8-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) March 5, 2003

QAD INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 0-22823
(Commission
File Number) 77-0105228
(IRS Employer
Identification Number)

6450 Via Real, Carpinteria, California
(Address of principal executive offices) 93013
(Zip code)

Registrant's telephone number, including area code (805) 684-6614

ITEM 9.    REGULATION FD DISCLOSURE

        On March 5, 2003, QAD Inc. issued a press release announcing 2003 fiscal fourth quarter results and guidance for the 2004 fiscal first quarter and full fiscal year, respectively. A copy of this press release is furnished with this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

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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.

	QAD INC. (Registrant)
Date:    March 5, 2003	By:	/s/  KATHLEEN M. FISHER Kathleen M. Fisher Chief Financial Officer (on behalf of the registrant and as Principal Financial Officer)

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EX-99.1

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Exhibit 99.1

FOR IMMEDIATE RELEASE
For More Information, Contact:
Cheryl Slomann	Rob Whetstone
QAD Investor Relations	PondelWilkinson MS&L
805 566 5139	323 866 6060
investor@qad.com	investor@pondel.com

QAD Reports Revenue, Earnings Growth
for Fiscal 2003 Fourth Quarter

Carpinteria, Calif.—March 5, 2003—QAD Inc. (NASDAQ:QADI) today reported operating results for the fiscal 2003 fourth quarter and year ended January 31, 2003.

        For the fiscal 2003 fourth quarter, revenue increased 18 percent to $57.1 million, from $48.5 million in the fiscal 2003 third quarter and increased 6 percent from $53.8 million in the same period last year. The TRW ISCS acquisition completed in November 2002 accounted for $4.2 million of this revenue. License revenue in the fiscal fourth quarter was $18.8 million, including $300,000 contributed by the TRW ISCS acquisition. This represents 34 percent growth when compared with $14.0 million in the preceding fiscal third quarter and a 4 percent decline when compared with $19.6 million in the year ago quarter.

        "We are steadfastly committed to providing our global manufacturing customers with enterprise applications that are focused on the unique needs of their vertical industries," said Karl Lopker, chief executive officer of QAD. "The market is beginning to realize the benefits of this focus, including faster implementations, a lower total cost of ownership and a higher return on investment than many of our competitors who aim to serve many markets with one application."

        Net income for the fiscal 2003 fourth quarter was $1.7 million, or $0.05 per diluted share, and included a net loss of $1.0 million, or $0.03 per diluted share, related to the acquired TRW ISCS business. Net income also included a restructuring charge of $2.1 million, or $0.06 loss per diluted share, comprised of costs related to personnel reductions and the adjustment of previous facility consolidation estimates. Net income for the fourth quarter of fiscal 2002 was $993,000, or $0.03 per diluted share.

        Pro forma net income for the fiscal 2003 fourth quarter was $4.1 million, or $0.12 per diluted share, equal to pro forma net income of $4.1 million, or $0.12 per diluted share, in the same period last year. QAD reports net income and earnings per diluted share both in accordance with GAAP and on a pro forma basis. QAD uses pro forma reporting to evaluate its operating performance and believes this presentation will provide investors with additional insight into its operating results. Pro forma reporting excludes the amortization of intangibles from acquisitions, restructuring charges, goodwill impairment loss and the cumulative effect of an accounting change related to goodwill. A reconciliation of the pro forma adjustments to GAAP appears in the financial statements of this news announcement.

        Gross margin for the fiscal 2003 fourth quarter remained steady at 62 percent when compared with the prior year fourth quarter. Although the increased mix of services business associated with the TRW ISCS acquisition applied downward pressure on the gross margin percentage, this impact was offset by a one-time benefit from the reduction of a prior royalty accrual. Operating expenses for the fiscal 2003 fourth quarter were up 3 percent over the fourth quarter of last year, primarily due to the TRW ISCS acquisition.

        "QAD's strong results this quarter underscore our ability to drive sales and control expenses in line with our plan to sustain profitability," Lopker said. "Both existing and new customers worldwide

rely on QAD to help solve their most pressing business issues, and many are extending their QAD implementations to more sites around the world."

        For the full fiscal year ended January 31, 2003, revenue was $195.2 million, compared with $205.8 in fiscal 2002. License revenue was $56.0 million for the 2003 fiscal year, compared with $62.8 million last year. Excluding the impact of the TRW ISCS acquisition, full year fiscal 2003 total revenue was $191.0 million and license revenue was $55.7 million.

        The company reported a net loss of $7.6 million for the 2003 fiscal year, equal to $0.22 per diluted share, compared with a net loss of $5.3 million, or $0.16 per diluted share, in fiscal 2002. As noted above, the fiscal 2003 results include a net loss of $1.0 million, or $0.03 per diluted share, related to the TRW ISCS acquisition. On a pro forma basis, the company broke even at the net income line for fiscal 2003, compared with pro forma net income of $384,000, or $0.01 per diluted share, for the 2002 fiscal year.

        QAD's balance sheet at January 31, 2003 remained strong, with $51.2 million in cash and equivalents. For the fiscal 2003 fourth quarter, cash flow provided by operations was approximately $9 million.

Recent Highlights

•

During the fourth quarter, QAD received orders from 21 customers representing more than $500,000 each in combined license, support and services billings, with 5 of these sales orders exceeding $1 million.



•

Customer license transactions during the quarter included sales to Akzo Nobel, ArvinMeritor, Delphi, Dura Automotive Systems, Eaton, Enodis, Faurecia, Flexsys, Freudenberg & Co., GlaxoSmithKline, Metso, R. Twining & Co., Rockwell, Smiths Group PLC, TRW, Tsubaki Nakashima Co., and Tyco.



•

During the fourth quarter QAD expanded its strategic alliance with IBM to standardize the QAD eQ suite of intelligent order management applications on IBM's middleware platforms.



•

In fiscal 2003, QAD introduced the next-generation version of its flagship enterprise application suite, MFG/PRO eB2. Launched in September, the suite has been the company's most successful release to date, with nearly 200 shipments to customer sites as of the end of the fiscal year.

Business Outlook

        For the fiscal 2004 first quarter, the company expects revenues to range between $50 and $53 million. Gross margin should range from 58 percent to 60 percent, and operating expenses should be slightly below the fourth quarter of fiscal 2003. Depending on the level and mix of revenue, these factors should generate a small loss to a small profit compared with a $4.6 million loss, or $0.14 per diluted share, before cumulative effect of accounting change related to goodwill as reported in the first fiscal quarter of 2003.

        For the 2004 fiscal year, QAD expects to post revenues in the range of $210 million to $220 million, translating to earnings of between $0.10 to $0.30 per diluted share.

Investor Conference Call:

        QAD management will host an investor conference call today, March 5, 2003 at 2:00 p.m. PST (5:00 p.m. EST) to review the company's financial results and operations for the fiscal 2003 fourth quarter and full year. The conference call will be webcast by CCBN and can be accessed on QAD's Web site at http://www.qad.com/company/ir/events.html. The audio webcast will be available through March 12, 2003.

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About QAD

        QAD delivers value through collaborative commerce for manufacturers, empowering enterprises to integrate diverse business processes and increase profitability. By enabling global manufacturers to efficiently manage resources within and beyond the enterprise, QAD solutions can improve customer delivery performance and reduce inventory costs. Manufacturers of automotive, consumer products, electronics, food and beverage, industrial and medical products use QAD applications at approximately 5,200 licensed sites in more than 80 countries and in as many as 26 languages. For more information about QAD, telephone +1 805 684 6614, or visit the QAD Web site at: www.qad.com. To receive any of QAD's press releases via facsimile, contact +1 800 356 0747, or outside the U.S. contact +1 213 253 5647.

        "QAD" and "MFG/PRO" are registered trademarks and "QAD eQ" is a trademark of QAD Inc. All other products or company names herein may be trademarks of their respective owners.

        Note to Investors: This press release contains certain forward-looking statements made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. A number of risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. These risks include, but are not limited to, evolving demand for the company's software products and products that operate with the company's products; the publication of opinions by industry analysts about the company, its products and technology; the reliability of estimates of transaction and integration costs and benefits; difficulties relating to integration of a new business; the entry of new competitors and their technological advances, delays in localizing the company's products for new markets; delays in sales as a result of lengthy sales cycles; changes in operating expenses, pricing, timing of new product releases, the method of product distribution or product mix; and general economic factors. In addition, revenue and earnings in the enterprise resource planning (ERP), e-business and collaborative commerce software industries are subject to fluctuations. Investors should not use any one quarter's results as a benchmark for future growth. For a more detailed description of the risk factors associated with the company and the industries in which it operates, please refer to the company's Annual Report on Form 10-K for the fiscal year ended January 31, 2002.

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QAD Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

			Three Months Ended January 31,				Twelve Months Ended January 31,
			2003		2002		2003			2002
Revenue:
	License fees		$	18,829	$	19,579	$	56,023		$	62,820
	Maintenance and other			27,760		25,798		106,294			103,624
	Services			10,523		8,457		32,931			39,341
		Total revenue		57,112		53,834		195,248			205,785
Cost of revenue				21,711		20,372		74,998			87,001
Gross profit				35,401		33,462		120,250			118,784
Operating expenses:
	Sales and marketing			15,915		14,675		61,723			59,365
	Research and development			8,188		7,909		33,395			31,672
	General and administrative			5,914		5,743		21,824			22,882
	Amortization of intangibles from acquisitions			325		623		1,165			3,538
	Impairment loss			—		2,066		151			2,066
	Restructuring			2,095		407		5,287			93
		Total operating expenses		32,437		31,423		123,545			119,616
Operating income (loss)				2,964		2,039		(3,295	)		(832	)
Other expense				891		246		2,003			1,581
Income (loss) before income taxes and cumulative effect of accounting change				2,073		1,793		(5,298	)		(2,413	)
	Income tax expense			400		800		1,300			2,900
Income (loss) before cumulative effect of accounting change				1,673		993		(6,598	)		(5,313	)
	Cumulative effect of accounting change			—		—		1,051			—
Net income (loss)			$	1,673	$	993	$	(7,649	)	$	(5,313	)
Basic net income (loss) per share			$	0.05	$	0.03	$	(0.22	)	$	(0.16	)
Basic weighted shares				34,629		34,209		34,460			34,055
Diluted net income (loss) per share			$	0.05	$	0.03	$	(0.22	)	$	(0.16	)
Diluted weighted shares				34,884		34,445		34,460			34,055
Pro forma supplemental information — Reconciliation of net income (loss) to pro forma net income (loss):
Net income (loss)			$	1,673	$	993	$	(7,649	)	$	(5,313	)
	Adjustments to net income (loss):
		Amortization of intangibles from acquisitions		325		623		1,165			3,538
		Impairment loss		—		2,066		151			2,066
		Restructuring		2,095		407		5,287			93
		Cumulative effect of accounting change		—		—		1,051			—
Pro forma net income			$	4,093	$	4,089	$	5		$	384
Pro forma basic net income per share			$	0.12	$	0.12	$	0.00		$	0.01
Pro forma basic weighted shares				34,629		34,209		34,460			34,055
Pro forma diluted net income per share			$	0.12	$	0.12	$	0.00		$	0.01
Pro forma diluted weighted shares				34,884		34,445		34,671			34,324

QAD Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

				January 31, 2003			January 31, 2002
Assets
	Current assets:
		Cash and equivalents		$	51,204		$	50,782
		Accounts receivable, net			57,340			59,714
		Other current assets			13,540			11,535
			Total current assets		122,084			122,031
Property and equipment, net					23,343			20,512
Other assets, net					16,879			15,466
			Total assets	$	162,306		$	158,009
Liabilities & stockholders' equity
	Current liabilities:
		Current portion of long-term debt		$	1,500		$	2,157
		Accounts payable and accrued expenses			45,831			38,368
		Deferred revenue and other			69,236			58,854
			Total current liabilities		116,567			99,379
Long-term debt					9,625			15,345
Other long-term liabilities					371			1,149
Stockholders' equity:
		Common stock			34			34
		Additional paid-in capital			115,800			114,911
		Accumulated deficit			(73,244	)		(65,595	)
		Accumulated other comprehensive loss			(6,847	)		(7,214	)
			Total stockholders' equity		35,743			42,136
		Total liabilities & stockholders' equity		$	162,306		$	158,009

QAD Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

		Twelve Months Ended January 31,
		2003			2002
Net cash provided by operating activities		$	13,442		$	21,503
Cash flows from investing activities:
	Cash acquired in business combination, net		784			—
	Purchase of property and equipment		(9,261	)		(3,845	)
	Investment in software development		(1,446	)		(636	)
	Other, net		145			18
Net cash used in investing activities			(9,778	)		(4,463	)
Cash flows from financing activities:
	Reduction of notes payable		(6,377	)		(3,244	)
	Issuance of common stock for cash		882			883
Net cash used in financing activities			(5,495	)		(2,361	)
Effect of exchange rates on cash and equivalents			2,253			(397	)
	Net increase in cash and equivalents		422			14,282
	Cash and equivalents at beginning of period		50,782			36,500
	Cash and equivalents at end of period	$	51,204		$	50,782

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QAD Reports Revenue, Earnings Growth for Fiscal 2003 Fourth Quarter