-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VLJSSLeLnHIuiQPsezNjuKekbETwZXAB9ir2/rW2l3+FWV3UlRSmGwQkI7o/7Xwt rh/jYegIg4W32RXYFcGJLQ== 0000313867-95-000008.txt : 19950517 0000313867-95-000008.hdr.sgml : 19950516 ACCESSION NUMBER: 0000313867-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIAD SYSTEMS CORP CENTRAL INDEX KEY: 0000313867 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 942160013 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10504 FILM NUMBER: 95538019 BUSINESS ADDRESS: STREET 1: 3055 TRIAD DR CITY: LIVERMORE STATE: CA ZIP: 94550 BUSINESS PHONE: 5104490606 MAIL ADDRESS: STREET 1: 3055 TRIAD DRIVE CITY: LIVERMORE STATE: CA ZIP: 94550 10-Q 1 CIK: 0000313867 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1995 OR ___ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 0-9505 Triad Systems Corporation ------------------------- (Exact name of registrant as specified in its charter) Delaware 94-2160013 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3055 Triad Drive, Livermore, CA 94550 -------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (510) 449-0606 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of March 31,1995, the registrant had outstanding 16,590,000 shares of common stock with $.001 par value. Triad Systems Corporation QUARTERLY REPORT FORM 10-Q Index Page # ------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets at March 31, 1995 and September 30, 1994 1 Consolidated Statements of Income for the Three and Six Month Periods Ended March 31, 1995 and 1994 2 Consolidated Statements of Cash Flows for the Six Month Periods Ended March 31, 1995 and 1994 3 Notes to Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 6-9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 10-12 Signatures 13 Exhibit 11.1 Computation of Earnings Per Share 14 Exhibit 27 Financial Data Schedule 15 PART I FINANCIAL INFORMATION Triad Systems Corporation CONSOLIDATED BALANCE SHEETS At March 31, 1995 and September 30, 1994 March 31, September 30, (Amounts in thousands except share data) 1995 1994 ----------- ------------- (Unaudited) Assets Current assets Cash and equivalents $3,255 $7,963 Trade receivables 13,775 14,090 Investment in leases 2,467 4,152 Inventories 6,705 6,113 Prepaid expenses and other current assets 7,492 6,068 --------- --------- Total current assets 33,694 38,386 Service parts 3,017 2,434 Property, plant and equipment, net of accumulated depreciation and amortization of $29,265 at March 31, 1995 and $27,486 at September 30, 1994 26,723 27,033 Long-term investment in leases 13,723 21,836 Land for resale 25,099 25,063 Capitalized software and intangible assets 14,528 13,870 Other assets 9,235 7,741 --------- --------- Total assets $126,019 $136,363 ========= ========= Liabilities Current liabilities Notes payable and current portion of long-term debt $6,652 $6,773 Accounts payable 7,280 8,940 Accrued employee compensation 7,753 8,090 Deferred income taxes 4,441 4,310 Other current liabilities and accrued expenses 10,007 10,189 --------- ---------- Total current liabilities 36,133 38,302 Long-term debt 52,902 56,633 Deferred income taxes 25,428 23,855 Other liabilities 5,387 5,432 --------- ---------- Total liabilities 119,850 124,222 Stockholders' Equity Cumulative convertible preferred stock $.01 par value; authorized 1,000,000 shares; no shares issued and outstanding at March 31,1995 and 1,000,000 shares issued and outstanding at September 30, 1994; liquidation value $20 million --- 10 Common stock $.001 par value; authorized 50,000,000 shares; issued 17,038,000 shares at March 31, 1995 and 13,896,000 shares at September 30, 1994 17 14 Treasury Stock 448,000 shares at March 31, 1995 and 270,000 shares at September 30, 1994 (2,257) (1,326) Capital in excess of par 23,759 31,680 Accumulated deficit (15,350) (18,237) --------- --------- Total stockholders' equity 6,169 12,141 --------- --------- Total liabilities and stockholders' equity $126,019 $136,363 ========= ========= The accompanying notes are an integral part of these financial statements. Triad Systems Corporation CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Month Periods Ended March 31, 1995 and 1994 (Unaudited) Three Months Ended Six Months Ended (Amounts in thousands March 31, March 31, except per share data) 1995 1994 1995 1994 ------- ------- ------- ------- Revenues Systems $18,106 $17,250 $35,488 $31,648 Customer support services 15,735 14,885 31,190 29,705 Information services 6,878 6,088 13,630 11,822 Finance 3,399 2,338 5,779 4,862 ------- ------- ------- ------- Total revenues 44,118 40,561 86,087 78,037 ------- ------- ------- ------- Costs and expenses Systems 8,631 7,994 16,990 14,719 Services and Finance 13,474 13,026 26,441 25,065 Marketing 11,721 10,647 22,862 20,608 Product development 2,066 1,976 4,166 4,188 General & administrative and other expenses 2,847 2,786 5,962 5,683 ------- ------- ------- ------- Total costs and expenses 38,739 36,429 76,421 70,263 ------- ------- ------- ------- Operating income 5,379 4,132 9,666 7,774 Interest and other expense 1,684 1,881 3,418 3,839 ------- ------- ------- ------- Income before income taxes and extraordinary charge 3,695 2,251 6,248 3,935 Provision for income taxes 1,404 855 2,374 1,495 ------- ------- ------- ------- Income before extraordinary charge 2,291 1,396 3,874 2,440 Extraordinary charge on repurchase of debt, net of taxes ---- ---- 153 ---- ------- ------- ------- ------- Net income $2,291 $1,396 $3,721 $2,440 ======= ======= ======= ======= Earnings per share Primary Income before extraordinary charge $0.13 $0.08 $0.22 $0.14 Net income $0.13 $0.08 $0.21 $0.14 Weighted average shares 18,155 17,425 17,993 17,424 Fully diluted Income before extraordinary charge $0.13 $0.08 $0.22 $0.14 Net income $0.13 $0.08 $0.21 $0.14 Weighted average shares 18,249 17,425 18,085 17,424 ======= ======= ======= ======= The accompanying notes are an integral part of these financial statements. Triad Systems Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Month Periods Ended March 31, 1995 and 1994 (Unaudited) Six Months Ended March 31, (Amounts in thousands) 1995 1994* -------- -------- Cash flows from operating activities Income before extraordinary charge $3,874 $2,440 Adjustments to reconcile income before extraordinary charge to net cash provided by operating activities Extraordinary charge on repurchase of debt, net of taxes (153) --- Depreciation and amortization 4,185 4,171 Receivable and inventory loss provisions 3,813 3,817 Gains from lease discounting (3,590) (2,648) Other (1,074) 684 Changes in assets and liabilities Trade accounts receivable (1,240) (2,724) Leases (purchased) discounted 12,809 1,543 Inventories (902) 474 Deferred income taxes 1,704 646 Prepaid expenses and other current assets (1,423) (571) Accounts payable (1,660) 103 Accrued employee compensation (337) (208) Other current liabilities and accrued expenses (182) (1,170) ------- ------- Net cash provided by operating activities 15,824 6,557 Cash flows from investing activities Investment in property, plant and equipment (1,173) (1,284) Capitalized software (1,369) (1,589) Other (3,840) (3,294) ------- ------- Net cash used in investing activities (6,382) (6,167) Cash flows from financing activities Issuance of debt 27,350 19,310 Repayment of debt (31,483) (21,205) Redemption of preferred stock (10,000) 0 Proceeds from sale of common stock 1,637 674 Dividends paid (400) (400) Purchase of treasury stock (932) (290) Other (322) --- ------- ------- Net cash used in financing activities (14,150) (1,911) Net decrease in cash and equivalents (4,708) (1,521) Beginning cash and equivalents 7,963 8,250 ------- ------- Ending cash and equivalents $3,255 $6,729 ======= ======= Supplemental disclosures of cash flow information Cash paid during the period for Interest $3,053 $3,538 Income Taxes 159 402 Noncash investing and financing activity Redemption of preferred stock 11,195 --- Capital leases 275 180 ======= ======= * Certain fiscal year 1994 amounts have been restated due to correction of an error. The accompanying notes are an integral part of these financial statements. Triad Systems Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1995 and 1994 (Unaudited) 1. In the opinion of the Registrant, the consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of March 31, 1995 and the results of operations and cash flows for the six month periods ended March 31, 1995 and 1994. The results of operations for the three and six month periods ended March 31, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. The Balance Sheet does not include all disclosure requirements under GAAP and should be read in conjunction with the September 30, 1994 audited financial statements and notes thereto. 2. The consolidated financial statements include the accounts of Triad Systems Corporation and its wholly-owned subsidiaries, including Triad Systems Financial Corporation ("Triad Financial"), after elimination of inter company accounts and transactions. Financial information relating to the Company's combined leasing operations is presented in Note 6. 3. Primary and fully diluted earnings per share are based on the average common shares outstanding, the dilutive effect of the stock options and the assumed conversion of the preferred stock and exercise of warrants. On March 31, 1995, Triad Systems Corporation (the "Registrant") effected an exchange ("Exchange") of all of the outstanding units ("Units") (consisting of 1,000,000 shares of the Registrant's Senior Cumulative Convertible Preferred Stock and associated Warrants to purchase 3.5 million shares of the Registrant's Common Stock par value $.001 held by entities affiliated with Richard C. Blum & Associates, L.P. for an aggregate of $10,000,000 and 2,222,222 shares of Registrant's Common Stock. Please refer to the Liquidity section of the Management Discussion & Analysis for explanation of the exchange. Dilution from common equivalents have been adjusted under the treasury stock method in fiscal year 1995 and further adjusted under the modified treasury stock method in fiscal year 1994. 4. Trade accounts receivable at March 31,1995 and September 30,1994 include allowances for doubtful accounts of $1,264,000 and $1,166,000, respectively. 5. Inventories are stated at the lower of cost (first-in, first-out method) or market and include amounts which ultimately may be capitalized as equipment or service parts. (Amounts in thousands) March 31, 1995 September 30, 1994 - ---------------------- -------------- ------------------ Purchased Parts $2,976 $2,404 Work in process 422 448 Finished Goods 3,308 3,261 ------ ------ Inventories $6,705 $6,113 ------ ------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. Triad Financial is a wholly-owned subsidiary which purchases Triad systems and other products and leases those products to third parties under full-payout, direct financing leases. Summarized financial information of the Company's combined leasing operations, included in the Consolidated Financial Statements is as follows: CONDENSED COMBINED BALANCE SHEETS At March 31, 1995 and September 30, 1994 March 31, September 30, (Amounts in thousands) 1995 1994 ------------ ------------- (Unaudited) Assets Cash $99 $--- Net investment in leases 16,190 25,988 Residual value retained on leases discounted 6,268 5,544 Receivable from parent company 36,960 25,633 Other assets 3,696 2,857 -------- -------- Total Assets $63,213 $60,022 ======== ======== Liabilities and Stockholder's Equity Other liabilities and accrued expenses $7,825 $8,115 Deferred income 2,223 1,955 Debt 1,785 2,171 Stockholder's equity 51,380 47,781 -------- -------- Total Liabilities and Stockholder's Equity $63,213 $60,022 ======== ======== CONDENSED COMBINED STATEMENTS OF INCOME For the Three and Six Month Periods Ended March 31, 1995 and 1994 (Unaudited) Three Months Ended Six Months Ended March 31, March 31, (Amounts in thousands) 1995 1994 1995 1994 ------- ------- ------- ------- Revenues $3,399 $2,338 $5,779 $4,862 Selling and administrative expenses 485 567 980 1,112 Provision for doubtful accounts 699 525 1,303 1,104 ------- ------- ------- ------- Operating income 2,215 1,246 3,496 2,646 Intercompany income 1,288 650 2,485 1,267 ------- ------- ------- ------- Income before taxes 3,503 1,896 5,981 3,913 Provision for income taxes 1,326 720 2,369 1,487 ------- ------- ------- ------- Net income $2,177 $1,176 $3,612 $2,426 ======= ======= ======= ======= Triad Systems Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Summary The quarterly results provided the seventh consecutive record revenue quarter for the Company. The Automotive market, which includes systems, services and finance revenues from the Jobber, Service Dealer and Warehouse segments, showed a 7% improvement in quarterly revenues of $29.0 million and an 8% improvement in the first half revenues of $56.8 million when compared to the prior year. Hardlines and Lumber market revenues of $13.5 million for second quarter and $26.1 million for the first half were better than a year ago by 6% and 7%, respectively. Improved operating income margins on higher revenues during the quarter increased operating profit 30% to $5.4 million. Net income rose 64% to $2.3 million when compared to the second quarter of 1994. First half operating profit of $9.7 million improved 24% and net income (before the 1995 extraordinary charge) of $3.9 million improved 59% when compared to the prior year. Second quarter earnings per share were 13 cents, a 63% improvement over the prior year, and first half 1995 earnings per share on net income of 21 cents compared to 14 cents a year ago. The Company discounted an incremental $7 million of portfolio to help fund the exchange of 1 million preferred shares and 3.5 million warrants. (Please refer to liquidity section of this document for further explanation of the equity exchange.) The discounting had a positive effect of two cents per share for the quarter. Percent of Revenues Three Months Ended Six Months Ended March 31, March 31, 1995 1994 1995 1994 Revenues 100.0% 100.0% 100.0% 100.0% Costs and expenses Cost of systems, services and finance 50.1 51.8 50.5 51.0 Marketing 26.6 26.2 26.6 26.4 Product development 4.7 4.9 4.8 5.4 General & administrative and other expense 6.5 6.9 6.9 7.3 Total costs and expenses 87.8 89.8 88.8 90.0 Operating income 12.2 10.2 11.2 10.0 Interest and other expense 3.8 4.6 4.0 4.9 Income before taxes and extraordinary charge 8.4 5.5 7.3 5.0 Provision for taxes 3.2 2.1 2.8 1.9 Income before extraordinary charge 5.2 3.4 4.5 3.1 Extraordinary charge on repurchase of debt, net of taxes --- --- 0.2 --- Net income 5.2% 3.4% 4.3% 3.1% Revenues Second quarter revenues improved nearly $2.5 million in the two markets served - the Automotive market and the Hardlines and Lumber market. The quarterly revenues includes a $1.1 million improvement in Finance due to higher discounting of $9.6 million compared to the prior year. Systems, Customer Support Services and Information Services revenues showed improvements of approximately $.8 million each. First half revenues also provided favorable results from last year of $3.8 million in Systems, $1.8 million in Information Services, $1.5 million in Customer Support Services and $.9 million in Finance. Systems Systems revenue for the quarter and the year to date improved over the same periods a year ago by $.9 million and $3.8 million, respectively, as a result of strong Automotive and multi-vendor sales. The multi-vendor systems business that began in mid 1994 provided $.8 million of the second quarter improvement and $1.6 million of the year to date improvement. The Automotive market, which includes the Jobber, Service Dealer, Warehouse and International system sales, contributed an increase of $.3 million compared to second quarter of the prior year and $2.1 million on a year to date basis. The Hardlines and Lumber market declined by $.2 million for the quarter due to lower sales productivity. On a year to date basis, Hardlines and Lumber improved by $.2 million compared to the prior year. During the third quarter, the Company suspended the second phase of the Triad PrismTM ("Prism B") shipments primarily due to a software problem in a software product which is provided by a third party. A correction has been received by the Company and initial testing indicates that this problem has been resolved. The Company does not believe that the cost of correcting the software on previously sold systems will be significant. Delivery of the Prism B product is anticipated to remain on hold until late May, providing sufficient time for the Company to fully test the correction. Upon release, Prism B products are anticipated to resume the controlled roll out, allowing the Company to closely monitor the product. This monitoring reflects the Company's caution concerning the normal new product issues relating to defect correction and performance tuning in installation. The Company anticipates that this pause will result in fewer Prism B units being shipped in the third quarter than were shipped in the second quarter. Services Second quarter 1995 Services revenues of $22.6 million improved 8% when compared to the same period in 1994. Information services business at $6.5 million improved $.5 million or 9% over the prior year due to continued penetration of the markets it serves. The Company's new Point-of-Sale (POS) businesses showed the most significant percentage increase, as they are in the investment stage and developing as expected. Customer Support Services revenues of $15.7 million improved $.9 million or 6% when compared to last year, with growth of $.3 million each in education revenues and multi-vendor services revenues. Business Products continues to grow as evidenced by a 44% or $.4 million revenue improvement from a year ago. First half Services revenues of $44.8 million improved $3.3 million from last year primarily in Information Services with an increase of $1.8 million resulting from expanding market presence and new POS services. Customer Support Services showed a 3% improvement or $.8 million and Business Products continues to expand its sales with an increase of 37% or $.7 million from the prior year. Finance Second quarter and first half Finance revenues of $3.4 million and $5.8 million, respectively, are $1.1 million and $.9 million higher than a year ago, resulting from additional discounting to help fund the March 31, 1995 exchange of the outstanding preferred shares and warrants for common stock (please refer to the Liquidity section of this document for further explanation of the equity exchange). Costs and Expenses Gross margin as a percentage of systems revenues was 52.3% for the current quarter and 52.1% for the first half, a decline of 1.4% and 1.5% over the prior year's second quarter and first half, respectively. The traditional businesses, such as Automotive, Service Dealer, Warehouse and Hardlines and Lumber, show an improved gross margin percentage, however more sales of the lower margin multi-vendor systems in the current year offset these improvements at the total systems margin level. Gross margin as a percentage of services revenues improved 2.6% to 41.1% for the quarter and improved 1.6% to 41.8% for the first half when compared to the same periods a year ago. The improvements in Services margins were due to lower Customer Services headcount. Marketing expenses of $11.7 million for the quarter were up $1.1 million or .3% of revenue, primarily due to continued investments in the Hardlines and Lumber and the Service Dealer segments. Product Development costs after capitalization of software development expense were $2.1 million for the quarter and $4.2 million for the first half, remained at 5% of revenue and were similar to last year periods. General and administrative costs were in line with the prior year expenses of 7% of revenue. The current quarter and first half administrative costs were 6.5% and 6.9% of revenue at $2.8 million and $6.0 million, respectively. Interest and other expense decreased $.2 million for the quarter and $.4 million for the first half primarily due to an $11 million lower debt balance at March 31,1995 versus 1994, partially offset by slightly higher interest rates on the floating rate debt. The early retirement of $2.9 million in senior fixed rate notes in October 1994 generated an extraordinary charge of $153,000 after taxes (one cent per share) that included a premium to retire the debt of $198,000, unamortized debt costs of $49,000 less taxes of $94,000. Future Operating Results The Company's future operating results will depend upon conditions in its markets that may affect demand for its products, and upon the Company's ability to introduce products and enhancements on a timely basis. Results will also be affected by seasonal changes in product demand, market acceptance of new products and enhancements, the size and experience of the sales force and the mix of products sold. All could cause operating results to fluctuate, especially on a quarterly basis. Liquidity Working Capital - management believes that working capital and the Company's ability to generate working capital by discounting its investment in Triad Financial's lease portfolio is sufficient to meet foreseeable business needs. The Company manages current assets, particularly cash, to maximize the return on assets. The Company utilizes its cash in excess of operating requirements to fund Triad Financial's lease portfolio and to reduce the Company's debt level. On March 31, 1995 the Company completed the exchange of 1 million shares of preferred stock and associated warrants to purchase 3.5 million shares of common stock for $10 million cash and approximately 2.2 million shares of Triad common stock. The transaction resulted in a reduction to preferred stock equity of approximately $20 million, offset by an increase in common stock equity of approximately $10 million for a net reduction to stockholder's equity of approximately $10 million. The Company financed the exchange by discounting approximately $7.5 million of its portfolio and with $2.5 million of cash. The exchange eliminated $400,000 in preferred shares dividend payments over the second half of the current year and up to $2 million annually in future years. The company obtained consent from a majority of the senior fixed noteholders; the sole senior floating noteholder; and the senior bank for the exchange and also negotiated certain changes in the covenants which will provide the Company with flexibility in certain circumstances in the future. In addition, the Company's revolving line of credit increased from $13.1 million to $17.5 million. (Please refer to the Company's Current Form 8-K filed in May 1995 for further information.) Cash provided by operating activities was $15.8 million for the first half compared to $6.6 million a year ago. Lease discounting was up $11.3 million primarily to fund the preferred shares exchange and to retire debt. Depreciation and amortization was even with the prior year at $4.2 million. Cash used in investing activities increased slightly at $6.4 million the first half compared to $6.2 million a year ago. Capital expenditures for the first half of $1.2 million were about even with the prior year. A planned information systems upgrade in 1995 will result in $1 million more capital expenditures than in 1994. Cash used in financing activities was $14.1 million for the first half, a $12.1 million increase from a year ago. The $10.0 million cash paid for the redemption of the preferred stock shares in the preferred stock exchange accounted for the majority of the variance. In addition, the Company retired $2.9 million of the senior fixed rate notes in October 1994. Business Resources Management believes available cash resources, primarily generated from operations, lease discounting and credit lines, will provide adequate funds to finance foreseeable operating needs. The Company maintains $17.5 million in bank lines of credit and there were no borrowings at March 31, 1995. The Company currently invests its available cash resources in the lease portfolio of Triad Financial due to the higher yields achieved and the flexibility to offer customers financing. Triad Financial financed 58% of Triad's domestic business systems sales and $8.4 million in non-Triad equipment through client lease programs during the first half of 1995. Additionally, Triad Financial received $24.4 million and $39.8 million of proceeds from discounting in the second quarter and first half, respectively. Limited and full-recourse discounting agreements are maintained with banks and lending institutions. The discounting agreements contain certain restrictive covenants which allow Triad Financial to discount only while in compliance with such covenants. The Company is in compliance with the restrictive covenants and management believes that it will maintain compliance with such covenants in the foreseeable future. Under the discounting agreements, Triad Financial is contingently liable for losses in the event of lessee nonpayment. The agreements provide for limited recourse of up to 10% or full recourse at 100% of discounting proceeds, depending on the credit risk associated with specific leases. At March 31, 1995, the portfolio available for discounting was $16.2 million and commitments for $53.3 million in discounting lines were available. PART II OTHER INFORMATION Item 1. Not applicable Item 2. (b) Changes in the rights of the Company's security holders. On March 31, 1995, Triad Systems Corporation (the "Registrant") effected an exchange ("Exchange") of all of the outstanding units ("Units") (consisting of 1,000,000 shares of the Registrant's Senior Cumulative convertible Preferred Stock and associated Warrants to purchase 3.5 million shares of the Registrant's Common Stock par value $.001 held by entities affiliated with Richard C. Blum & Associates, L.P. for an aggregate of $10,000,000 and 2,222,222 shares of Registrant's Common Stock. For further information concerning the exchange, please refer to the Management's Discussion and Analysis of Finanical Condition and Results of Operations - "Liquidity" in Part I of this report and the Company's Current Report on Form 8-K filed May 11, 1995. Item 3. Not applicable Item 4. Submission of Matters to a vote of Security Holders. Registrant's Annual Meeting of Stockholders was held on February 9, 1995. The following director was elected at the annual meeting, to serve a three year term until the 1998 Annual Meeting of Stockholders and his successor is duly elected and qualified: Henry M. Gay; the number of shares in favor were 11,419,622; and the number of shares withheld were 134,569. James R. Porter, George O. Harmon, William W. Stevens and Richard C. Blum continue to serve as directors. At the Annual Meeting, the stockholders approved an amendment to the Triad Systems Corporation 1990 Employee Stock Purchase Plan (the "Purchase Plan") to increase the number of shares reserved for issuance under the Purchase Plan from 650,000 shares to 1,150,000 shares. The number of shares voting for such proposal was 10,709,096; the number of shares voting against such proposal was 451,938; the number of shares abstaining from voting on such proposal was 120,139; and the number of broker non-votes was 273,018. Item 5. Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Index for March 31, 1995 Sequentially Exhibit Numbered Number Page - ------- ------------- 4.6 Exchange Agreement and Second Amendment to Unit Purchase Agreement by and among Triad Systems Corporation, Richard C. Blum & Associates, L.P. and certain holders dated March 31, 1995, incorporated by reference from Exhibit 1 to the Company's Current Report on Form 8-K filed May 11, 1995 ("May 1995" Form 8-K). 4.7 Consent Agreement between Triad Systems Corporation and certain holders of the Fixed Rate Notes dated March 31, 1995, incorporated by reference from Exhibit 2 to the May 1995 Form 8-K. 4.8 Consent Agreement between Triad Systems Corporation and certain holders of the Floating Rate Notes dated March 31, 1995, incorporated by reference from Exhibit 3 to the May 1995 Form 8-K. 4.9 First Supplemental Indenture between Triad Systems Corporation and BankAmerica National Trust Company dated March 31, 1995, incorporated by reference to Exhibit 4 to the May 1995 Form 8-K. 4.10 First Supplemental Indenture between Triad Systems Corporation and Chase Manhattan Bank N.A. dated March 31, 1995, incorporated by reference to Exhibit 5 to the May 1995 Form 8-K. 10 4.11 Triad Systems Corporation Amended Senior Floating Rate Note Due 1997, dated March 31, 1995, incorporated by reference to Exhibit 7 to the May 1995 Form 8-K. *10.1 Triad Systems Corporation Amended and Restated 1982 Stock Option Plan as amended on October 22, 1993, incorporated by reference from Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993. 10.2 Form of Indemnification Agreement, incorporated by reference from Exhibit 10.4 to the Company's Registration Statement on Form S-2 (File No. 33-2966) filed July 3, 1989 (the "1989 Form-2 Registration Statement"). *10.3 Nonqualified Stock Option Agreement between the Company and James R. Porter dated January 13, 1987, incorporated by reference from Exhibit 10.5 to the 1987 Form S-2 Registration Statement, (File No. 33-13599) (the "1987 Company's Form S-2 Registration Statement"). 10.4 Development Agreement between the Company and the City of Livermore dated December 2, 1985, incorporated by reference from Exhibit 10.5 to the 1987 Form S-2 Registration Statement. 10.5 Subdivision Improvement Agreement between the Company and the City of Livermore dated December 2, 1985, incorporated by reference from Exhibit 10.7 to the 1987 Form S-2 Registration Statement. 10.6 Mortgage between Variable Annuity Life Insurance Company and 3055 Triad Drive dated August 23, 1988, incorporated by reference from Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988 (the "1988 Form 10-K"). *10.7 Nonqualified Stock Option Agreement between the Company and James R. Porter dated as of February 17, 1987, incorporated by reference from Exhibit 10.7 of the 1988 Form 10-K. *10.8 Nonqualified Stock Option Agreement between the Company and James R. Porter dated November 12, 1988, incorporated by reference from Exhibit 10.8 of the 1988 Form 10-K. *10.9 Triad Systems Corporation 1990 Stock Option Plan as amended on October 22, 1993, incorporated by reference from Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993. *10.10 Triad Systems Corporation Amended and Restated Outside Directors Stock Option Plan, incorporated by reference from Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991. 10.11 Revolving Credit Loan Agreement dated as of June 30, 1992, as amended, between the Company and Plaza Bank of Commerce, incorporated by reference from Exhibit 10.3 to the Company's Current Report on Form 8-K filed August 17, 1992. 10.12 Unit Purchase Agreement dated as of July 2, 1992, between the Company, Richard C. Blum & Associates, Inc. and certain purchasers, together with the First Amendment to Unit Purchase Agreement dated as of August 3, 1992, and the form of irrevocable Proxy, incorporated by reference from Exhibit 10.4 to the Company's Current Report on Form 8-K filed August 17, 1992. 10.13 Unit Certificate evidencing Units to purchase Preferred Stock and Warrants, together with Form of Warrant Certificate, attached as Exhibit A thereto, incorporated by reference from Exhibit 3.2 to the Company's Current Report on Form 8-K filed August 17, 1992. 10.14 Registration Rights Agreement between the Company and certain purchasers under the Unit Purchase Agreement dated as of August 3, 1992, incorporated by reference from Exhibit 10.5 to the Company's Current Report on Form 8-K filed August 17, 1992. 10.15 Grant Agreement between the Industrial Development Authority and Triad Systems Ireland Limited, Triad Systems Corporation and Tridex Systems Limited and related agreements, incorporated by reference from Exhibit 10.15 to the 1992 Form S-4 Registration Statement. 10.16 Cancellation of Development Agreement between the Company and the City of Livermore dated July 15, 1993, incorporated by reference from Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993. 10.17 Amended and Restated Subdivision Improvement Agreement between the Company and the City of Livermore dated May 12, 1993, incorporated by reference from Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993. *10.18 Supplemental Deferred Compensation Plan between the Company and a select group of Triad Key Employees and their beneficiaries dated April 1, 1994, incorporated by reference from Exhibit 10.18 to the Company's Form 10-Q for the fiscal quarter ended June 30, 1994. *10.19 Amendment to the Amended and Restated 1982 Stock Option Plan dated April 25, 1994, incorporated by reference from Exhibit 10.19 to the Company's Form 10-Q for the fiscal quarter ended June 30, 1994. 10.20 Amendment No. Three to Revolving Credit Loan Agreement and Consent (to Exchange Agreement) between Triad Systems Corporation, Triad Systems Financial Corporation and Comerica Bank-California dated March 31, 1995, incorporated by reference from Exhibit 6 to the May 1995 Form 8-K. 11.1 Computation of Earnings Per Share. 14 27.0 Financial Data Schedule 15 (b) Reports on Form 8-K The Company filed a report on Form 8-K on May 11, 1995, which described under Item 5 - Other Events, the Company's March 31, 1995 exchange of 1,000,000 shares of preferred stock and associated warrants to purchase 3,500,000 shares of common stock for $10,000,000 cash and 2,222,222 shares of Triad common stock, and the respective amendments to the Revolving Credit Loan Agreement and the Indentures governing the Fixed Rate Notes and Floating Rate Notes. - -------- * Compensatory or employment agreement 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, a duly authorized officer of the Registrant. Triad Systems Corporation ------------------------- (Registrant) Date: May 11, 1995 /s/ STANLEY F. MARQUIS ------------ ----------------------- Stanley F. Marquis Vice President, Finance (Principal Financial Officer) EX-11 2 Exhibit 11.1 Triad Systems Corporation COMPUTATION OF EARNINGS PER SHARE For the Three and Six Month Periods Ended March 31, 1995 and 1994 Three Months Ended Six Months Ended March 31, March 31, (Amounts in thousands except per share data) 1995 1994 1995 1994 ------- ------- ------- ------- Calculation of number of shares entering into computations Weighted average shares outstanding 14,215 12,743 14,007 12,673 Assumed conversion of preferred stock and exercise of warrants 3,137 3,137 3,137 3,137 ------ ------ ------ ------ 17,352 15,880 17,144 15,810 Net effect of dilutive stock options and warrants based on the average stock price 803 1,545 849 1,614 ------ ------ ------ ------ Average primary shares outstanding 18,155 17,425 17,993 17,424 ------ ------ ------ ------ Net effect of dilutive stock options and warrants based on the ending stock price 94 ---- 92 ---- ------ ------ ------ ------ Average fully diluted shares outstanding 18,249 17,425 18,085 17,424 ====== ====== ====== ====== Income before extraordinary charge $2,291 $1,396 $3,874 $2,440 Net interest costs associated with assumed retirement of debt ---- 21 ---- 56 ------ ------ ------ ------ Adjusted income before extraordinary charge 2,291 1,417 3,874 2,496 Extraordinary charge on repurchase of debt, net of taxes ---- ---- 153 ---- ------ ------ ------ ------ Adjusted net income $2,291 $1,417 $3,721 $2,496 ====== ====== ====== ====== Earnings per share Primary Income before extraordinary charge $0.13 $0.08 $0.22 $0.14 Net income $0.13 $0.08 $0.21 $0.14 Fully diluted Income before extraordinary charge $0.13 $0.08 $0.22 $0.14 Net income $0.13 $0.08 $0.21 $0.14 ====== ====== ====== ====== EX-27 3 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets at March 31, 1995 and the Consolidated Statement of Income and Statement of Cash Flow for the six months ended March 31, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS SEP-30-1995 MAR-31-1995 3,255 0 15,039 1,264 6,705 33,694 55,988 29,265 126,019 36,133 52,902 17 0 0 6,152 126,019 35,488 86,087 16,990 43,431 0 3,813 3,418 6,248 2,374 3,874 0 153 0 3,721 0.21 0.21
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