-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kcpKGa5r/wClaveZlDcsqSHHndog1O1lCPrEb9/75BKdO5SgRWagRtRHxlEQFEgf Y3t5SsRuH//d9taKIbrDKA== 0000201513-95-000007.txt : 19950512 0000201513-95-000007.hdr.sgml : 19950512 ACCESSION NUMBER: 0000201513-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMSHARE INC CENTRAL INDEX KEY: 0000201513 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 381804887 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04096 FILM NUMBER: 95536853 BUSINESS ADDRESS: STREET 1: 3001 S STATE ST CITY: ANN ARBOR STATE: MI ZIP: 48108 BUSINESS PHONE: 3139944800 MAIL ADDRESS: STREET 1: P O BOX 1588 CITY: ANN ARBOR STATE: MI ZIP: 48106 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____. Commission File Number 0-4096 Comshare, Incorporated (Exact name of registrant as specified in its charter) Michigan 38-1804887 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 555 Briarwood Circle, Ann Arbor, Michigan, 48108 (Address of principal executive offices) (Zip Code) (313) 994-4800 (Registrant's telephone number, including area code) 3001 South State Street, Ann Arbor, Michigan 48108 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, 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 (April 30, 1995). Outstanding at Class of Common Stock April 30, 1995 $1.00 par value 5,445,576 shares 2 PART I. - FINANCIAL INFORMATION Item 1. - Financial Statements Comshare, Incorporated Condensed Consolidated Balance Sheet
March 31, June 30, 1995 1994 (unaudited) (audited) Assets Current Assets Cash $ 2,687,400 $ 1,773,900 Accounts receivable, net 32,322,800 30,846,600 Other current assets 5,266,500 5,498,800 ------------ ----------- Total current assets 40,276,700 38,119,300 Property and equipment, net 3,516,300 4,197,600 Computer software, net 39,748,400 40,235,600 Goodwill, net 2,303,600 2,033,000 Other assets 5,030,500 4,358,200 ------------ ----------- $ 90,875,500 $88,943,700 ============ =========== Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 13,208,100 $10,636,600 Accrued liabilities 6,470,900 7,672,900 Income taxes 1,586,400 641,700 Deferred revenue 20,073,700 19,616,800 ------------ ----------- Total current liabilities 41,339,100 38,568,000 Long-term debt 9,505,600 15,354,400 Deferred income taxes 5,969,500 5,510,500 Other liabilities 3,192,200 3,005,000 Shareholders' equity Common stock, $1 par value; authorized 10,000,000 shares; 5,445,576 shares outstanding in 1995 and 5,357,811 shares in 1994 5,445,600 5,357,800 Capital contributed in excess of par 15,557,700 14,660,600 Currency translation adjustments (2,979,700) (3,503,500) Retained earnings 13,808,600 10,190,100 ------------ ----------- 31,832,200 26,705,000 Less: Notes receivable 963,100 199,200 ------------ ----------- Total shareholders' equity 30,869,100 26,505,800 ------------ ----------- $ 90,875,500 $88,943,700 ============ ===========
See accompanying notes to condensed consolidated financial statements. 3 Comshare, Incorporated Condensed Consolidated Statement of Income (unaudited)
Three Months Ended March 31, 1995 1994 Revenue Software licenses $ 12,705,400 $ 9,188,400 Software maintenance 8,895,100 10,193,500 Implementation and consulting services 5,911,400 3,702,400 Remote processing and other 192,100 117,500 ------------ ----------- 27,704,000 23,201,800 Costs and expenses Selling and marketing 11,375,100 11,386,500 Cost of revenue and support 6,959,200 4,223,500 Internal research and product development 3,884,100 4,682,700 Internally capitalized software (2,844,700) (3,056,100) Software amortization 3,415,300 3,075,400 General and administrative 3,087,000 2,696,500 ------------ ----------- Total operating expenses 25,876,000 23,008,500 ------------ ----------- Income from operations 1,828,000 193,300 Other income (expense) Interest income 47,600 16,100 Interest expense (173,600) (98,300) Exchange gain (loss) 217,300 108,400 ------------ ----------- 91,300 26,200 ------------ ----------- Income before taxes 1,919,300 219,500 Provision for income taxes 714,700 125,700 ------------ ----------- Net income $ 1,204,600 $ 93,800 ============ =========== Weighted average number of common and dilutive common equivalent shares 5,647,700 5,513,500 ========= ========= Net income per common share $ .21 $ .02 ===== =====
See accompanying notes to condensed consolidated financial statements. 4 Comshare, Incorporated Condensed Consolidated Statement of Income (unaudited)
Nine Months Ended March 31, 1995 1994 Revenue Software licenses $ 35,729,300 $26,814,300 Software maintenance 27,103,700 31,160,800 Implementation and consulting services 16,232,500 12,055,600 Remote processing and other 451,900 680,100 ------------ ----------- 79,517,400 70,710,800 Costs and expenses Selling and marketing 33,120,300 34,279,400 Cost of revenue and support 18,320,300 12,644,700 Internal research and product development 11,984,900 14,582,200 Internally capitalized software (8,863,800) (9,852,900) Software amortization 10,062,300 8,995,300 General and administrative 8,801,400 7,171,100 ------------ ----------- Total operating expenses 73,425,400 67,819,800 ------------ ----------- Income from operations 6,092,000 2,891,000 Other income (expense) Interest income 103,600 61,000 Interest expense (571,400) (369,600) Exchange gain (loss) 174,400 (30,200) ------------ ----------- (293,400) (338,800) ------------ ----------- Income before taxes 5,798,600 2,552,200 Provision for income taxes 2,162,600 749,700 ------------ ----------- Net income $ 3,636,000 $ 1,802,500 ============ =========== Weighted average number of common and dilutive common equivalent shares 5,565,100 5,475,100 ========= ========= Net income per common share $ .65 $ .33 ===== =====
See accompanying notes to condensed consolidated financial statements. 5 Comshare, Incorporated Condensed Consolidated Statement of Cash Flow (unaudited)
Nine Months Ended March 31, 1995 1994 Cash flows from operating activities Cash received from customers $ 79,471,800 $69,261,700 Cash paid to suppliers and employees (61,618,700) (59,071,400) Interest received 84,000 61,500 Interest paid (439,500) (366,700) Income taxes paid (198,300) (445,800) ------------ ----------- Net cash provided by operating activities 17,299,300 9,439,300 Cash flows from investing activities Additions to computer software (8,863,900) (9,857,100) Payments for equipment (805,500) (949,300) Proceeds from sale of undeveloped land 0 3,376,100 Other (914,700) (1,126,300) ------------ ----------- Net cash used in investing activities (10,584,100) (8,556,600) Cash flows from financing activities Net borrowings (repayments) under notes payable (42,600) 256,400 Repayments under long-term debt (6,037,100) (2,704,200) Other 245,200 0 ------------ ----------- Net cash used in financing activities (5,834,500) (2,447,800) Effect of exchange rate changes 32,800 (39,100) ------------ ----------- Net increase (decrease) 913,500 (1,604,200) Balance at beginning of period 1,773,900 2,592,500 ------------ ----------- Balance at end of period $ 2,687,400 $ 988,300 ============ ===========
See accompanying notes to condensed consolidated financial statements. 6 Comshare, Incorporated Condensed Consolidated Statement of Cash Flow (unaudited)
Nine Months Ended March 31, 1995 1994 Net income $ 3,636,000 $ 1,802,500 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,083,700 11,599,300 Gain on sale of undeveloped land 0 (1,101,900) Other (67,800) 111,900 Change in operating assets and liabilities: Accounts receivable 82,900 669,500 Other current assets (254,800) (354,800) Other assets 0 (152,400) Accounts payable 1,167,700 32,900 Accrued liabilities (271,900) (1,632,900) Deferred revenue (128,700) (2,274,500) Deferred credits 953,100 706,600 Other liabilities 99,100 33,100 ------------ ----------- Total adjustments 13,663,300 7,636,800 ------------ ----------- Net cash provided by operating activities $ 17,299,300 $ 9,439,300 ============ ===========
See accompanying notes to condensed consolidated financial statements. 7 Comshare, Incorporated Notes to Condensed Consolidated Financial Statements March 31, 1995 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes 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- and nine- month periods ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ended June 30, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company's annual report on Form 10-K for the year ended June 30, 1994. NOTE B - BORROWINGS On October 31, 1994 the Company entered into a $14,000,000 amended and restated, secured domestic credit agreement with certain of its banks which matures on October 31, 1997. This agreement replaces the former $13,000,000 domestic line of credit. The amended and restated credit agreement contains covenants regarding among other things, working capital, current ratio and net worth. Permitted borrowings under the credit agreement are based on a percentage of worldwide eligible accounts receivable and worldwide borrowings. Interest is at the bank's prime rate plus 1% and reduces, upon the Company's meeting certain financial criteria, to the Eurodollar rate plus applicable margin, which varies between 1-1/2% and 2-1/2%. NOTE C - FINANCIAL INSTRUMENTS The Company at various times has entered into forward exchange contracts to hedge exposures related to foreign currency transactions. The Company does not use any other types of financial instruments to hedge such exposures nor does it engage in speculation. In general the Company only hedges against large selective transactions that present the most exposure to exchange rate fluctuations. The foreign exchange contracts vary in maturity dates but most do not exceed 12 months. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS (dollars in thousands) Revenue for the third quarter ended March 31, 1995 was $27,704, an increase of $4,502 or 19% compared with the corresponding period a year ago. For the nine month period ending March 31, 1995, revenue was $79,517, an increase of $8,807 or 12% compared with the corresponding period a year ago. Software license fees grew 38% for the third quarter and 33% for the nine month period ended March 31, 1995 compared with the corresponding periods a year ago. All three market areas continued to show solid license fee growth: EIS (Commander OLAP and tools) growth for the third quarter and nine month period ended March 31, 1995 was 46% and 30%, respectively, compared with the corresponding periods a year ago; financial applications (Commander FDC and Budget) - 41% and 42%, respectively; and retail applications (ARTHUR) - 21% and 40%, respectively. Customer acceptance of product releases in all three market areas continued to favorably influence license fee growth. Revenue from mainframe license fees for the third quarter ended March 31, 1995 was $852 or 7% of total license fee revenue compared to $1,385 or 15% for the corresponding period a year ago. Mainframe license fee revenue is now at a low enough level that further declines, which are expected to continue, will not significantly impact results. Maintenance revenue declined $1,298 or 13% for the third quarter and $4,057 or 13% for the nine month period ended March 31, 1995 compared with the corresponding periods a year ago. A decline in maintenance revenue from mainframe products was the primary reason for the decrease. Mainframe maintenance revenue was $4,027 or 45% of total maintenance revenue compared to $5,524 or 54% in the corresponding quarter a year ago. Mainframe maintenance revenue is expected to continue to decline, although at a slower rate than mainframe license fees. Maintenance revenue from desktop and client/server products increased $322 or 7% for the third quarter and $955 or 7% for the nine month period ended March 31, 1995 compared with the corresponding periods a year ago. The comparability of maintenance revenue (and license fee growth) continues to be impacted by the conversion of selected agencies to distributors in fiscal year 1994. When an agent converts to a distributor, sales are to the distributor, rather than directly to the customer, and revenue declines by approximately the same amount as what previously would have been recorded as selling expense for agency fees. Accordingly, both revenue and selling expenses are reduced by approximately the same amount after agents are converted to distributors. Implementation and consulting services revenue increased $2,209 or 60% for the third quarter and $4,177 or 35% for the nine month period ended March 31, 1995 compared with the corresponding periods a year ago. Increased software license fees are leading to increases in implementation and consulting services revenue. Operating expenses for the third quarter ended March 31, 1995 were $25,876, an increase of $2,866 or 12% compared with the corresponding period a year ago. Operating expenses increased $5,606 or 8% for the nine month period ended March 31, 1995 9 compared with the corresponding period a year ago. Selling and marketing expenses were essentially unchanged for the third quarter ended March 31, 1995 and decreased 3% for the nine month period ended March 31, 1995 compared to the corresponding periods a year ago. The decrease in selling and marketing expenses for the nine month period ended March 31, 1995 is the net effect of decreases in agency fees offset by increases in selling and marketing expenses to support increased revenue. The decrease in agency fees of $1,649 and $4,079 for the third quarter and nine month period ended March 31, 1995, compared with the corresponding periods a year ago is due to the conversion of agents to distributors as described above. Cost of revenue and support expenses increased principally due to personnel and outside contract costs associated with the growth in implementation and consulting services revenue as well as increases in royalties related to the use of Arbor Software Corporation's database engine in certain Comshare products. Royalty expenses related to Commander OLAP, which was released in the third quarter of last fiscal year, increased $1,334 and $3,630 for the third quarter and nine month period ended March 31, 1995. Internal research and product development costs decreased $799 and $2,597 for the third quarter and nine month period ended March 31, 1995, compared with the corresponding periods a year ago, primarily due to the effect of staff reductions. Lower research and product development costs resulted in lower capitalization of internally developed software which declined $211 and $989 for the third quarter and nine month period ended March 31, 1995 compared with the corresponding periods a year ago. For the third quarter and nine month period ended March 31, 1995, software amortization increased $340 and $1,067 compared with the same corresponding a year ago as a result of numerous products that were commercially released during the last year. General and administrative expenses increased $391 and $1,630 for the third quarter and nine month period ended March 31, 1995. The nine month period ended March 31, 1994 includes a $1,102 gain on the sale of undeveloped land which occurred in the second quarter ended December 31, 1993 and was included in general and administrative expenses. For the third quarter and nine month period ended March 31, 1995, approximately 54% and 55%, respectively, of the Company's revenue was from international sources and denominated in foreign currencies. The dollar weakened against foreign currencies for both the third quarter and nine month period ended March 31, 1995 compared with the corresponding periods a year ago positively impacting revenue. Total revenue growth on a currency adjusted basis for the third quarter and nine month period ended March 31, 1995 would have been approximately $1,000 and $2,500 less. Corresponding amounts of operating expenses were also incurred in foreign currencies which offsets most of the impact of foreign exchange rates on net income. As currency rates are constantly changing, exchange gains and losses can, at times, fluctuate greatly. For the third quarter ended March 31, 1995, there was a $217 exchange gain compared with a $108 exchange gain in the corresponding period a year ago. For the nine month period ended March 31, 1995 there was a $174 exchange gain compared with a $30 loss in the corresponding period a year ago. The third quarter and nine month period ended 10 March 31, 1995 were favorably impacted by the increase in value of the German Mark compared with the US Dollar. At March 31,1995, the Company had three forward dollar contracts whose US Dollar equivalent was $6,000 with various maturities through September 1995 to hedge currency exposures. The effective tax rate for the third quarter and nine month period ended March 31, 1995 was 37% compared with 57% and 29%, respectively, for the corresponding periods a year ago. The higher tax rate for the third quarter ended March 31, 1994 is attributable to losses occurring in foreign countries where there were no tax benefits available. The reversal of taxes previously provided for impacted the effective tax rate for the nine month period ended March 31, 1994. FINANCIAL CONDITION (dollars in thousands) Net cash provided by operating activities was $17,299 for the nine month period ended March 31, 1995 compared with $9,439 for the corresponding period a year ago. Higher billing levels combined with improved collections were the primary factors favorably impacting cash flow from operating activities. Current liabilities exceeded current assets by $1,062 and $449 as of March 31, 1995 and June 30, 1994, respectively. However, included in current liabilities as of March 31, 1995 was $20,074 of deferred revenue ($19,617 at June 30, 1994), substantially all of which relates to maintenance and is essentially non-cash in nature. Net cash used in investing activities was $10,584 for the nine month period ended March 31, 1995 compared with $8,557 for the corresponding period a year ago. Included in investing activities a year ago was $3,376 in proceeds from the sales of undeveloped land. Net cash used in investing activities decreased in the nine month period ended March 31, 1995 compared with the corresponding quarter a year ago after excluding the benefits of the land sale. The decrease resulted from lower capitalization of internally developed software and reduced acquisitions of property and equipment. Net cash from operating activities for the nine months ended March 31, 1995 was used to reduce long-term debt by $6,037 and fund additions to computer software. On October 31, 1994 the Company entered into a $14,000 amended and restated, secured domestic credit agreement with certain of its banks which matures on October 31, 1997. This agreement replaced a former $13,000 domestic line of credit. The amended and restated credit agreement contains covenants regarding among other things, working capital, current ratio and net worth. Permitted borrowings under the credit agreement are based on a percentage of worldwide eligible accounts receivable and worldwide borrowings. At March 31, 1995 the total amount available, including foreign lines of credit, was approximately $17,000. Interest is at the bank's prime rate plus 1% and reduces, upon the Company's meeting certain financial criteria, to the Eurodollar rate plus applicable margin, which varies between 1-1/2% and 2-1/2%. 11 The Company believes that the combination of present cash balances, future operating cash flows, and credit facilities are sufficient for near term operating needs. The Company intends to fund software additions and equipment purchases primarily through cash flow from operations. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits included herewith are set forth on the Index to Exhibits. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended March 31, 1995. 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. Date: May 11, 1995 Comshare, Incorporated (Registrant) /s/ Kathryn A. Jehle Kathryn A. Jehle Senior Vice President and Chief Financial Officer 12 INDEX TO EXHIBITS Exhibit No. Description 4.01 Specimen form of Common Stock Certificate - incorporated by reference to Exhibit 4(c) to the Company's Form S-1 Registration Statement No. 2- 29663. 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial informatin extracted from SEC form 10-Q and is qualified in its entirely by reference to such financial statements. 9-MOS JUN-30-1995 MAR-31-1995 2,687,400 0 32,322,800 0 0 40,276,700 3,516,300 0 90,875,500 41,339,100 0 5,445,600 0 0 25,423,500 90,875,500 0 79,517,400 0 73,425,400 278,000 0 571,400 5,798,600 2,162,600 3,636,000 0 0 0 3,636,000 .65 0 Accounts receivable are stated at net of allowance for doubtful accounts. Property and equipment is shown at net of accumulated depreciation. Comprised of $103,600 of interest income and $174,400 of exchange gain.
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