##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended December 31, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from _______________
to _______________
 Commission File Number 333-49389
 Activant Solutions Inc.
  Delaware
    
    94-2160013(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)7683 Southfront Road 
Livermore, CA
    
    94551(Address of principal executive offices)
    
    (Zip Code)
 (925) 449-0606
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at February 10, 2008Common Stock, par value $0.01 per share
    
    10 shares




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##### 



ACTIVANT SOLUTIONS INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2007
 INDEX
 PAGEFORWARD-LOOKING STATEMENTS
    
    
    3PART I  FINANCIAL INFORMATIONITEM 1.  FINANCIAL STATEMENTS (Unaudited)
    
    
    4Consolidated Balance Sheets as of September 30, 2007 and December 31, 2007
    
    
    4Consolidated Statements of Operations and Comprehensive Income for the
three months ended December 31, 2006 and December 31, 2007
    
    
    5Consolidated Statements of Cash Flows for the three months ended December
31, 2006 and December 31, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    20ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 4.  CONTROLS AND PROCEDURES
    
    
    27PART II  OTHER INFORMATIONITEM 1.  LEGAL PROCEEDINGS
    
    
    28ITEM 1A.  RISK FACTORS
    
    
    28ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    28ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
    
    
    28ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    28ITEM 5.  OTHER INFORMATION
    
    
    28ITEM 6.  EXHIBITS
    
    
    29SIGNATURE
    
    
    30Deferred Compensation PlanCertification Pursuant to Section 302 by Pervez QureshiCertification Pursuant to Section 302 by Kathleen M. CruscoCertification Pursuant to Section 906 by Pervez QureshiCertification Pursuant to Section 906 by Kathleen M. Crusco
  2




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
   
    
    failure to anticipate or respond to our customers needs and requirements;
    
    failure of our proprietary technology to support our customers future needs or it
becoming obsolete;
    
    failure to develop new relationships and maintain existing relationships with key
industry participants and/or key customers and/or loss of significant customer revenues;
    
    loss of recurring subscription service revenues;
    
    transition of certain of our senior management personnel and the failure to attract,
retain and integrate qualified management personnel;
    
    failure of our Activant Eagle and Vision products to gain acceptance within the
automotive parts aftermarket;
    
    our substantial indebtedness and our ability to incur additional indebtedness;
    
    certain covenants in our debt documents;
    
    costs and difficulties of integrating acquisitions, including our recently completed
acquisitions of Silk Systems and Intuits distribution software management division;
    
    possible future impairment charges, depending upon the financial results of our
business, in view of the fact that a significant portion of our total assets consist of
goodwill and other intangible assets;
    
    changes in the manner or basis on which we receive third-party information used to
maintain our electronic automotive parts and applications catalog;
    
    failure by certain of our existing customers to upgrade to our current generation of
systems;
    
    failure to effectively compete;
    
    substantial fluctuations in, or failure to maintain current systems sales levels of
one-time sales of software licenses and hardware;
    
    consolidation trends among our customers and consolidation trends in the market segments
in which we operate;
    
    failure to adequately protect our proprietary rights and intellectual property or
limitations on the availability of legal or technical means of effecting such protection;
    
    claims by third parties that we are infringing on their proprietary rights or other
adverse claims;
    
    defects or errors in our software or information services;
    
    interruptions of our connectivity applications or catastrophic failure of our data
center, telecommunications or information technology infrastructure;
    
    claims for damages against us in the event of a failure of our customers systems;
    
    our ability to assume additional debt on favorable terms, if at all;
    
    prolonged unfavorable general economic and market conditions, especially in the lumber
industry;
    
    differing interests of debt security holders and our controlling stockholders or
investors; and
    
    the other factors described under the heading Risk Factors and elsewhere in this
report.
  3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited).
 
 
 September 30,
    
    
    December 31,(in thousands, except share data)
    
    2007
    
    
    2007(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    33,379
    
    
    $
    33,526Trade accounts receivable, net of allowance for doubtful accounts of $5,378
and $6,631 at September 30, 2007 and December 31, 2007, respectively
    
    
    57,144
    
    
    
    56,950Inventories, net
    
    
    5,359
    
    
    
    6,850Deferred income taxes
    
    
    8,622
    
    
    
    10,650Income taxes receivable
    
    
    2,681
    
    
    
    1,658Prepaid expenses and other current assets
    
    
    5,736
    
    
    
    5,518Total current assets
    
    
    112,921
    
    
    
    115,152Property and equipment, net
    
    
    10,074
    
    
    
    9,685Intangible assets, net
    
    
    235,566
    
    
    
    230,147Goodwill
    
    
    672,206
    
    
    
    673,737Deferred financing costs
    
    
    15,501
    
    
    
    14,985Other assets
    
    
    4,341
    
    
    
    5,008Total assets
    
    $
    1,050,609
    
    
    $
    1,048,714LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    18,401
    
    
    $
    17,051Payroll related accruals
    
    
    15,974
    
    
    
    18,428Deferred revenue
    
    
    29,671
    
    
    
    28,312Current portion of long-term debt
    
    
    750
    
    
    
    750Accrued expenses and other current liabilities
    
    
    20,549
    
    
    
    20,987Total current liabilities
    
    
    85,345
    
    
    
    85,528Long-term debt
    
    
    632,113
    
    
    
    631,926Deferred tax liabilities
    
    
    67,072
    
    
    
    64,502Other liabilities
    
    
    9,885
    
    
    
    12,057Total liabilities
    
    
    794,415
    
    
    
    794,013Commitments and contingencies
    
    
    
    
    
    
    Common Stock:Par value $0.01 per share, 1,000 shares authorized, 10 shares issued and
outstanding, at September 30, 2007 and December 31, 2007
    
    
    
    
    
    
    Additional paid-in capital
    
    
    250,893
    
    
    
    251,776Retained earnings
    
    
    8,003
    
    
    
    8,327Other accumulated comprehensive income (loss):Unrealized loss on cash flow hedges
    
    
    (2,891
    )
    
    
    (5,542
    )Cumulative translation adjustment
    
    
    189
    
    
    
    140Total stockholders equity
    
    
    256,194
    
    
    
    254,701Total liabilities and stockholders equity
    
    $
    1,050,609
    
    
    $
    1,048,714
  4




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Three Months EndedDecember 31,(in thousands)
    
    2006
    
    
    2007Revenues:Systems
    
    $
    42,209
    
    
    $
    45,917Services
    
    
    56,022
    
    
    
    62,993Total revenues
    
    
    98,231
    
    
    
    108,910Cost of revenues (exclusive of depreciation
and amortization shown separately below):Systems (1)
    
    
    22,652
    
    
    
    26,150Services (1)
    
    
    20,003
    
    
    
    22,815Total cost of revenues
    
    
    42,655
    
    
    
    48,965Gross profit
    
    
    55,576
    
    
    
    59,945Operating expenses:Sales and marketing (1)
    
    
    16,522
    
    
    
    16,425Product development (1)
    
    
    10,208
    
    
    
    12,124General and administrative (1)
    
    
    6,531
    
    
    
    8,151Depreciation and amortization
    
    
    7,058
    
    
    
    8,595Acquisition related costs
    
    
    
    
    
    
    251Restructuring costs
    
    
    287
    
    
    
    168Total operating expenses
    
    
    40,606
    
    
    
    45,714Operating income
    
    
    14,970
    
    
    
    14,231Interest expense
    
    
    (12,124
    )
    
    
    (13,690
    )Other income, net
    
    
    442
    
    
    
    564Income before income taxes
    
    
    3,288
    
    
    
    1,105Income tax expense
    
    
    1,270
    
    
    
    512Net income
    
    $
    2,018
    
    
    $
    593Comprehensive income (loss):Net income
    
    $
    2,018
    
    
    $
    593Unrealized gain (loss) on cash flow hedges
    
    
    230
    
    
    
    (2,651
    )Foreign currency translation adjustment
    
    
    48
    
    
    
    (49
    )Comprehensive income (loss)
    
    $
    2,296
    
    
    $
    (2,107
    )(1) Includes share-based payment expense as
follows:Cost of revenuesSystems
    
    
    8
    
    
    
    8Services
    
    
    66
    
    
    
    69Operating expensesSales and marketing
    
    
    198
    
    
    
    204Product development
    
    
    76
    
    
    
    72General and administrative
    
    
    394
    
    
    
    529
  5




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Three Months EndedDecember 31,(in thousands)
    
    2006
    
    
    2007Operating activitiesNet income
    
    $
    2,018
    
    
    $
    593Adjustments to reconcile net income to net cash
provided by operating activities:Share-based payment expense
    
    
    742
    
    
    
    882Depreciation
    
    
    1,408
    
    
    
    1,509Amortization of intangible assets
    
    
    5,650
    
    
    
    7,086Amortization of deferred financing costs
    
    
    505
    
    
    
    623Deferred income taxes
    
    
    
    
    
    
    (4,599
    )Provision for doubtful accounts
    
    
    2,167
    
    
    
    1,253Other, net
    
    
    119
    
    
    
    (49
    )Changes in assets and liabilities:Trade accounts receivable
    
    
    (3,599
    )
    
    
    (1,059
    )Inventories
    
    
    (1,081
    )
    
    
    (1,491
    )Prepaid expenses and other assets
    
    
    120
    
    
    
    574Accounts payable
    
    
    448
    
    
    
    (1,350
    )Deferred revenue
    
    
    573
    
    
    
    (1,359
    )Accrued expenses and other liabilities
    
    
    (6,334
    )
    
    
    2,146Net cash provided by operating activities
    
    
    2,736
    
    
    
    4,759Investing activitiesPurchase of property and equipment
    
    
    (1,238
    )
    
    
    (1,120
    )Capitalized computer software costs and databases
    
    
    (1,174
    )
    
    
    (1,667
    )Purchase price adjustments
    
    
    700
    
    
    
    (1,531
    )Net cash used in investing activities
    
    
    (1,712
    )
    
    
    (4,318
    )Financing ActivitiesPayment on long-term debt
    
    
    (15,000
    )
    
    
    (187
    )Deferred financing costs
    
    
    (664
    )
    
    
    (107
    )Net cash used in financing activities
    
    
    (15,664
    )
    
    
    (294
    )Net change in cash and cash equivalents
    
    
    (14,640
    )
    
    
    147Cash and cash equivalents, beginning of period
    
    
    36,383
    
    
    
    33,379Cash and cash equivalents, end of period
    
    $
    21,743
    
    
    $
    33,526Supplemental disclosures of cash flow informationCash paid during the period for interest
    
    $
    15,862
    
    
    $
    17,173Cash paid during the period for income taxes
(net of receipts)
    
    $
    661
    
    
    $
    944
  6




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December 31, 2006(allocations as
    
    
    December 31, 2006previously
    
    
    (revised(in thousands)
    
    reported)
    
    
    allocations)
    
    
    ChangeSystems cost of revenues
    
    $
    404
    
    
    $
    887
    
    
    $
    483Services cost of revenues
    
    
    1,038
    
    
    
    1,716
    
    
    
    678Sales and marketing expense
    
    
    468
    
    
    
    1,097
    
    
    
    629Product development expense
    
    
    217
    
    
    
    1,030
    
    
    
    813General and administrative expense
    
    
    (2,127
    )
    
    
    (4,730
    )
    
    
    (2,603
    )Net allocations
    
    $
    
    
    
    $
    
    
    
    $
    
  7




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Business Combinations
 The Fair
Value Option for Financial Assets and Financial Liabilities Fair Value Measurements
 Fair Value Measurements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
   Silk Systems, Inc.
  Eclipse Distribution Management Solutions
   8




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Pro forma results (unaudited)
   Three Months Ended December 31,(in thousands)
    
    2006 (pro forma)
    
    
    2007 (actual)Total revenues
    
    $
    112,435
    
    
    $
    108,910Total cost of revenues
    
    
    50,100
    
    
    
    48,965Gross profit
    
    
    62,355
    
    
    
    59,945Total operating expenses
    
    
    45,755
    
    
    
    45,714Operating income
    
    
    16,580
    
    
    
    14,231Interest expense
    
    
    (14,085
    )
    
    
    (13,690
    )Other income, net
    
    
    462
    
    
    
    564Income before taxes
    
    
    2,957
    
    
    
    1,105Income tax expense
    
    
    1,140
    
    
    
    512Net income
    
    $
    1,817
    
    
    $
    593
   September 30,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2007Senior secured credit agreement due 2013
    
    $
    437,863
    
    
    $
    437,676Senior subordinated notes due 2016
    
    
    175,000
    
    
    
    175,000Revolving credit agreement due 2011
    
    
    20,000
    
    
    
    20,000Total debt
    
    
    632,863
    
    
    
    632,676Current portion
    
    
    (750
    )
    
    
    (750
    )Long-term debt
    
    $
    632,113
    
    
    $
    631,926
 Senior Secured Credit Agreement
  9




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
    
    under the revolving credit facility, 1.25% with respect to base rate borrowings and 2.25%
with respect to Eurodollar rate borrowings, which may be reduced subject to our attainment of
certain leverage ratios; and
 
    
    under the term loan facilities, 1.00% with respect to base rate borrowings and 2.00% with
respect to Eurodollar rate borrowings.
   Senior Subordinated Notes Due 2016
      Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement No. 109
   10




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Activant Solutions Inc.
    Three months ended December 31,2006
    
    2007Expected term
    
    6.66 years
    
    6.66 yearsExpected volatility
    
    
    50.00
    %
    
    
    50.00
    %Expected dividends
    
    
    0.00
    %
    
    
    0.00
    %Risk-free rate
    
    
    4.67
    %
    
    
    3.46
    %
   2006 Option PlanWeighted AverageNumber of Shares
    
    
    Exercise PriceTotal options outstanding at September 30, 2007
    
    
    6,759,073
    
    
    $
    4.38Options granted
    
    
    358,000
    
    
    
    4.92Options forfeited
    
    
    (535,000
    )
    
    
    4.36Options exercised
    
    
    
    
    
    
    Total options outstanding at December 31, 2007
    
    
    6,582,073
    
    
    $
    4.41Total options exercisable at December 31, 2007
    
    
    1,795,321
    
    
    $
    4.36
  11




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Predecessor Company
   Predecessor Company PlanWeighted AverageNumber of Shares
    
    
    Exercise PriceTotal options outstanding at September 30, 2007
    
    
    333,334
    
    
    $
    1.00Options granted
    
    
    
    
    
    
    Options forfeited
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Total options outstanding at December 31, 2007
    
    
    333,334
    
    
    $
    1.00
  Disclosures about Segments of an Enterprise and Related Information.
 Hardlines and Lumber Segment
  Wholesale Distribution Segment
  Automotive Segment
  Other
  12




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Segment Revenue and Contribution Margin
    Three months ended December 31, 2006Hardlines and
    
    Wholesale(in thousands)
    
    Lumber
    
    Distribution
    
    Automotive
    
    Other
    
    TotalRevenues
    
    $
    41,242
    
    
    $
    30,142
    
    
    $
    22,547
    
    
    $
    4,300
    
    
    $
    98,231Contribution Margin
    
    $
    10,619
    
    
    $
    10,188
    
    
    $
    8,380
    
    
    $
    502
    
    
    $
    29,689
 Three months ended December 31, 2007Hardlines and
    
    Wholesale(in thousands)
    
    Lumber
    
    Distribution
    
    Automotive
    
    Other
    
    TotalRevenues
    
    $
    39,790
    
    
    $
    42,440
    
    
    $
    21,785
    
    
    $
    4,895
    
    
    $
    108,910Contribution Margin
    
    $
    9,467
    
    
    $
    15,765
    
    
    $
    7,411
    
    
    $
    (65
    )
    
    $
    32,578
   Three months endedDecember 31,
    
    
    December 31,(in thousands)
    
    2006
    
    
    2007Segment contribution margin
    
    $
    29,689
    
    
    $
    32,578Corporate and unallocated costs
    
    
    (6,632
    )
    
    
    (8,451
    )Share-based payment expense
    
    
    (742
    )
    
    
    (882
    )Depreciation and amortization
    
    
    (7,058
    )
    
    
    (8,595
    )Acquisition related costs
    
    
    
    
    
    
    (251
    )Restructuring costs
    
    
    (287
    )
    
    
    (168
    )Interest expense
    
    
    (12,124
    )
    
    
    (13,690
    )Other income, net
    
    
    442
    
    
    
    564Income before income taxes
    
    $
    3,288
    
    
    $
    1,105
 13




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Geographic segments
  Three months ended December 31,(in thousands)
    
    2006
    
    
    2007Revenues:Americas
    
    $
    96,490
    
    
    $
    107,173Europe
    
    
    1,741
    
    
    
    1,737Total revenues
    
    $
    98,231
    
    
    $
    108,910
 September 30,
    
    
    December 31,2007
    
    
    2007Assets:Americas
    
    $
    1,047,960
    
    
    $
    1,045,864Europe
    
    
    2,649
    
    
    
    2,850Total assets
    
    $
    1,050,609
    
    
    $
    1,048,714
 14




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Consolidating Balance Sheet as of December 31, 2007
 GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-Guarantor(in thousands)
    
    Operations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    21,979
    
    
    $
    4,985
    
    
    $
    6,562
    
    
    $
    
    
    
    $
    33,526Trade accounts receivable, net of allowance for
doubtful accounts
    
    
    38,578
    
    
    
    16,049
    
    
    
    2,323
    
    
    
    
    
    
    
    56,950Inventories, net
    
    
    5,250
    
    
    
    1,342
    
    
    
    258
    
    
    
    
    
    
    
    6,850Income taxes receivable
    
    
    1,539
    
    
    
    19
    
    
    
    100
    
    
    
    
    
    
    
    1,658Deferred income taxes
    
    
    9,561
    
    
    
    942
    
    
    
    147
    
    
    
    
    
    
    
    10,650Prepaid expenses and other current assets
    
    
    4,412
    
    
    
    609
    
    
    
    497
    
    
    
    
    
    
    
    5,518Total current assets
    
    
    81,319
    
    
    
    23,946
    
    
    
    9,887
    
    
    
    
    
    
    
    115,152Property and equipment, net
    
    
    7,865
    
    
    
    1,233
    
    
    
    587
    
    
    
    
    
    
    
    9,685Intangible assets, net
    
    
    199,064
    
    
    
    28,740
    
    
    
    2,343
    
    
    
    
    
    
    
    230,147Goodwill
    
    
    562,399
    
    
    
    103,419
    
    
    
    1,882
    
    
    
    6,037
    
    
    
    673,737Investments in subsidiaries
    
    
    9,676
    
    
    
    
    
    
    
    864
    
    
    
    (10,540
    )
    
    
    Intercompany receivables (payables)
    
    
    60,738
    
    
    
    (40,639
    )
    
    
    (20,099
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    14,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,985Other assets
    
    
    4,214
    
    
    
    726
    
    
    
    68
    
    
    
    
    
    
    
    5,008Total assets
    
    $
    940,260
    
    
    $
    117,425
    
    
    $
    (4,468
    )
    
    $
    (4,503
    )
    
    $
    1,048,714Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable
    
    $
    13,360
    
    
    $
    2,179
    
    
    $
    1,512
    
    
    $
    
    
    
    $
    17,051Payroll related accruals
    
    
    11,995
    
    
    
    5,209
    
    
    
    1,224
    
    
    
    
    
    
    
    18,428Deferred revenue
    
    
    11,919
    
    
    
    15,290
    
    
    
    1,103
    
    
    
    
    
    
    
    28,312Current portion of long-term debt
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750Accrued expenses and other current liabilities
    
    
    21,266
    
    
    
    836
    
    
    
    (1,121
    )
    
    
    6
    
    
    
    20,987Total current liabilities
    
    
    59,290
    
    
    
    23,514
    
    
    
    2,718
    
    
    
    6
    
    
    
    85,528Long-term debt, net of discount
    
    
    631,926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    631,926Deferred tax liabilities and other liabilities
    
    
    79,510
    
    
    
    (3,049
    )
    
    
    98
    
    
    
    
    
    
    
    76,559Total liabilities
    
    
    770,726
    
    
    
    20,465
    
    
    
    2,816
    
    
    
    6
    
    
    
    794,013Total stockholders equity (deficit)
    
    
    169,534
    
    
    
    96,960
    
    
    
    (7,284
    )
    
    
    (4,509
    )
    
    
    254,701Total liabilities and stockholders equity (deficit)
    
    $
    940,260
    
    
    $
    117,425
    
    
    $
    (4,468
    )
    
    $
    (4,503
    )
    
    $
    1,048,714
 15




---



##### Table of Contents



Consolidating Balance Sheet as of September 30, 2007
 (in thousands)
    
    GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-GuarantorOperations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    24,862
    
    
    $
    4,154
    
    
    $
    4,363
    
    
    $
    
    
    
    $
    33,379Trade accounts receivable, net of allowance for
doubtful accounts
    
    
    39,382
    
    
    
    14,408
    
    
    
    3,354
    
    
    
    
    
    
    
    57,144Inventories, net
    
    
    4,061
    
    
    
    1,014
    
    
    
    284
    
    
    
    
    
    
    
    5,359Income taxes receivable
    
    
    1,638
    
    
    
    514
    
    
    
    529
    
    
    
    
    
    
    
    2,681Deferred income taxes
    
    
    7,534
    
    
    
    942
    
    
    
    146
    
    
    
    
    
    
    
    8,622Prepaid expenses and other current assets
    
    
    5,119
    
    
    
    398
    
    
    
    219
    
    
    
    
    
    
    
    5,736Total current assets
    
    
    82,596
    
    
    
    21,430
    
    
    
    8,895
    
    
    
    
    
    
    
    112,921Property and equipment, net
    
    
    8,066
    
    
    
    1,359
    
    
    
    649
    
    
    
    
    
    
    
    10,074Intangible assets, net
    
    
    203,447
    
    
    
    29,667
    
    
    
    2,452
    
    
    
    
    
    
    
    235,566Goodwill
    
    
    560,880
    
    
    
    103,420
    
    
    
    1,869
    
    
    
    6,037
    
    
    
    672,206Investments in subsidiaries
    
    
    9,656
    
    
    
    
    
    
    
    885
    
    
    
    (10,541
    )
    
    
    Intercompany receivables (payables)
    
    
    78,175
    
    
    
    (52,525
    )
    
    
    (25,650
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    15,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,501Other assets
    
    
    4,108
    
    
    
    143
    
    
    
    95
    
    
    
    (5
    )
    
    
    4,341Total assets
    
    $
    962,429
    
    
    $
    103,494
    
    
    $
    (10,805
    )
    
    $
    (4,509
    )
    
    $
    1,050,609Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable
    
    $
    13,606
    
    
    $
    3,104
    
    
    $
    1,691
    
    
    $
    
    
    
    $
    18,401Payroll related accruals
    
    
    11,168
    
    
    
    3,500
    
    
    
    1,306
    
    
    
    
    
    
    
    15,974Deferred revenue
    
    
    12,277
    
    
    
    16,104
    
    
    
    1,290
    
    
    
    
    
    
    
    29,671Current portion of long-term debt
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750Accrued expenses and other current liabilities
    
    
    19,042
    
    
    
    1,472
    
    
    
    35
    
    
    
    
    
    
    
    20,549Total current liabilities
    
    
    56,843
    
    
    
    24,180
    
    
    
    4,322
    
    
    
    
    
    
    
    85,345Long-term debt, net of discount
    
    
    632,113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    632,113Deferred tax liabilities and other liabilities
    
    
    79,941
    
    
    
    (3,049
    )
    
    
    65
    
    
    
    
    
    
    
    76,957Total liabilities
    
    
    768,897
    
    
    
    21,131
    
    
    
    4,387
    
    
    
    
    
    
    
    794,415Total stockholders equity (deficit)
    
    
    193,532
    
    
    
    82,363
    
    
    
    (15,192
    )
    
    
    (4,509
    )
    
    
    256,194Total liabilities and stockholders equity (deficit)
    
    $
    962,429
    
    
    $
    103,494
    
    
    $
    (10,805
    )
    
    $
    (4,509
    )
    
    $
    1,050,609
 16




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##### Table of Contents



Consolidating Statement of Operations for the Three Months Ended December 31, 2007
 (in thousands)
    
    GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-GuarantorOperations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Systems
    
    $
    23,352
    
    
    $
    19,386
    
    
    $
    3,179
    
    
    $
    
    
    
    $
    45,917Services
    
    
    35,555
    
    
    
    23,037
    
    
    
    4,401
    
    
    
    
    
    
    
    62,993Total revenues
    
    
    58,907
    
    
    
    42,423
    
    
    
    7,580
    
    
    
    
    
    
    
    108,910Cost of revenues (exclusive of
depreciation and amortization
shown separately below):Systems
    
    
    14,434
    
    
    
    7,912
    
    
    
    3,804
    
    
    
    
    
    
    
    26,150Services
    
    
    14,314
    
    
    
    6,421
    
    
    
    2,080
    
    
    
    
    
    
    
    22,815Total cost of revenues
    
    
    28,748
    
    
    
    14,333
    
    
    
    5,884
    
    
    
    
    
    
    
    48,965Gross profit
    
    
    30,159
    
    
    
    28,090
    
    
    
    1,696
    
    
    
    
    
    
    
    59,945Operating expenses:Sales and marketing
    
    
    9,238
    
    
    
    5,879
    
    
    
    1,308
    
    
    
    
    
    
    
    16,425Product development
    
    
    5,246
    
    
    
    5,888
    
    
    
    990
    
    
    
    
    
    
    
    12,124General and administrative
    
    
    6,675
    
    
    
    737
    
    
    
    739
    
    
    
    
    
    
    
    8,151Depreciation and amortization
    
    
    7,269
    
    
    
    1,131
    
    
    
    195
    
    
    
    
    
    
    
    8,595Acquisition related costs
    
    
    251
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    251Restructuring costs
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168Total operating expenses
    
    
    28,847
    
    
    
    13,635
    
    
    
    3,232
    
    
    
    
    
    
    
    45,714Operating income (loss)
    
    
    1,312
    
    
    
    14,455
    
    
    
    (1,536
    )
    
    
    
    
    
    
    14,231Interest expense
    
    
    (13,686
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    
    
    
    
    (13,690
    )Other income, net
    
    
    160
    
    
    
    120
    
    
    
    284
    
    
    
    
    
    
    
    564Income (loss) before income taxes
    
    
    (12,214
    )
    
    
    14,574
    
    
    
    (1,255
    )
    
    
    
    
    
    
    1,105Income tax expense
    
    
    511
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    512Net income (loss)
    
    $
    (12,725
    )
    
    $
    14,574
    
    
    $
    (1,256
    )
    
    $
    
    
    
    $
    593
 17




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##### Table of Contents



Consolidating Statement of Operations for the Three Months Ended December 31, 2006
 (in thousands)
    
    GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-GuarantorOperations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Systems
    
    $
    27,602
    
    
    $
    13,263
    
    
    $
    1,344
    
    
    $
    
    
    
    $
    42,209Services
    
    
    35,434
    
    
    
    16,879
    
    
    
    3,709
    
    
    
    
    
    
    
    56,022Total revenues
    
    
    63,036
    
    
    
    30,142
    
    
    
    5,053
    
    
    
    
    
    
    
    98,231Cost of revenues (exclusive of
depreciation and amortization
shown separately below):Systems
    
    
    16,072
    
    
    
    4,830
    
    
    
    1,750
    
    
    
    
    
    
    
    22,652Services
    
    
    13,893
    
    
    
    4,185
    
    
    
    1,925
    
    
    
    
    
    
    
    20,003Total cost of revenues
    
    
    29,965
    
    
    
    9,015
    
    
    
    3,675
    
    
    
    
    
    
    
    42,655Gross profit
    
    
    33,071
    
    
    
    21,127
    
    
    
    1,378
    
    
    
    
    
    
    
    55,576Operating expenses:Sales and marketing
    
    
    9,761
    
    
    
    5,763
    
    
    
    998
    
    
    
    
    
    
    
    16,522Product development
    
    
    6,086
    
    
    
    3,497
    
    
    
    625
    
    
    
    
    
    
    
    10,208General and administrative
    
    
    4,578
    
    
    
    1,082
    
    
    
    871
    
    
    
    
    
    
    
    6,531Depreciation and amortization
    
    
    6,766
    
    
    
    220
    
    
    
    72
    
    
    
    
    
    
    
    7,058Restructuring costs
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287Total operating expenses
    
    
    27,478
    
    
    
    10,562
    
    
    
    2,566
    
    
    
    
    
    
    
    40,606Operating income (loss)
    
    
    5,593
    
    
    
    10,565
    
    
    
    (1,188
    )
    
    
    
    
    
    
    14,970Interest expense
    
    
    (12,119
    )
    
    
    (1
    )
    
    
    (4
    )
    
    
    
    
    
    
    (12,124
    )Other income, net
    
    
    299
    
    
    
    127
    
    
    
    16
    
    
    
    
    
    
    
    442Income (loss) before income taxes
    
    
    (6,227
    )
    
    
    10,691
    
    
    
    (1,176
    )
    
    
    
    
    
    
    3,288Income tax expense
    
    
    1,267
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    1,270Net income (loss)
    
    $
    (7,494
    )
    
    $
    10,688
    
    
    $
    (1,176
    )
    
    $
    
    
    
    $
    2,018
 18




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##### Table of Contents



Consolidating Statement of Cash Flows for the Three Months Ended December 31, 2007
 (in thousands)
    
    GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-GuarantorOperations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating
activities
    
    $
    1,619
    
    
    $
    906
    
    
    $
    2,234
    
    
    $
    
    
    
    $
    4,759Investing activitiesPurchase of property and equipment
    
    
    (1,015
    )
    
    
    (75
    )
    
    
    (30
    )
    
    
    
    
    
    
    (1,120
    )Capitalized computer software costs
and databases
    
    
    (1,667
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,667
    )Purchase price adjustments
    
    
    (1,526
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (1,531
    )Net cash used in
investing activities
    
    
    (4,208
    )
    
    
    (75
    )
    
    
    (35
    )
    
    
    
    
    
    
    (4,318
    )Financing activitiesPayment on long-term debt
    
    
    (187
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187
    )Deferred financing costs
    
    
    (107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )Net cash used in financing activities
    
    
    (294
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (294
    )Net change in cash and cash
equivalents
    
    
    (2,883
    )
    
    
    831
    
    
    
    2,199
    
    
    
    
    
    
    
    147Cash and cash equivalents, beginning
of period
    
    
    24,862
    
    
    
    4,154
    
    
    
    4,363
    
    
    
    
    
    
    
    33,379Cash and cash equivalents, end of
period
    
    $
    21,979
    
    
    $
    4,985
    
    
    $
    6,562
    
    
    $
    
    
    
    $
    33,526
 Consolidating Statement of Cash Flows for the Three Months Ended December 31, 2006
 (in thousands)
    
    GuarantorPrincipal
    
    
    Guarantor
    
    
    Non-GuarantorOperations
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    4,268
    
    
    $
    (2,233
    )
    
    $
    701
    
    
    $
    
    
    
    $
    2,736Investing activitiesPurchase of property and equipment
    
    
    (1,180
    )
    
    
    (55
    )
    
    
    (3
    )
    
    
    
    
    
    
    (1,238
    )Capitalized computer software costs
and databases
    
    
    (1,174
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,174
    )Purchase price adjustments
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700Net cash used in investing activities
    
    
    (1,654
    )
    
    
    (55
    )
    
    
    (3
    )
    
    
    
    
    
    
    (1,712
    )Financing activitiesPayment on long-term debt
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Deferred financing costs
    
    
    (664
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (664
    )Net cash used in financing activities
    
    
    (15,664
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,664
    )Net change in cash and cash
equivalents
    
    
    (13,050
    )
    
    
    (2,288
    )
    
    
    698
    
    
    
    
    
    
    
    (14,640
    )Cash and cash equivalents, beginning
of period
    
    
    26,498
    
    
    
    7,772
    
    
    
    2,113
    
    
    
    
    
    
    
    36,383Cash and cash equivalents, end of
period
    
    $
    13,448
    
    
    $
    5,484
    
    
    $
    2,811
    
    
    $
    
    
    
    $
    21,743
 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis in conjunction with our financial statements
and related notes included above. This discussion contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of a variety of factors listed below,
including those set forth under Risk Factors.
  Overview
 Disclosures about Segments of an Enterprise and Related
Information.
  
    
    The hardlines and lumber vertical market consists of independent hardware retailers;
home improvement centers; paint, glass and wallpaper stores; farm supply stores; retail
nurseries and garden centers; and independent lumber and building material dealers,
primarily in the United States.
    
    The wholesale distribution vertical market consists of distributors of a range of
products including electrical supply; plumbing; medical supply; heating and air
conditioning; brick, stone and related materials; roofing; siding; insulation; industrial
machinery and equipment; industrial supplies; fluid power; janitorial and sanitation
products; paper and packaging; and service establishment equipment vendors, primarily in
the United States.
    
    The automotive vertical market consists of customers involved in the manufacture,
distribution, sale and installation of new and remanufactured parts used in the maintenance
and repair of automobiles and light trucks, and includes manufacturers, warehouse
distributors, parts stores, professional installers and several chains in North America and
Europe.
    
    The productivity tools business consists of software migration and application
development tools.
  
    
    Systems, which is comprised primarily of proprietary software applications;
implementation services; training; forms and paper products; and third-party software,
hardware and peripherals.
    
    Services, which is comprised primarily of product support, content, and supply chain
services. Product support services are comprised of customer support activities, including
support through our advice line, software updates, preventive and remedial on-site
maintenance and depot repair services. Our content services are comprised of proprietary
database and data management products such as our comprehensive electronic automotive parts
and applications catalog and point-of-sale business analysis data. Supply chain services
are comprised of connectivity services, e-commerce, networking and
 20




---



##### Table of Contents



security monitoring management solutions. We generally provide our services on a monthly
subscription basis, and accordingly, revenues are generally recurring in nature.
 Historical Results of Operations
 Three months ended December 31, 2007 compared to three months ended December 31, 2006
 Revenues.
  Three months ended December 31,(in thousands)
    
    2006
    
    
    2007
    
    
    Variance $
    
    
    Variance %Hardlines and Lumber Revenues:Systems
    
    $
    22,703
    
    
    $
    19,677
    
    
    $
    (3,026
    )
    
    
    (13.3
    )%Services
    
    
    18,539
    
    
    
    20,113
    
    
    
    1,574
    
    
    
    8.5
    %Total Hardlines and Lumber Revenues
    
    $
    41,242
    
    
    $
    39,790
    
    
    $
    (1,452
    )
    
    
    (3.5
    )%Wholesale Distribution Revenues:Systems
    
    $
    13,263
    
    
    $
    19,385
    
    
    $
    6,122
    
    
    
    46.2
    %Services
    
    
    16,879
    
    
    
    23,055
    
    
    
    6,176
    
    
    
    36.6
    %Total Wholesale Distribution Revenues
    
    $
    30,142
    
    
    $
    42,440
    
    
    $
    12,298
    
    
    
    40.8
    %Automotive Revenues:Systems
    
    $
    3,736
    
    
    $
    3,511
    
    
    $
    (225
    )
    
    
    (6.0
    )%Services
    
    
    18,811
    
    
    
    18,274
    
    
    
    (537
    )
    
    
    (2.9
    )%Total Automotive Revenues
    
    $
    22,547
    
    
    $
    21,785
    
    
    $
    (762
    )
    
    
    (3.4
    )%Other Revenues:Systems
    
    $
    2,507
    
    
    $
    3,344
    
    
    $
    837
    
    
    
    33.4
    %Services
    
    
    1,793
    
    
    
    1,551
    
    
    
    (242
    )
    
    
    (13.5
    )%Total Other Revenues
    
    $
    4,300
    
    
    $
    4,895
    
    
    $
    595
    
    
    
    13.8
    %Total Revenues:Systems
    
    $
    42,209
    
    
    $
    45,917
    
    
    $
    3,708
    
    
    
    8.8
    %Services
    
    
    56,022
    
    
    
    62,993
    
    
    
    6,971
    
    
    
    12.4
    %Total Revenues
    
    $
    98,231
    
    
    $
    108,910
    
    
    $
    10,679
    
    
    
    10.9
    %
 21




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##### Table of Contents




    
    Hardlines and Lumber Revenues.Hardlines and Lumber revenues decreased by $1.5 million, or
3.5%, due to a decrease in co-op related revenues as well as from a softening of general
economic conditions, particularly in the residential housing construction market, which was
partially offset by systems and services revenues associated with the purchase of Silk Systems
in May 2007.
    
    Wholesale Distribution Revenues.Wholesale Distribution revenues increased by $12.3 million,
or 40.8%. This increase is attributable to systems and services revenues associated with the
purchase of Eclipse in August 2007.
    
    Automotive Revenues.Automotive revenues decreased by $0.8 million, or 3.4%, primarily due
to lower system sales than the prior year and reduced customer support due to planned attrition
of a major customer.
    
    Other Revenues.Other revenues increased by $0.6 million, or 13.8%, primarily due to
increased systems revenues from our productivity tools business.
 Total cost of revenues and gross margins as a percentage of revenues.
  (dollars in thousands)
    
    Three months ended December 31,2006
    
    2007
    
    VarianceCost of systems revenues
    
    $
    22,652
    
    
    $
    26,150
    
    
    $
    3,498Systems gross margins
    
    
    46.3
    %
    
    
    43.0
    %Cost of services revenues
    
    $
    20,003
    
    
    $
    22,815
    
    
    $
    2,812Services gross margins
    
    
    64.3
    %
    
    
    63.8
    %Total cost of revenues
    
    $
    42,655
    
    
    $
    48,965
    
    
    $
    6,310Total gross margins
    
    
    56.6
    %
    
    
    55.0
    %
 Cost of Systems Revenues and Systems Gross Margins.
   Cost of Services Revenues and Services Gross Margins
   22




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##### Table of Contents



Total Operating Expenses.
 Three months ended December 31,(in thousands)
    
    2006
    
    
    2007
    
    
    Variance $
    
    
    Variance %Sales and Marketing Expense
    
    $
    16,522
    
    
    $
    16,425
    
    
    $
    (97
    )
    
    
    (0.6
    )%Product Development Expense
    
    
    10,208
    
    
    
    12,124
    
    
    
    1,916
    
    
    
    18.8
    %General and Administrative Expense
    
    
    6,531
    
    
    
    8,151
    
    
    
    1,620
    
    
    
    24.8
    %Depreciation and Amortization
    
    
    7,058
    
    
    
    8,595
    
    
    
    1,537
    
    
    
    21.8
    %Acquisition-related costs
    
    
    
    
    
    
    251
    
    
    
    251
    
    
    
    100.0
    %Restructuring costs
    
    
    287
    
    
    
    168
    
    
    
    (119
    )
    
    
    (41.5
    )%Total Operating Expenses
    
    $
    40,606
    
    
    $
    45,714
    
    
    $
    5,108
    
    
    
    12.6
    %
  
    
    Sales and Marketing Expense.Sales and marketing expense consist primarily of salaries
and commissions for our sales forces, share-based payment expense, marketing expenses and an
allocation of overhead expenses including facilities and IT costs. Sales and marketing
expenses decreased by $0.1 million, or 0.6%, for the three months ended December 31, 2007
compared to the three months ended December 31, 2006. The decrease was primarily a result
of $0.9 million lower bad debt expense and lower operating costs, partially offset by
$1.2 million of expenses related to Silk Systems and Eclipse.
    
    Product Development Expense.Product development expense consists primarily of salaries,
share-based payment expense, outside services and an allocation of overhead expenses,
including facilities and IT costs. Product development expense increased by $1.9 million, or
18.8%, for the three months ended December 31, 2007 compared to the three months ended
December 31, 2006. The increase is primarily due to $2.2 million of expenses related to
Silk Systems and Eclipse, partially offset by higher capitalization of software development
costs.
    
    General and Administrative Expense.General and administrative expense primarily
consists of salaries and bonuses, share-based payment expense, facility costs, finance and
legal services, IT support and telecommunication costs. General and administrative expenses
increased by $1.6 million, or 24.8%, for the three months ended December 31, 2007 compared
to the three months ended December 31, 2006. The primary reason for the increase was $0.5
million higher facility costs, $0.4 million administrative costs related to the Silk Systems
and Eclipse acquisitions, $0.3 million of costs related to strategic initiatives, and higher
salary costs as we continue to build our management team.
    
    Depreciation and Amortization.Depreciation and amortization expense consists of
depreciation on our fixed assets and amortization of our purchased intangible assets.
Depreciation and amortization are not allocated to our segments. Depreciation and
amortization expense was $8.6 million for the three months ended December 31, 2007 compared
to $7.1 million for the three months ended December 31, 2006. The increase resulted
primarily from the amortization of the additional $32.6 million of intangible assets
associated with the acquisitions of Silk Systems and Eclipse.
    
    Acquisition-Related Costs.Acquisition-related costs for the three months ended December
31, 2007 were $0.3 million, which primarily included consulting fees and other professional
services incurred in connection with integrating acquired companies.
    
    Restructuring Costs.Restructuring costs for the three months ended December 31, 2007 of
$0.2 million primarily relate to closing costs of redundant facilities and severance costs
related to outsourcing certain activities to third-party providers. Restructuring costs for
the three months ended December 31, 2006 of $0.3 million primarily related to costs
associated with moving the corporate headquarters to Livermore, California in 2006.
    
    Interest Expense.Interest expense for the three months ended December 31, 2007 was
$13.7 million compared to $12.1 million for the three months ended December 31, 2006, an
increase of $1.6 million, or 12.9%. The increase is primarily a result of additional
borrowings of $95.0 million to fund the asset purchase of Eclipse in August 2007.
    
    Other income.Other income consisted primarily of interest income.
    
    Provision for income taxes.We recognized an income tax expense of approximately $0.5
million, or 46.3% of pre-tax income for the three months ended December 31, 2007 compared to
an income tax expense of $1.3 million or 38.6% of pre-tax income in the comparable period in
2006.
 23




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##### Table of Contents



Segment Information
   Contribution Margin
 Three months ended December 31,(in thousands)
    
    2006
    
    
    2007
    
    
    Variance $
    
    
    Variance %Hardlines and Lumber
    
    $
    10,619
    
    
    $
    9,467
    
    
    $
    (1,152
    )
    
    
    (10.8
    )%Wholesale Distribution
    
    
    10,188
    
    
    
    15,765
    
    
    
    5,577
    
    
    
    54.7
    %Automotive
    
    
    8,380
    
    
    
    7,411
    
    
    
    (969
    )
    
    
    (11.6
    )%Other
    
    
    502
    
    
    
    (65
    )
    
    
    (567
    )
    
    
    
    %Total Contribution Margin
    
    $
    29,689
    
    
    $
    32,578
    
    
    $
    2,889
    
    
    
    9.7
    %
 Factors affecting Hardlines and Lumber contribution margin for the three months ended December 31,
2007.
  Factors affecting Wholesale Distribution contribution margin for the three months ended December
31, 2007.
  Factors affecting Automotive contribution margin for the three months ended December 31, 2007.
  Factors affecting Other contribution margin for the three months ended December 31, 2007.
  24




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##### Table of Contents



Liquidity and Capital Resources
 Overview
      
    
    under the revolving credit facility, 1.25% with respect to base rate borrowings and 2.25%
with respect to Eurodollar rate borrowings, which may be reduced subject to our attainment of
certain leverage ratios; and
 
    
    under the term loan facilities, 1.00% with respect to base rate borrowings and 2.00% with
respect to Eurodollar rate borrowings.
  1 2
  25




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##### Table of Contents



Three Months Ended December 31, 2007 Compared to Three Months Ended December 31, 2006
     26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 Interest Rate Risk
  Foreign Currency Risk
   
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Internal controls over financial reporting
  Limitations on Effectiveness of Controls
  27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  AggregateExecutive
    
    Company
    
    Aggregate
    
    Withdrawals/Contributions in FY
    
    Contributions in FY
    
    Earnings in
    
    Distributions
    
    Aggregate Balance2007
    
    2007
    
    FY 2007
    
    in FY 2007
    
    at Sept. 30, 2007Name
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Stephen A. McLaughlin
    
    
    27,931
    
    
    
    N/A
    
    
    
    21,601
    
    
    
    N/A
    
    
    
    215,526William Wilson
    
    
    33,375
    
    
    
    N/A
    
    
    
    41,003
    
    
    
    N/A
    
    
    
    491,055Scott B. Hanson
    
    
    8,389
    
    
    
    N/A
    
    
    
    389
    
    
    
    N/A
    
    
    
    8,778
  28




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##### Table of Contents



Item 6. Exhibits.
  ExhibitNo.
    
    Description10.1*
    
    Activant Solutions Inc. Deferred Compensation Plan as amended and restated effective January 1, 200831.1*
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Pervez Qureshi.31.2*
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Kathleen M. Crusco32.1**
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Pervez Qureshi.32.2**
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Kathleen M. Crusco
 
 *
    
    Exhibit is filed herewith.**
    
    Exhibit is furnished herewith. This certification is not deemed filed for purposes of Section
18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section.
Such certification will not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the
registrant specifically incorporates it by reference.
 29




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##### Table of Contents



SIGNATURE
 th
 ACTIVANT SOLUTIONS INC.By:
    /s/ KATHLEEN M. CRUSCOKathleen M. CruscoSenior Vice President and Chief Financial Officer
(Principal Financial and Duly Authorized Officer) 30