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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
|- |  | -------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



| |  | For the quarterly period ended December 31, 2002
| |  | ------------------------------------------------



| ̈ |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
|- |  | --------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



Commission File Number 333-49389



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Cooperative
Computing, Inc.

(Exact name of Registrant as specified in its charter)



|Delaware                                                       |  | 94-2160013                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|804 Las Cimas Parkway, Suite 200 Austin, Texas |  | 78746     
|---------------------------------------------- |  | ----------
|(Address of principal executive offices)       |  | (Zip Code)



(512)
328-2300

(Registrants telephone number, including area code)



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Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date:



|Class        |  | Outstanding at February 12, 2003
|------------ |  | --------------------------------
|Common Stock |  | 1,000 shares                    



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COOPERATIVE COMPUTING, INC.

INDEX



|                                                                                                         |  | PAGE
|-------------------------------------------------------------------------------------------------------- |  | ----
|FORWARD-LOOKING STATEMENTS                                                                               |  | 3   
|                                                                                                        
|PART IFINANCIAL INFORMATION                                                                             |  | 4   
|                                                                                                        
|Note to Financial Information                                                                            |  | 4   
|                                                                                                        
|ITEM 1.FINANCIAL STATEMENTS                                                                             |  | 5   
|                                                                                                        
|COOPERATIVE COMPUTING, INC.                                                                              |  |     
|                                                                                                        
|Consolidated Balance Sheets as of September 30, 2001 and December 31, 2002                               |  | 5   
|                                                                                                        
|Consolidated Statements of Operations for the three months ended December 31, 2001 and December 31, 2002 |  | 6   
|                                                                                                        
|Consolidated Statements of Cash Flows for the three months ended December 31, 2001 and December 31, 2002 |  | 7   
|                                                                                                        
|Notes to Consolidated Financial Statements                                                               |  | 8   
|                                                                                                        
|ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS            |  | 11  
|                                                                                                        
|ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                       |  | 14  
|                                                                                                        
|ITEM 4.CONTROLS AND PROCEDURES                                                                          |  | 14  
|                                                                                                        
|PART IIOTHER INFORMATION                                                                                |  |     
|                                                                                                        
|ITEM 1.LEGAL PROCEEDINGS                                                                                |  | 15  
|                                                                                                        
|ITEM 2.CHANGES IN SECURITIES AND USE OF PROCEEDS                                                        |  | 15  
|                                                                                                        
|ITEM 3.DEFAULTS UPON SENIOR SECURITIES                                                                  |  | 15  
|                                                                                                        
|ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                              |  | 15  
|                                                                                                        
|ITEM 5.OTHER INFORMATION                                                                                |  | 15  
|                                                                                                        
|ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K                                                                 |  | 15  
|                                                                                                        
|SIGNATURE                                                                                                |  | 16  
|                                                                                                        
|SECTION 302 CERTIFICATIONS                                                                               |  | 17  



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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, THE COMPANY CLAIMS 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: (1) INCREASED COMPETITION; (2) RAPID TECHNOLOGICAL CHANGE; (3) INCREASED COSTS; (4) RISKS ASSOCIATED WITH THE INTRODUCTION OF NEW PRODUCTS AND PRODUCT UPGRADES AND DEPENDENCE
ON PROPRIETARY TECHNOLOGY; (5) THE LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (6) THE INABILITY OF THE COMPANY TO SUCCESSFULLY INTEGRATE BUSINESSES ACQUIRED IN THE FUTURE AND TO REALIZE ANTICIPATED REVENUE AND COST SAVINGS OPPORTUNITIES; (7)
INCREASES IN THE COMPANYS COST OF BORROWINGS OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; AND (8) CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH FACTORS WILL
BE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. IN ADDITION, OTHER FACTORS THAT COULD AFFECT THE FUTURE RESULTS OF THE COMPANY 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 THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS 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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PART 1. FINANCIAL INFORMATION



The
consolidated financial statements filed on Form 10-K and 10-Q prior to September 30, 2002 included the accounts of Cooperative Computing Holding Company, Inc. (Holding) and its wholly owned subsidiary Cooperative Computing, Inc.
(CCITRIAD or the Company). Holding has no assets or liabilities other than (1) its wholly owned subsidiary CCITRIAD and (2) its Redeemable Class A Common Stock, the net proceeds of which were contributed in full to CCITRIAD.
The difference between the financial statements of Holding and those of CCITRIAD relate solely to the Class A Common Stock. The Class A Common Stock is an obligation of Holding and not of the registrant and the registrant does not guarantee the
Class A Common Stock. Prior years financial presentation resulted in the inclusion of the accretion of Holdings Redeemable Common Stock of $4.0 million for the three months ended December 31, 2001, as well as its net loss to shareholders
of $2.7 million. Additionally, Holdings balances for the Redeemable Class A Common Stock of $55.1 million as of December 31, 2001, and for stockholders deficit of $78.2 million as of December 31, 2001 were depicted. The cash flow for
both companies was identical in each year presented. CCITRIAD, as the registrant, is presented in the following unaudited interim financial statements.



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##### Table of Contents



Item 1. Financial Statements.



COOPERATIVE COMPUTING, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



|                                                                                                                                                 |  | September 30, 2002 |          |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | -------- | - | ----------------- | -
|                                                                                                                                                 |  |                    |          |   | (Unaudited)       |  
|ASSETS:                                                                                                                                          |  |                    |          |   |                   |  
|Current assets:                                                                                                                                  |  |                    |          |   |                   |  
|Cash and cash equivalents                                                                                                                        |  | $                  | 398      |   |                   | $
|Trade accounts receivable, net of allowance for doubtful accounts of $6,751 and $6,837
at September 30, 2002 and December 31, 2002, respectively |  |                    | 29,013   |   |                   |  
|Inventories, net                                                                                                                                 |  |                    | 2,380    |   |                   |  
|Investment in leases, net                                                                                                                        |  |                    | 2,820    |   |                   |  
|Deferred income taxes                                                                                                                            |  |                    | 8,303    |   |                   |  
|Prepaid expenses and other current assets                                                                                                        |  |                    | 4,122    |   |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total current assets                                                                                                                             |  |                    | 47,036   |   |                   |  
|Service parts, net                                                                                                                               |  |                    | 1,780    |   |                   |  
|Property and equipment, net                                                                                                                      |  |                    | 6,480    |   |                   |  
|Long-term investment in leases                                                                                                                   |  |                    | 4,468    |   |                   |  
|Capitalized computer software costs, net                                                                                                         |  |                    | 10,257   |   |                   |  
|Databases, net                                                                                                                                   |  |                    | 12,094   |   |                   |  
|Goodwill                                                                                                                                         |  |                    | 87,159   |   |                   |  
|Other assets                                                                                                                                     |  |                    | 16,513   |   |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total assets                                                                                                                                     |  | $                  | 185,787  |   |                   | $
|                                                                                                                                                 |  |                    |          |   |                   |  
|LIABILITIES AND STOCKHOLDERS DEFICIT:                                                                                                           |  |                    |          |   |                   |  
|Current liabilities:                                                                                                                             |  |                    |          |   |                   |  
|Accounts payable                                                                                                                                 |  | $                  | 8,095    |   |                   | $
|Payroll related accruals                                                                                                                         |  |                    | 13,564   |   |                   |  
|Deferred revenue                                                                                                                                 |  |                    | 12,529   |   |                   |  
|Current portion of long-term debt                                                                                                                |  |                    | 8,828    |   |                   |  
|Accrued income taxes                                                                                                                             |  |                    | 3,969    |   |                   |  
|Accrued expenses and other current liabilities                                                                                                   |  |                    | 8,940    |   |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total current liabilities                                                                                                                        |  |                    | 55,925   |   |                   |  
|Long-term debt                                                                                                                                   |  |                    | 129,169  |   |                   |  
|Deferred income taxes and other liabilities                                                                                                      |  |                    | 15,546   |   |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total liabilities                                                                                                                                |  |                    | 200,640  |   |                   |  
|Stockholders deficit:                                                                                                                           |  |                    |          |   |                   |  
|Common Stock:                                                                                                                                    |  |                    |          |   |                   |  
|Par value $.01, authorized, issued and outstanding, 1,000 shares at September 30, 2002 and December 31, 2002                                     |  |                    |         |   |                   |  
|Additional paid-in capital                                                                                                                       |  |                    | 113,155  |   |                   |  
|Retained deficit                                                                                                                                 |  |                    | (127,236 | ) |                   |  
|Other accumulated comprehensive income:                                                                                                          |  |                    |          |   |                   |  
|Cumulative translation adjustment                                                                                                                |  |                    | (772     | ) |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total stockholders deficit                                                                                                                      |  |                    | (14,853  | ) |                   |  
|                                                                                                                                                 |  |                    |          |   |                   |  
|Total liabilities and stockholders deficit                                                                                                      |  | $                  | 185,787  |   |                   | $
|                                                                                                                                                 |  |                    |          |   |                   |  



See
accompanying notes



5



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##### Table of Contents



COOPERATIVE
COMPUTING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands)



|                                        |  | Three Months Ended December 31, |       
|--------------------------------------- |  | ------------------------------- | ------
|                                        |  | 2001                            |       
|Revenues:                               |  |                                 |       
|Systems                                 |  | $                               | 14,581
|Services and finance                    |  |                                 | 40,038
|                                        |  |                                 |       
|Total revenues                          |  |                                 | 54,619
|Cost of revenues:                       |  |                                 |       
|Systems                                 |  |                                 | 9,087 
|Services and finance                    |  |                                 | 19,326
|                                        |  |                                 |       
|Total cost of revenues                  |  |                                 | 28,413
|                                        |  |                                 |       
|Gross profit                            |  |                                 | 26,206
|Operating expenses:                     |  |                                 |       
|Sales and marketing                     |  |                                 | 9,038 
|Product development                     |  |                                 | 3,649 
|General and administrative              |  |                                 | 7,069 
|                                        |  |                                 |       
|Total operating expenses                |  |                                 | 19,756
|                                        |  |                                 |       
|Operating income                        |  |                                 | 6,450 
|Interest expense                        |  |                                 | (4,057
|Equity loss in affiliate                |  |                                 | (200  
|Foreign exchange loss                   |  |                                 | (142  
|Other income, net                       |  |                                 | 337   
|                                        |  |                                 |       
|Income before income taxes              |  |                                 | 2,388 
|Income tax expense                      |  |                                 | 1,058 
|                                        |  |                                 |       
|Net income                              |  | $                               | 1,330 
|                                        |  |                                 |       
|Comprehensive income:                   |  |                                 |       
|Net income                              |  | $                               | 1,330 
|Foreign currency translation adjustment |  |                                 | 280   
|                                        |  |                                 |       
|Comprehensive income                    |  | $                               | 1,610 
|                                        |  |                                 |       



See
accompanying notes



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COOPERATIVE
COMPUTING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)



|                                                                                  |  | Three Months Ended December 31, |       
|--------------------------------------------------------------------------------- |  | ------------------------------- | ------
|                                                                                  |  | 2001                            |       
|OPERATING ACTIVITIES                                                              |  |                                 |       
|Net income                                                                        |  | $                               | 1,330 
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                                 |       
|Depreciation                                                                      |  |                                 | 1,845 
|Amortization                                                                      |  |                                 | 2,820 
|Deferred income taxes                                                             |  |                                 |      
|Equity loss from affiliate                                                        |  |                                 | 200   
|Equity income from partnerships                                                   |  |                                 | (79   
|Lease loss provision                                                              |  |                                 | 925   
|Provision for doubtful accounts                                                   |  |                                 | 3,216 
|Other, net                                                                        |  |                                 | 177   
|Changes in assets and liabilities:                                                |  |                                 |       
|Trade accounts receivable                                                         |  |                                 | (3,040
|Inventories                                                                       |  |                                 | (367  
|Investment in leases                                                              |  |                                 | 791   
|Prepaid expenses and other assets                                                 |  |                                 | 583   
|Accounts payable                                                                  |  |                                 | (870  
|Deferred revenue                                                                  |  |                                 | 1,123 
|Accrued expenses and other liabilities                                            |  |                                 | 2,340 
|                                                                                  |  |                                 |       
|Net cash provided by operating activities                                         |  |                                 | 10,994
|                                                                                 
|INVESTING ACTIVITIES                                                              |  |                                 |       
|Purchase of property and equipment                                                |  |                                 | (975  
|Capitalized computer software costs and databases                                 |  |                                 | (2,254
|Purchase of service parts                                                         |  |                                 | (390  
|Equity distributions from partnerships                                            |  |                                 | 40    
|                                                                                  |  |                                 |       
|Net cash used in investing activities                                             |  |                                 | (3,579
|                                                                                 
|FINANCING ACTIVITIES                                                              |  |                                 |       
|Proceeds from debt facility                                                       |  |                                 |      
|Payment on long-term debt facilities                                              |  |                                 | (9,706
|                                                                                  |  |                                 |       
|Net cash used in financing activities                                             |  |                                 | (9,706
|                                                                                  |  |                                 |       
|Net change in cash and cash equivalents                                           |  |                                 | (2,291
|Cash and cash equivalents, beginning of period                                    |  |                                 | 3,897 
|                                                                                  |  |                                 |       
|Cash and cash equivalents, end of period                                          |  | $                               | 1,606 
|                                                                                  |  |                                 |       
|Supplemental disclosures of cash flow information                                 |  |                                 |       
|Cash paid during the period for:                                                  |  |                                 |       
|Interest                                                                          |  | $                               | 1,440 
|                                                                                  |  |                                 |       
|Income taxes                                                                      |  | $                               | 298   
|                                                                                  |  |                                 |       



See
accompanying notes



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##### Table of Contents



COOPERATIVE
COMPUTING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002

(UNAUDITED)



1. BASIS OF PRESENTATION



The accompanying unaudited consolidated financial statements of CCITRIAD have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 2002 may not be indicative of the results for the full fiscal year ending September 30, 2003.



Certain amounts in the three months ended December 31, 2001 have
been reclassified to conform to the presentation for the three months ended December 31, 2002.



2. LEASE RECEIVABLES



Activity in the following servicing and recourse obligation liability accounts (recorded in other liabilities in the Companys balance sheet) was as
follows (in thousands):



|                              |  | LEASE SERVICING OBLIGATION |     |   | RECOURSE OBLIGATION |  
|----------------------------- |  | -------------------------- | --- | - | ------------------- | -
|Balance at September 30, 2002 |  | $                          | 439 |   |                     | $
|Newly-created liabilities     |  |                            | 3   |   |                     |  
|Recoveries                    |  |                            |    |   |                     |  
|Charges and lease write-offs  |  |                            | (79 | ) |                     |  
|                              |  |                            |     |   |                     |  
|Balance at December 31, 2002  |  | $                          | 363 |   |                     | $
|                              |  |                            |     |   |                     |  



3. INCOME TAXES



The Company recorded income tax
expense for the three months ended December 31, 2002 at an effective rate of 39.3%, which is based on the Companys anticipated results for the full fiscal year. The Companys income tax expense differs from the amount computed by applying
the statutory rate to income before income taxes due to the impact of permanent differences, such as meals and entertainment expense, and amortization of certain acquired intangibles.



4. COMMON STOCK OPTION PLAN



During the quarter ended December 31, 2002, Holding, the Companys parent company, approved the grant of 250,000 options
to the employees of the company at an exercise price equal to the then estimated fair market value of $2.50 per share under the Cooperative Computing Holding Company, Inc. 2000 Stock Option Plan.



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5. DEBT



On December 3, 2002, the Company
replaced the Restated Senior Credit Facilities with a new three year credit agreement comprised of a $35.0 million term loan facility and a $17.5 million revolving credit facility. The term loan facility is payable in quarterly installments from
March 31, 2003 through December 31, 2005 and bears interest at CCITRIADs option either at (i) a margin of 3.5% applied to the greatest of (a) the Prime Rate, (b) the Base CD Rate plus 1% and (c) the Federal Funds Effective Rate plus 0.5% or
(ii) a margin of 4.5% applied to the Eurodollar Base Rate divided by the product of one minus the Eurocurrency Reserve Requirements. In March, June and September 2003 each quarterly installment is $2.0 million. The revolving credit facility provides
for maximum borrowings of $17.5 million (including letters of credit up to a maximum of $10.0 million) and matures in December 2005. The new credit agreement includes restrictions on certain activities and financial covenant tests.



6. RECENT ACCOUNTING PRONOUNCEMENTS



In August 2001, the FASB issued SFAS No. 143, Accounting for
Asset Retirement Obligations. The statement is effective for financial statements for fiscal years beginning after June 15, 2002. The new statement establishes accounting standards for recognition of a liability for an asset retirement
obligation and the associated asset retirement cost. The Company has no asset retirement obligations, therefore there was no impact from the adoption of this statement as of October 1, 2002.



In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets(SFAS 144). The statement broadens the presentation of discontinued operations to include more disposal transactions, and establishes a single accounting model for long-lived assets to be
disposed of by sale. SFAS 144 is effective for financial statements for fiscal years beginning after December 15, 2001. There was no material impact from the adoption of this statement as of October 1, 2002.



In June 2002, the FASB issued SFAS No. 145, Recission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections(SFAS 145). The new statement requires sale-leaseback accounting for those lease modifications that have economic effects similar to sale-leaseback
transactions. It also provides new guidance for debt extinguishment transactions that are part of an entitys recurring operations. SFAS 145 is effective for fiscal years beginning after May 15, 2002. There was no material impact from the
adoption of this statement as of October 1, 2002.



In June 2002,
the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities, effective for exit or disposal activities initiated after December 31, 2002. The statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. The Company does not anticipate any material impact from this statement on its financial position or results of operations.



In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation  Transition andDisclosure, effective for fiscal years ending after December 15, 2002. This statement amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee compensation. The statement also requires prominent disclosures about the method of accounting for stock-based employee compensation and its effect on reported
results. The Company does not anticipate any material impact from this statement on its financial position or results of operations.



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7. SEGMENT REPORTING



The Companys business
operations are organized into two divisions, the automotive division and the hardlines and lumber division, as shown below. Additionally, a breakdown by geographic area of total revenues and total assets is disclosed. The Americas geographic area
covers the United States and Canada. The Europe geographic area covers the United Kingdom, Ireland and France.



|                                             |  | (In thousands) Three Months Ended December 31, |        
|-------------------------------------------- |  | ---------------------------------------------- | -------
|                                             |  | 2001                                           |        
|Systems revenues:                            |  |                                                |        
|Automotive                                   |  | $                                              | 5,390  
|Hardlines and lumber                         |  |                                                | 9,191  
|                                             |  |                                                |        
|Total systems revenues:                      |  |                                                | 14,581 
|                                            
|Services and finance revenues:               |  |                                                |        
|Automotive                                   |  |                                                | 24,955 
|Hardlines and lumber                         |  |                                                | 15,083 
|                                             |  |                                                |        
|Total services and finance revenues:         |  |                                                | 40,038 
|                                            
|Systems costs of revenues:                   |  |                                                |        
|Automotive                                   |  |                                                | 3,609  
|Hardlines and lumber                         |  |                                                | 5,478  
|                                             |  |                                                |        
|Total systems costs of revenues:             |  |                                                | 9,087  
|                                            
|Services and finance cost of revenues:       |  |                                                |        
|Automotive                                   |  |                                                | 12,160 
|Hardlines and lumber                         |  |                                                | 7,166  
|                                             |  |                                                |        
|Total services and finance cost of revenues: |  |                                                | 19,326 
|                                            
|Sales and marketing:                         |  |                                                |        
|Automotive                                   |  |                                                | 4,166  
|Hardlines and lumber                         |  |                                                | 4,872  
|                                             |  |                                                |        
|Total sales and marketing:                   |  |                                                | 9,038  
|                                            
|Product development:                         |  |                                                |        
|Automotive                                   |  |                                                | 2,766  
|Hardlines and lumber                         |  |                                                | 883    
|                                             |  |                                                |        
|Total product development:                   |  |                                                | 3,649  
|                                            
|General and administrative                   |  |                                                | 7,069  
|Interest expense                             |  |                                                | (4,057 
|Other income (expense), net                  |  |                                                | (5     
|                                             |  |                                                |        
|Income before income taxes                   |  | $                                              | 2,388  
|                                             |  |                                                |        
|Revenues:                                    |  |                                                |        
|Americas                                     |  | $                                              | 53,253 
|Europe                                       |  |                                                | 1,366  
|                                             |  |                                                |        
|Total revenues                               |  | $                                              | 54,619 
|                                             |  |                                                |        
|Assets:                                      |  |                                                |        
|Americas                                     |  | $                                              | 198,767
|Europe                                       |  |                                                | 5,108  
|                                             |  |                                                |        
|                                             |  | $                                              | 203,875
|                                             |  |                                                |        



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following
discussion of the financial condition and results of operations of the Company should be read in conjunction with the unaudited historical consolidated financial statements and notes thereto, which are included elsewhere herein.



General



CCITRIAD is a leading designer and provider of management information systems
and services for the automotive parts aftermarket and the hardlines and lumber industry. The automotive parts aftermarket consists of the production, sale and installation of both new and remanufactured parts used in the maintenance and repair of
automobiles and light trucks. The hardlines and lumber industry consists of the sale of products and services for residential and commercial building construction, maintenance and repair, lawn and garden, and agribusiness.



The Companys products are designed to improve the operating efficiency
and profitability of distributors and retailers through enhanced information, control and inventory management. The Companys products enable users to conduct computerized identification, location and selection of parts, to manage inventory and
to obtain sales history and point-of-sale information. The system offerings are enhanced by extensive information services featuring specialized database products and by customer support and maintenance services. Interconnectivity throughout the
distribution channel is provided by the Companys network of electronically linked customers, which adds to the efficiency and functionality of the Companys products and enhances customer profitability.



The Company is a leading provider of industry-specific management information
solutions to every level of the wholesale distribution channel in the automotive parts aftermarket, which includes manufacturers, warehouse distributors, parts sales outlets and service dealers. By servicing all of these levels, the Company has
acquired substantial industry knowledge to improve and support the information products and services that are made available to its customers. For the hardlines and lumber industry, the Company provides point of sale movement information services to
manufacturers.



Historical
Results of Operations



Three Months Ended December 31, 2002
Compared to Three Months ended December 31, 2001



Revenues for the three months ended December 31, 2002 were $57.6 million, an increase of $3.0 million, or 6%, from the $54.6 million recorded in the prior years period. Automotive division revenues for the first quarter
were $29.8 million, a decrease of $0.5 million, or 2%, as compared to the quarter ended December 31, 2001. The hardlines and lumber divisions revenues were $27.8 million for the three months ended December 31, 2002, an increase of $3.5
million, or 15%.



Systems revenues for the three months ended
December 31, 2002 were $17.7 million, compared to $14.6 million for the three months ended December 31, 2001, an increase of $3.1 million, or 21%. Systems revenues for the automotive division for the three months ended December 31, 2002 decreased
$0.4 million to $5.0 million, as compared to last year, a decrease of 7%. The revenue decrease was primarily due to a higher number of customers upgrading their store systems in the previous year. Systems revenues for the hardlines and lumber
division for the three months ended December 31, 2002 increased $3.5 million to $12.7 million, an improvement of 38%, as compared to the three months ended December 31, 2001. The revenue increase was due to generally higher sales across the various
hardlines and lumber system offerings.



Services and finance
revenues were $39.9 million for the three months ended December 31, 2002, compared to $40.0 million for the three months ended December 31, 2001, a decrease of $0.1 million, or less than 1%. For the three months ended December 31, 2002, services and
finance revenues for the automotive division decreased $0.1 million, or 1%, to $24.8 million, while the hardlines and lumber divisions revenues remained constant at $15.1 million, as compared to the three months ended December 31, 2001.



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Cost of revenue was $27.6
million for the three months ended December 31, 2002, compared to $28.4 million for the three months ended December 31, 2001, a decrease of $0.8 million, or 3%. For the three months ended December 31, 2002, cost of revenues for the automotive
division decreased $2.0 million, or 13%, to $13.8 million. For the quarter ended December 31, 2002, cost of revenues for the hardlines and lumber division increased $1.2 million, or 9%, to $13.8 million as compared to the three months ended December
31, 2001.



Cost of systems revenues was $10.0 million for the
three months ended December 31, 2002, compared to $9.1 million for the three months ended December 31, 2001, an increase of $0.9 million, or 10%. Cost of systems revenues for the automotive division for the three months ended December 31, 2002
decreased $0.5 million, or 13%, to $3.1 million compared to the three months ended December 31, 2001. The decrease in cost of systems revenues is primarily due to lower systems revenue. Cost of systems revenues as a percentage of systems revenues
for the automotive division was 62% and 67% for the three months ended December 31, 2002 and 2001, respectively. The decreased cost percentage is primarily due to a different systems mix being sold in the quarter ended December 31, 2002. Cost of
systems revenues for the hardlines and lumber division for the three months ended December 31, 2002 increased $1.4 million to $6.9 million compared to the three months ended December 31, 2001, an increase of 26%. The increase in cost of systems
revenue is primarily due to the increase in systems sales. Cost of systems revenue as a percentage of systems for the hardlines and lumber division was 54% and 60% for the three months ended December 31, 2002 and 2001, respectively. The decreased
cost percentage is primarily due to a different product mix sold in the quarter ended December 31, 2002.



Cost of revenues for services and finance was $17.6 million for the three months ended December 31, 2002, compared to $19.3 million for the three months ended December 31, 2001, a decrease of $1.7
million, or 9%. Cost of revenues for services and finance for the automotive division for the three months ended December 31, 2002 decreased $1.5 million to $10.6 million, or 13%, compared to the three months ended December 31, 2001. Cost of
revenues for services and finance for the automotive division was down due to several factors, including lower bad debt expense, lower personnel costs, lower communications costs, and lower facilities costs. Cost of revenues for services and finance
for the hardlines and lumber division for the three months ended December 31, 2002 decreased $0.2 million to $6.9 million, compared to the three months ended December 31, 2001. Cost of revenues of services and finance for the hardlines and lumber
division decreased primarily due to lower communication and facility expenses. As a percentage of automotive services revenues, cost of revenues for services and finance for the automotive division was 43% and 49% for the three months ended December
31, 2002 and 2001, respectively. As a percentage of hardlines and lumber division services revenues, cost of revenues for services and finance for the hardlines and lumber division was 46% and 48% for the three months ended December 31, 2002 and
2001, respectively. The percentage fluctuations are primarily due to the factors mentioned above.



Sales and marketing expense for the three months ended December 31, 2002 decreased $1.7 million, or 19%, to $7.3 million, as compared to the three months ended December 31, 2001. Sales and marketing
expense for the automotive division for the three months ended December 31, 2002 decreased $0.9 million to $3.2 million, as compared to the three months ended December 31, 2001. As a percentage of automotive revenue, sales and marketing expense for
the automotive division was 11% and 14% for the three months ended December 31, 2002 and 2001, respectively. Sales and marketing expense for the hardlines and lumber division for the three months ended December 31, 2002 decreased $0.8 million to
$4.1 million, as compared to the three months ended December 31, 2001. As a percentage of hardlines and lumber division revenue, sales and marketing expense for the hardlines and lumber division was 15% and 20% for the three months ended December
31, 2002 and 2001, respectively. The decreases in sales and marketing expense in the automotive and hardlines and lumber divisions were due to lower bad debt expense related to the outsourcing of lease originations and lower personnel costs related
to a new account strategy.



Product development expenses for the
three months ended December 31, 2002 increased $0.1 million, or 2%, to $3.7 million, as compared to the three months ended December 31, 2001. As a percentage of revenue, product development expense was 6% and 7% for the three months ended December
31, 2002 and December 31, 2001, respectively. Product development expenses for the automotive division for the three months ended December 31, 2002 remained constant at $2.7 million. As a percentage of automotive division revenue, product
development expenses for the automotive division remained at 9% for the three months ended December 31, 2002 and 2001, respectively. Product development





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expenses for the hardlines and lumber division for the three months ended December 31, 2002 increased $0.1
million to $1.0 million for the three months ended December 31, 2002. As a percentage of hardlines and lumber division revenue, product development expense for the hardlines and lumber division remained constant at 4% for the three months ended
December 31, 2002 and 2001.



General and administrative expense
for the three months ended December 31, 2002 was $6.8 million, a decrease of $0.3 million, or 4%, as compared to the three months ended December 31, 2001. The decrease was primarily due to lower facility and communication expense. As a percentage of
revenues, general and administrative expense was 12% and 13% for the three months ended December 31, 2002 and 2001, respectively.



Interest expense for the three months ended December 31, 2002 was $3.5 million compared to $4.1 million for the three months ended December 31, 2001, a
decrease of $0.6 million, or 15%. Interest was down due to a combination of lower interest rates and a lower principal balance. See Liquidity and Capital Resources.



As a result of the above factors, the Company realized net income of $5.5 million for the three months ended December 31,
2002, compared to net income of $1.3 million for the three months ended December 31, 2001, an improvement of $4.2 million, or 313%.



Liquidity and Capital Resources



On December 3, 2002, the Company replaced the Restated Senior Credit Facilities with a new three year credit agreement comprised of a $35.0 million term
loan facility and a $17.5 million revolving credit facility. The term loan facility is payable in quarterly installments from March 31, 2003 through December 31, 2005 and bears interest at CCITRIADs option either at (i) a margin of 3.5%
applied to the greatest of (a) the Prime Rate, (b) the Base CD Rate plus 1% and (c) the Federal Funds Effective Rate plus 0.5% or (ii) a margin of 4.5% applied to the Eurodollar Base Rate divided by the product of one minus the Eurocurrency Reserve
Requirements. In March, June and September 2003 each quarterly installment is $2.0 million. The revolving credit facility provides for maximum borrowings of $17.5 million (including letters of credit up to a maximum of $10.0 million) and matures in
December 2005. The new credit agreement includes restrictions on certain activities and financial covenant tests.



As of December 31, 2002, the Company had $136.1 million in outstanding indebtedness, a decrease of $1.9 million from September 30, 2002. The
Companys outstanding indebtedness under its New Senior Credit Facility at December 31, 2002 included no borrowings on the Companys $17.5 million senior secured revolving credit facility and $35.0 million of senior secured term loans. At
December 31, 2002, a balance of $100.0 million on the Notes, due in 2008, bearing interest at 9% was outstanding. The remaining $1.1 million was related to lease financing and the debt matures in varying amounts over the next four years. A portion
of the Companys debt bears interest at floating rates; therefore, its financial condition is and will be affected by changes in prevailing rates.



The Companys New Senior Credit Facility imposes certain restrictions on the Company, the most significant of which include limitations on additional
indebtedness, liens, guarantees, payment or declaration of dividends, sale of assets, investments, capital expenditures, and transactions with affiliates. Under the Companys New Senior Credit Facility, the Company is obligated to meet certain
tests relating to certain financial amounts and ratios defined in the new credit agreement. At December 31, 2002, the Company was in compliance with these covenants.



In addition to servicing its debt obligations, the Company requires substantial liquidity for capital expenditures and
working capital needs. At December 31, 2002, working capital was $(4.1) million compared to $(8.9) million at September 30, 2002. The increase in working capital principally relates to the increased system sales causing an increase in cash and
accounts receivable. For the three months ended December 31, 2002, the Companys capital expenditures were $3.7 million, which included $2.3 million for capitalized computer software and databases costs.



The Company believes that cash flows from operations, together with the
amounts available under its New Senior



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Credit Facility, will be
sufficient to fund its working capital and debt service requirements. The Companys ability to meet its working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Companys control. If the Company is not able to meet such requirements, it may be required to seek additional financing. There can be no assurance that the Company will be able to obtain financing from
other sources on terms acceptable to the Company, if at all.



Contractual Obligations and Commercial Commitments



Due to the impact of the New Credit Facility on the Companys contractual obligations, the contractual obligations table has been revised as of December 31, 2002. The following table summarizes
the Companys contractual obligations and payments due by fiscal period following December 31, 2002 (in thousands):



|                                      |  | Payment Due or Expiration by Fiscal Year
|------------------------------------- |  | ----------------------------------------
|                                      |  | Total                                   
|Debt:                                 |  |                                         
|Senior subordinated notes             |  | $                                       
|Term loan facility                    |  |                                         
|Revolving credit facility             |  |                                         
|Other (2)                             |  |                                         
|                                      |  |                                         
|Total debt                            |  |                                         
|Other lease financing obligations (2) |  |                                         
|Operating leases                      |  |                                         
|                                      |  |                                         
|Total                                 |  | $                                       
|                                      |  |                                         



(1)
Fiscal 2003 represents the nine months following December 31, 2002.



(2) These obligations will be funded by amounts received from lessees party to these lease agreements. Furthermore, the Companys recourse obligation is limited to a percentage of the aggregate initial financing
proceeds.



Item 3. Quantitative and Qualitative Disclosures about Market Risk.



Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in the Companys Annual Report on Form 10-K for the fiscal year ended September
30, 2002. There have been no material changes in the quarter ended December 31, 2002.



Item 4 Controls and Procedures.



An
evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer (CEO) and Principal Financial Officer (CFO), of the effectiveness of the design and operation of the
Companys disclosure controls and procedures within 90 days of the filing date of this quarterly report on Form 10-Q. Additionally, the internal controls were evaluated in conjunction with the year-end audit and no material weaknesses were
identified. Based on those evaluations, the Companys management, including the CEO and CFO, concluded that the Companys disclosure controls and procedures were effective. There have been no significant changes in the Companys
internal controls or in other factors that could significantly affect these internal controls subsequent to the date of their evaluation.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings.



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The Company is a party to
various legal proceedings and administrative actions, which arise in the ordinary course of business, except as noted below. In the opinion of the Companys management, such proceedings and actions should not, individually or in the aggregate,
have a material adverse effect on the Companys results of operations, financial conditions or cash flows.



The Company is a defendant in a lawsuit that was filed by Preston Staats, a director of the Company, on December 9, 2002, in the United States District Court for the Western District of Texas, Austin
Division. The suit alleges that Mr. Staats was constructively terminated by the Company in violation of the Age Discrimination in Employment Act and that such alleged termination constituted a breach of contract. The lawsuit seeks monetary damages
in excess of $75,000 as well as attorneys fees, court costs, and interest. The Company has filed appropriate responsive pleadings, including an Answer and a Motion to Partially Dismiss, and intends to defend itself vigorously.



Item 2. Changes in Securities and Use of Proceeds.



None



Item 3. Defaults Upon Senior Securities.



None



Item 4. Submission of Matters to a Vote of Security Holders.



None



Item 5. Other Information.



None



Item 6. Exhibits and Reports on Form 8-K.



(a) Exhibits



99.1 Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Michael A. Aviles.

99.2 Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by Greg Petersen.



(b) Reports on Form 8-K



No
reports on Form 8-K have been filed during the three months ended December 31, 2002.



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SIGNATURE



Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 12th day of February, 2003.



COOPERATIVE COMPUTING, INC.By:

/s/ GREG PETERSENGreg Petersen Senior Vice President, Finance and Administration




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CERTIFICATION



I, Michael A. Aviles,
certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Cooperative Computing, Inc.;
| | -- |  | ----------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the registrant and have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     
|-----
|Date:
|     
|     
|     
|     
|     
|     



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CERTIFICATION



I, Greg Petersen, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Cooperative Computing, Inc.;
| | -- |  | ----------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for the registrant and have:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent functions):
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     
|-----
|Date:
|     
|     
|     
|     
|     
|     



18