3,000,000?
13. DETERMINATION OF MARGIN AND FEES
(a) Borrower EBITDA: From 10(e) $___________
(b) All Capital Expenditures (financed and unfinanced) $___________
(c) Actual technical support contract Capital Expenditures
not to exceed $1,500,000 incurred in the period through
the Fiscal Quarter ending January 31, 1999 $___________
(d) (line 13(a) minus the positive sum of (i) line 13(b)
minus (ii), if calculated for a period prior to
February 1, 1999, line 13(c)) $___________
(e) Interest Expense $___________
(f) Interest Coverage Ratio (line 13(d) divided by line
13(e)) ___:1.00
(g) Adjustment to margin and fees required by Section 3.2? Yes No
(h) If adjustment required, set forth below new margins and
fees in accordance with Section 3.2:
(i) Base Margin _______%
(ii) Libor Rate Margin and LC Fee _______%
(iii) Commitment Fee _______%
14. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the computation set forth
above in this Certificate. All information contained herein and on the attached schedules
is true and correct.
</TABLE>
EXHIBIT "D" - Compliance Certificate - Page 4
<PAGE> 13
15. FINANCIAL STATEMENTS
The unaudited financial statements attached hereto were prepared in
accordance with GAAP but presented in accordance with the interim reporting
rules and regulations of the Securities and Exchange Commission and fairly
present (subject to year end audit adjustments) the financial conditions
and the results of the operations of the Persons reflected thereon, at the
date and for the periods indicated therein.
IN WITNESS WHEREOF, the undersigned has executed this Certificate effective
this ____ day of __________, _____.
SOFTWARE SPECTRUM, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT "D" - Compliance Certificate - Page 5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 7,561
<SECURITIES> 0
<RECEIVABLES> 158,077
<ALLOWANCES> 3,371
<INVENTORY> 457
<CURRENT-ASSETS> 164,810
<PP&E> 55,085
<DEPRECIATION> 31,450
<TOTAL-ASSETS> 236,153
<CURRENT-LIABILITIES> 146,796
<BONDS> 12,300
0
0
<COMMON> 46
<OTHER-SE> 77,011
<TOTAL-LIABILITY-AND-EQUITY> 236,153
<SALES> 705,061
<TOTAL-REVENUES> 794,211
<CGS> 642,248
<TOTAL-COSTS> 705,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,298
<INTEREST-EXPENSE> 1,113
<INCOME-PRETAX> 7,972
<INCOME-TAX> 3,666
<INCOME-CONTINUING> 4,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,306
<EPS-BASIC> 1.08
<EPS-DILUTED> 1.06
</TABLE>
