UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission File No. 33-92810
Programmer's Paradise, Inc.
(Name of issuer in its charter)
Delaware 13-3136104
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1157 Shrewsbury Avenue, Shrewsbury, New Jersey 07702
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (732) 389-8950
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the past
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
There were 4,828,523 outstanding shares of Common Stock, par value $.01 per
share, as of October 31, 1998.
Page 1
Exhibit index is on page 14.
<PAGE>
PROGRAMMER'S PARADISE, INC.
Index to Form 10-Q
Page No.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1998 and December 31, 1997 3
Condensed Consolidated Statements of Income and
Comprehensive Income for the Nine Months and Three Months
Ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
PART II -- OTHER INFORMATION
Item 5. Other information 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule 15
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1998 1997
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 13,884 $ 20,571
Accounts receivable 34,731 38,517
Inventory 5,948 4,627
Prepaid expenses and other current assets 2,857 2,561
Deferred tax asset 1,782 1,619
-------- --------
Total current assets 59,202 67,895
Equipment and leasehold improvements 2,482 1,862
Goodwill 13,452 14,185
Other assets 866 707
Deferred income taxes 1,329 1,719
-------- --------
$ 77,331 $ 86,368
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to banks $ 712 $ 958
Accounts payable and accrued expenses 36,831 46,979
Other current liabilities 3,850 3,881
-------- --------
Total current liabilities 41,393 51,818
Other liabilities 218 117
Notes payable - Long-term 1,913 2,220
Stockholders' equity
Common stock 49 48
Additional paid-in capital 33,382 33,633
Retained earnings (deficit) 1,521 (256)
Treasury stock (407) (343)
Cumulative foreign currency translation adjustment (738) (869)
-------- --------
Total stockholders' equity 33,807 32,213
-------- --------
$ 77,331 $ 86,368
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
<PAGE>
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 158,434 $ 114,921 $ 54,461 $ 36,882
Cost of sales 138,707 97,395 47,754 31,460
--------- --------- --------- ---------
Gross profit 19,727 17,526 6,707 5,422
Selling, general and administrative expenses 15,965 12,833 5,362 4,177
Amortization expense 736 661 246 208
--------- --------- --------- ---------
Income from operations 3,026 4,032 1,099 1,037
Interest income, net 216 170 76 67
Unrealized foreign exchange gain ( loss ) 73 (84) 160 16
--------- --------- --------- ---------
Income before income taxes 3,315 4,118 1,335 1,120
Provision for taxes 1,538 1,535 655 357
--------- --------- --------- ---------
Net income $ 1,777 $ 2,583 $ 680 $ 763
========= ========= ========= =========
Net income per common share-Basic $ .37 $ .55 $ .14 $ .16
--------- --------- --------- ---------
Net income per common share-Diluted $ .33 $ .48 $ .13 $ .14
--------- --------- --------- ---------
Weighted average common shares outstanding-Basic 4,805 4,737 4,800 4,792
--------- --------- --------- ---------
Weighted average common shares outstanding-Diluted 5,306 5,336 5,134 5,416
--------- --------- --------- ---------
Reconciliation of Net Income to Comprehensive Income:
Net Income $ 1,777 $ 2,583 $ 680 $ 763
--------- --------- --------- ---------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (70) 433 (191) 151
--------- --------- --------- ---------
Comprehensive Income $ 1,707 $ 3,016 $ 489 $ 914
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
<PAGE>
PROGRAMMER'S PARADISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1998 1997
-------- --------
<S> <C> <C>
Cash provided by (used for)
Operations:
Net income $ 1,777 $ 2,583
Adjustments for non cash charges 1,448 1,310
Changes in assets and liabilities (7,732) (3,254)
-------- --------
Net cash (used for) provided by operations (4,507) 639
-------- --------
Investing:
Capital expenditures (1,261) (522)
Capitalized software costs (51) (50)
Acquisitions, net of cash acquired -- (2,286)
-------- --------
Net cash used for investing (1,312) (2,858)
-------- --------
Financing:
Net proceeds from issuance of common stock (269) 41
Borrowings (Repayments) under lines of credit (307) 6,412
Repayments under lines of credit (292) (5,489)
-------- --------
Net cash used for financing activities (868) 964
-------- --------
Net change in cash (6,687) (1,255)
Cash at beginning of year 20,571 16,281
-------- --------
Cash at end of period $ 13,884 $ 15,026
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
<PAGE>
PROGRAMMER'S PARADISE, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 1998
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months and three months ended September 30, 1998, are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year-ended December 31, 1997.
2. Assets and liabilities of the foreign subsidiaries, all of which are
located in Europe, have been translated at current exchange rates, and
related revenues and expenses have been translated at average rates of
exchange in effect during the year. Resulting cumulative translation
adjustments have been recorded as a separate component of stockholders'
equity.
3. In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information,
which is effective for years beginning after December 15, 1997. Statement
131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements
and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. Statement 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements retroactively in
1998. Management has not completed its review of Statement 131, but does
not anticipate that the adoption of this statement will have a significant
effect on the Company's reported segments.
Page 6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company is an international marketer of software targeting the software
development professional and information technology professional within
enterprise organizations. The Company operates principally , through five
distribution channels-internet, catalog, direct sales, telemarketing and
wholesale distribution. Internet sales encompass the Company's international web
sites. Catalog operations include worldwide catalog sales, advertising and
publishing. Direct sales operations include ISP-USA in the United States, ISP*D
International Software Partners Gmbh ("ISP*D") in Munich, Germany, wholly owned
subsidiaries of the Company, ISP*F International Software Partners France SA
("ISP*F"), a majority-owned subsidiary in Paris, France, and Logicsoft Holding
BV ("Logicsoft"), a recently acquired and wholly-owned subsidiary located in
Amsterdam, the Netherlands. Telemarketing operations are presently conducted in
the United States, Germany and the United Kingdom. Wholesale operations include
distribution to dealers and large resellers through Lifeboat Distribution Inc.
in the United States and Lifeboat Associates Italia Srl ("Lifeboat Italy") in
Milan, Italy, also subsidiaries of the Company.
The Company was founded in 1982 as a wholesaler and reseller of educational
software. In June 1986, the Company acquired Lifeboat Associates, a wholesale
distributor and publisher of software founded in 1976. Later in 1986,
Programmer's Paradise was started by the Company as a catalog marketer of
technical software. In 1988, the Company acquired Corsoft Inc., a direct sales
company founded in 1983, and combined it with the operations of the Programmer's
Paradise catalog and Lifeboat Associates, both of which were involved in the
marketing of technical software for microcomputers. In May 1995, the Company
changed its name from "Voyager Software Corp." to "Programmer's Paradise, Inc.".
In July 1995, the Company completed an initial public offering of its common
stock. In June 1996, the Company acquired substantially all of the assets of The
Software Developer's Company, Inc. ("SDC") including The Programmer's Supershop
catalog, its largest domestic competitor. In August 1997, the Company formed
Programmer's Paradise, Canada Inc. located in Mississauga, Ontario, to serve the
growing developer market in Canada.
The Company began European-based operations in the first quarter of 1993,
when it acquired a controlling interest in Lifeboat Italy, a long-standing
software distributor in Italy. In January and April 1994, the Company purchased
the remaining ownership interest in Lifeboat Italy. In June 1994, the Company
acquired a 90% controlling interest in ISP*D, a large software-only dealer and a
leading independent supplier of Microsoft Select licenses and other software to
many large German and Austrian companies. In January 1995, the remaining 10%
interest in ISP*D was purchased by the Company. In late 1994, the Company
organized a subsidiary in the United Kingdom to engage in catalog operations. In
December 1995, the Company acquired Systematika Ltd. , a leading reseller of
technical software in the United Kingdom and the publisher of the popular System
Science catalog. In January 1996, the Company formed ISP*F, as a full service
corporate reseller of PC software, based in Paris and majority-owned by
Programmer's Paradise France SARL. In September 1997, the Company acquired
Logicsoft, the parent company of Logicsoft Europe BV, the predominate Large
Account Reseller in the Benelux countries. The Company is using its
European-based operations as a platform for pan-European business development,
including the distribution of local versions of its catalogs.
Page 7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
information derived from the Company's consolidated statement of operations
expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
----------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 87.5 84.7 87.7 85.3
----- ----- ----- -----
Gross Profit 12.5 15.3 12.3 14.7
Selling, general and administrative expenses 10.1 11.2 9.8 11.3
Amortization expense 0.5 0.6 0.5 0.6
----- ----- ----- -----
Income from operations 1.9 3.5 2.0 2.8
Interest income (expense), net 0.1 0.1 0.1 0.2
Unrealized foreign exchange gain (loss) 0.0 (0.1) .3 0.1
----- ----- ----- -----
Income before income taxes 2.1 3.5 2.4 3.1
Income taxes (1.0) (1.3) (1.2) (1.0)
----- ----- ----- -----
Net income 1.1% 2.2% 1.2% 2.1%
----- ----- ----- -----
</TABLE>
NET SALES
Net sales of the Company represents the gross consolidated revenue of the
Company less returns. Although net sales consist primarily of sales of software,
revenue from marketing services and advertising is also included within net
sales. Net sales for the quarter ended September 30, 1998 increased by
$17,579,000, or 47.6%, to $54,461,000, over the quarter ended September 30,
1997. Net sales for the nine months ended September 30, 1998 increased by
$43,513,000, or 37.8%, to $158,434,000, over the same period in 1997.
The increase in net sales for the nine months ended September 30, 1998 as
compared to the same period in 1997 reflects the growth of the Company's direct
sales businesses, plus a resurgence in catalog revenues caused primarily by the
introduction of several new Microsoft products in the period, as well as growth
through acquisitions. Consolidated direct sale revenues increased by 98% or
$48.8 million for the nine months ended September 30, 1998, primarily as a
result of market share gains in both France and Germany, compared to the same
period in 1997, as well as the effect of the acquisition of Logicsoft in
September 1997. For the nine months ended September 30, 1998, direct sale
revenues in France and Germany increased by 39.8% and 35.3% respectively, over
1997. Excluding the acquisition of Logicsoft, consolidated direct sales revenues
for the nine months ended September 30, 1998 increased by 45.8% or $22.8
million. Catalog revenues decreased 8.8% or $4.7 million for the nine months
ended September 30, 1998 due primarily to the impact from the Microsoft
Developer Days event that occurred in March 1997 and not again until September
1998, and prior to this event, the absence of any significant new product
releases into the market in 1998. Revenues within the distribution channel
decreased 5.0% or $0.6 million for the nine months ended September 30, 1998 due
primarily to the impact of reduced revenues within Italy.
The increase in net sales for the three months ended September 30, 1998 as
compared to the same period in 1997 primarily reflects the growth of the
Company's direct sales businesses, growth through acquisitions, and increased
catalog revenues as a result of Microsoft's Developer Days event in September
1998. Consolidated direct sales revenues increased by 88.9% or $15.9 million for
the three months ended September 30, 1998, primarily as a result of market share
gains in both France and Germany, compared to the same period in 1997, as well
as the impact of the direct sales operation begun in the United States late in
1997and the effect of the acquisition of Logicsoft in September 1997. For the
three months ended September 30, 1998, direct sales revenues in France and
Germany increased by 33% and 31% respectively, over 1997. Excluding the
acquisition of Logicsoft, consolidated direct sales revenues for the three
months ended September 30, 1998 increased by 41.9% or $7.5 million with the
United States accounting for approximately $2.1 million of the increase. Catalog
revenues increased 10.1% or $1.6 million for the three months ended September
30, 1998 due primarily to the impact from the Microsoft Developer Days event
that occurred in the early part of September 1998. Revenues within the
distribution channel increased 1.4% or $0.05 million for the three months ended
September 30, 1998 due primarily to a slight increase in revenues in Italy.
Internet revenues grew to over $1.0 million in the period as compared to
approximately $200,000 in 1997 as the Company continues to promote web traffic
through it's co-branding activities and the utilization of it's catalog for
banner advertising.
Page 8
<PAGE>
Geographically, approximately 66% of the revenues were derived from the
European operations for the three and nine months ended September 30, 1998,
respectively. Approximately 54% of the revenues were derived from the European
operations for both the three and nine months ended September 30, 1997.
GROSS PROFIT
Gross profit represents the difference between net sales and costs of
sales. Cost of sales is composed primarily of amounts paid by the Company to
publishers and vendors plus catalog printing and mailing costs. Publisher and
vendor rebates are credited against cost of sales. For the three-month and
nine-month periods ended September 30, 1998, gross profit as a percentage of
sales decreased by 2.4% and 2.8%, respectively, over the same periods in 1997,
reflecting a shift in the mix of sales through the Company's distribution
channels as a result of the substantial increase in lower margin corporate
direct sales, primarily Microsoft Select licensing sales. The acquisition of
Logicsoft was a significant factor in the overall shift of the lower margin,
revenue mix. Gross profit in absolute dollars for the three-month and nine-month
periods ended September 30, 1998 increased by $1.29 million and $2.2 million
over the previous year, which reflects the strength of the direct sales
business.
Gross margins have been affected by the mix of products sold and the mix of
distribution channels. Historically, the gross margins attained in the catalog
channel have been higher than either the direct sales or distribution channels.
Margins within the direct sales channel are also subject to mix variations as
Microsoft Select License sales typically produce lower gross margin results. For
the nine-months ended September 30, 1998, catalog operations contributed
approximately 31% of revenue and approximately 46% of gross margin dollars as
compared with approximately 46% of revenue and approximately 64% of gross margin
dollars in 1997. Direct sales operations contributed approximately 62% of
revenue and approximately 46% of gross margin dollars as compared with
approximately 43% of revenue and approximately 26% of gross margin dollars in
1997. The distribution channel contributed approximately 7% of revenue and
approximately 8% of gross margin dollars as compared with approximately 10% of
revenue and approximately 10% of gross margin dollars in 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses include all corporate
personnel costs (including salaries and health benefits), depreciation and
amortization, non-personnel-related marketing and administrative costs and the
provision for doubtful accounts. Depreciation and amortization consists
primarily of equipment depreciation and leasehold improvements. SG&A expenses
have decreased as a percentage of revenues to 9.8% from 11.3% for the three
months ended September 30, 1998 and 1997, respectively. For the nine-months
ended September 30, 1998, SG&A expenses have decreased as a percentage of
revenues to 10.1%, down from 11.2% for the same period in 1997. The decrease in
SG&A as a percentage of revenues reflect the economies of scale associated with
the increase in revenues from the Logicsoft acquisition, as well as the increase
in revenue from the direct sales channel. SG&A expenses in absolute dollars for
the three-month and nine-month periods ended September 30, 1998 increased by
$1,185,000 and $3,132,000, respectively, when compared to the same period in
1997. This increase reflects the costs associated with the start-up of the
Canadian operations in August 1997 and the acquisition of Logicsoft in September
1997, as well as additional infrastructure in the form of personnel-related
costs as the Company moves into the e-commerce arena.
Geographically, the North America operation of the Company accounted for
approximately 40% of total SG&A expenditures for the three- months ended
September 30, 1998 compared with 51% for the same period in 1997. For the nine
months ended September 30, 1998 and 1997, respectively, the North America
operations accounted for 41% and 53% of total SG&A costs.
Page 9
<PAGE>
AMORTIZATION EXPENSE
Amortization expense includes the systematic write-off of goodwill.
Amortization expense for the three and nine months ended September 30, 1998
increased by $37,000 and $75,000, respectively, as compared to the same period
in 1997. This increase reflects the amortization of the excess of the purchase
price over the fair value of the net assets acquired in the acquisition of
Logicsoft. In connection with such acquisition, during 1997, the Company
recognized approximately $2.4 million in goodwill, which is being amortized over
a fifteen-year period.
INTEREST INCOME AND EXPENSE
Net interest income increased by $9,000 for the three months ended
September 30, 1998 as compared to the same period in 1997, which is primarily
attributable to interest earned on escrow monies that were returned to the
Company offset by the additional interest expenses associated with the financing
of the acquisition of Logicsoft B.V. in September 1997. For the nine months
ended September 30, 1998, net interest income increased by $46,000 as compared
to the same period in 1997, primarily reflecting incremental net interest income
recognized in the United States.
INCOME TAXES
Provision for income tax was $1,538,000 for the nine months ended September
30, 1998, compared to $1,535,000 for the same period in 1997. As a percentage of
pre-tax income, the provision reflects higher statutory rates in Germany due to
the utilization of the net operating loss carryforwards for German income tax
purposes, as well as the impact of certain subsidiary losses, which are not
being sheltered by tax benefits.
NET INCOME
Net income was $680,000 or $.13 per share on a diluted basis with
approximately 5,134,000 weighted average common shares outstanding for the
quarter ended September 30, 1998 compared to $763,000 or $.14 per share on a
diluted basis with approximately 5,416,000 weighted average common shares
outstanding for the same period of the previous year. Net income was $1,777,000
or $.33 per share on a diluted basis with approximately 5,306,000 weighted
average common shares outstanding for the nine months ended September 30, 1998
compared to $2,583,000 or $.48 per share on a diluted basis with approximately
5,336,000 weighted average common shares outstanding for the same period of the
previous year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital needs have been to fund the working capital
requirements created by its sales growth and to make acquisitions. The Company
had cash and cash equivalents of approximately $13.9 million at September 30,
1998.
Net cash used for operations was approximately $4,507,000 for the nine
months ended September 30, 1998 compared with $639,000 of cash provided by
operating activities in the same period of the previous year. For the first nine
months of 1998, cash flow was primarily used for a reduction in accounts payable
(approximately $10.1 million), specifically amounts due to Microsoft by ISP*D
under the Microsoft Select License program, as well as an increase in prepaid
expenses and other current assets (approximately $1.3 million), offset by a
decrease in accounts receivable (approximately $3.6 million) as well as net
earnings for the current year period (approximately $1.8 million). For 1997,
cash flow was primarily provided by a decrease in accounts receivable
(approximately $5.8 million) as well as an increase in net earnings for the
period, offset by a decrease in accounts payable.
During the current period, the Company announced a plan to reacquire up to
5% of its outstanding stock. As of September 30, 1998, the Company had
reacquired 75,000 shares which are classified as Treasury stock on the
accompanying Balance Sheet.
Page 10
<PAGE>
Domestically, the Company has a secured, demand revolving line of credit,
pursuant to which the Company may borrow up to $7.5 million under a committed
line of credit with interest at either the prime rate or Euro-rate plus 200
basis points. The new credit facility expires on September 30, 1999 and is
secured by all of the domestic assets of the Company and 65% of the outstanding
stock of the foreign subsidiaries and contains certain covenants that require
the Company to maintain a minimum level of tangible net worth and working
capital. There were no amounts outstanding under the line at September 30, 1998.
In connection with the Logicsoft acquisition, the Company secured a
five-year term loan in the US dollar equivalent of approximately $3.0 million.
The term loan bears interest at 6.17% and principal and interest are payable
quarterly. The loan is payable in Netherland guilders and has an outstanding
balance at September 30, 1998 of $2,551,020 (DFL 4,800,000), of which $637,755
(DFL 1,200,000) is classified as current notes payable to banks in the
accompanying consolidated balance sheet. The term loan is also secured by all of
the domestic assets of the Company and 65% of the outstanding stock of the
foreign subsidiaries
The Company maintains a secured, demand revolving line of credit for ISP*D,
its German subsidiary, pursuant to which it may borrow in deutschmarks up to DM
1,500,000 (the equivalent of approximately $898,000 at September 30, 1998),
based upon its eligible accounts receivable and inventory and a limited
guarantee by the Company of up to DM 300,000 (the equivalent of approximately
$180,000 at September 30, 1998). At September 30, 1998, there were no amounts
outstanding under the line.
The Company's Italian subsidiary, Lifeboat Italy, maintains banking
arrangements with several Italian banks, pursuant to which it may borrow in lire
on an unsecured, demand basis to finance working capital requirements, through
credit and overdrafting privileges, as well as receivables-based advances. The
aggregate credit and overdrafting limits of such arrangements at September 30,
1998 was Lit 3,200,000,000 (the equivalent of approximately $1.9 million at
September 30, 1998). At September 30, 1998, there were no amounts outstanding
under these lines.
The Company's subsidiary in France, ISP*F, maintains a demand revolving
line of credit pursuant to which it may borrow up to FRF 5,000,000 (the
equivalent of approximately $893,000 at September 30, 1998), and is secured by
its accounts receivable and inventory and a FRF 3,000,000 letter of credit. At
September 30, 1998, approximately FRF 170,341 (the equivalent of approximately
$30,000) of the line of credit was outstanding, bearing interest at 6.50%.
The Company's subsidiary in the Netherlands, Logicsoft, maintains a demand
revolving line of credit pursuant to which it may borrow in guilders up to DFL
2,500,000 (the equivalent of approximately $1,329,000 at September 30, 1998),
and is secured by its accounts receivable and inventory. At September 30, 1998,
there were no amounts outstanding under the line.
IMPACT OF THE YEAR 2000
The Company presently believes that with minor modifications to existing
operating systems, the Year 2000 Issue will not pose significant operational
problems for its computer systems. The Company believes the costs for these
modifications to be minimal.
The Company is presently conducting a review of it's key vendors to
determine whether they have effective plans to address the Year 2000. In the
event that the Company's key vendors cannot provide the Company with software
products that meet Year 2000 requirements on a timely basis, or if customers
delay or forego software purchases based upon Year 2000 related issues, the
Company's operating results could be materially adversely affected. 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.
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 as well as the
accompanying Form 10-Q contains forward looking statements that involve certain
risks and uncertainties. Such risks and uncertainties include the continued
acceptance of the Company's distribution channel by vendors and customers, the
timely availability and acceptance of new products, and contribution of key
vendor relationships and support programs.
Page 11
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Under SEC Rule14a-4(c)(1), if a proposal is to be submitted for a vote at
the Company's next annual meeting of stockholders and the proposal is not
submitted for inclusion in the Company's proxy statement and the proxy card in
compliance with the processes of SEC Rule 14a-8, then, if the Company does not
have notice of the proposal at least 45 days before the date on which the
Company first mailed its proxy materials for the prior year's annual meeting (or
any earlier or later date specified in any overriding advance notice provision
in the Company's certificate of incorporation or by-laws), proxies solicited by
the Company may confer discretionary authority to vote on the proposal. Based on
the foregoing, the date after which notice of such a proposal submitted outside
the processes of Rule 14a-8 will be considered untimely with respect to the
Company's annual meeting of stockholders is March 14, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGRAMMER'S PARADISE, INC.
November 13, 1998 By: /s/ John P. Broderick
- ----------------- -------------------------------------------
Date John P. Broderick, Chief Financial Officer,
Vice President of Finance and duly
authorized officer
Page 13
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EXHIBIT INDEX
Exhibit
Number Description of Exhibits Page No.
- ------ ----------------------- --------
27 Financial Data Schedule 15
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at September 30, 1998 and 1997 and
Consolidated Statement of Income and Comprehensive Income for the nine months
ended September 30, 1998 and 1997, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 13,884 15,026
<SECURITIES> 0 0
<RECEIVABLES> 35,594 25,252
<ALLOWANCES> 863 1,038
<INVENTORY> 5,948 4,445
<CURRENT-ASSETS> 59,202 48,138
<PP&E> 5,333 3,864
<DEPRECIATION> 2,852 1,920
<TOTAL-ASSETS> 77,331 66,784
<CURRENT-LIABILITIES> 41,394 35,702
<BONDS> 0 0
0 0
0 0
<COMMON> 49 48
<OTHER-SE> 33,757 30,932
<TOTAL-LIABILITY-AND-EQUITY> 77,331 66,784
<SALES> 158,434 114,921
<TOTAL-REVENUES> 158,434 114,921
<CGS> 138,707 97,395
<TOTAL-COSTS> 155,408 110,889
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 13 79
<INTEREST-EXPENSE> 216 170
<INCOME-PRETAX> 3,315 4,118
<INCOME-TAX> 1,538 1,535
<INCOME-CONTINUING> 1,777 2,583
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,777 2,583
<EPS-PRIMARY> 0.37 0.55
<EPS-DILUTED> 0.33 0.48
</TABLE>
