##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 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 June 30, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 333-49389
 Activant Solutions Inc.
  Delaware
    
    94-2160013(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)804 Las Cimas ParkwayAustin, Texas
    
    78746(Address of principal executive offices)
    
    (Zip Code)
 (512) 328-2300
  þ o
  o þ
  Class
    
    Outstanding at August 12, 2005Common Stock
    
    1,000 shares
   1




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PAGEFORWARD-LOOKING STATEMENTS
    
    
    3PART I  FINANCIAL INFORMATION
    
    
    4ITEM 1.  FINANCIAL STATEMENTS (Unaudited)
    
    
    4Consolidated Balance Sheets as of September 30, 2004 and June 30, 2005
    
    
    4Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended June 30, 2004 and June 30, 2005
    
    
    5Consolidated Statements of Cash Flows for the nine months ended June 30, 2004 and June 30, 2005
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    14ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 4.  CONTROLS AND PROCEDURES
    
    
    27PART II  OTHER INFORMATION
    
    
    28ITEM 1.  LEGAL PROCEEDINGS
    
    
    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
    
    
    28SIGNATURE
    
    
    29Indemnity AgreementCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  2




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FORWARD-LOOKING STATEMENTS
 INFORMATION SET FORTH IN THIS QUARTERLY REPORT ON FORM 10-Q REGARDING EXPECTED OR POSSIBLE
FUTURE EVENTS, INCLUDING STATEMENTS OF THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE GROWTH,
OPERATIONS, PRODUCTS AND SERVICES AND STATEMENTS RELATING TO FUTURE ECONOMIC PERFORMANCE, IS
FORWARD-LOOKING AND SUBJECT TO RISKS AND UNCERTAINTIES. FOR THOSE STATEMENTS, WE CLAIM THE
PROTECTION OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS PROVIDED FOR BY SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON ESTIMATES
AND ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY, WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE
INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND
STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES OR STATEMENTS WILL BE REALIZED,
AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE THE FOLLOWING:
 
    
    LOSS OR OBSOLESCENCE OF THE PROPRIETARY TECHNOLOGY ON WHICH WE DEPEND;
    
    CHANGES IN THE MARKETS IN WHICH WE COMPETE INCLUDING THE MANNER IN WHICH AUTO PARTS OR
HARDWARE, LUMBER AND BUILDING MATERIALS ARE SOURCED, SOLD, DISTRIBUTED OR INVENTORIED, AND
CHANGES IN ECONOMIC CONDITIONS IN THESE MARKETS GENERALLY;
    
    CLAIMS BY THIRD PARTIES THAT WE ARE INFRINGING ON THEIR INTELLECTUAL PROPERTY RIGHTS;
    
    LOSS OF OUR EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL;
    
    INCREASED COMPETITION OR FAILURE TO EFFECTIVELY COMPETE;
    
    LOSS OF KEY CUSTOMERS OR INCREASE IN ATTRITION RATES WITH RESPECT TO REVENUE WHICH
MANAGEMENT VIEWS AS RECURRING;
    
    MANUFACTURING DEFECTS OR ERRORS IN OUR SOFTWARE OR DATABASES;
    
    PROLONGED UNFAVORABLE GENERAL ECONOMIC AND MARKET CONDITIONS;
    
    FAILURE TO RECOUP THE COST OF INVESTMENT IN NEW BUSINESSES INTO WHICH WE MAY EXPAND, AND
    
    INCREASES IN OUR COST OF BORROWINGS OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL.
 MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. IN ADDITION,
OTHER FACTORS THAT COULD AFFECT OUR FUTURE RESULTS AND COULD CAUSE THOSE RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS ARE DISCUSSED AT GREATER LENGTH
UNDER MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND
APPEAR ELSEWHERE IN THIS QUARTERLY REPORT. THESE RISKS, UNCERTAINTIES AND OTHER FACTORS SHOULD NOT
BE CONSTRUED AS EXHAUSTIVE, AND WE DO NOT UNDERTAKE, AND SPECIFICALLY DISCLAIM ANY OBLIGATION TO
UPDATE, ANY FORWARD-LOOKING STATEMENTS TO REFLECT OCCURRENCES OR UNANTICIPATED EVENTS OR
CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.
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September 30,
    
    June 30,2004
    
    2005(Unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    32,065
    
    
    $
    48,064Trade accounts receivable, net of allowance for doubtful accounts of $5,639 and
$6,021 at September 30, 2004 and June 30, 2005, respectively
    
    
    33,516
    
    
    
    47,225Inventories, net
    
    
    2,668
    
    
    
    4,391Investment in leases, net
    
    
    430
    
    
    
    313Deferred income taxes
    
    
    430
    
    
    
    4,180Prepaid income taxes
    
    
    5,338
    
    
    
    3,153Prepaid expenses and other current assets
    
    
    2,758
    
    
    
    5,160Total current assets
    
    
    77,205
    
    
    
    112,486Service parts, net
    
    
    1,308
    
    
    
    1,009Property and equipment, net
    
    
    4,945
    
    
    
    5,750Capitalized computer software costs, net
    
    
    5,482
    
    
    
    4,112Databases, net
    
    
    5,290
    
    
    
    5,009Intangible assets
    
    
    5,512
    
    
    
    15,829Goodwill
    
    
    79,541
    
    
    
    180,050Other assets
    
    
    9,622
    
    
    
    15,045Total assets
    
    $
    188,905
    
    
    $
    339,290LIABILITIES AND STOCKHOLDERS DEFICIT:Current liabilities:Accounts payable
    
    $
    9,026
    
    
    $
    12,546Payroll related accruals
    
    
    14,175
    
    
    
    13,383Deferred revenue
    
    
    15,418
    
    
    
    26,864Current portion of long-term debt
    
    
    276
    
    
    
    213Accrued expenses and other current liabilities
    
    
    9,761
    
    
    
    8,470Total current liabilities
    
    
    48,656
    
    
    
    61,476Long-term debt
    
    
    155,438
    
    
    
    275,464Deferred income taxes and other liabilities
    
    
    4,831
    
    
    
    8,759Total liabilities
    
    
    208,925
    
    
    
    345,699Commitments and contingencies
    
    
    
    

    
    
    Stockholders deficit:Common Stock:Par value $0.01, authorized, issued and outstanding, 1,000 shares at
September 30, 2004 and June 30, 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    83,155
    
    
    
    83,155Retained deficit
    
    
    (102,654
    )
    
    
    (88,778
    )Other accumulated comprehensive income (loss):Cumulative translation adjustment
    
    
    (521
    )
    
    
    (786
    )Total stockholders deficit
    
    
    (20,020
    )
    
    
    (6,409
    )Total liabilities and stockholders deficit
    
    $
    188,905
    
    
    $
    339,290
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Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Revenues:Systems
    
    $
    20,530
    
    
    $
    28,222
    
    
    $
    61,397
    
    
    $
    75,792Services
    
    
    36,776
    
    
    
    45,200
    
    
    
    107,911
    
    
    
    116,717Total revenues
    
    
    57,306
    
    
    
    73,422
    
    
    
    169,308
    
    
    
    192,509Cost of revenues:Systems
    
    
    12,846
    
    
    
    16,595
    
    
    
    36,046
    
    
    
    45,207Services
    
    
    15,118
    
    
    
    18,141
    
    
    
    44,730
    
    
    
    46,033Total cost of revenues
    
    
    27,964
    
    
    
    34,736
    
    
    
    80,776
    
    
    
    91,240Gross profit
    
    
    29,342
    
    
    
    38,686
    
    
    
    88,532
    
    
    
    101,269Operating expenses:Sales and marketing
    
    
    7,977
    
    
    
    9,495
    
    
    
    23,320
    
    
    
    26,467Product development
    
    
    4,099
    
    
    
    6,606
    
    
    
    11,583
    
    
    
    14,752General and administrative
    
    
    7,221
    
    
    
    8,336
    
    
    
    19,556
    
    
    
    21,687Total operating expenses
    
    
    19,297
    
    
    
    24,437
    
    
    
    54,459
    
    
    
    62,906Operating income
    
    
    10,045
    
    
    
    14,249
    
    
    
    34,073
    
    
    
    38,363Interest expense
    
    
    (5,739
    )
    
    
    (7,487
    )
    
    
    (15,718
    )
    
    
    (17,206
    )Foreign exchange gain (loss)
    
    
    (70
    )
    
    
    48
    
    
    
    (177
    )
    
    
    151Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    6,270
    
    
    
    Other income (loss), net
    
    
    (56
    )
    
    
    233
    
    
    
    304
    
    
    
    687Income before income taxes
    
    
    4,180
    
    
    
    7,043
    
    
    
    24,752
    
    
    
    21,995Income tax expense
    
    
    1,551
    
    
    
    2,333
    
    
    
    9,511
    
    
    
    8,119Net income
    
    $
    2,629
    
    
    $
    4,710
    
    
    $
    15,241
    
    
    $
    13,876Comprehensive income:Net income
    
    $
    2,629
    
    
    $
    4,710
    
    
    $
    15,241
    
    
    $
    13,876Foreign currency translation adjustment
    
    
    286
    
    
    
    (590
    )
    
    
    33
    
    
    
    (265
    )Comprehensive income
    
    $
    2,915
    
    
    $
    4,120
    
    
    $
    15,274
    
    
    $
    13,611
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Nine Months EndedJune 30,2004
    
    2005OPERATING ACTIVITIESNet income
    
    $
    15,241
    
    
    $
    13,876Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    4,063
    
    
    
    3,948Amortization
    
    
    8,163
    
    
    
    6,256Deferred income taxes
    
    
    4,697
    
    
    
    (241
    )Lease loss provision
    
    
    (1,095
    )
    
    
    (102
    )Provision for doubtful accounts
    
    
    3,438
    
    
    
    1,662Gain on sale of assets
    
    
    (6,270
    )
    
    
    Other, net
    
    
    538
    
    
    
    652Changes in assets and liabilities (net of the effect of acquisition):Trade accounts receivable
    
    
    1,796
    
    
    
    (8,793
    )Inventories
    
    
    107
    
    
    
    (1,193
    )Investment in leases
    
    
    4,300
    
    
    
    306Prepaid expenses and other assets
    
    
    4,323
    
    
    
    1,691Accounts payable
    
    
    (237
    )
    
    
    (3,314
    )Deferred revenue
    
    
    432
    
    
    
    5,596Accrued expenses and other liabilities
    
    
    (12,826
    )
    
    
    (8,884
    )Net cash provided by operating activities
    
    
    26,670
    
    
    
    11,460INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (1,714
    )
    
    
    (2,074
    )Purchase of businesses, net of cash acquired
    
    
    
    
    
    
    (99,934
    )Capitalized computer software costs and databases
    
    
    (4,353
    )
    
    
    (3,651
    )Purchase of service parts
    
    
    (1,159
    )
    
    
    (793
    )Proceeds from sale of assets
    
    
    7,212
    
    
    
    Purchase of other businesses
    
    
    
    
    
    
    (2,646
    )Equity distributions from partnerships
    
    
    64
    
    
    
    305Net cash provided by (used in) investing activities
    
    
    50
    
    
    
    (108,793
    )FINANCING ACTIVITIESProceeds from debt facility
    
    
    
    
    
    
    120,000Debt issuance costs
    
    
    
    
    
    
    (6,439
    )Payment on long-term debt
    
    
    (17,743
    )
    
    
    (229
    )Net cash provided by (used in) financing activities
    
    
    (17,743
    )
    
    
    113,332Net change in cash and cash equivalents
    
    
    8,977
    
    
    
    15,999Cash and cash equivalents, beginning of period
    
    
    10,215
    
    
    
    32,065Cash and cash equivalents, end of period
    
    $
    19,192
    
    
    $
    48,064Supplemental disclosures of cash flow informationCash paid during the period for:Interest
    
    $
    18,118
    
    
    $
    20,154Income taxes
    
    $
    4,286
    
    
    $
    4,886
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Trade receivables
    
    $
    6,526Property and equipment
    
    
    1,442Other assets
    
    
    4,525Goodwill
    
    
    99,531Other intangible assets
    
    
    11,300Accounts payable and accrued expenses
    
    
    (23,390
    )Total purchase price
    
    $
    99,934
 7




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(in thousands)
    
    Three months ended June 30,
    
    Nine months ended June 30,2004
    
    2005
    
    2004
    
    2005Revenues
    
    $
    64,848
    
    
    $
    73,422
    
    
    $
    191,159
    
    
    $
    218,547Net
income
    
    $
    1,592
    
    
    $
    4,710
    
    
    $
    11,818
    
    
    $
    11,825
    September 30, 2004
    
    June 30, 200510 1/2 %
senior notes due
2011, net of
discount
    
    $
    155,272
    
    
    $
    155,464Floating
rate senior
notes due 2010
    
    
    
    
    
    
    120,000Other
    
    
    442
    
    
    
    213Total
debt
    
    
    155,714
    
    
    
    275,677Current
portion
    
    
    (276
    )
    
    
    (213
    )Long-term
debt
    
    $
    155,438
    
    
    $
    275,464
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Three months ended June 30,
    
    Nine months ended June 30,2004
    
    2005
    
    2004
    
    2005Net income
reported
    
    $
    2,629
    
    
    $
    4,710
    
    
    $
    15,241
    
    
    $
    13,876Pro forma
stock-based
compensation
expense, net of
tax
    
    
    53
    
    
    
    43
    
    
    
    175
    
    
    
    387Pro forma
net
income
    
    $
    2,576
    
    
    $
    4,667
    
    
    $
    15,066
    
    
    $
    13,489
 9




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Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20 and FASB Statement No. 3
   
    
    Systems, which is comprised primarily of proprietary software applications, third-party
hardware and peripherals and implementation and training;
    
    Product Support, which is comprised of daily operating support through our advice line,
software updates, preventive and remedial on-site maintenance and depot repair services;
    
    Content and Data Services, which is comprised primarily of databases, exchanges and other
information services, including our electronic catalog in the automotive parts aftermarket;
and
    
    Other Services, which is comprised primarily of business products, such as forms and
other paper products, and the revenues and earnings from our former leasing operations. In
June 2001, the Company outsourced all leasing operations to a third party and thus has not
originated any new leases since that time.
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Three Months Ended June 30, 2004
    

Three Months Ended June 30, 2005Content
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ContentProduct
    
    & Data
    
    
    
    
    
    
    
    
    
    
    
    
    
    Product
    
    & DataSystems
    
    Support
    
    Services
    
    Other
    
    Total
    
    Systems
    
    Support
    
    Services
    
    Other
    
    TotalRevenues
    
    $
    20,530
    
    
    $
    20,059
    
    
    $
    14,701
    
    
    $
    2,016
    
    
    $
    57,306
    
    
    $
    28,222
    
    
    $
    28,115
    
    
    $
    14,755
    
    
    $
    2,330
    
    
    $
    73,422Cost of Revenues
    
    
    12,846
    
    
    
    9,179
    
    
    
    4,782
    
    
    
    1,157
    
    
    
    27,964
    
    
    
    16,595
    
    
    
    12,475
    
    
    
    4,143
    
    
    
    1,523
    
    
    
    34,736Gross Profit
    
    $
    7,684
    
    
    $
    10,880
    
    
    $
    9,919
    
    
    $
    859
    
    
    $
    29,342
    
    
    $
    11,627
    
    
    $
    15,640
    
    
    $
    10,612
    
    
    $
    807
    
    
    $
    38,686Gross Profit as a
Percentage of
Revenues
    
    
    37.4
    %
    
    
    54.2
    %
    
    
    67.5
    %
    
    
    42.6
    %
    
    
    51.2
    %
    
    
    41.2
    %
    
    
    55.6
    %
    
    
    71.9
    %
    
    
    34.6
    %
    
    
    52.7
    %
 Nine Months Ended June 30, 2004
    

Nine Months Ended June 30, 2005Content
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ContentProduct
    
    & Data
    
    
    
    
    
    
    
    
    
    
    
    
    
    Product
    
    & DataSystems
    
    Support
    
    Services
    
    Other
    
    Total
    
    Systems
    
    Support
    
    Services
    
    Other
    
    TotalRevenues
    
    $
    61,397
    
    
    $
    59,785
    
    
    $
    42,824
    
    
    $
    5,302
    
    
    $
    169,308
    
    
    $
    75,792
    
    
    $
    67,727
    
    
    $
    43,501
    
    
    $
    5,489
    
    
    $
    192,509Cost of Revenues
    
    
    36,046
    
    
    
    27,672
    
    
    
    13,924
    
    
    
    3,134
    
    
    
    80,776
    
    
    
    45,207
    
    
    
    30,485
    
    
    
    11,934
    
    
    
    3,614
    
    
    
    91,240Gross Profit
    
    $
    25,351
    
    
    $
    32,113
    
    
    $
    28,900
    
    
    $
    2,168
    
    
    $
    88,532
    
    
    $
    30,585
    
    
    $
    37,242
    
    
    $
    31,567
    
    
    $
    1,875
    
    
    $
    101,269Gross Profit as a
Percentage of
Revenues
    
    
    41.3
    %
    
    
    53.7
    %
    
    
    67.5
    %
    
    
    40.9
    %
    
    
    52.3
    %
    
    
    40.3
    %
    
    
    55.0
    %
    
    
    72.6
    %
    
    
    34.1
    %
    
    
    52.6
    %
  
    
    Automotive (Auto), which includes 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 service chains in North America and Europe;
    
    Hardware and Home Centers (HWHC), which consists of independent hardware retailers,
home improvement centers, paint, glass and wallpaper stores, agribusiness and retail
nurseries and gardens, primarily in the United States;
    
    Lumber and Building Materials (LBM), which consists of retailers and distributors to
builders and contractors in the lumber and building materials vertical markets, primarily in
the United States; and
    
    Wholesale Distribution (WDN), which consists of distributors in a range of markets
including electrical supply, plumbing, heating and air conditioning, brick, stone and
related materials, roofing, siding, insulation, industrial machinery and equipment,
industrial supplies, and service establishment equipment vendors primarily in the United
States.
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Three Months Ended June 30, 2004
    
    Three Months Ended June 30, 2005Content
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ContentProduct
    
    & Data
    
    
    
    
    
    
    
    
    
    
    
    
    
    Product
    
    & DataSystems
    
    Support
    
    Services
    
    Other
    
    Total
    
    Systems
    
    Support
    
    Services
    
    Other
    
    TotalAuto
    
    $
    4,235
    
    
    $
    9,564
    
    
    $
    12,980
    
    
    $
    212
    
    
    $
    26,991
    
    
    $
    3,891
    
    
    $
    8,445
    
    
    $
    12,877
    
    
    $
    212
    
    
    $
    25,425HWHC
    
    
    10,274
    
    
    
    6,877
    
    
    
    1,167
    
    
    
    1,236
    
    
    
    19,554
    
    
    
    12,994
    
    
    
    7,002
    
    
    
    1,090
    
    
    
    817
    
    
    
    21,903LBM
    
    
    5,393
    
    
    
    3,217
    
    
    
    133
    
    
    
    501
    
    
    
    9,244
    
    
    
    8,221
    
    
    
    7,595
    
    
    
    219
    
    
    
    1,243
    
    
    
    17,278WDN
    
    
    628
    
    
    
    401
    
    
    
    421
    
    
    
    67
    
    
    
    1,517
    
    
    
    2,289
    
    
    
    2,875
    
    
    
    567
    
    
    
    58
    
    
    
    5,789Tools
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    827
    
    
    
    2,198
    
    
    
    2
    
    
    
    
    
    
    
    3,027Total
    
    $
    20,530
    
    
    $
    20,059
    
    
    $
    14,701
    
    
    $
    2,016
    
    
    $
    57,306
    
    
    $
    28,222
    
    
    $
    28,115
    
    
    $
    14,755
    
    
    $
    2,330
    
    
    $
    73,422
 Nine Months Ended June 30, 2004
    
    Nine Months Ended June 30, 2005Content
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ContentProduct
    
    & Data
    
    
    
    
    
    
    
    
    
    
    
    
    
    Product
    
    & DataSystems
    
    Support
    
    Services
    
    Other
    
    Total
    
    Systems
    
    Support
    
    Services
    
    Other
    
    TotalAuto
    
    $
    13,250
    
    
    $
    28,632
    
    
    $
    38,297
    
    
    $
    696
    
    
    $
    80,875
    
    
    $
    10,957
    
    
    $
    26,249
    
    
    $
    37,964
    
    
    $
    212
    
    
    $
    75,382HWHC
    
    
    29,489
    
    
    
    20,457
    
    
    
    2,826
    
    
    
    2,749
    
    
    
    55,521
    
    
    
    37,514
    
    
    
    21,504
    
    
    
    3,335
    
    
    
    2,722
    
    
    
    65,075LBM
    
    
    16,684
    
    
    
    9,479
    
    
    
    429
    
    
    
    1,615
    
    
    
    28,207
    
    
    
    22,643
    
    
    
    14,064
    
    
    
    636
    
    
    
    2,316
    
    
    
    39,659WDN
    
    
    1,974
    
    
    
    1,217
    
    
    
    1,272
    
    
    
    242
    
    
    
    4,705
    
    
    
    3,851
    
    
    
    3,712
    
    
    
    1,564
    
    
    
    239
    
    
    
    9,366Tools
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    827
    
    
    
    2,198
    
    
    
    2
    
    
    
    
    
    
    
    3,027Total
    
    $
    61,397
    
    
    $
    59,785
    
    
    $
    42,824
    
    
    $
    5,302
    
    
    $
    169,308
    
    
    $
    75,792
    
    
    $
    67,727
    
    
    $
    43,501
    
    
    $
    5,489
    
    
    $
    192,509
   Three Months Ended June 30, 2004
    
    Three Months Ended June 30, 2005Americas
    
    Europe
    
    Total
    
    Americas
    
    Europe
    
    TotalRevenues
    
    $
    55,427
    
    
    $
    1,879
    
    
    $
    57,306
    
    
    $
    71,273
    
    
    $
    2,149
    
    
    $
    73,422Total Assets (at
end of
period)
    
    $
    183,470
    
    
    $
    3,697
    
    
    $
    187,167
    
    
    $
    336,110
    
    
    $
    3,180
    
    
    $
    339,290
 Nine Months Ended June 30, 2004
    
    Nine Months Ended June 30, 2005Americas
    
    Europe
    
    Total
    
    Americas
    
    Europe
    
    TotalRevenues
    
    $
    164,235
    
    
    $
    5,073
    
    
    $
    169,308
    
    
    $
    186,810
    
    
    $
    5,699
    
    
    $
    192,509Total Assets (at
end of
period)
    
    $
    183,470
    
    
    $
    3,697
    
    
    $
    187,167
    
    
    $
    336,110
    
    
    $
    3,180
    
    
    $
    339,290
 12




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##### Table of Contents



1 2
 Guarantor
    
    Non-Principal
    
    Guarantor
    
    GuarantorOperations
    
    Subsidiaries
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedTotal assets as of June 30, 2005
    
    $
    265,640
    
    
    $
    69,990
    
    
    $
    56,536
    
    
    $
    (52,876
    )
    
    $
    339,290Stockholders equity (deficit) as of
June 30, 2005
    
    
    17,734
    
    
    
    57,095
    
    
    
    46,336
    
    
    
    (127,574
    )
    
    
    (6,409
    )Revenue for the three months ended
June 30, 2005
    
    
    55,219
    
    
    
    12,479
    
    
    
    5,724
    
    
    
    
    
    
    
    73,422Revenue for the three months ended
June 30, 2004
    
    
    53,866
    
    
    
    258
    
    
    
    3,227
    
    
    
    (45
    )
    
    
    57,306Revenue for the nine months ended
June 30, 2005
    
    
    167,407
    
    
    
    12,783
    
    
    
    12,319
    
    
    
    
    
    
    
    192,509Revenue for the nine months ended
June 30, 2004
    
    
    159,186
    
    
    
    757
    
    
    
    9,412
    
    
    
    (47
    )
    
    
    169,308Net income (loss) for the three months
ended June 30, 2005
    
    
    1,954
    
    
    
    1,779
    
    
    
    977
    
    
    
    
    
    
    
    4,710Net income (loss) for the three months
ended June 30, 2004
    
    
    4,014
    
    
    
    (1,434
    )
    
    
    49
    
    
    
    
    
    
    
    2,629Net income (loss) for the nine months
ended June 30, 2005
    
    
    10,933
    
    
    
    1,434
    
    
    
    1,509
    
    
    
    
    
    
    
    13,876Net income (loss) for the nine months
ended June 30, 2004
    
    
    18,579
    
    
    
    (3,149
    )
    
    
    (189
    )
    
    
    
    
    
    
    15,241Net cash provided by operating activities for
the nine months ended June 30, 2005
    
    
    5,463
    
    
    
    6,288
    
    
    
    (291
    )
    
    
    
    
    
    
    11,460Net cash provided by operating activities for
the nine months ended June 30, 2004
    
    $
    24,234
    
    
    $
    420
    
    
    $
    2,016
    
    
    $
    
    
    
    $
    26,670
 13




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##### Table of Contents



Overview
  
    
    Systems, which is comprised primarily of proprietary software applications, third-party
hardware and peripherals and implementation and training. For the three months ended June
30, 2005, systems revenues accounted for approximately 39% of our total revenues;
    
    Product Support, which is comprised primarily of customer support activities, including
support through our advice line, software updates, preventive and remedial on-site
maintenance and depot repair services. Our product support services are generally provided
on a monthly subscription basis, and accordingly, revenues from this Segment are generally
recurring in nature. For the three months ended June 30, 2005, product support revenues
accounted for approximately 38% of our total revenues;
    
    Content and Data Services, which is comprised primarily of proprietary database and data
management products for our vertical markets (such as our comprehensive electronic
automotive parts and applications catalog and point of sale business analysis data),
connectivity services, e-commerce, networking and security monitoring management solutions.
For the three months ended June 30, 2005, content and data services revenues accounted for
approximately 20% of our total revenues; and
    
    Other Services, which is comprised primarily of business products, such as forms and
other paper products, and the revenues and earnings from our legacy customer lease
portfolio. Subsequent to July 2001, we outsourced all future customer lease origination to
a third party and thus have not originated, or had any interest in or contingency over, any
new leases since that time. For the three months ended June 30, 2005, other services
revenues accounted for approximately 3% of our total revenues.
  
    
    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 service chains in North America and
Europe. For the three months ended June 30, 2005, the automotive business generated
approximately 35% of our total revenues.
    
    The Hardware and Home Centers vertical market consists of independent hardware retailers,
home improvement centers, paint, glass and wallpaper stores, agribusiness and retail
nurseries and gardens, primarily in the United States. For the three months ended June 30,
2005, the Hardware and Home Centers business generated approximately 30% of our total
revenues.
    
    The Lumber and Building Materials vertical market consists of retailers and distributors
to builders and contractors in the lumber and building materials vertical markets, primarily
in the United States. For the three months ended June 30, 2005, the Lumber and Building
Materials business generated approximately 23% of our total revenues.
 14




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##### Table of Contents




    
    The Wholesale Distribution vertical market consists of distributors in a range of markets
including electrical
supply, plumbing, heating and air conditioning, brick, stone and related materials, roofing,
siding, insulation, industrial machinery and equipment, industrial supplies, and service
establishment equipment vendors, primarily in the United States. For the three months ended
June 30, 2005, the Wholesale Distribution business generated approximately 8% of our total
revenues.
    
    The Productivity Tools business primarily consists of software migration and application
development tools. For the three months ended June 30, 2005, the Productivity Tools
business generated approximately 4% of our total revenue.
 Segment Reporting and Classification
   Trends
 
 
 
 
 15




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##### Table of Contents



Acquisition of Business
   General Parts, Inc. Relationship
   Sale of Assets
  Recent Accounting Pronouncements
  16




---



##### Table of Contents



Accounting Changes and Error Corrections, a
replacement of APB Opinion No. 20 and FASB Statement No. 3
 Key Components of Results of Operations
 Revenues.
 Cost of Revenues
 Sales and Marketing Expense.
 Product Development Expense.
 General and Administrative Expense.
 17




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##### Table of Contents



Historical Results of Operations
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
 Revenues.
 Three Months EndedJune 30,2004
    
    2005
    
    Variance $
    
    Variance %(dollars in thousands)Systems Revenues:Automotive
    
    $
    4,235
    
    
    $
    3,891
    
    
    $
    (344
    )
    
    
    (8.1
    )%Hardware and Home Centers
    
    
    10,274
    
    
    
    12,994
    
    
    
    2,720
    
    
    
    26.5
    %Lumber and Building Materials
    
    
    5,393
    
    
    
    8,221
    
    
    
    2,828
    
    
    
    52.4
    %Wholesale Distribution
    
    
    628
    
    
    
    2,289
    
    
    
    1,661
    
    
    
    264.5
    %Productivity Tools
    
    
    
    
    
    
    827
    
    
    
    827
    
    
    
    Total Systems Revenues
    
    $
    20,530
    
    
    $
    28,222
    
    
    $
    7,692
    
    
    
    37.5
    %Product Support Revenues:Automotive
    
    $
    9,564
    
    
    $
    8,445
    
    
    $
    (1,119
    )
    
    
    (11.7
    )%Hardware and Home Centers
    
    
    6,877
    
    
    
    7,002
    
    
    
    125
    
    
    
    1.8
    %Lumber and Building Materials
    
    
    3,217
    
    
    
    7,595
    
    
    
    4,378
    
    
    
    136.1
    %Wholesale Distribution
    
    
    401
    
    
    
    2,875
    
    
    
    2,474
    
    
    
    617.0
    %Productivity Tools
    
    
    
    
    
    
    2,198
    
    
    
    2,198
    
    
    
    Total Product Support
Revenues
    
    $
    20,059
    
    
    $
    28,115
    
    
    $
    8,056
    
    
    
    40.2
    %Content and Data Services Revenues:Automotive
    
    $
    12,980
    
    
    $
    12,877
    
    
    $
    (103
    )
    
    
    (0.8
    )%Hardware and Home Centers
    
    
    1,167
    
    
    
    1,090
    
    
    
    (77
    )
    
    
    (6.6
    )%Lumber and Building Materials
    
    
    133
    
    
    
    219
    
    
    
    86
    
    
    
    64.7
    %Wholesale Distribution
    
    
    421
    
    
    
    567
    
    
    
    146
    
    
    
    34.7
    %Productivity Tools
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    Total Content and Data
Services Revenues
    
    $
    14,701
    
    
    $
    14,755
    
    
    $
    54
    
    
    
    0.4
    %Other Revenues:Automotive
    
    $
    212
    
    
    $
    212
    
    
    $
    
    
    
    
    Hardware and Home Centers
    
    
    1,236
    
    
    
    817
    
    
    
    (419
    )
    
    
    (33.7
    )%Lumber and Building Materials
    
    
    501
    
    
    
    1,243
    
    
    
    742
    
    
    
    148.1
    %Wholesale Distribution
    
    
    67
    
    
    
    58
    
    
    
    (9
    )
    
    
    (13.4
    )%Productivity Tools
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other
Revenues
    
    $
    2,016
    
    
    $
    2,330
    
    
    $
    314
    
    
    
    15.6
    %Total Revenues:Automotive
    
    $
    26,991
    
    
    $
    25,425
    
    
    $
    (1,566
    )
    
    
    (5.8
    )%Hardware and Home Centers
    
    
    19,554
    
    
    
    21,903
    
    
    
    2,349
    
    
    
    12.0
    %Lumber and Building Materials
    
    
    9,244
    
    
    
    17,278
    
    
    
    8,034
    
    
    
    86.9
    %Wholesale Distribution
    
    
    1,517
    
    
    
    5,789
    
    
    

    4,272
    
    
    
    280.3
    %Productivity Tools
    
    
    
    
    
    
    3,027
    
    
    
    3,027
    
    
    
    Total Revenues
    
    $
    57,306
    
    
    $
    73,422
    
    
    $
    16,116
    
    
    
    28.1
    %
 Total Revenues.
 Factors affecting systems revenues for the three months ended June 30, 2005.
 
 18




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##### Table of Contents




 
 
 Factors affecting product support revenues for the three months ended June 30, 2005.
 
 
 
 Factors affecting other revenues for the three months ended June 30, 2005.
 
 
 Cost of Revenues and Gross Margin as a Percentage of Revenues.
 Three Months EndedJune 30,2004
    
    2005
    
    Variance $
    
    Variance %(dollars in thousands)Cost of Revenues:Systems
    
    $
    12,846
    
    
    $
    16,595
    
    
    $
    3,749
    
    
    
    29.2
    %Product Support
    
    
    9,179
    
    
    
    12,475
    
    
    
    3,296
    
    
    
    35.9
    %Content and Data Services
    
    
    4,782
    
    
    
    4,143
    
    
    
    (639
    )
    
    
    (13.4
    )%Other
    
    
    1,157
    
    
    
    1,523
    
    
    
    366
    
    
    
    31.6
    %Total Cost of Revenues
    
    $
    27,964
    
    
    $
    34,736
    
    
    $
    6,772
    
    
    
    24.2
    %
 19




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##### Table of Contents



Three Months EndedJune 30,2004
    
    2005Gross Margin as a Percentage of Revenues:Systems
    
    
    37.4
    %
    
    
    41.2
    %Product Support
    
    
    54.2
    %
    
    
    55.6
    %Content and Data Services
    
    
    67.5
    %
    
    
    71.9
    %Other
    
    
    42.6
    %
    
    
    34.6
    %Total Gross Margin
    
    
    51.2
    %
    
    
    52.7
    %
 Total Cost of Revenues.
 Cost of Systems Revenues.
 Cost of Product Support Revenues.
 Cost of Content and Data Services Revenues.
 Operating Expenses.
 Three Months EndedJune 30,2004
    
    2005
    

Variance $
    

Variance %(dollars in thousands)Sales and Marketing Expense
    
    $
    7,977
    
    
    $
    9,495
    
    
    $
    1,518
    
    
    
    19.0
    %Product Development
Expense
    
    
    4,099
    
    
    
    6,606
    
    
    
    2,507
    
    
    
    61.2
    %General and Administrative
Expense
    
    
    7,221
    
    
    
    8,336
    
    
    
    1,115
    
    
    
    15.4
    %Total Operating Expenses
    
    $
    19,297
    
    
    $
    24,437
    
    
    $
    5,140
    
    
    
    26.6
    %
 20




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##### Table of Contents



 Sales and Marketing Expense.
  Product Development Expense.
  General and Administrative Expense.
 Interest Expense.
 Net Income.
 21




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##### Table of Contents



Nine Months Ended June 30, 2005 Compared to Nine Months Ended June 30, 2004
 Revenues.
 Nine Months Ended(dollars in thousands)
    
    June 30,2004
    
    2005
    
    Variance $
    
    Variance %Systems Revenues:Automotive
    
    $
    13,250
    
    
    $
    10,957
    
    
    $
    (2,293
    )
    
    
    (17.3
    )%Hardware and Home Centers
    
    
    29,489
    
    
    
    37,514
    
    
    
    8,025
    
    
    
    27.2
    %Lumber and Building Materials
    
    
    16,684
    
    
    
    22,643
    
    
    
    5,959
    
    
    
    35.7
    %Wholesale Distribution
    
    
    1,974
    
    
    
    3,851
    
    
    
    1,877
    
    
    
    95.1
    %Productivity Tools
    
    
    
    
    
    
    827
    
    
    
    827
    
    
    
    Total Systems Revenues
    
    $
    61,397
    
    
    $
    75,792
    
    
    $
    14.395
    
    
    
    23.4
    %Product Support Revenues:Automotive
    
    $
    28,632
    
    
    $
    26,249
    
    
    $
    (2,383
    )
    
    
    (8.3
    )%Hardware and Home Centers
    
    
    20,457
    
    
    
    21,504
    
    
    
    1,047
    
    
    
    5.1
    %Lumber and Building Materials
    
    
    9,479
    
    
    
    14,064
    
    
    
    4,585
    
    
    
    48.4
    %Wholesale Distribution
    
    
    1,217
    
    
    
    3,712
    
    
    
    2,495
    
    
    
    205.0
    %Productivity Tools
    
    
    
    
    
    
    2,198
    
    
    
    2,198
    
    
    
    Total Product Support
Revenues
    
    $
    59,785
    
    
    $
    67,727
    
    
    $
    7,942
    
    
    
    13.3
    %Content and Data Services Revenues:Automotive
    
    $
    38,297
    
    
    $
    37,964
    
    
    $
    (333
    )
    
    
    (0.9
    )%Hardware and Home Centers
    
    
    2,826
    
    
    
    3,335
    
    
    
    509
    
    
    
    18.0
    %Lumber and Building Materials
    
    
    429
    
    
    
    636
    
    
    
    207
    
    
    
    48.3
    %Wholesale Distribution
    
    
    1,272
    
    
    
    1,564
    
    
    
    292
    
    
    
    23.0
    %Productivity Tools
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    Total Content and Data
Services Revenues
    
    $
    42,824
    
    
    $
    43,501
    
    
    $
    677
    
    
    
    1.6
    %Other Revenues:Automotive
    
    $
    696
    
    
    $
    212
    
    
    $
    (484
    )
    
    
    (69.5
    )%Hardware and Home Centers
    
    
    2,749
    
    
    
    2,722
    
    
    
    (27
    )
    
    
    (1.0
    )%Lumber and Building Materials
    
    
    1,615
    
    
    
    2,316
    
    
    
    701
    
    
    
    43.4
    %Wholesale Distribution
    
    
    242
    
    
    
    239
    
    
    
    (3
    )
    
    
    (1.2
    )%Productivity Tools
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other
Revenues
    
    $
    5,302
    
    
    $
    5,489
    
    
    $
    187
    
    
    
    3.5
    %Total Revenues:Automotive
    
    $
    80,875
    
    
    $
    75,382
    
    
    $
    (5,493
    )
    
    
    (6.8
    )%Hardware and Home Centers
    
    
    55,521
    
    
    
    65,075
    
    
    
    9,554
    
    
    
    17.2
    %Lumber and Building Materials
    
    
    28,207
    
    
    
    39,659
    
    
    
    11,452
    
    
    
    40.6
    %Wholesale Distribution
    
    
    4,705
    
    
    
    9,366
    
    
    
    4,661
    
    
    
    99.1
    %Productivity Tools
    
    
    
    
    
    
    3,027
    
    
    
    3,027
    
    
    
    Total Revenues
    
    $
    169,308
    
    
    $
    192,509
    
    
    $
    23,201
    
    
    
    13.7
    %
 Total Revenues.
 Factors affecting systems revenues for the nine months ended June 30, 2005.
 
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
 
 
 
 Factors affecting product support revenues for the nine months ended June 30, 2005.
 
 
 
 
 
 Factors affecting content and data services revenues for the nine months ended June 30, 2005.
 
 
 Factors affecting other revenues for the nine months ended June 30, 2005.
 
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##### Table of Contents



Cost of Revenues and Gross Margin as a Percentage of Revenues.
 Nine Months EndedJune 30,2004
    
    2005
    
    Variance $
    
    Variance %(dollars in thousands)Cost of Revenues:Systems
    
    $
    36,046
    
    
    $
    45,207
    
    
    $
    9,161
    
    
    
    25.4
    %Product Support
    
    
    27,672
    
    
    
    30,485
    
    
    
    2,813
    
    
    
    10.2
    %Content & Data Services
    
    
    13,924
    
    
    
    11,934
    
    
    
    (1,990
    )
    
    
    (14.3
    )%Other
    
    
    3,134
    
    
    
    3,614
    
    
    
    480
    
    
    
    15.3
    %Total Cost of Revenues
    
    $
    80,776
    
    
    $
    91,240
    
    
    $
    10,464
    
    
    
    13.0
    %
  Nine Months EndedJune 30,2004
    
    2005Gross Margin as a Percentage of Revenues:Systems
    
    
    41.3
    %
    
    
    40.3
    %Product Support
    
    
    53.7
    %
    
    
    55.0
    %Content & Data Services
    
    
    67.5
    %
    
    
    72.6
    %Other
    
    
    40.9
    %
    
    
    34.1
    %Total Gross Margin
    
    
    52.3
    %
    
    
    52.6
    %
 Cost of Revenues.
 Cost of Systems Revenues.
 Cost of Product Support Revenues.
 Cost of Content and Data Services Revenues.
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Operating Expenses.
 Nine Months EndedJune 30,2004
    
    2005
    

Variance $
    

Variance %(dollars in thousands)Sales and Marketing Expense
    
    $
    23,320
    
    
    $
    26,467
    
    
    $
    3,147
    
    
    
    13.5
    %Product Development Expense
    
    
    11,583
    
    
    
    14,752
    
    
    
    3,169
    
    
    
    27.4
    %General and Administrative Expense
    
    
    19,556
    
    
    
    21,687
    
    
    
    2,131
    
    
    
    10.9
    %Total Operating Expenses
    
    $
    54,459
    
    
    $
    62,906
    
    
    $
    8,447
    
    
    
    15.5
    %
   Sales and Marketing Expense.
  Product Development Expense.
  General and Administrative Expense.
 Interest Expense.
 Gain on Sale of Assets.
 Net Income.
 Liquidity and Capital Resources
  25




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10.1
    
    Indemnity agreement dated July 28, 2005 among Activant Solutions Holdings Inc,
Activant Solutions Inc. and Robert Shaw*31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by A. Laurence Jones.*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Greg Petersen.*32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by A. Laurence Jones.*32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Greg Petersen.*
 
 *
    
    Filed Herewith 28




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ACTIVANT SOLUTIONS INC.By:
    /s/ GREG PETERSENGreg PetersenSenior Vice President and Chief Financial Officer 29