-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T6r4TEnSkgtSUeq0igG/w4D935L/XaD5IavBqYHoGLIe0cwZ1pcVC8mO6MJgmuiC ixwmMcb/jbDgc/G3mG1fJA== 0000950124-96-004237.txt : 19961001 0000950124-96-004237.hdr.sgml : 19961001 ACCESSION NUMBER: 0000950124-96-004237 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960930 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12185 FILM NUMBER: 96636749 BUSINESS ADDRESS: STREET 1: 555 BRIARWOOD CIRCLE STREET 2: P O BOX 1588 CITY: ANN ARBOR STATE: MI ZIP: 48108 BUSINESS PHONE: 313-995-8251 MAIL ADDRESS: STREET 1: P O BOX 1588 STREET 2: 555 BRIARWOOD CIRCLE CITY: ANN ARBOR STATE: MI ZIP: 48108 10-K 1 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED JUNE 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 number) 555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (313) 994-4800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock $1.00 Par Value Rights to Purchase Preferred Shares
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock held by non-affiliates of the Registrant as of August 30, 1996 based on $14.75 per share, the last sale price for the Common Stock on such date as reported on the NASDAQ National Market System, was approximately $132,413,000. As of August 30, 1996 the Registrant had 9,704,621 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Document Part of Form 10-K Report Portions of Proxy Statement for the into which it is incorporated 1996 Annual Meeting of Shareholders III ("The 1996 Proxy Statement") 2 (THIS PAGE IS INTENTIONALLY LEFT BLANK) 2 3 PART 1 ITEM 1. BUSINESS This Business section contains forward looking statements that involve uncertainties. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to those discussed below, particularly in "Business - Uncertainties Relating to Forward Looking Statements." GENERAL Comshare, Incorporated and its subsidiaries (collectively referred to as "Comshare" or the "Company") develop, market and support client/server decision support applications software designed to improve business analysis, planning, reporting and decision making. The Company's software products enable the enterprise-wide integration and transformation of data into business-critical information and provide customers with robust multidimensional analysis capabilities. More specifically, the Company focuses on delivering complete decision support solutions by targeting specific industry markets and by providing implementation, consulting, training and support services in these markets. Such complete decision support solutions permit the implementation and adoption of the Company's software applications throughout an enterprise, thus enabling end-users to make better and faster decisions. Comshare offers several decision support applications designed for use by customers in any industry, as well as decision support applications targeted to meet the specific needs of the retail and consumer packaged goods ("CPG") industries. BUSINESS STRATEGY The Company's objective is to be the leading provider of client/server decision support applications software in its target markets. The Company's strategy includes the following key elements: 1. A product strategy of offering complete decision support solutions, either through customizable or packaged applications, targeted at specific industry needs. The Company's software products address the full range of a customer's information access and analysis needs from data extraction to end-user desktop access. Packaged applications are designed to satisfy the specific decision support needs of an industry, such as retail or CPG, or the functional needs of a number of industries. The Company intends to expand the range of packaged applications within its targeted vertical markets and to add new vertical markets in the future. 2. A product development strategy which uses a common technology platform, Comshare Application Architecture, developed in fiscal 1996, for new products. Commander Decision is the Comshare Application Architecture currently in use. Through the use of this common technology platform, the Company expects to be able to develop new packaged applications more quickly, leveraging the underlying technology capabilities of Commander Decision. In addition, the use of a common technology platform permits the addition of new software tools and technological advances to all products developed using the Comshare Application Architecture at the same time. 3. A product design strategy which capitalizes on innovative internally-developed technology and third-party software tools offering the latest technological advances. The Company believes the use of third-party tools allows it to focus product development efforts on differentiating applications and developing innovative technology, while offering products which include the latest technological advances and reducing product development risk and time to market. 4. A marketing strategy designed to leverage the Company's current customer base through sales of additional or new products to existing clients and the extension into other departments or functional areas of existing clients, and to leverage the Company's established direct and indirect international sales distribution network in 40 countries. By utilizing its extensive worldwide sales network, the Company can address the 3 4 global needs of its international customers for decision support applications software and provide the implementation, consulting, training and support services required. 5. A service and support strategy of offering superior implementation, consulting, training and support to the Company's customers. The foregoing statements regarding the Company's product expansion, design, development and market strategy contain "forward looking statements" within the meaning of the Securities Exchange Act of 1934. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to, those described below and under "Business - Uncertainties Relating to Forward Looking Statements". PRODUCTS The Company offers several decision support applications designed for use by customers in any industry, as well as decision support applications targeted to meet the specific needs of the retail and consumer packaged goods industries. In line with the Company's strategy of focusing on vertical industries, the sales force and implementation services group are organized by vertical market within each major geographic market. Comshare's software products are generally licensed to end-user customers under non-exclusive, non-transferable perpetual license agreements. Software license fees for the Company's decision support software applications vary widely depending upon the product, platform and number of users supported. Add-on features and products are available for additional fees. The initial amount paid by customers purchasing decision support applications typically covers the software license fee and product maintenance for the first year of the license. Customers may continue product maintenance thereafter for an annual fee normally ranging from 15% to 20% of the software license fee. GENERAL INDUSTRY APPLICATIONS The general industry sales force services all customers outside of the retail and CPG industries and sells the Company's products designed for use by customers in any industry. These products include Commander Decision and budgeting and financial reporting applications. Customizable DSS Applications Comshare's flagship product is Commander Decision, the latest generation customizable decision support product for client/server systems, which follows a long line of Executive Information Systems ("EIS") products offered by the Company. Comshare was among the first software companies to successfully introduce EIS products to the market. Today, Comshare is the industry leader in the EIS market, based upon reports prepared by International Data Corporation, an independent market research company, which ranks EIS software companies by revenues. Commander Decision is a customizable decision support ("DSS") application designed to provide information to a wide range of business users for planning, analysis, reporting and decision-making. Typical applications include customer and product profitability analysis, sales reporting and analysis, business unit profitability analysis, critical success factor reporting and key performance indicator monitoring. The Company designed Commander Decision so that it can be customized by the Company's consultants, third parties or the customers themselves to meet specific customer requirements. Commander Decision capitalizes on the increased use of multidimensional analysis by business professionals to solve business problems. Using multidimensional analysis, business professionals view information in a manner which is consistent with their perception of the underlying business. For example, for a business organized along 4 5 geographic lines and product lines, a business professional is able to view this data across multiple time periods. Commander Decision facilitates these and other multidimensional analyses by permitting end-users to structure business data across the multiple dimensions of importance to these users. Commander Decision includes a full suite of client/server software necessary to deliver enterprise-wide decision support applications. Commander Decision is designed using the latest 32-bit Microsoft technology, and supports NT and O/S2 on the server and Windows 95 and Windows NT on the client/desktop. The Commander Decision server software includes: Data Integrator. A powerful back-end which gathers, consolidates, interprets, cleanses and reshapes data from multiple, disparate data sources, including spreadsheets, relational database management systems ("RDBMS"), data warehouses, legacy systems and other data repositories. Essbase. A multidimensional database software developed by Arbor Software Corporation ("Arbor"), which provides a comprehensive on-line analytical processing ("OLAP") solution that stores and summarizes data, and supports concurrent multi-user read-write for multidimensional analysis. Decision Access Module ("DecAM"). Comshare's internally-developed technology which is the backbone of Commander Decision. DecAM facilitates fast-response sorting of large volumes of data by reducing the size of the Essbase database and increasing the speed of computation-intensive functions, such as sorting and ad hoc calculations, by processing the calculations on the server. Commander Decision provides information to the end-user through Decision Desktop, a front-end which presents business information in five ways: graphically, with charts; geographically, with an integrated mapping system; visually, with color-coded exception reporting; analytically, with ad hoc queries and calculations; and with Comshare's data mining capabilities. By pointing and clicking, end-users are able to easily and quickly query the information, drill down for more detail, change dimensions and extract data for further analysis. End-users alternatively may select Microsoft Excel or Lotus 1-2-3 front-ends which provide spreadsheet capability. Budgeting and Financial Reporting Applications Comshare offers two packaged applications for budgeting: Commander BudgetPlus and Commander Budget. Commander BudgetPlus, commercially available at the end of fiscal 1996, is a client/server based application offering full multi-dimensional budgeting functionality. By using the Comshare Application Architecture, Commander BudgetPlus offers all the functionality available in Commander Decision, in addition to specific budgeting capabilities. As an integrated budgeting, analysis, and reporting application, Commander BudgetPlus is designed to improve productivity, shorten budget cycles and enhance the quality and usability of an enterprise's budgeting information. Commander BudgetPlus has built in data collection mechanisms that integrate with Lotus and Excel spreadsheets, and load enterprise data from other systems. Commander BudgetPlus also offers salary planning and asset planning capabilities. Commander BudgetPlus's OLAP database and processing engine, Essbase, allows the end-users to define enterprise wide calculations, allocations and adjustments to the budget data. The use of the Comshare Application Architecture provides a powerful information delivery and analysis mechanism for data mining, exception reporting and enterprise-wide information distribution. Commander Budget, an earlier packaged budgeting application, is a distributed application which allows managers throughout an organization to prepare budgets using Microsoft Excel or Lotus 1-2-3 front-ends and enables an organization's central financial group to easily consolidate the budgets. Commander Budget is fully integrated with Comshare's consolidation and financial reporting application, Commander FDC. 5 6 Commander FDC is a packaged statutory consolidation and financial reporting application which collects and consolidates financial data from different general ledgers, spreadsheets, and other sources within a multi-division or multi-location company and produces consolidated financial reports for management, public and statutory reporting. Commander FDC performs currency translation, handles intercompany eliminations and account reclassifications and is readily adaptable to the changing reporting needs of the end-user. Commander FDC and Commander Budget consist of data extraction tools, a central database and a choice of front ends. Their data extraction tools collect, integrate, summarize and filter data from multiple, disparate data sources. Commander FDC and Commander Budget, when used together, share a Btrieve database that permits the integration of consolidated historical and budgetary financial data, giving the end-user the option of a fully-integrated financial management system. Commander FDC and Commander Budget are offered with Microsoft Excel or Lotus 1-2-3. Customers may separately purchase Execu-View Finance, which allows users point-and-click access to interactively browse, report, graph and analyze information generated by Commander FDC and Commander Budget. Other Comshare continues to support Commander OLAP, the client/server predecessor to Commander Decision, and earlier LAN-based EIS products. The Company also sells and supports System W and IFPS decision support products for use on mainframe and UNIX-based computers. Customers use System W and IFPS for applications similar to those performed with Commander Decision and Commander OLAP, although the multidimensional database resides on the mainframe, rather than on the server. Because market demand has shifted towards client/server technology, the mainframe-related portions of Comshare's general industry business have declined significantly in recent years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RETAIL DECISION SUPPORT APPLICATIONS The Company offers retailers a suite of decision support software, sold under the ARTHUR brand name, specifically tailored to their merchandise planning needs, as well as the general industry products described above. The ARTHUR products enable retailers to plan merchandise purchases to control inventory levels, tailor their purchases to consumer preferences and market trends, and track and analyze actual sales performance. Comshare designs its ARTHUR products to improve the productivity and profitability of its retail customers and to serve as a strategic planning tool for retailers by allowing them to test merchandise plans and identify market opportunities, changing sales trends or problems. ARTHUR Planning is a suite of software offering retailers a packaged application which enables them to create detailed merchandise plans, analyze information and test merchandise strategies before placing orders and committing resources. The product also helps buyers match merchandise assortments to their customers' requirements and the characteristics of their stores. ARTHUR Planning can be used by smaller retailers on a desktop platform or by larger retailers using ARTHUR Plan Monitor as the data repository. ARTHUR Plan Monitor is server-based and has Arbor's Essbase as its core. It may be used in conjunction with ARTHUR Planning for larger retail applications, as described above, or as the database for multidimensional sales reporting and tracking. ARTHUR Performance Tracking is offered on both UNIX and mainframe platforms. ARTHUR Performance Tracking and ARTHUR Plan Monitor report weekly sales information across the retailer's product lines and geographic regions in various levels of detail. They provide up-to-date merchandise performance information, giving retailers the opportunity to change merchandise plans in response to consumer preferences and market trends. 6 7 These products deliver information to the end-user through ARTHURView, which allows users point-and-click access to interactively browse, report, graph and analyze information generated by the ARTHUR products. CONSUMER PACKAGED GOODS APPLICATIONS The Company introduced in fiscal 1996 two packaged applications, sold under the BOOST brand name, targeted at the specific planning needs of the CPG industry: BOOST Sales and Margin Planning and BOOST Sales Analysis. The Company's CPG-focused sales and consulting organizations offer these two new applications to the CPG industry, as well as the general industry products described above. BOOST Sales and Margin Planning ("BOOST SMP"), commercially available in December 1995, is a cross functional planning application designed for use primarily by finance, marketing and sales managers in the CPG industry. BOOST SMP is a brand and customer planning system which integrates brand plans with sales forecasts and company margin goals, to shorten plan cycle times and improve the quality of planning. BOOST SMP uses neural nets to build strategic business plans which take into account promotional and advertising resources, new product introductions and pricing. The effects of alternative plan scenarios on product, customer, market and margins can be quickly determined. BOOST Sales Analysis ("BOOST SA"), commercially available in June 1996, is a packaged sales tracking and analysis application. BOOST SA is designed for use by sales representatives, key account managers, business unit managers and sales executives to track sales and profits, compare actual results against planned targets, and monitor growth trends and product contributions. BOOST SA leads end-users through an intuitive interface comprised of a series of questions and answers to easily navigate through the database for the most relevant information. The question and answer interface reflects the best thinking of CPG industry consultants, manufacturers, and academics. BOOST SA is also "data independent", unlike applications from data information providers, which means that BOOST SA can integrate and analyze a company's internal and external data. SERVICES AND SUPPORT The Company offers implementation, consulting, training, pre-sales and post-sales technical support and maintenance to complement its software product offerings. Comshare supports its product offerings with customer support from its teams of industry and product decision support specialists and its worldwide agent/distributor network. IMPLEMENTATION AND CONSULTING SERVICES Implementation and consulting services are offered in all of the Company's decision support software markets, and are organized by industry and/or product decision support expertise. These services include application design and modification, installation assistance, implementation and troubleshooting support. Comshare complements its services through partnership arrangements with value added consultants who complete a certification process. Certification is a distinction given to recognize consultants qualified in the use of Comshare applications and products. The certification process is also designed to help Comshare's customers receive quality service and support, training, project oversight and service monitoring. Comshare certified value added consultants include Andersen Consulting, Legacy Technology and Technium in the U.S.; A.G. Solutions, Ltd. in the U.K.; Cap Gemini Sogeti and Valoris in France and Kurt Salmon Associates in the U.K. and Germany. 7 8 SOFTWARE MAINTENANCE AND SUPPORT The Company provides customer telephone helpline support staffed with experienced professionals. Customers under maintenance receive product enhancements and updates, bug fixing and access to Comshare's CompuServe forum. Initial product license fees typically include the first year of maintenance support. Thereafter, maintenance customers pay an annual maintenance fee, which is typically 15 to 20 percent of the software license fee. CUSTOMER EDUCATION AND TRAINING Comshare offers an education and training program to customers and third party consultants. Training classes are provided by the Company at customer sites, at its local sales offices and at its central training centers in Ann Arbor, Michigan and London, England. The Company's training program is designed for end-users and system support staff and includes a variety of training classes covering software applications functional use, system administration and tools. CUSTOMERS Comshare has implemented its client/server and mainframe decision support applications software, and is currently providing maintenance, at more than 3,000 corporate and public sector customer sites in over 40 countries. Comshare's diversified customer base includes many Fortune 1000 and Financial Times 1000 industrial companies as well as large and mid-sized companies in the communications, financial services, health care, retail and transportation industries, and many governmental and other public sector organizations. SALES AND MARKETING Comshare products and services are sold on a worldwide basis by a direct sales operation and by an extensive worldwide agent/distributor network. Both of these complementary distribution channels leverage the Company's industry and application expertise and offer pre-sales and post-sales implementation, consulting, and customer support and services. The Company sells and markets its software products and services in the United States, Canada, United Kingdom, France and Germany through a direct sales organization. Direct sales operations are organized geographically, and within a geographic region, are organized by industry. The Company has an extensive agent/distributor network covering 36 countries not directly served by the Company. The Company has selected established software application vendors or systems integration firms to act as agents and distributors to market, implement and support Comshare products in their respective geographic areas. Comshare derived 19% of its total revenue in fiscal 1996 from the Company's agent/distributor network. To generate sales, the Company conducts comprehensive marketing programs which include direct mail, public relations, advertising, seminars, trade shows and on-going customer communication programs. The sales cycle begins with the generation of a sales lead or request for proposal from a prospect. After a lead is qualified, the Company's sales force analyzes the potential customer's decision support needs and makes one or more presentations to the potential customer. After obtaining a preliminary commitment, the Company often develops customized demonstrations to illustrate how the Company's products will satisfy a customer's specific needs. The sales cycle varies in length from customer to customer, but typically requires three to six months or more. RESEARCH AND PRODUCT DEVELOPMENT The Company's product development strategies are: (1) to expand the range of its application-specific products by repackaging these products into unique versions for specific vertical industries; (2) to develop new application- 8 9 specific products for specific vertical industries; (3) to differentiate its applications with innovative technology; and (4) to incorporate into its applications tools offering the latest technology which have either been acquired from third-parties or developed internally. To support its application strategy, the Company developed a common architectural platform during fiscal year 1996, known as Comshare Application Architecture ("CAA"). This architecture is a three-tiered design that includes a database tier, an application server tier, and a client-side presentation tier with standard interfaces which allow changes in one tier without affecting the other tiers. The CAA offers several benefits for future product development. First, new applications can be developed using the CAA allowing the Company to leverage existing technology. Second, the CAA gives the Company the ability to support multiple platforms in its database and client tiers. Third, CAA will also enable the Company to implement innovative, differentiating features in the application server tier, which will benefit all applications developed based on CAA. Fourth, CAA will allow the Company to integrate its application products for the benefit of customers who buy multiple Comshare applications. The Company has increasingly incorporated third-party tools into its products in order to focus its internal product development efforts on applications, and reduce product development risk and time to market. Commander Decision, which is the Comshare Application Architecture, employs third-party OLAP technology in its database tier and multiple third-party objects in its presentation tier, e.g., a third-party charting object, a third-party data grid object, a third-party geographic mapping object, and a third party Visual Basic scripting language. At June 30, 1996 the Company had 147 product development specialists located in Ann Arbor, Michigan and Leicester, England. These development specialists are organized to support the development strategy previously described, including teams of developers specifically focused on developing and supplying the technologies for building applications across existing and future vertical markets. These specialists develop new products and product enhancements based upon ongoing surveillance of customer needs, competitive threats, technology trends, opportunities for innovation, and the guidance of the Company's strategic plan. During the fiscal years ended June 30, 1996, 1995 and 1994 worldwide internal research and development expenses were (in thousands): 1996 1995 1994 ------- ------- ------- Internal research and product development $15,977 $16,180 $19,293 As a % of total revenue 13.4% 14.9% 20.0% Internal research and product development expenses in fiscal 1996 were flat compared with fiscal 1995 primarily due to the Company's increased utilization of software tools developed by third parties, the royalty fees for which are classified as cost of revenue and support. The reduction in internal development expenses in fiscal 1995 compared with the prior year reflected cost savings as a result of staff reductions made at the end of fiscal 1994. The foregoing statements regarding the Company's product development efforts contain "forward looking statements" within the meaning of the Securities Exchange Act of 1934. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to, those described below and under "Business - Uncertainties Relating to Forward Looking Statements". The markets for the Company's products are characterized by rapid technological advances, evolving industry standards, changes in customer requirements and frequent introductions and enhancements of competitive products. The Company's success and future financial performance will depend on its ability to anticipate these changes as they occur and to enhance its existing products and develop new products in a timely and cost-effective manner which keeps pace with these changes. There can be no assurance that the Company will be able to successfully accomplish future technological or product transitions, that the Company will not experience significant delays in developing new products or enhancements required to accomplish such transitions, or that the Company will have sufficient financial resources available to it to finance such efforts. There can be no assurance as to the impact that any such transition would have on the Company's revenue or profitability. In addition, there can be no assurance that the Company's new products and enhancements will adequately address the changing 9 10 needs of the marketplace and achieve market acceptance or that developments by others will not render the Company's products obsolete or noncompetitive. INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS The Company's success is dependent on its proprietary technology. The Company does not hold any material patents and seeks to protect its technology primarily through trademarks, copyrights, employee and third-party non-disclosure agreements and trade secret laws, which afford only limited protection. Comshare distributes its software products under software license agreements which generally grant customers a non-exclusive, non-transferable license to use the Company's products. The Company considers its software products to be valuable and unique assets and actively attempts to protect them contractually by generally restricting usage to internal operations, and prohibiting the unauthorized reproduction or transfer to third parties. The Company also believes that the nature of its customers and the provision of continuing maintenance and support services reduce the risk of unauthorized reproduction. The Company has registered certain of its trademarks and copyrights. The Company is the owner of various trademarks, including ARTHUR(TM), BOOST(TM), Commander(TM) Budget, Commander(TM) BudgetPlus, Commander(TM) Decision, Commander(TM) EIS, Commander(TM) Execu-View Server, Commander(TM) FDC and Commander(TM) NewsAlert. The Company's software bears appropriate copyright notices. The laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. In addition, certain provisions of the Company's contracts prohibiting unauthorized reproduction may be unenforceable under the laws of certain foreign countries. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of its technology or development by others of similar or superior technology. Although the Company believes that its products and technology do not infringe on any existing proprietary rights of others, there can be no assurance that third parties will not assert infringement claims in the future or that any such claims will not require the Company to enter into license arrangements or result in litigation, regardless of the merits of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. Should litigation with respect to any such claims commence, such litigation could be extremely expensive and time-consuming. LICENSED TECHNOLOGIES The Company licenses certain software programs and tools from third parties and incorporates them into the Company's products. Generally, these licenses are non-exclusive worldwide licenses providing for varying royalty payments and expiration dates. The Company believes that the inclusion of third-party software programs and tools in its products reduces product development risk and time to market. Examples of third-party software tools that the Company incorporates into its products include Arbor's Essbase, Btrieve Technology, Inc.'s Btrieve database, Microsoft Excel and Strategic Mapping, Inc.'s Atlas View SDK and Right Information Systems. The Company is substantially dependent upon Essbase, which is an integral part of the Comshare Application Architecture, and the Company's Commander Decision, ARTHUR Planning and Plan Monitor, Commander BudgetPlus, BOOST Sales and Margin Planning and BOOST Sales Analysis products and certain planned new products. The Company's worldwide license for Essbase expires December 31, 2001. The license may also be terminated in the event of an uncured material breach. Arbor and the Company disagree about certain definitions in the license agreement related to the calculation of royalties and are currently in the process of defining the procedure and legal and accounting issues that will be resolved through arbitration. Essbase is the OLAP technology which provides the critical multidimensional functionality for Commander Decision and is an integral component of certain of the Company's applications. If there is any significant change 10 11 in the competitiveness of Essbase, loss of the Company's rights to Essbase, or any change impacting the availability of Essbase, the Company could be required to undertake an expensive and time-consuming revision of its products to operate on the competitive product or technology. COMPETITION The markets for Comshare's software products are highly competitive and characterized by continued change and rapid technological advancements. In general, the Company competes principally on the basis of: (1) software application utility, which includes the extent to which its product offerings meet specific end-user markets and needs; (2) functionality, which includes the breadth and depth of features and functions and ease-of-use; (3) service and support, which includes the range and quality of technical support, training and consulting services; (4) vendor reputation; (5) product architecture, which includes distributed computing capability, and ease of customization and integration with other applications; and (6) product pricing in relation to performance. The Company believes it competes favorably with respect to these factors. The client/server applications software market, including the market for decision support software, is intensely competitive, highly fragmented and subject to rapid change and evolving industry standards. Because the Company offers multiple products, the Company competes with a variety of other companies depending on the target market for their applications software products. The Company competes primarily with Oracle Corporation, which purchased Express software from Information Resources, Inc.; Information Resources, Inc., which retained rights to Express software for certain applications; Hyperion Software Corporation; Cognizant, a spin-off company of the Dun and Bradstreet Corporation, which purchased Pilot Software; and certain other smaller software vendors. In the retail and CPG decision support applications markets, the Company also competes with a few software vendors who have specific planning and sales tracking applications. The Company also competes with a variety of additional software companies, third-party professional service organizations that develop custom software and with internal information technology departments which develop decision support solutions. Among The Company's current and potential competitors are also a number of large software companies, including developers of spreadsheets, RDBMSs, data warehouses, database query and reporting tools, transaction processing-based applications and OLAP technologies, that may elect to increase the decision support capabilities of their current products or that may develop or acquire products that compete with the Company's products. In addition, recent acquisitions and adoptions of OLAP technologies by various software vendors may result in increased competition in the Company's markets. Increased competition could result in price reductions, reduced operating margins and loss of market share. In addition, many of the Company's current and potential competitors have significantly greater financial, technical, marketing and other resources than the Company. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of products than can the Company. There can be no assurance that the Company will be able to compete successfully against current and future competitors. INTERNATIONAL OPERATIONS The Company derived 53%, 55% and 55% of its total revenue from outside North America in fiscal 1996, 1995 and 1994, respectively, and expects that revenue generated outside North America will continue to represent a significant portion of the Company's total revenue. This international business is subject to various risks inherent in international activities, including the impact on the Company's operations of, and the burdens of complying with, a wide variety of laws, regulations, rules and policies of local foreign governments, such as those relating to currency controls, hiring and termination of employees, import restrictions and the protection of proprietary rights. The Company's international operations also expose the Company to constantly fluctuating currency rates. Currency fluctuations have in the past adversely affected, and may in the future adversely affect, the Company's reported revenue, expenses and shareholders' equity. The Company's international sales are primarily denominated in foreign currencies. As a result, an increase in the value of the U.S. dollar relative to foreign 11 12 currencies may have the effect of reducing the Company's reported revenue and profits from international sales denominated in such currencies. Currency exchange rate fluctuations can also result in gains and losses from foreign currency exchange transactions. The Company at various times has entered into forward exchange contracts to hedge exposures related to foreign currency exchange transactions. Because the Company only selectively hedges against certain large transactions that present the most exposure to exchange rate fluctuations, the Company's results of operations will continue to be impacted by fluctuations in foreign currency exchange rates, which at times could be material. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 of Notes to Consolidated Financial Statements. EMPLOYEES Comshare employed 695 full-time employees as of June 30, 1996; including 254 in sales and marketing, 151 in consulting and implementation services, 147 in research and product development, and 143 in customer support and administration. None of the Company's employees is represented by a collective bargaining agreement, nor has the Company experienced any work stoppages. The Company considers its relations with its employees to be good. MISCELLANEOUS Compliance with federal, state and local laws and ordinances that regulate the discharge of materials into the environment has not had, and is not expected to have, a material effect upon the capital expenditures, earnings or competitive position of Comshare. UNCERTAINTIES RELATING TO FORWARD LOOKING STATEMENTS "Item 1. Business" and other parts of this Form 10-K contain "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to, those discussed in this section and in "Business Strategy", "Research and Product Development", "Intellectual Property and Proprietary Rights", "Licensed Technologies", "Competition" and "International Operations" above. The Company's future results could be affected by the demand for Company's products and services; the size, timing and recognition of revenue from significant orders; increased competition; the Company's success in and expense associated with developing, introducing and shipping new products, particularly in markets not previously served by the Company; the ability of the Company to successfully implement its business strategy of developing and licensing client/server decision support applications software designed to address specific industry markets; new product introductions and announcements by the Company's competitors; changes in Company strategy; product life cycles; the cost and continued availability of third party software and technology incorporated into the Company's products; the impact of rapid technological advances, evolving industry standards and changes in customer requirements; the impact of recent transitional changes in North American and international management and sales personnel; the impact of the investigation into violations of the Company's revenue recognition policies on the Company's ongoing operations; cancellations of maintenance and support agreements; software defects; changes in operating expenses; fluctuations in foreign exchange rates; and economic conditions generally or in specific industry segments. In addition, a significant portion of the Company's revenue in any quarter is typically derived from non-recurring license fees, a substantial portion of which is booked in the last month of a quarter. Since the purchase of the Company's products is relatively discretionary and generally involves a significant commitment of capital, in the event of any downturn in any potential customer's business or the economy in general, purchases of the Company's products may be deferred or canceled. Further, the Company's expense levels are based, in part, on its expectations as to future revenue and a significant portion of the Company's expenses do not vary with revenue. As a result, if revenue is below expectations, results of operations are likely to be materially adversely affected. 12 13 ITEM 2. PROPERTIES Comshare leases sales offices and general office space in 20 major cities throughout the United States, Canada, Europe and Australia. Comshare's primary leased locations are identified in the following table: Approximate Lease Area in Principal Expiration Location Square Feet Activity Date - -------- ----------- -------- ---- Headquarters, Administration, Sales, Marketing, Research Ann Arbor, and Product Development Michigan 67,200 and Customer Support February 2005* Administration, Sales, London, Marketing and England 52,115 Implementation Services December 2007 * Option to cancel February 2000. ITEM 3. LEGAL PROCEEDINGS Between August 9, 1996 and September 5, 1996, following the Company's announcement of certain violations of the Company's revenue recognition policies described under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations -- Revenue," four separate shareholder class action suits were filed in the United States District Court for the Eastern District of Michigan against the Company and certain of its officers and directors on behalf of shareholders who had purchased the Company's common stock between April 17, 1996 and August 6, 1996. These actions, which contain substantially similar claims, allege that the plaintiffs sustained losses as a result of the defendants' alleged untrue statements of material facts and alleged omissions to state material facts necessary in order to make the statements made not misleading. The complaints seek unspecified damages and costs. The Company intends to vigorously contest the plaintiffs' claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 13 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The Company's common stock is traded on The Nasdaq Stock Market under the symbol "CSRE". The following table sets forth, for the periods indicated, the high and low per share closing sales prices for the Company's common stock as reported on The Nasdaq Stock Market. All amounts in the following table have been adjusted to reflect the three-for-two stock split effective in the second quarter of fiscal 1996.
MARKET PRICES FISCAL YEAR ---------------- ENDING JUNE 30 HIGH LOW -------------- ------- ------- 1994 First Quarter $ 7.33 $ 3.83 Second Quarter 7.83 6.33 Third Quarter 8.50 6.00 Fourth Quarter 9.33 6.17 1995 First Quarter 8.50 6.00 Second Quarter 9.83 7.17 Third Quarter 11.50 8.83 Fourth Quarter 14.33 10.00 1996 First Quarter 21.58 13.50 Second Quarter 25.67 17.33 Third Quarter 27.25 20.00 Fourth Quarter 31.50 20.25 1997 First Quarter $32.00 $10.75 (through August 31, 1996)
At August 30, 1996, there were approximately 1,200 holders of record of the Company's common stock. DIVIDEND POLICY The Company has not paid dividends on its common stock since incorporation. It is the Company's present policy to retain earnings for use in the Company's business. Accordingly, the Company does not anticipate that cash dividends will be paid in the foreseeable future. Certain of the Company's credit agreements contain covenants which prohibit the payment of cash dividends on the common stock. See Note 3 of the Notes to Consolidated Financial Statements regarding restrictions on the payment of dividends. 14 15 ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION The selected financial data for the five fiscal years ended June 30, 1996 are derived from the audited Consolidated Financial Statements of the Company. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related Notes included elsewhere in this annual report on Form 10-K.
FISCAL YEAR ENDED JUNE 30, --------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: - ------------------------------------------ Revenue $118,984 $108,358 $ 96,626 $105,194 $119,174 Income from operations before unusual and restructuring charges 6,375 8,850 3,991 218 2,180 Income (loss) from operations (16,792) 2,485 1,648 (1,271) (13,122) Net income (loss) (9,891) 5,328 222 (1,763) (11,133) Per share $ (1.09) $ 0.63 $ 0.03 $ (0.22) $ (1.40) Average shares (thousands) 9,048 8,398 8,234 7,978 7,965 JUNE 30, ------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (IN THOUSANDS) CONSOLIDATED BALANCE SHEET DATA: - -------------------------------- Cash & cash equivalents $ 27,468 $ 1,398 $ 1,774 $ 2,593 $ 3,810 Total assets 98,238 79,310 88,944 92,582 107,963 Long-term debt 1,913 5,436 15,354 16,058 17,146 Total shareholders' equity $ 48,664 $ 32,548 $ 26,506 $ 26,161 $ 29,953 ADDITIONAL DATA: - ------------------------------- Number of employees at year-end 695 686 729 862 999
NOTES: (1) The income (loss) from operations for the fiscal years ended June 30, 1996, 1995, 1994, 1993 and 1992 includes restructuring and unusual charges of $23,167,000, $6,365,000, $2,343,000, $1,489,000 and $15,302,000, respectively. See Note 2 of the Notes to Consolidated Financial Statements for information regarding restructuring and unusual charges. (2) The fiscal year ended June 30, 1996 included a $1,200,000 tax benefit which related to the settlement of certain tax issues and the amendment of certain tax returns to claim credits which had previously not been claimed. (3) The fiscal year ended June 30, 1995 included a $4,100,000 tax benefit related to the recognition of prior years net operating losses and tax credits, as well as tax reserves released. (4) The fiscal year ended June 30, 1994 included a $1,100,000 gain from the sale of undeveloped land. 15 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth for the periods indicated, certain financial data as a percentage of total revenue:
As a Percent of Total Revenue Year Ended June 30, -------- 1996 1995 1994 ---- ---- ---- REVENUE Software licenses 48.5% 45.5% 39.2% Software maintenance 31.2 33.8 43.1 Implementation, consulting and other services 20.3 20.7 17.7 ----- ----- ----- TOTAL REVENUE 100.0 100.0 100.0 COSTS AND EXPENSES Selling and marketing 43.2 41.8 48.1 Cost of revenue and support 26.7 22.9 18.3 Internal research and product development 13.4 14.9 20.0 Internally capitalized software (5.2) (10.8) (13.7) Software amortization 5.5 12.2 13.0 General and administrative 11.0 10.8 10.2 Unusual charge 19.5 5.9 - Restructuring related costs - - 2.4 ----- ----- ----- TOTAL COSTS AND EXPENSES 114.1 97.7 98.3 INCOME (LOSS) FROM OPERATIONS (14.1) 2.3 1.7 Interest and other income (expense) 0.4 (0.2) (0.5) ----- ----- ---- INCOME (LOSS) BEFORE INCOME TAXES (13.7) 2.1 1.2 Provision (benefit) for income taxes (5.4) (2.8) 1.0 ----- ----- ---- NET INCOME (LOSS) (8.3)% 4.9% 0.2% ===== ===== ====
16 17 REVENUE
PERCENT YEAR PERCENT YEAR ENDED CHANGE ENDED CHANGE JUNE 30, 1996 OVER JUNE 30, 1995 OVER 1996 1995 1995 1994 1994 -------- -------- ---------- -------- --------- REVENUE Software licenses $ 57,715 $ 49,294 17.1% $ 37,871 30.2% Software maintenance 37,095 36,649 1.2 41,625 (12.0) Implementation and consulting services 24,174 22,415 7.8 17,130 30.9 -------- -------- -------- TOTAL REVENUE $118,984 $108,358 9.8% $ 96,626 12.1% ======== ======== ========
Total revenue increased 9.8% in fiscal 1996 compared with fiscal 1995 primarily due to the growth in client/server software license and maintenance revenue. This growth in fiscal 1996 was negatively impacted due to violations of the Company's revenue recognition policies that occurred in the Company's international business as described below. Total revenue increased 12.1% in fiscal 1995 compared with fiscal 1994 principally due to the increase in client/server software license revenue, which reflected the release of the Company's new products during fiscal 1995 and the last half of fiscal 1994. SOFTWARE LICENSE REVENUE Software license revenue increased 17.1% in fiscal 1996 compared with fiscal 1995. This growth in software license revenue primarily reflected the strong demand for the Company's EIS products, which include Commander Decision and Commander OLAP, its predecessor. In the EIS market, software license revenue grew 27.5% in fiscal 1996 compared with the prior year. In fiscal 1996, software license revenue was flat for the Company's financial reporting and retail decision support products principally due to the transitional changes experienced as a result of reorganizing the sales and marketing organizations and aligning them by specific industry markets. In connection with the Company's fiscal 1996 year end audit, the Company discovered side letters setting forth conditions to certain foreign orders in violation of the Company's revenue recognition policies. No violations were found in U.S. orders. The growth in software license revenue in fiscal 1996 for all the Company's products was negatively impacted by these violations, although it is difficult to estimate what license growth would have been in fiscal 1996 without the violation of Company policies. The full impact on fiscal 1996 income (loss) before taxes from orders requiring non-recognition or reversal was approximately $6.9 million, which includes amounts for prior quarters and years. These prior period adjustments are not material to the quarter or year to which they relate, and prior period results have not been restated. Corrective actions have been taken including management changes, personnel terminations and other disciplinary actions and the establishment of new order procedures. In fiscal 1995, total software license revenue increased 30.2% as compared with fiscal 1994. Software license revenue increased in all three decision support market areas. In the EIS market, software license revenue grew 25.7% compared with the prior year principally due to the March 1994 release of Commander OLAP, the Company's client/server EIS product. In the financial reporting applications market area software license revenue increased 39.5% compared with fiscal 1994, principally due to the release of Windows versions of Commander FDC and Commander Budget. In the retail decision support applications market area, software license revenue in fiscal 1995 increased 40.9% compared with fiscal 1994, primarily as a result of new client/server releases of ARTHUR Planning and ARTHUR Plan Monitor. SOFTWARE MAINTENANCE REVENUE Software maintenance revenue increased 1.2% in fiscal 1996 compared to fiscal 1995 principally as a result of client/server maintenance revenue growth of 29.4%. Client/server software maintenance revenue in fiscal 1996 represented 72% of total software maintenance revenue. Mainframe software maintenance revenue decreased 34.2% in fiscal 1996 compared to fiscal 1995, primarily due to mainframe maintenance cancellations and continued 21 customer migration to client/server platforms. Mainframe software maintenance revenue is expected to continue to decline. Software maintenance revenue decreased 12.0% in fiscal 1995 compared with fiscal 1994, mainly due to the decline in software maintenance revenue from mainframe products. Mainframe software maintenance revenue decreased 25.2% in 17 18 fiscal 1995 compared with fiscal 1994, principally due to the conversion of certain agents to distributors, the impact of maintenance cancellations and price discounts on multi-year agreements. Client/server software maintenance revenue increased 6.3% in fiscal 1995 compared with fiscal 1994 due to the growth in client/server software licenses, partially offset by the conversion of certain agents to distributors. The conversion of certain agents to distributors impacted the comparability of software maintenance revenue in fiscal 1995 and fiscal 1994. When an agent converts to a distributor, sales are made directly to the distributor rather than the end-user, and the distributor assumes the obligation of providing maintenance. In addition, the revenue from distributors is recognized net of fees (which fees are approximately the same as agent fees, but unlike agent fees, are not recorded as selling expenses), and revenue from agents is recognized before deducting their fees. As a result, the conversion of agents to distributors reduced reported software maintenance revenue in fiscal 1995, without a material impact on operating profits. In addition, in fiscal 1994, software maintenance revenue benefited from the nonrecurring release of approximately $1.6 million of deferred software maintenance revenue related to the conversion of the Company's Belgium and Holland sales operations to an independent agency and to the conversion of certain of the Company's agents to distributors. Included in fiscal 1994 operating expenses was approximately $0.9 million of costs associated with the recording of this software maintenance revenue. IMPLEMENTATION AND CONSULTING SERVICES REVENUE Implementation, consulting and other service revenue increased in fiscal 1996 and fiscal 1995 due to increased demand for such services resulting from the growth in client/server software license revenue, primarily in the EIS market area. COSTS AND EXPENSES
PERCENT PERCENT YEAR ENDED CHANGE YEAR ENDED CHANGE JUNE 30, 1996 OVER JUNE 30, 1995 OVER 1996 1995 1995 1994 1994 ---- ---- ------- ---------- --------- COSTS AND EXPENSES: Selling and marketing $ 51,354 $ 45,283 13.4% $ 46,457 (2.5)% Cost of revenue and support 31,814 24,799 28.3 17,670 40.3 Internal research and product development 15,977 16,180 (1.3) 19,293 (16.1) Internally capitalized software (6,153) (11,667) (47.3) (13,193) (11.6) Software amortization 6,535 13,250 (50.7) 12,517 5.9 General and administrative 13,082 11,663 12.2 9,891 17.9 -------- -------- -------- Total costs and expenses before 112,609 99,508 13.2 92,635 7.4 unusual charge and restructuring charges Unusual charge 23,167 6,365 * - * Restructuring related charges - - - 2,343 * ------- -------- -------- TOTAL COSTS AND EXPENSES $135,776 $105,873 28.2% $ 94,978 11.5% ======== ======== ========
* % not meaningful. Total operating expenses increased 28.2% in fiscal 1996 compared with the same period last year, primarily as a result of the $23.2 million non-cash charge to write off capitalized software. Excluding the software write-off charges, total operating expenses increased 13.2% in fiscal 1996 compared with fiscal 1995, in support of total revenue growth of 9.8%. The operating profit margin, excluding the software write-off charges, decreased to 5.4% in fiscal 1996 compared with 8.2% in fiscal 1995. The revenue recognition violations negatively impacted expected revenue which was the basis for fiscal 1996 spending, and, as a result, the operating margin was affected. Total operating expenses, excluding restructuring and unusual charges, in fiscal 1995 increased 7.4% compared with fiscal 1994 in support of total revenue growth of 12.1%. The operating profit margin, excluding the restructuring and unusual charges, for fiscal year ended June 30, 1995 was 8.2% compared with 4.1% for fiscal 1994. Selling and marketing expense increased 13.4% in fiscal 1996 compared to fiscal 1995 primarily due to increased employee-related expenses, including travel and compensation costs, and agency fees, incurred in support of the growth in total software license revenue. Selling and marketing expense decreased 2.5% in fiscal 1995 compared with fiscal 1994, principally due to a $5.4 million reduction in agent fees as a result of the conversion of certain agents to distributors. Partially offsetting this decline was a $3.8 million increase in direct selling and marketing expenses during fiscal 1995 to support the increased revenue base. 18 19 Cost of revenue and support expense increased 28.3% in fiscal 1996 and 40.3% in fiscal 1995 principally due to increased royalty fees payable to Arbor Software Corporation as a result of increased software license revenue from certain Comshare products which use Arbor's Essbase, and higher employee-related costs and outside consulting fees related to the growth in implementation and consulting services revenue. Internal research and product development expense in fiscal 1996 was relatively flat compared with fiscal 1995 due to the size of the development staff remaining relatively unchanged since July 1994 and the increased use of third party software tools in Comshare products, the royalty fees for which are classified as cost of revenue and support. Internal research and product development expense in fiscal 1995 decreased 16.1% compared with fiscal 1994, primarily due to staff reductions made at the end of fiscal 1994. These reductions principally reflected the Company's development strategy which included the increased utilization of technology developed by third parties to shorten development cycles, minimize investment in software tools and accelerate time to market. General and administrative expense was flat in fiscal 1996 compared with the same period last year, after excluding the provisions for approximately $900,000 of professional service fees associated with the investigation into violations of the Company's revenue recognition policies, $760,000 reserved in connection with the termination of the Company's vacated office facility in London, England and $600,000 gain on sale of the Company's Australian business. In June 1996, the Company sold its Australian business for approximately $798,000. At the same time, Comshare entered into a distribution agreement with the purchaser of the Australian business to market, sell, implement and provide maintenance and support of Comshare products in the Australian territories. General and administrative expense increased 6.4% in fiscal 1995, compared with fiscal 1994, after excluding the $1.1 million gain on the sale of undeveloped land which was included in general and administrative expense in fiscal 1994. General and administrative employee expenses related to relocation, travel and incentives contributed to the increase in fiscal 1995. Total costs and expenses for the fiscal year ended June 30, 1996 included a $23.2 million non-cash charge to write off certain capitalized software. The write-off was a result of strong customer interest in the Company's newest generation product, Commander Decision, for customizable decision support applications, which substantially reduced the realizable value of the Company's older desktop products. The write-off also reflected the reduction of the estimated useful service life of the Company's products and the amortization period of its capitalized software costs, prompted by the Company's acceleration of its product development cycles in response to changes in the technological environment in the decision support applications market. An unusual charge of $6.4 million was recorded in fiscal 1995, due to the non-cash write-off of capitalized software associated with the Company's mainframe products. The write-off was the result of the Company's fiscal 1996 product plans to focus primarily on desktop and client/server software and the decreased industry emphasis on mainframe decision support software products. In addition, the Company implemented a marketing strategy to migrate its existing clients using mature mainframe products to its new client/server products. The above factors would reduce the future revenue from mainframe software, and as a result the Company wrote-off the remaining capitalized mainframe software. See Note 2 of Notes to Consolidated Financial Statements. OTHER INCOME AND EXPENSE
YEAR ENDED JUNE 30, --------------------------- 1996 1995 1994 ---- ---- ---- OTHER INCOME (EXPENSE) Net interest income (expense) $492 $(512) $(489) Exchange gain (loss) (50) 307 (25) ---- ----- ------ TOTAL OTHER INCOME (EXPENSE) $442 $(205) $(514) ==== ===== ======
Interest income net of interest expense increased in fiscal 1996 due to investment of the net proceeds received from the public offering of the Company's common stock closed in the second quarter ended December 31, 1995 (see Note 4 of Notes to Consolidated Financial Statements) and the reduced loan balances outstanding following the closing of the offering (see Note 3 to Consolidated Financial Statements). Interest expense in fiscal 1995 increased primarily due to the loan origination fees associated with amending and restating the domestic credit agreement with the Company's banks. 19 20 INCOME TAXES The benefit from income taxes in fiscal 1996 was $6.5 million which included the tax benefits related to the Company's operating loss for the current year, and $1.2 million related to the settlement of certain tax issues and the amendment of certain tax returns to claim credits which had previously not been claimed. The benefit from income taxes in fiscal 1995 was $3.0 million which included the release of tax valuation reserves of $2.5 million related to tax credits. This release was attributable to the significant improvement in the Company's profitability in fiscal 1995, which allowed the realization of a significant portion of these credits. In addition, settlements with tax authorities regarding certain outstanding issues allowed the Company to release tax reserves of $1.6 million previously established against these exposures. Net tax assets remaining are projected by the Company to be utilized before expiration. A comparative analysis of the factors influencing the effective income tax rate is presented in Note 8 of the Notes to Consolidated Financial Statements. FOREIGN CURRENCY In fiscal 1996, 1995, and 1994, 53.1%, 55.3% and 55.3% of the Company's total revenue was from outside North America. Most of the Company's international revenue is denominated in foreign currencies. Comshare recognizes currency transaction gains and losses in the period of occurrence. As currency rates are constantly changing, these gains and losses can, at times, fluctuate greatly. The Company had an exchange loss of $50,000 in fiscal 1996, compared with an exchange gain of $307,000 in fiscal 1995. The exchange gain in fiscal 1995 was attributable to the strengthening of the Deutsche mark and French franc against the British pound. Foreign currency fluctuations in fiscal 1996 and 1995 impacted operating income as currency fluctuations on revenue denominated in a foreign currency were offset by currency fluctuations on expenses denominated in a foreign currency. In fiscal 1996, the increase in total revenue, at actual exchange rates, was $216,000 less than at comparable exchange rates. The increase in total expenses in fiscal 1996, at actual exchange rates, was $34,000 more than at comparable exchange rates. As a result of the changes in the foreign currency exchange rates, the increase in the net loss before taxes in fiscal 1996, at actual exchange rates, was $250,000 more than at comparable exchange rates. In fiscal 1995, the increase in total revenue at actual exchange rates was $3.6 million more than at comparable exchange rates. The increase in total expenses in fiscal 1995 at actual exchange rates was $3.3 million more than at comparable exchange rates. As a result of the changes in the foreign currency exchange rates, the increase in net income before taxes in fiscal 1995, at actual exchange rates, was $300,000 more than at comparable exchange rates. The Company at various times denominates borrowings in foreign currencies and enters into forward exchange contracts to hedge exposures related to foreign currency transactions. The Company does not use any other types of derivatives to hedge such exposures nor does it speculate in foreign currency. In general, the Company only uses forward exchange contracts to hedge against large selective transactions that present the most exposure to exchange rate fluctuations. At June 30, 1996 and June 30, 1995 the Company had forward contracts totaling $5.7 million and $2.2 million, respectively. Inflation did not have a material impact on the Company's revenue or income from operations in fiscal 1996, 1995 or 1994. 20 21 LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, cash and cash equivalents were $27.5 million, compared with cash of $1.4 million at June 30, 1995. The increase in cash and cash equivalents was principally attributable to the $25.2 million in net proceeds received from the public offering of the Company's common stock closed in the second quarter ended December 31, 1995. The Company used approximately $5.0 million of the net proceeds from the public offering to reduce long term debt during the second quarter ended December 31, 1995. The Company expects to use the remaining net proceeds from the offering for working capital and general corporate purposes. Pending such uses, the Company invested the net proceeds from the public offering in investment grade, short-term, interest bearing instruments. Net cash provided by operating activities was $13.0 million in fiscal 1996, compared with $23.3 million in fiscal 1995. The decrease in net cash provided by operating activities was partially due to the lower amount of development costs that were capitalized, and partially due to non-cash tax benefits and higher working capital. The positive cash flow generated in fiscal 1996 was principally due to net income, excluding the non-cash write-off of software. Net cash used in investing activities was $9.9 million in fiscal 1996, compared with $14.1 million in fiscal 1995. The decrease in net cash used in investing activities was primarily due to a decrease in the amount of capitalized internally developed software costs, discussed previously, partially offset by an increase in property and equipment purchases. At June 30, 1996, the Company did not have any material capital expenditure commitments. In fiscal 1997, property and equipment purchases and additions to internally developed software are expected to continue at levels similar to those of fiscal 1996. Working capital as of June 30, 1996 was $24.6 million, compared with a negative $2.2 million as of June 30, 1995. The $26.8 million increase from June 30, 1995 to June 30, 1996 was primarily due to the increase in cash and cash equivalents resulting from the public offering. Deferred revenue as of June 30, 1996 was $18.4 million, compared with $18.6 million as of June 30, 1995. Deferred revenue principally relates to prepaid maintenance contracts. Total assets were $98.2 million at June 30, 1996, compared with total assets of $79.3 million at June 30, 1995. The primary contributing factors to the increase from June 30, 1995 to June 30, 1996 were the increases in cash and cash equivalents and accounts receivable offset by the decrease in computer software (net of long-term deferred income taxes), which decreased as a result of the write-off of capitalized software. The Company has a $10.0 million amended and restated, domestic, unsecured credit agreement with its banks which matures on October 31, 1997. The amended and restated credit agreement contains covenants regarding among other things, working capital, leverage, net worth and payment of dividends. Under the terms of the agreement, the Company is not permitted to pay dividends on its common stock. Permitted borrowings under the credit agreement are based on a percentage of worldwide eligible accounts receivable. At June 30, 1996, permitted borrowings under the agreement totaled $10.0 million. There were no borrowings outstanding under this agreement at June 30, 1996. In November 1995, the Company reduced permitted borrowings under the agreement from $14.0 million to $10.0 million. At June 30, 1996 interest was at the Eurodollar rate (5-1/2% at June 30, 1996) plus applicable margin, which varies between 1-1/2% and 2-1/2% (1-1/2% at June 30, 1996). In addition, certain of the Company's European subsidiaries have local currency credit agreements or overdraft facilities with banks totaling $4.3 million at June 30, 1996. The Company had outstanding borrowings of $1.9 million at June 30, 1996. The credit agreements expire on October 1, 1997. The interest rates generally vary with the banks' base rate. Most of such borrowings are guaranteed by the Company. The Company believes that the combination of present cash balances, future operating cash flows and amounts available under credit facilities will be sufficient to meet the Company's currently anticipated cash requirements for at least the next twelve months. 21 22 ITEM 8. FINANCIAL STATEMENTS The financial statements and schedule filed herewith are set forth on the Index to Consolidated Financial Statements and Schedule on page 25 and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated herein by reference to the Company's 1996 Proxy Statement under the captions "Election of Directors" and "Further Information-Executive Officers." ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the Company's 1996 Proxy Statement under the caption "Executive Compensation." ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by this Item is incorporated herein by reference to the Company's 1996 Proxy Statement under the captions "Further Information-Principal Shareholders" and "Further Information-Stock Ownership of Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this Item is incorporated herein by reference to the Company's 1996 Proxy Statement under the captions "Certain Relationships and Related Transactions." 22 23 PART IV ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: 1. Consolidated Financial Statements: The Financial Statements filed with this report are listed in the Index to Consolidated Financial Statements and Schedule which appears on page 25. 2. Consolidated Financial Statement Schedule: The Financial Statement Schedule filed with this report is listed in the Index to Consolidated Financial Statements and Schedule which appears on page 25. 3. The exhibits filed with this report are listed in the Exhibit Index which appears on page 45. The following are the Company's management contracts and compensatory plans and arrangements which are required to be filed as exhibits to this Form 10-K: EXHIBIT NO. DESCRIPTION 10.01 Benefit Adjustment Plan of Comshare, Incorporated, effective June 1, 1986, as amended - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 10.02 Comshare, Incorporated 1988 Stock Option Plan, as amended - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1990 and Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.03 Amended and Restated Profit Sharing Plan of Comshare, Incorporated, effective as of October 1, 1995 - incorporated by reference to Exhibit 4.1 to the Registrant's Form S-8 Registration Statement No. 33-65109. 10.04 Employee Stock Ownership Plan of Comshare, Incorporated, effective June 28, 1985, as amended - incorporated by reference to Exhibit 10.06 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.05 Rules of the Comshare Retirement and Death Benefits Plan for employees of the United Kingdom, effective January 1, 1991, as amended - incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 10.06 Interim Trust Deed establishing the Comshare Money Purchase Plan for employees of the United Kingdom, effective March 1, 1994 - incorporated by reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.07 Employment and NonCompetition Agreement between Comshare, Incorporated and T. Wallace Wrathall, effective as of April 1, 1994 - incorporated by reference to Exhibit 10.23 to the Registrant's Form 10-Q Report for the quarter ended December 31, 1994. 10.08 Amended and Restated Employee Agreement between Comshare, Incorporated and Richard L. Crandall effective July 1, 1994, as amended - incorporated by reference to Exhibit 10.10 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.09 Non-Competition Agreement between Comshare, Incorporated and Richard L. Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K for the fiscal year ended June 30, 1994. (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2). 23 24 10.10 Letter Agreement from Comshare, Incorporated to Kathryn A. Jehle regarding terms of employment dated April 18, 1994 - incorporated by reference to Exhibit 10.12 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.11 Severance and Consulting Agreement, dated May 29, 1996, between Comshare, Incorporated and Donald J. Walker. 10.12 Description of Incentive Arrangements for certain executive officers for fiscal years 1994 and 1995 - 2000. 10.13 Trust Agreement under the Benefit Adjustment Plan of Comshare, Incorporated, effective April 25, 1988, as amended - incorporated by reference to Exhibit 10.31 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 10.14 Trust Agreement between Comshare, Incorporated and Vanguard Fiduciary for maintaining the Profit Sharing Plan of Comshare, Incorporated effective March 31, 1992, as amended - incorporated by reference to Exhibit 10.15 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.15 1994 Executive Stock Purchase Program of Comshare, Incorporated - incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.16 Employee Stock Purchase Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.17 1994 Directors Stock Option Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended June 30, 1996. 24 25 COMSHARE, INCORPORATED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE FINANCIAL STATEMENTS PAGE ---- Report of Independent Public Accountants 26 Consolidated Statement of Operations for the Fiscal Years Ended June 30, 1996, 1995 and 1994 27 Consolidated Balance Sheet as of June 30, 1996 and 1995 28-29 Consolidated Statement of Cash Flows for the Fiscal Years Ended June 30, 1996, 1995 and 1994 30 Consolidated Statement of Shareholders' Equity for the Fiscal Years Ended June 30, 1996, 1995 and 1994 31 Notes to Consolidated Financial Statements 32-42 SCHEDULE II. Consolidated Schedule of Valuation and Qualifying Accounts 43 25 26 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Comshare, Incorporated: We have audited the accompanying consolidated balance sheet of COMSHARE, INCORPORATED (a Michigan corporation) and subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1996. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Comshare, Incorporated and subsidiaries as of June 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the accompanying index is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Detroit, Michigan, August 30, 1996 (except with respect to the matters discussed in Notes 4 and 12, as to which the dates are September 16 and 5, 1996, respectively). 26 27 COMSHARE, INCORPORATED CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED JUNE 30, -------------------------------- 1996 1995 1994 ---- ---- ---- REVENUE Software licenses $ 57,715 $ 49,294 $ 37,871 Software maintenance 37,095 36,649 41,625 Implementation, consulting and other services 24,174 22,415 17,130 -------- -------- -------- TOTAL REVENUE 118,984 108,358 96,626 COSTS AND EXPENSES Selling and marketing 51,354 45,283 46,457 Cost of revenue and support 31,814 24,799 17,670 Internal research and product development 15,977 16,180 19,293 Internally capitalized software (6,153) (11,667) (13,193) Software amortization 6,535 13,250 12,517 General and administrative 13,082 11,663 9,891 Unusual charge 23,167 6,365 - Restructuring related costs - - 2,343 -------- -------- ------- TOTAL COSTS AND EXPENSES 135,776 105,873 94,978 -------- -------- ------- INCOME (LOSS) FROM OPERATIONS (16,792) 2,485 1,648 OTHER INCOME (EXPENSE) Interest income (expense) 492 (512) (489) Exchange gain (loss) (50) 307 (25) -------- -------- ------- TOTAL OTHER INCOME (EXPENSE) 442 (205) (514) -------- -------- ------- INCOME (LOSS) BEFORE TAXES (16,350) 2,280 1,134 PROVISION (BENEFIT) FOR INCOME TAXES (6,459) (3,048) 912 -------- -------- ------- NET INCOME (LOSS) $ (9,891) $ 5,328 $ 222 ======== ======== ======= Weighted average number of common and dilutive common equivalent shares 9,048 8,398 8,234 ======== ======== ======= NET INCOME (LOSS) PER COMMON SHARE $ (1.09) $ 0.63 $ 0.03 ======== ======== =======
The accompanying notes are an integral part of this statement. 27 28 COMSHARE, INCORPORATED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
AS OF JUNE 30, ----------------- 1996 1995 ------ ------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 27,468 $ 1,398 Accounts receivable, less allowance for doubtful accounts of $1,411 as of June 30, 1996 and $887 as of June 30, 1995 34,853 29,531 Deferred income taxes 758 783 Prepaid expenses 5,733 4,098 -------- ------- Total current assets 68,812 35,810 PROPERTY AND EQUIPMENT, at cost Computers and other equipment 24,946 24,023 Leasehold improvements 2,999 3,053 -------- ------- 27,945 27,076 Less - Accumulated depreciation 23,426 23,663 -------- ------- Property and equipment, net 4,519 3,413 COMPUTER SOFTWARE, net of accumulated amortization of $3,423 as of June 30, 1996 and $32,677 as of June 30, 1995 9,064 32,676 GOODWILL, net of accumulated amortization of $1,684 as of June 30, 1996 and $1,751 as of June 30, 1995 1,947 2,246 DEFERRED INCOME TAXES 7,940 - OTHER ASSETS 5,956 5,165 -------- ------- $ 98,238 $79,310 ======== =======
The accompanying notes are an integral part of this statement. 28 29 COMSHARE, INCORPORATED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
AS OF JUNE 30, -------------- 1996 1995 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $17,934 $11,342 Accrued liabilities - Payroll 3,394 3,467 Taxes, other than income taxes 1,971 1,486 Other 1,391 1,465 ------- ------- Total accrued liabilities 6,756 6,418 Income taxes 1,200 1,602 Deferred revenue 18,364 18,599 ------- ------- Total current liabilities 44,254 37,961 LONG-TERM DEBT 1,913 5,436 DEFERRED INCOME TAXES - 275 OTHER LIABILITIES 3,407 3,090 SHAREHOLDERS' EQUITY Capital stock: Preferred stock, no par value; authorized 5,000,000 shares; none issued - - Common stock, $1.00 par value; authorized 20,000,000 shares; outstanding 9,691,443 shares as of June 30, 1996 and 8,221,234 shares as of June 30, 1995 9,691 8,221 Capital contributed in excess of par 38,132 13,199 Retained earnings 5,239 15,500 Currency translation adjustments (3,586) (3,239) ------- ------- 49,476 33,681 Less - Notes receivable 812 1,133 ------- ------- Total shareholders' equity 48,664 32,548 ------- ------- $98,238 $79,310 ======= =======
The accompanying notes are an integral part of this statement. 29 30 COMSHARE, INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED JUNE 30, ------------------------------- 1996 1995 1994 --------- --------- --------- OPERATING ACTIVITIES NET INCOME (LOSS) $ (9,891) $ 5,328 $ 222 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 8,904 15,873 15,893 Write-off of capitalized software 23,167 6,365 - Gain on sale of business property (600) - (1,102) Provision for losses on accounts receivable 578 (119) 140 Loss on sale of property and equipment 26 28 3 Changes in operating assets and liabilities: Accounts receivable (6,257) 2,675 585 Prepaid expenses and other assets (1,726) 77 964 Accounts payable 6,686 (469) (1,083) Accrued liabilities 58 (337) 853 Deferred revenue (19) (1,489) (3,875) Deferred income taxes (8,238) (4,645) 732 Other liabilities 338 42 301 --------- -------- -------- Net cash provided by operating activities 13,026 23,329 13,633 INVESTING ACTIVITIES Additions to computer software (6,207) (11,667) (13,187) Payments for property and equipment (3,220) (1,207) (1,199) Proceeds from sale of business property 798 - 3,376 Other (1,272) (1,227) (1,382) --------- -------- -------- Net cash used in investing activities (9,901) (14,101) (12,392) FINANCING ACTIVITIES Net repayments under notes payable - (33) (40) Net repayments under long-term debt (3,394) (10,044) (2,046) Stock options exercised 474 248 74 Issuance of common stock 25,148 - - Other 730 202 (42) --------- -------- -------- Net cash provided by (used in) financing activities 22,958 (9,627) (2,054) EFFECT OF EXCHANGE RATE CHANGES (13) 23 (6) --------- -------- -------- NET INCREASE (DECREASE) IN CASH 26,070 (376) (819) BALANCE AT BEGINNING OF YEAR 1,398 1,774 2,593 --------- -------- -------- BALANCE AT END OF YEAR $ 27,468 $ 1,398 $ 1,774 ========= ======== ======== SUPPLEMENTAL DISCLOSURES: - -------------------------- Cash paid for interest $ 371 $ 690 $ 624 ========= ======== ======== Cash paid for income taxes $ 1,869 $ 558 $ 481 ========= ======== ========
The accompanying notes are an integral part of this statement. 30 31 COMSHARE, INCORPORATED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED JUNE 30, ------------------------------- 1996 1995 1994 --------- --------- --------- COMMON STOCK Balance beginning of year $ 8,221 $ 8,037 $ 8,019 Employee Stock Purchase Plan 26 22 - 1994 Executive Stock Purchase Program - 104 - Retirement of shares (16) (2) - Sale of common stock in a public offering 1,294 - - Stock options exercised 166 60 18 --------- --------- --------- Balance end of year 9,691 8,221 8,037 --------- --------- --------- CAPITAL CONTRIBUTED IN EXCESS OF PAR Balance beginning of year 13,199 11,982 11,926 Employee Stock Purchase Plan 384 155 - 1994 Executive Stock Purchase Program - 855 - Retirement of shares (62) (3) - Sale of common stock in a public offering 23,854 - - Stock options exercised 757 210 54 Tax benefits related to stock options - - 2 --------- --------- --------- Balance end of year 38,132 13,199 11,982 --------- --------- --------- RETAINED EARNINGS Balance beginning of year 15,500 10,190 9,968 Net income (loss) (9,891) 5,328 222 Retirement of shares (370) (18) - --------- --------- --------- Balance end of year 5,239 15,500 10,190 --------- --------- --------- CURRENCY TRANSLATION ADJUSTMENTS Balance beginning of year (3,239) (3,504) (3,553) Translation adjustments (347) 265 49 --------- --------- --------- Balance end of year (3,586) (3,239) (3,504) --------- --------- --------- LESS - NOTES RECEIVABLE Balance beginning of year 1,133 199 199 1994 Executive Stock Purchase Program (122) 934 - Employee Stock Ownership Plan (199) - - --------- --------- --------- Balance end of year 812 1,133 199 --------- --------- --------- Total shareholders' equity $ 48,664 $ 32,548 $ 26,506 ========= ========= =========
The accompanying notes are an integral part of this statement. 31 32 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES THE COMPANY. Comshare, Incorporated (the "Company") develops, markets and supports client/server decision support applications software designed for business analysis, planning, reporting and decision making. The Company also provides services such as maintenance, training, consulting and support services. Comshare is currently providing maintenance at more than 3,000 corporate and public sector customer sites. The Company markets its products through a direct sales force in the United States, Canada, United Kingdom, France and Germany and has an extensive agent/distributor network in 36 other countries. The Company was incorporated in Michigan in February 1966 and commenced operations on that date. PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All material intercompany accounts and transactions have been eliminated. REVENUE. The Company's revenue consists of software license, software maintenance and implementation, consulting and other service revenue. Software license revenue, including sales to distributors, is recognized when a customer contract is fully executed and the software has been shipped. Software maintenance revenue, whether bundled with product license or priced separately, is recorded as deferred revenue on the balance sheet when invoiced and is recognized over the term of the maintenance contract. Implementation, consulting and other services revenue is recognized as the services are performed. EXPENSE CLASSIFICATION. Selling and marketing expense primarily includes employee costs, travel costs, facilities expenses, advertising and agency fees. Cost of revenue and support includes personnel and other costs related to implementation and consulting services revenue, customer support costs, direct cost of producing software and royalty expense for products licensed from others for use in the Company's product offerings. Internal research and product development includes all such expense before computer software capitalization and amortization. FOREIGN CURRENCY TRANSLATION. All assets and liabilities of the Company's foreign operations are translated at current exchange rates and revenue and expenses are translated at monthly exchange rates. Resulting translation adjustments are reflected as a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in net income. FINANCIAL INSTRUMENTS. The Company at various times enters into forward exchange contracts to hedge certain exposures related to identifiable foreign currency transactions that are relatively certain as to both timing and amount. Gains and losses on the forward contracts are recognized concurrently with the gains and losses from the underlying transactions. The forward exchange contracts used are classified as "held for purposes other than trading." The Company does not use any other types of derivative financial instruments to hedge such exposures, nor does it use derivatives for speculative purposes. At June 30, 1996 and 1995, the Company has forward foreign currency exchange contracts of approximately $5,746,000 and $2,250,000 (notional amounts), respectively, denominated in European currencies. The contracts outstanding at June 30, 1996 mature through July 19, 1996 and are intended to hedge various foreign currency commitments due from foreign subsidiaries and the Company's agents and distributors. Due to the short term nature of these financial instruments, the fair value of these contracts is not materially different than their notional amount at June 30, 1996 and 1995. CASH AND CASH EQUIVALENTS. Cash and cash equivalents includes investments in highly liquid investments with maturities of ninety days or less at the time of acquisition. 32 33 CONSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) COMPUTER SOFTWARE. The costs of developing and purchasing new software products and enhancements to existing software products are capitalized after technological feasibility is established. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross product revenue, estimated economic product lives and changes in software and hardware technology. Capitalized costs include capitalized interest of $0, $681,000, and $814,000 in fiscal 1996, 1995 and 1994, respectively. Beginning October 1, 1995, capitalized development costs are amortized using the straight-line method over a two-year service life (see Note 2). Previously, capitalized development costs were amortized using a rolling three year method, effectively a service life of approximately six years. The policy is reevaluated and adjusted as necessary at the end of each accounting period. On an ongoing basis, management reviews the valuation and amortization of capitalized development costs. As part of this review, the Company considers the value of future cash flows attributable to the capitalized development costs in evaluating potential impairment of the asset. DEPRECIATION. The cost of depreciable assets is charged to operations on a straight-line basis. Principal service lives for computers and other equipment are three to five years. Leasehold improvements are amortized over the expected life of the asset or term of the lease, whichever is shorter. GOODWILL. Goodwill represents the unamortized cost in excess of fair value of net assets acquired and is amortized on a straight-line basis over forty years. On an ongoing basis, management reviews the valuation and amortization of goodwill. As part of this review, the Company considers the value of future cash flows attributable to the acquired operations in evaluating potential impairment of goodwill. OTHER ASSETS. Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. This statement is required to be adopted by the Company during its fiscal year ending June 30, 1997. Although a detailed analysis has not been performed, the Company believes there would be no material impact on its financial statements, if this statement was adopted as of June 30, 1996. INCOME TAXES. The Company accounts for estimated income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This statement provides for an asset and liability approach under which deferred income taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable. EARNINGS PER SHARE. Earnings per share of common stock is based on the daily weighted average number of shares of common stock outstanding considering the dilutive effect of outstanding stock options when appropriate. See Note 4 for information regarding the stock split during the year ended June 30, 1996. STOCK PLANS. The Company accounts for its stock option plans and Employee Stock Purchase Plan in accordance with the provisions of Accounting Principles Board Opinion No. 25 ("APB 25") "Accounting for Stock Issued To Employees." Effective for the Company's fiscal year ending June 30, 1997, Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" requires that companies electing to continue to use the intrinsic value method under APB 25 make pro forma disclosure regarding the effect of the fair-value-based method of accounting as if it had been applied. Pro forma disclosure will be provided in the Company's fiscal 1997 financial statements. USE OF ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates. 33 34 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) RECLASSIFICATIONS. Certain amounts in the 1994 and 1995 financial statements have been reclassified to conform with 1996 presentations. 2. RESTRUCTURING AND UNUSUAL CHARGES During the year ended June 30, 1996, the Company recorded a $23,200,000 non-cash charge to write off certain capitalized software. The write-off resulted from the strong customer interest in Commander Decision, the Company's newest generation product for customizable decision support applications, which substantially reduced the realizable value of the Company's older Commander desktop products, and the Company's acceleration of its product development cycles in response to changes in the technological environment in the decision support application software market. The write-off principally reflected the Company's decision to focus its sales efforts on Commander Decision, which was released in December 1995. Commander Decision was introduced at the Company's Users Conference held during the second quarter of fiscal 1996 and generated greater interest than originally anticipated by the Company. This strong customer interest, combined with the Company's decision in fiscal 1996 to offer the new Commander Decision end-user front-end to existing maintenance-paying Commander OLAP customers at no charge, was expected to result in rapid migration from Commander OLAP front-ends to the Commander Decision front-end. The write-off also reflected the reduction of the estimated useful service life of the Company's products and the amortization period for its capitalized software costs, prompted by the Company's acceleration of its product development cycle. The reduction of the software amortization period to two years and a review of projected revenues over this two year service life resulted in the write-off of unamortized capitalized software development costs. During the year ended June 30, 1995, the Company recorded an unusual charge of $6,365,000. This charge related to the write-off of capitalized software associated with its mature mainframe products. The write-off of capitalized software associated with the Company's mainframe products was the result of industry trends and reflected the Company's strategic product plan to focus on client/server software products. During the year ended June 30, 1994, the Company made provisions totaling $2,343,000 for management actions or plans in connection primarily with staff reductions related to its restructuring. These restructuring charges included staff reductions of approximately 50 employees and estimated savings of $4,000,000 which were achieved in fiscal 1995. At June 30, 1996, $538,000 remains to be paid for contractual obligations related to restructuring actions taken during 1994. 3. BORROWINGS The Company has a $10,000,000 amended and restated, domestic unsecured credit agreement with its bank which matures on October 31, 1997. The amended and restated credit agreement contains covenants regarding, among other things, working capital, leverage, net worth and payment of dividends. Under the terms of the agreement, the Company is not permitted to pay dividends. Permitted borrowings are based on a percentage of worldwide eligible accounts receivable and worldwide borrowings. At June 30, 1996, the permitted borrowings available under the agreement were $10,000,000. There were no borrowings outstanding under this agreement at June 30, 1996. In November 1995, the Company reduced permitted borrowings under the agreement from $14,000,000 to $10,000,000. At June 30, 1996 interest was at the Eurodollar rate (5-1/2% at June 30, 1996) plus applicable margin (1-1/2% at June 30, 1996), which varies between 1-1/2% and 2-1/2%. 34 35 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Separately, certain of the Company's European subsidiaries entered into local currency credit agreements or overdraft facilities in various currencies with banks totaling $4,340,000. At June 30, 1996, the Company had outstanding borrowings of $1,913,000. The credit agreements expire on October 1, 1997. The interest rates generally vary with the banks' base rate. Most of such borrowings are guaranteed by the Company. 4. SHAREHOLDERS' EQUITY The Board of Directors has the authority to issue up to 5,000,000 shares of no par value preferred stock. The shares can be issued in one or more series with full, limited or no voting powers and with such special rights, qualifications, limitations and restrictions as may be adopted by the Board of Directors. On September 16, 1996, the Company announced that its Board of Directors has approved a Shareholder Rights Plan ("Rights Plan"). Under the Rights Plan, the Company declared a dividend of one preferred stock purchase right on each outstanding share of common stock. Under certain conditions, each right may be exercised to purchase one one-hundredth share of Series A Preferred Stock at an exercise price of $110. Of the 5,000,000 preferred shares the Company is authorized to issue, 200,000 shares have been designated Series A Preferred. The Series A Preferred has certain dividend, voting and liquidation preferences. No preferred shares have been issued. The rights may only be exercised beginning ten business days following a public announcement that a person or group acquires 15% or more of the Company's common stock (subject to certain exceptions) or beginning ten business days (or under certain circumstances a later date) following the commencement or announcement of a tender or exchange offer which would cause that result. In addition, under certain circumstances, the rights will entitle shareholders (other than the acquiror) to purchase the Company's common stock, or stock of the acquiror, at a discount to market prices. The rights, which do not have voting rights, expire on September 30, 2006. Distribution of these rights will be made to shareholders of record on September 30, 1996. Effective November 20, 1995, upon approval of the Company's Board of Directors, Comshare declared a three-for-two stock split of the Company's common stock distributable to shareholders of record as of November 13, 1995. All share and per share data included in the consolidated financial statements and accompanying notes have been adjusted to reflect this stock split. In December 1995, the Company completed a public offering of its common stock which involved the issuance and sale by the Company of 1,293,750 shares resulting in net proceeds to the Company of approximately $25,150,000. The Company's senior executives are encouraged to own Comshare common stock. To facilitate such ownership, the shareholders approved the 1994 Executive Stock Purchase Program which enables certain executives to purchase Comshare common stock at then current market prices directly from the Company via a promissory note. The promissory note cannot exceed the executive's base annual salary and is secured by the related common stock issued by the Company. The promissory note matures four years from the date of issuance. Interest is at the prime rate plus 1% and may be deferred until the promissory note matures. A total of 300,000 shares of the Company's common stock has been reserved for issuance under the 1994 Executive Stock Purchase Program. For the year ended June 30, 1995, a total of 104,044 shares at prices ranging from $8.67 to $12.33 were issued in exchange for notes totaling $934,000. The aggregate principal balance of these promissory notes outstanding and due to the Company was $812,000 at June 30, 1996. No shares were purchased under this program during fiscal 1996. 5. STOCK OPTIONS The Company has two stock option plans, the 1988 Stock Option Plan (the "1988 Plan") and the 1994 Directors Stock Option Plan (the "Directors Plan"). 35 36 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENT - (CONTINUED) 1988 STOCK OPTION PLAN The Company's 1988 Plan provides for the grant of both incentive stock options and non-qualified options to officers and key employees. Options under the 1988 Plan are granted at 100% of market price on the date of grant, are exercisable at the rate of 25% per year after one year from the date of grant and have a term of five years. The Board of Directors may, at its discretion, grant stock appreciation rights in connection with the grant of options, but to date has not elected to do so. The 1988 Stock Option Plan was amended in November, 1994 to increase the number of shares of common stock authorized for grant from 900,000 shares to 1,275,000. At June 30, 1996, the Company has reserved 1,029,284 shares of common stock for the exercise of employee stock options. The number of options outstanding and exercisable under the 1988 Plan was 702,756 and 206,068 at June 30, 1996, respectively. 1994 DIRECTORS STOCK OPTION PLAN The 1994 Directors Stock Option Plan, approved by the shareholders in November, 1994, provides for the issuance of options to purchase up to 150,000 shares of the Company's common stock to non-employee directors of the Company. Options under the Directors Plan are granted at 100% of the market price on the date of grant, are exercisable at a rate of 25% per year after one year from the date of grant and have a term of five years. At June 30, 1996 the Company has reserved 146,250 shares of common stock for the exercise of directors' stock options. The number of options outstanding and exercisable under the Directors Plan was 60,000 and 9,375 at June 30, 1996, respectively. SUMMARY OF ACTIVITY Stock option activity for the 1988 Plan and the Directors Plan is summarized below:
Number Price Of Shares Per Share --------- --------- Outstanding at June 30, 1993 1,186,140 $4.09 to $14.67 Granted 352,500 6.00 to 9.17 Exercised (17,625) 4.09 to 4.09 Canceled (713,247) 4.09 to 14.67 -------- Outstanding at June 30, 1994 807,768 4.09 to 11.17 Granted 268,500 7.33 to 13.00 Exercised (60,698) 4.09 to 4.09 Canceled (197,545) 4.09 to 11.17 -------- Outstanding at June 30, 1995 818,025 4.09 to 13.00 Granted 177,750 20.50 to 27.25 Exercised (167,394) 4.09 to 8.75 Canceled (65,625) 4.09 to 20.50 -------- Outstanding at June 30, 1996 762,756 $4.09 to $27.25 ======== Exercisable at June 30, 1996 215,443 ========
36 37 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. EMPLOYEE STOCK PURCHASE PLAN The Employee Stock Purchase Plan (the "ESPP") was approved by the shareholders in November, 1994. A total of 300,000 shares of the Company's common stock have been reserved for issuance under the ESPP. The ESPP allows participating employees to purchase through payroll deductions shares of the Company's common stock at 85% of the fair market value at July 1 and January 1. Substantially all employees are eligible to participate in the ESPP. Under the ESPP 26,218 and 21,834 shares were issued in fiscal 1996 and 1995, respectively. 7. BENEFIT PLANS The Company has a profit sharing plan covering substantially all United States employees. The profit sharing plan provides for a minimum annual contribution of 2% of an employee's salary, and matching contributions based on employee 401(K) contributions. Effective October 1, 1995, the Company merged its employee stock ownership plan with the Company's profit sharing plan. The Company also has a deferred compensation plan for United States officers for the payment of benefits which would not otherwise be eligible under its tax-qualified retirement plans. The Company contributions, other than the above, are discretionary and are determined by the Board of Directors. The total contributions were $1,183,000 in 1996, $1,224,000 in 1995, and $1,007,000 in 1994. A subsidiary in the United Kingdom maintains, through a trustee, a defined benefit pension plan for substantially all of its employees hired before January 1, 1994 and a defined contribution plan for employees hired January 1, 1994 or later. The defined contribution plan provides that participating employees contribute a minimum of 5% of their pensionable salary with the Company contributing 5%. The benefits of the defined benefit plan, which are pay related, are integrated with and supplement the benefits called for under the applicable laws of the United Kingdom. The components of pension expense are as follows (in thousands):
1996 1995 1994 ------- -------- ------- Service cost for benefits earned during the year $ 429 $ 540 $ 501 Interest cost on projected benefit obligation 1,340 1,292 1,111 Actual return on assets (1,899) (1,347) (1,347) Net amortization and deferral 722 101 261 ------- ------- ------- Net pension expense $ 592 $ 586 $ 526 ======= ======== ======= The funded status of the pension plan is as follows (in thousands): 1996 1995 ------- -------- Actuarial present value of benefit obligations Vested benefits $15,742 $ 14,705 Non-vested benefits - 29 ------- -------- Accumulated benefit obligation 15,742 14,734 Effects of salary progression 1,583 1,664 ------- -------- Projected benefit obligation 17,325 16,398 Plan assets at fair value 17,314 15,103 ------- -------- Plan assets under projected benefit obligation $ 11 $ 1,295 ======= ======== Amounts not recognized in balance sheet: Unamortized transition obligation $ 650 $ 702 Unamortized net (gain) loss 1,796 2,888 ------- -------- $ 2,446 $ 3,590 ======= ========
37 38 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The actuarial present value of the projected benefit obligation was determined using a weighted average discount rate of 8.5% and an annual increase in future compensation of 6.5% for fiscal 1996 and fiscal 1995 calculations; for fiscal 1994 a weighted average discount rate of 9% and an annual rate of increase in future compensation of 7% was used to project benefit obligations. The long term weighted average rate of return on assets used was 8.5% for 1996 and 1995 and 10% for 1994. The Company provides defined retirement benefits to the employees of the other foreign subsidiaries through various contribution plans. The amount charged to expense for these benefits was $228,000 in fiscal 1996, $142,000 in fiscal 1995 and $201,000 in fiscal 1994. 8. INCOME TAXES A summary of income (loss) before provision (benefit) for income taxes and components of the provision (benefit) for income taxes for the years ended June 30 is as follows (in thousands): 1996 1995 1994 --------- -------- -------- Income (loss) before provision (benefit) for income taxes: Domestic $ (12,428) $ 486 $ (2,270) Foreign ( 3,922) 1,794 3,404 --------- -------- -------- $ (16,350) $ 2,280 $ 1,134 ========= ======== ======== Domestic provision (benefit) for income taxes: Current $ 731 $ (15) $ (230) Deferred ( 5,781) (2,773) (205) Foreign provision (benefit) for income taxes: Current 1,000 1,499 281 Deferred (2,409) (1,759) 1,066 --------- ------- ------- Provision (benefit) for income taxes $ (6,459) $ (3,048) $ 912 ========= ======== ========
The differences between the United States Federal statutory income tax provision (benefit) and the consolidated income tax provision (benefit) for the years ended June 30 are summarized as follows (in thousands): 1996 1995 1994 -------- -------- ----- Federal statutory provision (benefit) $ (5,559) $ 775 $ 386 Non-deductible meals and entertainment 256 109 83 State income taxes, net of federal tax benefit 146 67 41 Increase in valuation reserve due to domestic and foreign losses without tax benefit and tax credits 872 42 882 Recognition of tax credits (1,222) (2,500) - Tax reserves provided (released) (1,200) (1,600) 65 Tax rate differences 76 (51) 189 Tax credits generated - - (665) Other, net 172 110 (69) ------- -------- ----- Actual income tax provision (benefit) $ (6,459) $ (3,048) $ 912 ======= ======== =====
38 39 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Deferred income taxes represent temporary differences in the recognition of certain items for income tax and financial reporting purposes. The components of the net deferred income tax asset as of June 30 are summarized as follows (in thousands):
1996 1995 ------- ------- Deferred income tax assets: Research and development $2,810 $ - Tax credits 3,097 1,602 Depreciation and amortization 975 1,075 Net operating loss 1,290 493 Deferred revenue 458 474 Employee benefits 901 875 Accrued liabilities 851 409 Other 495 580 ------- ------- 10,877 5,508 Valuation allowance (1,241) (369) ------- ------- 9,636 5,139 Deferred income tax liabilities: Research and development - (3,714) Employee benefits (808) (727) Other (130) (190) ------- ------- (938) (4,631) ------- ------- Net deferred income tax asset $ 8,698 $ 508 ======= =======
At June 30, 1996, for income tax purposes, the Company and certain of its foreign subsidiaries had available net operating loss carryforwards of approximately $3,794,000. If not used, these net operating loss carryforwards, as well as the Company's general business tax credits, will expire between 1998 and 2011. Income taxes have been provided on all undistributed earnings of foreign subsidiaries which are expected to be remitted to the Company. 9. LEASES The Company leases most of its office space and certain of its equipment. Initial lease terms vary in length; several of the leases contain renewal options. Future minimum lease payments under noncancellable operating leases are as follows (in thousands): Fiscal Year ending June 30, 1997 $ 4,966 1998 4,148 1999 3,164 2000 2,908 2001 1,952 After 2001 7,006 ------- $24,144 =======
Total rental expense was $8,513,000 in fiscal 1996, $7,252,000 in fiscal 1995 and $7,231,000 in fiscal 1994. In August 1996, Comshare surrendered its lease of the Company's vacated London office facility to the facilities landlord. The cost to terminate the lease, approximately $2,600,000, was fully reserved for by the Company in accounts payable at June 30, 1996. 39 40 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 10. GEOGRAPHIC OPERATIONS AND SEGMENT INFORMATION The following table summarizes selected financial information of the Company's operations by geographic location (in thousands):
Fiscal Year Ended June 30, -------------------------- 1996 1995 1994 ---- ---- ---- Revenue from customers: North America $ 55,782 $ 48,478 $ 43,222 International 63,202 59,880 53,404 -------- -------- -------- Total revenue $118,984 $108,358 $ 96,626 ======== ======== ======== Operating income: North America $ 15,720 $ 15,205 $ 10,082 International 12,438 15,392 13,938 -------- -------- -------- Total operating income 28,158 30,597 24,020 Unallocated expenses, net (44,508) (28,317) (22,886) -------- -------- -------- Income (loss) before taxes $(16,350) $ 2,280 $ 1,134 ======== ======== ======== Identifiable assets: North America $ 53,635 $ 16,672 $ 21,356 International 35,539 29,962 27,352 -------- -------- -------- Total identifiable assets 89,174 46,634 48,708 Computer software 9,064 32,676 40,236 -------- -------- -------- Total assets $ 98,238 $ 79,310 $ 88,944 ======== ======== ========
Unallocated expenses consist of general corporate expenses, internal research and product development expenses, interest expense and interest income. In fiscal 1996 and fiscal 1995, unallocated expenses include $23,167,000 and $6,365,000 of unusual charges related to the write-off of capitalized software. The presentation of information on a geographical basis requires the use of estimation techniques and does not take into account the extent to which Comshare's marketing and management skills are inter-dependent. The Company operates in one business segment: the development and marketing of computer software and related services. No customer accounted for more than 5% of total revenues in the fiscal years ended June 30, 1996, 1995 and 1994. 40 41 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 11. QUARTERLY FINANCIAL DATA Summarized quarterly financial data is as follows (unaudited and in thousands except per share data): INCOME NET (LOSS) NET INCOME FROM INCOME (LOSS) REVENUE OPERATIONS (LOSS) PER SHARE ------- ---------- ------ --------- 1996 First Quarter $ 28,653 $ 2,628 $ 1,510 $ 0.17 Second Quarter 32,183 (18,979) (12,864) (1.48) Third Quarter 31,534 2,759 2,038 0.20 Fourth Quarter 26,614 (3,200) (575) (0.06) -------- -------- -------- Year ended June 30 $118,984 $(16,792) $ (9,891) $ (1.09) ======== ======== ======== 1995 First Quarter $ 24,158 $ 1,418 $ 751 $ 0.09 Second Quarter 27,656 2,846 1,681 0.20 Third Quarter 27,704 1,828 1,204 0.14 Fourth Quarter 28,840 (3,607) 1,692 0.20 -------- -------- -------- Year ended June 30 $108,358 $ 2,485 $ 5,328 $ 0.63 ======== ======== ======== 1994 First Quarter $ 23,730 $ 997 $ 657 $ 0.08 Second Quarter 23,779 1,701 1,052 0.13 Third Quarter 23,202 193 94 0.01 Fourth Quarter 25,915 (1,243) (1,581) (0.20) -------- -------- -------- Year ended June 30 $ 96,626 $ 1,648 $ 222 $ 0.03 ======== ======== ========
During the quarter ended June 30, 1996, the Company realized a $1,200,000 tax benefit related to the settlement of certain tax issues and the amendment of certain tax returns to claim credits which had previously not been claimed. During the quarter ended December 31, 1995, the Company recorded a non-cash charge of $23,167,000 to write off certain capitalized software. During the quarter ended June 30, 1995, the Company wrote off $6,365,000 of capitalized mainframe computer software. The fourth quarter ended June 30, 1995, also included a $4,100,000 tax benefit related to the recognition of prior years net operating losses and tax credits as well as tax reserves released. During the quarter ended June 30, 1994, the Company made provisions totaling $2,343,000 for management actions or plans primarily in connection with staff reductions related to restructuring. During the quarter ended December 31, 1993, the Company concluded an agreement to sell undeveloped land that it owned. This resulted in a gain of approximately $1,100,000. 41 42 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 12. LITIGATION Between August 9, 1996 and September 5, 1996, following the Company's announcement of certain violations of the Company's revenue recognition policies, four separate shareholder class action suits were filed against the Company and certain of its officers and directors on behalf of shareholders who had purchased the Company's common stock between April 17, 1996 and August 6, 1996. These actions, which contain substantially similar claims, allege that the plaintiffs sustained losses as a result of the defendants' alleged untrue statements of material facts and alleged omissions to state material facts necessary in order to make the statements made not misleading. The complaints seek unspecified damages and costs. The Company intends to vigorously contest the plantiffs' claims. 42 43 COMSHARE, INCORPORATED SCHEDULE II CONSOLIDATED SCHEDULE OF VALUATION & QUALIFYING ACCOUNTS
Balance Charged to Deductions Balance Beginning Costs and from Translation End of DESCRIPTION of Period Expenses Reserves Adjustments Other Period - -------------------------------- ---------- ---------- ---------- ----------- ------- ------- Allowance for doubtful accounts For the year ended June 30: 1996 $ 887 $ 578 $ (52) $ (2) $ - $ 1,411 ======= ======= ======= ======= ===== ======= 1995 $ 1,161 $ (119) $ (173) $ 18 $ - $ 887 ======= ======= ======= ======= ===== ======= 1994 $ 1,029 $ 140 $ (19) $ 11 $ - $ 1,161 ======= ======= ======= ======= ===== =======
43 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Comshare, Incorporated Date: September 30, 1996 By: /s/ Kathryn a. Jehle __________________ ___________________________________ Kathryn A. Jehle Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ T. Wallace Wrathall - ----------------------- President, Chief Executive September 30, 1996 T. Wallace Wrathall Officer, and a Director ------------------ (Principal Executive Officer) /s/ Kathryn A. Jehle - ----------------------- Senior Vice President, September 30, 1996 Kathryn A. Jehle Chief Financial Officer, ------------------ Treasurer and Assistant Secretary (Principal Financial Officer) /s/ R. Michael Mahoney - ----------------------- Senior Director of Finance, September 30, 1996 R. Michael Mahoney Chief Accounting Officer, ------------------ (Principal Accounting Officer) /s/ Richard L. Crandall - ---------------------- Chairman of the Board September 30, 1996 Richard L. Crandall ------------------ /s/ Geoffrey B. Bloom - ---------------------- Director September 30, 1996 Geoffrey B. Bloom ------------------ /s/ Daniel T. Carroll - ---------------------- Director September 30, 1996 Daniel T. Carroll ------------------ /s/ Stanley R. Day - ---------------------- Director September 30, 1996 Stanley R. Day ------------------ /s/ W. John Driscoll - ---------------------- Director September 30, 1996 W. John Driscoll ------------------ /s/ Alan G. Merten - ---------------------- Director September 30, 1996 Alan G. Merten ------------------ /s/ George R. Mrkonic - ---------------------- Director September 30, 1996 George R. Mrkonic ------------------ /s/ John F. Rockart - ---------------------- Director September 30, 1996 John F. Rockart ------------------ 44 45 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 2.01 Asset Purchase Agreement dated March 11, 1991, and amendment to Asset Purchase Agreement dated March 22, 1991, by and between Comshare, Incorporated and Execucom Systems Corporation, and MPSI Systems Inc. relating to the sale of the operating assets and business of Execucom Systems Corporation - incorporated by reference to Exhibit 2 to the Registrant's Form 8-K Report filed April 5, 1991. 3.01 Restated Articles of Incorporation of the Registrant, as amended. 3.02 Bylaws of the Registrant, as amended - incorporated by reference to Exhibit 3.02 to the Registrant's 10-K Report for the fiscal year ended June 30, 1995. 4.01 Specimen form of Common Stock Certificate - incorporated by reference to Exhibit 4(c) to the Registrant's Form S-1 Registration Statement No. 2-29663. 4.02 Comshare, Incorporated $14,000,000 Amended and Restated Credit Agreement between Comshare, Incorporated and NBD Bank, N.A., Society Bank, Michigan, dated October 31, 1994 - incorporated by reference to Exhibit 4.09 of the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 4.03 First Amendment to Comshare, Incorporated $14,000,000 Amended and Restated Credit Agreement between Comshare, Incorporated and NBD Bank, N.A., Society Bank, Michigan dated May 19, 1995 - incorporated by reference to Exhibit 4.03 to the Registrant's 10-K Report for the fiscal year ended June 30, 1995. 4.04 Second Amendment to Comshare, Incorporated $14,000,000 Amended and Restated Credit Agreement between Comshare, Incorporated and NBD Bank, N.A., Society Bank, Michigan dated July 31, 1995 - incorporated by reference to Exhibit 4.04 to the Registrant's 10-K Report for the fiscal year ended June 30, 1995. 4.05 Third Amendment to Comshare, Incorporated Amended and Restated Credit Agreement between Comshare, Incorporated and NBD Bank, formerly known as NBD Bank, N.A., Michigan dated November 19, 1995 - incorporated by reference to Exhibit 4.05 to the Registrant's 10-Q Report for the quarter ended December 31, 1995. 4.06 Rights Agreement, dated as of September 16, 1996, between Comshare, Incorporated and KeyBank National Association, as Rights Agent - incorporated by reference to Exhibit 2 to the Registrant's Registration Statement on Form 8-A, filed on September 17, 1996. 4.07 Form of certificate representing Rights (included as Exhibit B to the form of Rights Agreement filed as Exhibit 4.06). Pursuant to the Rights Agreement, Rights Certificates will not be mailed until after the earlier of (i) the tenth business day (or such later date as may be determined by the Board of Directors, with the concurrence of a majority of the Continuing Directors, prior to such time as any person becomes an Acquiring Person) after the date of the commencement of, or first public announcement of the intent to commence, a tender or exchange offer by any person or group of affiliated or associated persons (other than the Company or certain entities affiliated with or associated with the Company), if, upon consummation thereof, such person or group of affiliated or associated persons would be the beneficial owner of 15% or more of such outstanding shares of common stock - incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A, filed on September 17, 1996. 10.01 Benefit Adjustment Plan of Comshare, Incorporated, effective June 1, 1986, as amended - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 45 46 10.02 Comshare, Incorporated 1988 Stock Option Plan, as amended - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1990 and Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.03 Amended and Restated Profit Sharing Plan of Comshare, Incorporated, effective as of October 1, 1995 - incorporated by reference to Exhibit 4.1 to the Registrant's Form S-8 Registration Statement No. 33-65109. 10.04 Employee Stock Ownership Plan of Comshare, Incorporated, effective June 28, 1985, as amended - incorporated by reference to Exhibit 10.06 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.05 Rules of the Comshare Retirement and Death Benefits Plan for employees of the United Kingdom, effective January 1, 1991, as amended - incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 10.06 Interim Trust Deed establishing the Comshare Money Purchase Plan for employees of the United Kingdom, effective March 1, 1994 - incorporated by reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.07 Employment and NonCompetition Agreement between Comshare, Incorporated and T. Wallace Wrathall, effective as of April 1, 1994 - incorporated by reference to Exhibit 10.23 to the Registrant's Form 10-Q Report for the quarter ended December 31, 1994. 10.08 Amended and Restated Employee Agreement between Comshare, Incorporated and Richard L. Crandall effective July 1, 1994, as amended - incorporated by reference to Exhibit 10.10 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.09 Non-Competition Agreement between Comshare, Incorporated and Richard L. Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K for the fiscal year ended June 30, 1994. (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2). 10.10 Letter Agreement from Comshare, Incorporated to Kathryn A. Jehle regarding terms of employment dated April 18, 1994 - incorporated by reference to Exhibit 10.12 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.11 Severance and Consulting Agreement, dated May 29, 1996, between Comshare, Incorporated and Donald J. Walker. 10.12 Description of Incentive Arrangements for certain executive officers for fiscal years 1994 and 1995 - 2000. 10.13 Trust Agreement under the Benefit Adjustment Plan of Comshare, Incorporated, effective April 25, 1988, as amended - incorporated by reference to Exhibit 10.31 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1993. 10.14 Trust Agreement between Comshare, Incorporated and Vanguard Fiduciary for maintaining the Profit Sharing Plan of Comshare, Incorporated effective March 31, 1992, as amended - incorporated by reference to Exhibit 10.15 to the Registrant's Form 10-K for the fiscal year ended June 30, 1994. 10.15 1994 Executive Stock Purchase Program of Comshare, Incorporated - incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.16 Employee Stock Purchase Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 46 47 10.17 1994 Directors Stock Option Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.18 Lease dated September, 1994, between Comshare, Incorporated, Tenant and MGI Holding, Inc., Landlord for office space located at 555 Briarwood Circle, Ann Arbor, Michigan 48108 - incorporated by reference to Exhibit 10.18 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1994. 10.19 Agreement between Taurusbuild Limited, Comshare and Svenska Handelsbanken related to the lease of office space for the Company's London office facility - incorporated by reference to Exhibit 10.17 of the Registrant's Form 10-K Report for the fiscal year ended June 30, 1994. 10.20 Software License Agreement by and between Arbor Software Corporation and Comshare, Incorporated dated December 23, 1993 - incorporated by reference to Exhibit 10.20 to Amendment Number 3 to the Registrant's Form 10-K Report, filed November 8, 1995, for the fiscal year ended June 30, 1995. (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2). 10.21 First Amendment to License Agreement by and between Arbor Software Corporation and Comshare, Incorporated dated March 1, 1994 - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1995. (Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2). 11.1 Computation of per share earnings. 21.01 Subsidiaries of the Registrant. 23.01 Consent of Independent Public Accountants. 27.00 Financial Data Schedule. 99.00 Amended and Restated Profit Sharing Plan of Comshare, Incorporated, Form 11-K Annual Report - filed pursuant to Section 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended June 30, 1996. 47 EX-3.01 2 EXHIBIT 3.01 1 EXHIBIT 3.01 RESTATED ARTICLES OF INCORPORATION FOR COMSHARE, INCORPORATED Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned corporation executes the following Restated Articles of Incorporation: 1. The present name of the corporation is: COMSHARE, INCORPORATED. 2. The identification number assigned by the Bureau is: 085-703. 3. All former names of the corporation are: Com-Share, Incorporated. 4. The date of filing the original Articles of Incorporation was: February 15, 1966. The following Restated Articles of Incorporation supersede the Articles of Incorporation as amended and shall be the Articles of Incorporation for the corporation. ARTICLE I The name of the corporation is COMSHARE, INCORPORATED. ARTICLE II The purpose or purposes for which the Corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of the State of Michigan. ARTICLE III The total authorized capital stock is: 1 2 (i) 20,000,000 shares of common stock, $1.00 par value; and (ii) 5,000,000 shares of preferred stock, no par value. A statement of the designation, relative rights, preferences and limitations of the shares of each class is as follows: 2 3 PREFERRED STOCK Issuance in Series: The shares of Preferred Stock may be issued upon resolution of the Board of Directors and without action or approval by the shareholders, in one or more series, with the rights, preferences, privileges and restrictions of each such series to be fixed by the resolution of the Board of Directors establishing such series. The Preferred Stock in each series will rank equally and be substantially identical in all respects, except that with respect to each series the Board of Directors may fix, among other things, the voting rights, if any, the dividends payable thereon, the times and prices of redemption, if any, the amount payable upon liquidation, the retirement or sinking fund, if any, the conversion rights, if any, the restrictions, if any, on the payment of dividends or to retirements of junior stock, the limitations, if any, on the creation of indebtedness or the issuance of stock of equal or prior rank, and the number of shares to comprise each series. Dividend Rights: The Board of Directors is authorized to determine whether, and the terms and conditions upon which, the shares of Preferred Stock of each series will be entitled to receive dividends, and whether such dividends shall be cumulative. Redemption Provisions: The Board of Directors is authorized to determine whether, and the terms and conditions upon which, the shares of Preferred Stock of each series will have redemption rights. The shares of Preferred Stock of each series, if redeemable, will be redeemable at a time so fixed and determined, in whole or in part, and by lot or in such other manner as the Board of Directors may determine. Sinking Fund: The Board of Directors is authorized to determine whether, and the terms and conditions upon which, the shares of Preferred Stock of each series shall be entitled to the benefits of a retirement or sinking fund. Conversion Rights: 3 4 The Board of Directors is authorized to determine whether, and the terms and conditions upon which, the shares of Preferred Stock of each series shall have conversion or exchange rights. Voting Rights: The Board of Directors is authorized to determine whether, and the terms and conditions upon which, the shares of Preferred Stock of each series shall have voting rights. General: 4 5 The Board of Directors is authorized to determine any other preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions relating to the Preferred Stock, or any series thereof, as shall not be inconsistent with this Article III or Michigan law. The terms of any series of Preferred Stock may be amended without consent of the holders of any other series of Preferred Stock or of the Common Stock, provided such amendment does not substantially adversely affect the holders of such other series of Preferred Stock or the Common Stock. Reissue of Reacquired Shares; Issuance of Additional Shares of Same Series: Shares of any series of Preferred Stock which have been issued and reacquired in any manner and not held as treasury shares, including shares redeemed by purchase (whether through the operation of a retirement or sinking fund or otherwise), will have the status of authorized and unissued Preferred Stock and may be reissued as a part of the series of which they were originally a part or may be reclassified into and reissued as part of the new series. Amendment to Articles of Incorporation: Any resolution of the Board of Directors establishing and designating a series of Preferred Stock and fixing and determining the relevant rights and preferences thereof shall be appropriately filed with the Department of Commerce of the State of Michigan as an amendment to the Articles of Incorporation. COMMON STOCK Subject to the preferences accorded the holders of Preferred Stock pursuant to the Articles of Incorporation or action of the Board of Directors taken with respect to such preferences, holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors of the Corporation from time to time. Subject to the preferences provided in the Articles of Incorporation or action of the Board of Directors taken with respect to such preferences, in the event of any liquidation, dissolution or winding up of the Corporation, the holders of Common Stock will be entitled to receive pro rata all the remaining assets of the Corporation available for distribution. Holders of Common Stock shall have equal voting and other rights 5 6 share for share, and each holder of Common Stock is entitled to one vote per share. Except to the extent required by law, no holder of Common Stock shall have the right in voting for directors to cumulate his shares and give one candidate as many votes as will equal the number of directors to be elected multiplied by the number of shares of his stock, or to distribute his votes on the same principle among as many candidates as he shall determine. Except as otherwise stated herein, the shares of Common Stock shall have the rights and privileges provided by Michigan law. PREFERRED AND COMMON STOCK No holder of any shares of any class of stock of this corporation shall have any preemptive or preferential right to subscribe for, or to 6 7 purchase any part of a new or additional issue of stock or any other reacquired shares of stock of any class whatsoever or of any securities convertible into stock of any class whatsoever, whether now or hereafter authorized and whether issued for cash or other consideration. ARTICLE IV The address of the current registered office is 30600 Telegraph Road, Bingham Farms, Michigan 48025. The name of the current resident agent is The Corporation Company. ARTICLE V Whenever a compromise or arrangement or any plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them and/or between this corporation and its shareholders or any class of them, any court of equity jurisdiction within the state of Michigan, may on the application of this corporation or of any creditor or any shareholder thereof, or on the application of any receiver or receivers appointed for this corporation, order a meeting of the creditors or class of creditors, and/or of the shareholders or class of shareholders, as the case may be, to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders, as the case may be, to be affected by the proposed compromise or arrangement or reorganization, agree to any compromise or arrangement or to any reorganization of this corporation as a consequence of such compromise or arrangement, said compromise or arrangement and said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the shareholders or class of shareholders, as the case may be, and also on this corporation. ARTICLE VI (a) No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that the foregoing shall not eliminate or limit 7 8 the liability of a director for any of the following: (i) breach of the director's duty of loyalty to the Corporation or its shareholders; (ii) acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law; (iii) a violation of Section 551(1) of the Michigan Business Corporation Act; (iv) a transaction from which the director derived an improper personal benefit; or (v) an act or omission occurring before the date on which the Article VI became effective. If the Michigan Business Corporation Act hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability contained herein, shall be limited to the fullest extent permitted by the amended 8 9 Michigan Business Corporation Act. No amendment or repeal of this Article VI shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. (b)(1) Each individual who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such individual, or an individual of whom such individual is the legal representative, (i) is or was a director or officer of the Corporation, or (ii) is or was serving (at such time as such individual is or was a director or officer of the Corporation) at the request of the Corporation as a director, officer, partner, trustee, administrator, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, partner, trustee, administrator, employee or agent or in any other capacity while serving as a director, officer, partner, trustee, administrator, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Michigan Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of such indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (b)(2) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter "advances"); provided, however, that the payment of such expenses incurred by an indemnitee in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all advances if it shall ultimately be 9 10 determined by final judicial decision that such indemnitee is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors or by action of any person to whom the Board of Directors has delegated such authority, provide indemnification to other employees and agents of the Corporation with the same scope and effect as the foregoing indemnification. (b)(2) If a claim under paragraph (b)(1) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If 10 11 successful in whole or in part in any such suit or in a suit brought by the Corporation to recover advances, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such claim. In any action brought by the indemnitee to enforce a right hereunder (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) it shall be a defense that, and in any action brought by the Corporation to recover advances the Corporation shall be entitled to recover such advances if, the indemnitee has not met the applicable standard of conduct set forth in the Michigan Business Corporation Act. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Michigan Business Corporation Act, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the indemnitee has not met such applicable standard of conduct, shall be a defense to an action brought by the indemnitee or create a presumption that the indemnitee has not met the applicable standard of conduct. In any action brought by the indemnitee to enforce a right hereunder or by the Corporation to recover payments by the Corporation of advances, the burden of proof shall be on the Corporation. (b)(3) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise. (b)(4) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Michigan Business Corporation Act. These Restated Articles of Incorporation were duly adopted on the 5th day of February, 1996, in accordance with the provisions of Section 642 of the Act and were duly adopted by the Board of Directors without a vote of the shareholders. 11 12 Signed the 5th day of February, 1996 /s/ Kathryn A. Jehle ---------------------------------- Kathryn A. Jehle Senior Vice President and Chief Financial Officer 12 13 CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION DETERMINING THE TERMS OF THE SERIES A PREFERRED STOCK of COMSHARE, INCORPORATED It is certified that: FIRST: That the name of the corporation is Comshare, Incorporated (the "Corporation"). SECOND: The Corporation identification number (CID) assigned by the Bureau is: 085-703. THIRD: The location of its registered office is: 30600 Telegraph Road, Bingham Farms, Michigan 48025. FOURTH: That pursuant to the authority conferred upon the Board of Directors by the Articles of Incorporation of said Corporation, the Board of Directors of the Corporation on September 12, 1996, duly adopted the following resolution creating a series of 200,000 shares of Preferred Stock, no par value, designated as Series A Preferred Stock: RESOLVED, That it is hereby declared to be in the best interests of the Corporation that the Articles of Incorporation of the Corporation, as amended to date, be further amended to create a new series of Preferred Stock to consist of 200,000 shares and to be designated as Series A Preferred Stock, no par value, and to determine the preferences, limitations and relative rights of the Series A Preferred Stock by adding the following to Article V of such Articles of Incorporation to read as follows: SERIES A PREFERRED STOCK, NO PAR VALUE A. Designation and Amount. The shares of such series 1 14 shall be designated as "Series A Preferred Stock, no par value," and the number of shares constituting such series shall be 200,000. Such number of shares may be increased or decreased by resolution of the Board of Directors of the Corporation; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, 2 15 rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. B. Dividends and Distributions. (1) Subject to any prior and superior rights of the holders of any series of Preferred Stock ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends that may be authorized by the Articles of Incorporation, the holders of shares of Series A Preferred Stock shall be entitled prior to the payment of any dividends on shares ranking junior to the Series A Preferred Stock to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $1.00 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after September 12, 1996 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of 3 16 Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (2) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (1) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no 4 17 dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (3) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. (4) Dividends in full shall not be declared or paid or set apart for payment on the Series A Preferred Stock for a dividend period terminating on the Quarterly Dividend Payment Date unless dividends in full have been declared or paid or set apart for payment on the Preferred Stock of all series (other than series with respect to which dividends are not cumulative from a date prior to such dividend date) for the respective dividend periods terminating on such dividend date. C. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: 5 18 (1) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters voted on at a meeting of the shareholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, or (ii) 6 19 subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (2) Except as otherwise provided herein, in any other Amendment to the Articles of Incorporation of the Corporation or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one voting group on all matters voted on at a meeting of shareholders of the Corporation. (3) Except as set forth herein or by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. D. Certain Restrictions. (1) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section B. are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (a) declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; 7 20 (b) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 8 21 (c) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; (d) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares and the Series A Preferred Stock upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (2) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (1) of this Section D, purchase or otherwise acquire such shares at such time and in such manner. E. Liquidation, Dissolution or Winding Up. (1) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A 9 22 Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (3) below to reflect such events as stocks splits, stock dividends and recapitalizations 10 23 with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Preferred Stock and Common Stock, respectively, holders of Series A Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed, with the holders of Series A Preferred Stock entitled to receive an aggregate per share amount equal to 100 times (as appropriately adjusted as set forth in subparagraph (3) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) the aggregate amount to be distributed per share to holders of shares of Common Stock. (2) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares and the Series A Preferred Stock in proportion to their respective liquidation preferences. (3) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. F. Merger, Consolidation, etc. In case the Corporation shall enter into any merger, consolidation, combination or other transaction in which the shares of Common Stock are exchanged or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the 11 24 provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine 12 25 the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. G. Redemption. The shares of Series A Preferred Stock shall not be redeemable. H. Ranking. The Series A Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and other distribution of assets, unless, in accordance with authorization in the Articles of Incorporation, the terms of any such series shall provide otherwise. I. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Amendment to the Articles of Incorporation creating a series of preferred stock or any similar stock or as otherwise required by law. J. Amendment. The Articles of Incorporation of the Corporation shall not be further amended in any manner which would alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock, voting separately as one voting group. K. Fractional Shares. Series A Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of 13 26 holders of Series A Preferred Stock. FIFTH: That this Amendment to the Articles of Incorporation of the Corporation was duly adopted by the Board of Directors of the Corporation on September 12, 1996, without shareholder action, which shareholder action was not required. 14 27 IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true this 16th day of September, 1996. COMSHARE, INCORPORATED By: ----------------------------- Kathryn A. Jehle Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary Attest: - --------------------------- 15 EX-10.11 3 EXHIBIT 10.11 1 EXHIBIT 10.11 SEVERANCE AND CONSULTING AGREEMENT THIS SEVERANCE AND CONSULTING AGREEMENT is made this 29th day of May, 1996, between DONALD J. WALKER ("Walker") and COMSHARE, INCORPORATED ("Comshare"). RECITALS A. Walker is currently employed by Comshare. B. Walker and Comshare desire to phase out Walker's employment and provide for consultation to Comshare by Walker. C. Comshare and Walker, without any admission of liability, desire to settle with finality, compromise, dispose of, and release all claims and demands asserted or which could be asserted arising out of the employment of Walker and the termination of his employment. In consideration of the stated recitals and of the promises and mutual covenants contained herein, it is hereby agreed between Walker and Comshare as follows: AGREEMENT 1. Walker will continue to be employed as Senior Vice President at his present level of compensation and benefits with such duties as shall be assigned by the company's President until June 30, 1996. Walker will be eligible to receive his share of the senior executive incentive plan on the same basis as the other senior executives who participated in the plan for the 1995 and 1996 fiscal years and who remain employed on the day on which the 1996 payment is made. From and after April 7, 1996, Walker may take reasonable vacation time but shall not be entitled to accrue vacation time, and no payment in lieu of vacation shall be due with respect to any period of his employment. 2. From June 30 through November 30, 1996, or until he becomes an employee of another entity, whichever occurs first, Walker will be considered an employee of Comshare with such job description and duties as the President shall assign. Walker will have an office and reasonable secretarial assistance until July 31, 1996. Comshare understands, however, that Walker's primary focus will be outplacement and not service to the company. 2 3. Walker hereby irrevocably agrees that on November 30, 1996, or when he becomes an employee of another entity, whichever occurs first, he will voluntarily and irrevocably resign his employment with Comshare and execute the Release attached hereto as Exhibit A. In the event that Walker fails to comply with the provisions of this paragraph or later revokes the Release, all payments to him hereunder shall immediately cease, and he will return to Comshare all amounts paid hereunder from June 30, 1996 to that date. 4. From December 1, 1996 through June 30, 1997, so long as he is receiving the payments described in paragraph 7, Walker will make himself reasonably available to provide as an independent consultant to Comshare strategic advice in the area of computer software sales and marketing in the retail industry. These consulting services will be provided at the request and direction of the President of Comshare, or such other officer as he may designate, for reasonable periods and upon reasonable notice. The requirements of this paragraph 4 shall cease immediately upon Walker's becoming employed substantially full time, either as an employee or an independent contractor, by another entity. Walker shall immediately inform Comshare of the identity of his new employer and of the effective date of his employment. 5. Until July 1, 1997, Walker will not perform services anywhere in the world for a competitor of Comshare, whether such services are provided as an officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1 percent of the equity securities of any entity whose securities are listed or traded on any recognized public exchange), consultant, advisor, agent, or in any other capacity. As used in this Agreement, a competitor is defined as any entity engaged in the licensing or distribution of decision support software tools or applications whose product is at that time or is designed to be competitive with a Comshare product. If Walker is unsure whether a particular entity which he has under serious consideration would be construed by Comshare as a competitor, he may submit a written request to the President of Comshare for a determination. Comshare shall respond in writing within ten (10) days after receipt of the notice. If Comshare either states that the entity is not a competitor or does not respond within the prescribed time period, then Walker may accept employment with that entity without breach of this paragraph 5. If Walker does not become employed by the entity in question within three (3) months after receipt of Comshare's acceptance (or deemed acceptance), however, then Comshare's acceptance shall be automatically revoked and may be reinstated only if Walker 2 3 submits a new request and the above procedure is repeated. Walker agrees that the nature and the extent of the restrictions in this paragraph 5 are reasonable, are designed to eliminate competition which otherwise would be unfair to Comshare, do not stifle the inherent skill and experience of Walker, would not operate as a bar to Walker's sole means of support, and are required to protect the legitimate interests of Comshare. If the provisions of this paragraph are found by any court having jurisdiction to be unreasonably broad to any extent, then the restrictions shall nevertheless remain effective, but shall be deemed amended (solely for the purposes of jurisdiction of such court) as may be considered to be reasonably necessary by such court, and as so amended shall be enforced. In the event that Walker breaches this covenant not to compete, Comshare shall, in addition to any other remedy available in law or equity, be entitled to cease making any further payment under this Agreement. 6. During the period from July 1, 1996 through November 30, 1996, Comshare will pay Walker each month (on the biweekly payroll schedule) the sum of $17,916.67 plus a $945.00 car allowance, less withholding, and will provide health, disability and accidental death insurance coverage equivalent to Walker's present coverage at the company's expense. No other employee benefits with respect to Walker's employment during this period shall accrue or be provided, including but not limited to vacation, life insurance (unless Walker makes the purchase election described in paragraph 9), company contributions to the profit sharing plan, travel and business expenses, and the like. Walker will, however, be eligible to receive payments that are made by the company to employees generally during this period that relate to his employment up to June 30, 1996, including the company's contribution to the profit sharing plan for fiscal year 1996. 7. During the period from December 1, 1996 through June 30, 1997, Comshare will pay Walker each month the sum of $17,916.67 (subject to withholding if required in Comshare's reasonable judgment) and will provide health insurance coverage equivalent to Walker's present coverage at the company's expense. No other benefits shall accrue or be provided, including but not limited to vacation, disability or life insurance, company contributions to the profit sharing plan, travel and entertainment expenses, and the like. The payments in this paragraph 7 shall, however, cease immediately upon Walker's becoming employed substantially full time on or after January 1, 1997, either as an employee or an independent contractor, by another entity. 3 4 8. Upon Walker's request, Comshare shall engage and pay for the services of an outplacement firm to be chosen by Walker from the three outplacement firms currently used by the company, provided that the services are commenced no later than July 31, 1996 and are used continuously thereafter. 9. Walker may elect, in writing before June 1, 1996, to purchase the universal life insurance policy now owned by Comshare, in the face amount of $977,000. If Walker does not make this written election, the Company shall have the right to transfer the policy to another beneficiary as of June 30, 1996. If he does make the election, Walker's designee will remain the beneficiary under the policy until December 10, 1996. The purchase price shall be the surrender value at the time of purchase, which is presently estimated to be $90,000. Payment in full must be made on or before December 10, 1996, which shall be the date of transfer. Execution of the Release attached as Exhibit A on November 30, 1996, without subsequent revocation, shall be a condition precedent of Comshare's obligation to sell and transfer the policy. 10. Upon termination of his employment, Walker may purchase the laptop computer presently assigned to him, at book value. 11. Except as specifically varied herein, upon termination of his employment, Walker shall be subject to and comply with and have the benefit of all of the company's customary policies and procedures with respect to a departing employee. 12. Walker, individually and on behalf of his heirs, legal representatives, and assigns, does hereby release, remise, and forever discharge Comshare, its subsidiaries, successors, affiliates, shareholders, directors, officers, agents, and past and present employees (hereinafter "the Released Parties"), of and from all actions, causes of action, charges, claims, demands, damages (including compensatory, exemplary, statutory, and punitive damages), sums of money, expenses, costs, suits, debts, contracts, agreements, arrangements, promises, obligations, torts, injuries and losses, rights to recovery, and any and all other liability or relief of any nature whatsoever, whether known or unknown, foreseen or unforeseen, resulting or to result, whether in law or in equity, or that Walker, individually or in any representative capacity, ever had, now has, or hereafter can, shall or may have by reason of or arising out of any matter, fact, cause or event occurring on or prior to the date hereof, including specifically, but not limited to, any and all claims, 4 5 injuries, damages, or other relief for libel, slander, breach of contract, wrongful discharge, emotional distress, any claims or demands under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Elliott-Larsen Civil Rights Act, the Michigan Handicappers' Civil Rights Act, and/or of the Employee Retirement Income Security Act, any and all claims under any other federal, state or local laws, regulations, executive orders, rules or ordinances, as well as any and all other claims arising out of or in any way relating to Walker's employment with or his termination of employment from Comshare. Walker understands that this Release does not constitute an admission of liability by the Released Parties. 13. Walker and Comshare declare and represent that they fully understand the terms of this Agreement and that no promise, inducement or agreement has been made except as expressly provided herein, and that this Agreement contains the entire agreement between the parties, and the terms of this Agreement are contractual and not a mere recital. 14. Walker further agrees that he has been represented by an attorney and has read this Agreement carefully and understands all of its terms. 15. Walker understands and agrees that he has been given twenty-one (21) calendar days within which to consider this Agreement. 16. Walker understands and agrees that he may revoke this Agreement for a period of seven (7) calendar days following its execution. The Agreement is not effective until this revocation period has expired. Walker understands that any revocation, to be effective, must be in writing and either (a) postmarked within seven (7) days of the execution of this Agreement and addressed to T. Wallace Wrathall at Comshare, Inc., 555 Briarwood Circle, Ann Arbor, Michigan 48108, or (b) hand delivered within seven (7) days of execution of this Agreement to T. Wallace Wrathall. Walker understands that if revocation is made by mail, mailing by certified mail, return receipt requested, is recommended to show proof of mailing. 17. In agreeing to sign this Agreement, Walker is doing so completely voluntarily and agrees that he has not relied upon any oral statements or explanations made by Comshare or its representatives. 5 6 18. This Agreement and each and every term and provision hereof, shall be construed in accordance with the laws of the State of Michigan. If any provision of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof. /s/ Donald J. Walker /s/ Raynold A. Schmick - ---------------------- ---------------------------- DONALD J. WALKER Witness May 29, 1996 - ---------------------- Date COMSHARE INCORPORATED: /s/ T. Wallace Wrathall /s/ Janet L. Neary - ---------------------- ---------------------------- By: T. Wallace Wrathall Witness President and CEO May 29, 1996 - ---------------------- Date 6 7 EXHIBIT A RELEASE DONALD J. WALKER ("Walker"), for valuable consideration from COMSHARE, INCORPORATED ("Comshare"), agrees as follows: 1. Walker, individually and on behalf of his heirs, legal representatives, and assigns, does hereby release, remise, and forever discharge Comshare, its subsidiaries, successors, affiliates, shareholders, directors, officers, agents, and past and present employees (hereinafter "the Released Parties"), of and from all actions, causes of action, charges, claims, demands, damages (including compensatory, exemplary, statutory, and punitive damages), sums of money, expenses, costs, suits, debts, contracts, agreements, arrangements, promises, obligations, torts, injuries and losses, rights to recovery, and any and all other liability or relief of any nature whatsoever, whether known or unknown, foreseen or unforeseen, resulting or to result, whether in law or in equity, or that Walker, individually or in any representative capacity, ever had, now has, or hereafter can, shall or may have by reason of or arising out of any matter, fact, cause or event occurring on or prior to the date hereof, including specifically, but not limited to, any and all claims, injuries, damages, or other relief for libel, slander, breach of contract, wrongful discharge, emotional distress, any claims or demands under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Elliott-Larsen Civil Rights Act, the Michigan Handicappers' Civil Rights Act, and/or of the Employee Retirement Income Security Act, any and all claims under any other federal, state or local laws, regulations, executive orders, rules or ordinances, as well as any and all other claims arising out of or in any way relating to Walker's employment with or his termination of employment from Comshare. Walker understands that this Release does not constitute an admission of liability by the Released Parties. 2. Walker agrees that he has been represented by an attorney and has read this Agreement carefully and understands all of its terms. Walker further understands and agrees that he has been given twenty-one (21) calendar days within which to consider this Agreement. 7 8 3. Walker understands and agrees that he may revoke this Release for a period of seven (7) calendar days following its execution. The Release is not effective until this revocation period has expired. Walker understands that any revocation, to be effective, must be in writing and either (a) postmarked within seven (7) days of the execution of this Agreement and addressed to T. Wallace Wrathall at Comshare, Inc., 555 Briarwood Circle, Ann Arbor, Michigan 48108, or (b) hand delivered within seven (7) days of execution of this Agreement to T. Wallace Wrathall. Walker understands that if revocation is made by mail, mailing by certified mail, return receipt requested, is recommended to show proof of mailing. - ----------------------------- ------------------------------ DONALD J. WALKER Witness - ----------------------------- Date 8 EX-10.12 4 EXHIBIT 10.12 1 EXHIBIT 10.12 COMSHARE, INCORPORATED INCENTIVE BONUS ARRANGEMENTS FOR EXECUTIVE OFFICERS The Company established maximum incentive bonus arrangements for certain of its executive officers for fiscal 1994, which was based on each officer's achievement of certain performance goals. For fiscal 1995-2000, the Company has established the Executive Officer Annual Incentive Award Program to benefit its executive officers. A description of the arrangements is set forth below. Fiscal 1994 Donald J. Walker had a targeted performance bonus of $59,000 in fiscal 1994 based on the Company achieving certain North American profit goals. Norman R. Neuman, Jr. had a targeted performance bonus of $30,200 in fiscal 1994 based on the Company achieving certain goals in the North American marketplace relating to profit, sales, customer support and telesales. Mr. Neuman's bonus plan also included an additional payment for EIS/DSS profit contribution in excess of certain levels. Ian G. McNaught-Davis had a targeted performance bonus of $40,000 in fiscal 1994 based on the Company achieving certain profit goals in the International marketplace. Dennis G. Ganster was eligible to earn a maximum performance bonus of $30,000 in fiscal 1994 based on his achievement of various performance goals including new product releases, expense control and product development. Fiscal 1995-2000 The executive officers of the Company are the participants in the Comshare Executive Officer Annual Incentive Award Program (the "Program") for fiscal years 1995-2000. Under the Program, the Company's senior executives may be paid bonuses from an award pool to be allocated among the executives pro rata in accordance with their base salaries. 1995-1997 Bonus Pools. The 1995-1997 Bonus Pools are determined in accordance with an earnings per share base line, based upon earnings per share targets in fiscal years 1995, 1996, and 1997. The award pool determination is an addition or subtraction of $10,000 for each cent per share that earnings per share results deviate from the earnings per share target base line; provided, however, that the Board of Directors has discretion to adjust the award pool for items including, but not limited to, unusual items which impact earnings per share results. The 1995-1997 Bonus Pools are adjusted downward for each fiscal year of the Program if certain revenue and free cash flow targets are not achieved. If in 2 the next fiscal year (other than fiscal year 1998) cash and free cash flow goals are exceeded, the downward adjustment can be reversed to the extent of the adjustment in the prior year. Two-thirds of the amount of bonuses payable under the Program in fiscal years 1995, 1996 and 1997 is paid out in the year earned and one-third of the amount of bonuses payable under the Program in fiscal years 1995 and 1996 is deferred and, except for the deferred portion of the fiscal year 1997 bonus pool, added to the participant's bonus for the next fiscal year or is used to offset any negative bonus amounts generated under the Program in a subsequent fiscal year. If performance in any fiscal year is below threshold levels, a negative bonus pool amount will result. This negative bonus pool amount will be allocated among the participants and will first be used to reduce the deferred portion of the bonus pool from the prior fiscal year, if any, and the remainder will reduce the bonus pool amount for the next fiscal year. Payments, if any, will be made on or about July 31 following the fiscal year in which they are earned to executive officers employed by the Company on the date of payment. One-third of the amount of the bonus payable under the Program in fiscal year 1997 (the "1997 LTIP Award") will be deferred and separately maintained. It will not be credited toward amounts to be paid under the Program in fiscal year 1998, nor will it be reduced by a negative bonus pool amount in fiscal year 1998. The 1997 LTIP Award will be increased or decreased annually by a percentage of the 1997 LTIP Award equal to the percentage increase (if in excess of certain minimum levels and if earnings per share increases by certain minimum levels), or percentage decrease, in the Company's revenues for the fiscal year as compared to the prior year's revenue. All 1997 LTIP Award amounts remaining in the bonus pool at July 31, 2000 will be paid to the participants employed by the Company at that time, or, if earlier, upon a participant's retirement under normal circumstances on or after age 60. 1998-2000 Bonus Pools. The 1998-2000 Bonus Pools are determined in accordance with an earnings per share base line, based upon earnings per share targets in fiscal years 1998, 1999 and 2000. The award pool determination is an addition or subtraction of $45,000 for each one percent that earnings per share results deviate from the earnings per share percentage growth target base line; provided, however, that the Board of Directors has discretion to adjust the award pool for items including, but not limited to, unusual items which impact earnings per share results. In addition, if the Company exceeds the targeted earnings per share growth rate in any year, an additional $150,000 is added to the Bonus Pool for that year. Two-thirds of the bonus payable under the Program for fiscal years 1998 and 1999 is paid out in the year earned and one-third is deferred and added to the participant's bonus for the next fiscal year or is used to offset any negative bonus amounts generated under the Program in a subsequent fiscal year. If performance in any fiscal year is below threshold levels, a negative bonus pool amount will result. This negative bonus pool amount will be allocated among the participants and will first be used to reduce the deferred portion of the bonus pool from the prior fiscal year, if any, and the remainder will reduce the bonus pool amount for the next fiscal year. Payments, if any, will 2 3 be made on or about July 31 of each year of the Program to participants who are employees of the Company at the time of payment. All amounts remaining in the bonus pool on July 31, 2000 will be paid to the participants employed by the Company at that time, or, if earlier, upon a participant's retirement under normal circumstances on or after age 60. Payments from the 1998-2000 Bonus Pools may be made in cash, the Company's Common Stock, or a combination thereof. 3 EX-11 5 EXHIBIT 11 1 EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS
Years Ended June 30, -------------------- 1996 1995 1994 ---- ---- ---- (In thousands, except per share amounts) WEIGHTED AVERAGE SHARES Common stock outstanding 9,048 8,221 8,037 Common stock equivalents, treasury stock method - 177 197 ------- ------ ------ 9,048 8,398 8,234 ======= ====== ====== NET INCOME PER COMMON SHARE Net income applicable to common stockholders $(9,891) $5,328 $ 222 Shares used in per common share computation 9,048 8,398 8,234 Net income per common share $ (1.09) $ 0.63 $ 0.03
48 EX-21.01 6 EXHIBIT 21.01 1 EXHIBIT 21.01 SUBSIDIARIES OF COMSHARE, INCORPORATED
Subsidiaries of the Incorporated Registrant(a) In - ------------------- ------------ Comshare (U.S.), Inc. Michigan Comshare Limited Canada Comshare International BV (CIBV) Netherlands Comshare Holdings Unlimited United Kingdom Comshare Limited United Kingdom Comshare International Limited United Kingdom Comshare, GmbH Germany Comshare SA France CSI International Holdings, Inc. Delaware Comshare Australia Pty., Ltd. Australia CS Holdings, Inc. Delaware
- --------------- (a) All subsidiaries are wholly owned by their immediate parent. EX-23.01 7 EXHIBIT 23.01 1 Exhibit 23.01 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our report on the June 30, 1996 consolidated financial statements of Comshare, Incorporated and subsidiaries dated August 30, 1996 (except with respect to the matters discussed in Notes 4 and 12, as to which the dates are September 16 and 5, 1996, respectively), included in this Form 10-K, into the Company's previously filed Form S-8 and S-3 registration statements (File No. 33-6730, File No. 33-9755-3, File No. 33-28437, File No. 33-27002, File No. 33-37564, File No. 33-85720, File No. 33-87706, File No. 33-87708, File No. 33-86908 and File No. 33-65109). /s/ ARTHUR ANDERSEN LLP ----------------------- Arthur Andersen LLP Detroit, Michigan, September 27, 1996 EX-27 8 EXHIBIT 27
5 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 27,468,000 0 34,853,000 1,411,000 0 68,812,000 27,945,000 23,426,000 98,238,000 44,254,000 0 0 0 9,691,000 38,973,000 98,238,000 0 118,984,000 0 135,776,000 (918,000) 0 476,000 (16,350,000) (6,459,000) (9,891,000) 0 0 0 (9,891,000) (1.09) 0 Accounts receivable are stated at net of allowance for doubtful accounts. Comprised of $968,000 of interest income and $50,000 of exchange loss.
EX-99.00 9 EXHIBIT 99.00 1 EXHIBIT 99.00 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED JUNE 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _________ to __________ commission file number _____________ Profit Sharing Plan of Comshare, Incorporated Full Title of the plan. Comshare, Incorporated, 555 Briarwood Circle, Ann Arbor, MI 48108 Name of issuer of securities held pursuant to the plan and the address of its principal executive offices. 2 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED FINANCIAL STATEMENTS AS OF JUNE 30, 1996 AND 1995 AND FOR THE THREE YEARS ENDED JUNE 30, 1996 TOGETHER WITH AUDITORS' REPORT 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of the Profit Sharing Plan of Comshare, Incorporated: We have audited the accompanying statement of net assets available for benefits of the PROFIT SHARING PLAN OF COMSHARE, INCORPORATED (the "Plan") as of June 30, 1996 and 1995, and the related statement of changes in net assets available for benefits for the years ended June 30, 1996, 1995 and 1994. These financial statements and the schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of June 30, 1996 and 1995 and the changes in net assets available for benefits for the years ended June 30, 1996, 1995 and 1994 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Detroit, Michigan, September 20, 1996 4 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED INDEX TO FINANCIAL STATEMENTS AND SCHEDULES EXHIBITS 1. Statements of Net Assets Available for Benefits as of June 30, 1996 and 1995 2. Statements of Changes in Net Assets Available for Benefits for the Years Ended June 30, 1996, 1995 and 1994 Notes to Financial Statements SCHEDULES I. Item 27a - Schedule of Assets Held for Investment Purposes as of June 30, 1996 II. Item 27d - Schedule of Reportable Transactions for the Year Ended June 30, 1996 5 EXHIBIT 1 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF JUNE 30, 1996
Vanguard Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index S&P 500 Wellington U.S. Growth Prime Portfolo Fund Portfolio Fund Portfolio -------------- ---- --------- ---- --------- RECEIVABLES: Employer's contribution $ 56,579 $ 55,851 $ 256,124 $ 104,117 $ 98,407 Participants' contributions 11,045 7,593 46,175 18,776 22,138 Accrued loan repayments 3,189 1,175 5,279 1,588 2,347 ---------- ---------- ----------- ---------- ---------- 70,813 64,619 307,578 124,481 122,892 INVESTMENTS, at market: Registered Investment Companies 3,065,717 1,687,144 10,395,281 2,309,281 2,999,767 Company Stock Fund -- -- -- -- -- Loans to participants -- -- -- -- -- ---------- ---------- ----------- ---------- ---------- 3,065,717 1,687,144 10,395,281 2,309,281 2,999,767 NET ASSETS AVAILABLE FOR BENEFITS $3,136,530 $1,751,763 $10,702,859 $2,433,762 $3,122,659 ---------- ---------- ----------- ---------- ---------- Vanguard Trustees' Equity- International Comshare Loan 1996 Portfolio Fund Stock Fund Fund Total -------------- ---------- ---- ----- RECEIVABLES: Employer's contribution $ 28,973 $ 15,913 $ -- $ 615,964 Participants' contributions 8,019 4,274 -- 118,020 Accrued loan repayments 926 741 -- 15,245 ---------- ---------- -------- ----------- 37,918 20,928 -- 749,229 INVESTMENTS, at market: Registered Investment Companies 1,083,123 -- -- 21,540,313 Company Stock Fund -- 3,960,341 -- 3,960,341 Loans to participants -- -- 635,662 635,662 ---------- ---------- -------- ----------- 1,083,123 3,960,341 635,662 26,136,316 NET ASSETS AVAILABLE FOR BENEFITS $1,121,041 $3,981,269 $635,662 $26,885,545 ---------- ---------- -------- -----------
The accompanying notes are an integral part of this statement. 6 EXHIBIT 1 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF JUNE 30, 1995
Vanguard Trustees' Vanguard Vanguard Vanguard Vanguard Vanguard Equity- Money Market- Bond Index S&P 500 Wellington U.S. Growth International Loan 1995 Prime Portfolo Fund Portfolio Fund Portfolio Portfolio Fund Total -------------- ---- --------- ---- --------- --------- ---- ----- RECEIVABLES: Employer's contribution $ 90,109 $ 39,110 $ 145,648 $ 57,178 $ 41,938 $ 20,415 $ -- $ 394,398 Participants' contributions 28,581 12,225 55,904 22,920 18,648 10,545 -- 148,823 Accrued loan repayments 7,305 1,897 8,312 3,215 1,977 1,671 -- 24,377 ---------- ---------- ---------- ---------- ---------- -------- -------- ----------- 125,995 53,232 209,864 83,313 62,563 32,631 -- 567,598 INVESTMENTS, at market: Registered Investment Companies 3,672,804 1,604,491 7,868,924 1,840,334 1,595,680 870,423 -- 17,452,656 Loans to participants -- -- -- -- -- -- 614,424 614,424 ---------- ---------- ---------- ---------- ---------- -------- -------- ----------- 3,672,804 1,604,491 7,868,924 1,840,334 1,595,680 870,423 614,424 18,067,080 NET ASSETS AVAILABLE FOR BENEFITS $3,798,799 $1,657,723 $8,078,788 $1,923,647 $1,658,243 $903,054 $614,424 $18,634,678 ---------- ---------- ---------- ---------- ---------- -------- -------- -----------
The accompanying notes are an integral part of this statement. 7 EXHIBIT 2 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1996
Vanguard Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index S & P 500 Wellington U.S. Growth INVESTMENT INCOME: Prime Portfolio Fund Portfolio Fund Portfolio --------------- ---- --------- ---- --------- Unrealized appreciation (depreciation) of investments $ -- ($30,758) $ 1,674,861 $ 196,661 $ 472,563 Interest and dividend income 178,792 107,802 219,446 120,986 82,532 Realized gain on investments -- 937 141,928 47,203 31,118 ---------- ---------- ------------ ----------- ----------- 178,792 77,981 2,036,235 364,850 586,213 CONTRIBUTIONS: Employer 97,516 95,724 434,895 180,635 156,646 Participants 242,547 166,416 587,678 265,954 238,877 ---------- ---------- ------------ ----------- ----------- 340,063 262,140 1,022,573 446,589 395,523 TRANSFER OF ASSETS FROM OTHER PLANS -- -- -- -- -- ---------- ---------- ------------ ----------- ----------- LOAN ORIGINATIONS (67,911) (36,006) (93,771) (28,087) (28,488) ---------- ---------- ------------ ----------- ----------- LOAN REPAYMENTS 77,916 21,485 123,139 50,137 47,321 ---------- ---------- ------------ ----------- ----------- INTERFUND TRANSFERS, NET (798,285) (168,273) 845,839 152,052 569,951 ---------- ---------- ------------ ----------- ----------- DISTRIBUTIONS TO PARTICIPANTS (392,844) (63,287) (1,309,944) (475,426) (106,104) ---------- ---------- ------------ ----------- ----------- Increase (decrease) in Net Assets Available for Benefits (662,269) 94,040 2,624,071 510,115 1,464,416 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,798,799 1,657,723 8,078,788 1,923,647 1,658,243 ---------- ---------- ------------ ----------- ----------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $3,136,530 $1,751,763 $ 10,702,859 $ 2,433,762 $ 3,122,659 ---------- ---------- ------------ ----------- ----------- Vanguard Trustees' Equity - International Comshare Loan 1996 INVESTMENT INCOME: Portfolio Stock Fund Fund Total --------- ---------- ---- ----- Unrealized appreciation (depreciation) of investments $ 10,636 $1,424,698 $ -- $ 3,748,661 Interest and dividend income 95,269 -- 53,701 858,528 Realized gain on investments 5,530 177,244 -- 403,960 ---------- ---------- --------- ----------- 111,435 1,601,942 53,701 5,011,149 CONTRIBUTIONS: Employer 56,055 18,778 -- 1,040,249 Participants 109,048 40,930 -- 1,651,450 ---------- ---------- --------- ----------- 165,103 59,708 -- 2,691,699 TRANSFER OF ASSETS FROM OTHER PLANS -- 3,183,333 -- 3,183,333 ---------- ---------- --------- ----------- LOAN ORIGINATIONS (7,880) (61,411) 323,554 -- ---------- ---------- --------- ----------- LOAN REPAYMENTS 21,707 3,122 (344,827) -- ---------- ---------- --------- ----------- INTERFUND TRANSFERS, NET (15,567) (585,717) -- -- ---------- ---------- --------- ----------- DISTRIBUTIONS TO PARTICIPANTS (56,811) (219,708) (11,190) (2,635,314) ---------- ---------- --------- ----------- Increase (decrease) in Net Assets Available for Benefits 217,987 3,981,269 21,238 8,250,867 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 903,054 -- 614,424 18,634,678 ---------- ---------- --------- ----------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $1,121,041 $3,981,269 $ 635,662 $26,885,545 ---------- ---------- --------- -----------
The accompanying notes are an integral part of this statement. 8 EXHIBIT 2 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1995
Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index S & P 500 Wellington INVESTMENT INCOME: Prime Portfolio Fund Portfolio Fund --------------- ------------- --------------- ---------------- Unrealized appreciation (depreciation) of investments $ -- $76,028 $1,317,955 $ 219,092 Interest and dividend income 215,539 107,263 207,110 75,542 Realized gain (loss) on investments -- (3,635) 141,397 14,376 --------------- ------------- --------------- ---------------- 215,539 179,656 1,666,462 309,010 CONTRIBUTIONS: Employer 146,227 87,651 321,337 129,416 Participants 290,831 131,045 525,878 210,493 --------------- ------------- --------------- ---------------- 437,058 218,696 847,215 339,909 LOAN ORIGINATIONS (60,361) (22,769) (81,743) (33,744) --------------- ------------- --------------- ---------------- LOAN REPAYMENTS 106,026 45,034 216,657 31,785 --------------- ------------- --------------- ---------------- INTERFUND TRANSFERS, NET (95,951) (176,643) (634,641) (259,828) --------------- ------------- --------------- ---------------- DISTRIBUTIONS TO PARTICIPANTS (1,313,081) (393,804) (1,573,917) (210,204) --------------- ------------- --------------- ---------------- Increase (decrease) in Net Assets (710,770) (149,830) 440,033 176,928 Available for Benefits NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 4,509,569 1,807,553 7,638,755 1,746,719 --------------- ------------- --------------- ---------------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 3,798,799 $1,657,723 $8,078,788 $ 1,923,647 --------------- ------------- --------------- ---------------- Vanguard Vanguard Trustees' Equity- U.S. Growth International Loan 1995 INVESTMENT INCOME: Portfolio Portfolio Fund Total --------------- ------------- --------------- ------------- Unrealized appreciation (depreciation) of investments $ 246,207 $ (26,308) $ -- $ 1,832,974 Interest and dividend income 9,333 42,870 66,753 724,410 Realized gain (loss) on investments 12,981 (19,061) -- 146,058 --------------- ------------- --------------- ---------------- 268,521 (2,499) 66,753 2,703,442 CONTRIBUTIONS: Employer 89,099 54,274 -- 828,004 Participants 139,318 105,377 -- 1,402,942 --------------- ------------- --------------- ---------------- 228,417 159,651 -- 2,230,946 LOAN ORIGINATIONS (44,223) (4,840) 247,680 -- --------------- ------------- --------------- ---------------- LOAN REPAYMENTS 22,643 23,266 (445,411) -- --------------- ------------- --------------- ---------------- INTERFUND TRANSFERS, NET 724,844 442,219 -- -- --------------- ------------- --------------- ---------------- DISTRIBUTIONS TO PARTICIPANTS (151,539) (213,255) (55,821) (3,911,621) --------------- ------------- --------------- ---------------- Increase (decrease) in Net Assets 1,048,663 404,542 (186,799) 1,022,767 Available for Benefits NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 609,580 498,512 801,223 17,611,911 --------------- ------------- --------------- ---------------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 1,658,243 $ 903,054 $ 614,424 $18,634,678 --------------- ------------- --------------- ----------------
The accompanying notes are an integral part of this statement. 9 EXHIBIT 2 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1994
Vanguard Vanguard Guaranteed Vanguard Vanguard Money Market- Bond Index Investment S&P 500 Wellington INVESTMENT INCOME: Prime Portfolio Fund Contracts Portfolio Fund Fund --------------- ---- --------- -------------- ---- Unrealized appreciation (depreciation) of investments $ -- ($144,451) $ -- ($140,104) ($78,779) Interest and dividend income 115,588 156,669 58,328 229,927 106,641 Realized gain (loss) on investments -- (14,574) -- 33,171 (16,108) ----------- ---------- ----------- ---------- ---------- 115,588 (2,356) 58,328 122,994 11,754 CONTRIBUTIONS: Employer 231,140 130,428 -- 390,793 126,710 Participants 344,102 199,756 -- 621,505 201,937 ----------- ---------- ----------- ---------- ---------- 575,242 330,184 -- 1,012,298 328,647 LOAN ORIGINATIONS (160,693) (59,406) (12,045) (140,007) (16,463) ----------- ---------- ----------- ---------- ---------- LOAN REPAYMENTS 149,113 71,945 -- 194,506 30,817 ----------- ---------- ----------- ---------- ---------- INTERFUND TRANSFERS 1,295,422 (543,631) (1,269,371) (725,786) 995,165 ----------- ---------- ----------- ---------- ---------- DISTRIBUTIONS TO PARTICIPANTS (1,160,845) (819,786) (255,610) (1,635,753) (599,617) ----------- ---------- ----------- ---------- ---------- Increase (decrease) in Net Assets 813,827 (1,023,050) (1,478,698) (1,171,748) 750,303 Available for Benefits NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,695,742 2,830,603 1,478,698 8,810,503 996,416 ----------- ---------- ----------- ---------- ---------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 4,509,569 $1,807,553 $ -- $7,638,755 $1,746,719 ----------- ---------- ----------- ---------- ---------- Vanguard Vanguard Trustees' Equity - U.S. Growth International Loan 1994 INVESTMENT INCOME: Portfolio Portfolio Fund Total --------- --------- ---- ----- Unrealized appreciation (depreciation) of investments ($2,824) $ 5,417 $ -- ($360,741) Interest and dividend income 10,250 3,341 80,880 761,624 Realized gain (loss) on investments 3,709 22 -- 6,220 --------- -------- --------- ----------- 11,135 8,780 80,880 407,103 CONTRIBUTIONS: Employer 67,151 23,931 -- 970,153 Participants 118,797 14,537 -- 1,500,634 --------- -------- --------- ----------- 185,948 38,468 -- 2,470,787 LOAN ORIGINATIONS (7,110) (1,496) 397,220 -- --------- -------- --------- ----------- LOAN REPAYMENTS 22,888 1,355 (470,624) -- --------- -------- --------- ----------- INTERFUND TRANSFERS (203,204) 451,405 -- -- --------- -------- --------- ----------- DISTRIBUTIONS TO PARTICIPANTS (134,503) -- (87,038) (4,693,152) --------- -------- --------- ----------- Increase (decrease) in Net Assets (124,846) 498,512 (79,562) (1,815,262) Available for Benefits NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 734,426 -- 880,785 19,427,173 --------- -------- --------- ----------- NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 609,580 $498,512 $ 801,223 $17,611,911 --------- -------- --------- -----------
The accompanying notes are an integral part of this statement. 10 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (1) DESCRIPTION OF THE PLAN The information discussed below is a summary only and reference should be made to the Profit Sharing Plan of Comshare, Incorporated (the "Plan") or inquiries made of the Plan Administrator for more complete information. (a) General The Plan is a defined contribution plan covering eligible employees of Comshare, Incorporated (the "Company"). The Plan provides retirement benefits and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company administers the Plan and pays all plan administration costs, including fees paid to the Trustee. The operating expenses of the investment advisor are netted from the returns of the funds. The Employee Stock Ownership Plan (ESOP) of Comshare Incorporated was merged with the Plan effective October 1, 1995. All of the assets of the ESOP which consisted primarily of Comshare common stock were transferred to the Plan and placed in the new Comshare Stock Fund. (b) Trustee and Investment Advisor As of June 30, 1996 the Plan held all investments with Vanguard Fiduciary Trust Company (the "Trustee" and "Investment Advisor"). In accordance with the Trust Agreement, the Trustee holds and administers the Plan's assets and executes transactions therewith for the purpose of providing benefits as described in the Plan agreement. The Investment Advisor executes all investment transactions. (c) Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. (d) Contributions The Plan provides for annual employer fixed contributions equal to 2% of eligible participants' compensation. In addition, the Company may make discretionary contributions, the amount of which is determined by the Board of Directors. The discretionary contribution for 1996 was $234,000. There were no discretionary contributions in 1995 or 1994. To qualify for such employer contributions for any given Plan year, a participant must be credited with 1,000 or more hours of service during the Plan year and be employed by the Company on the last day of the Plan year. 11 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) Participants may make before-tax contributions, subject to Internal Revenue Service limitations. Participants are eligible for employer matching contributions equal to 50% of the participant's before-tax contributions up to 6% of their compensation. (e) Investment Options As of June 30, 1996 the investment options available to participants are as follows: (1) Vanguard Money Market Reserves - Prime Portfolio, a money market fund, consisting of investments with maturities of one year or less; (2) Vanguard Bond Index Fund, an intermediate bond fund, consisting primarily of investments in U.S. Government and corporate bonds; (3) Vanguard Index 500 Portfolio, a diversified equity fund, consisting of investments in the stocks included in the Standard & Poors' 500 Index; (4) Vanguard Wellington Fund, a balanced fund, consisting of investments in both stocks and bonds; (5) Vanguard United States Growth Portfolio, a growth stock fund, consisting of investments in common stocks of companies with above-average growth potential; (6) Vanguard Trustees' Equity Fund - International Portfolio, an international equity fund, consisting of investments in stocks of companies based outside the United States; (7) Comshare Stock Fund, a fund investing in the shares of Comshare Inc. There are no guaranteed rates of returns for these funds. Participants may change their investment election daily for new funds contributed or loans repaid to the Plan. Contributions to the Plan are invested directly by the Trustee into the investment options based on participant elections. (f) Vesting and Eligibility All full-time employees and certain part-time employees are eligible to make employee before-tax contributions to the Plan at the beginning of the calendar quarter following the date of hire. Eligible participants begin sharing in employer contributions after completing one year of service. As of June 30, 1996 there were 295 active participants. Participants vest in employer discretionary contributions according to a seven year schedule. Participants completing at least 1,000 hours of service in a given plan year are credited with an increase in vesting for such plan year. Full vesting also occurs upon retirement at age 65, or after death or total disability. Employer matching contributions vest according to a seven year schedule for participants with targeted compensation greater than the social security wage base. All other participants are fully vested in employer matching contributions. Employee contributions and employer fixed contributions are always fully vested. 12 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) (g) Loans and Hardship Withdrawals The Plan provides for hardship withdrawals in certain circumstances and for loans to participants. Loans are limited to 50% of a participant's vested balance, and bear interest comparable to competitive bank rates for loans of similar purpose. Loans are repaid through payroll withholding, and most mature within five years. A 10% excise tax is imposed upon hardship withdrawals. (h) Benefit Distributions Distribution of the vested amounts in a participant's account can be made upon termination of employment or upon retirement. Benefits are paid, at the option of the participant, in a lump sum payment or in periodic payments of substantially equal amounts for a specified number of years, not in excess of 10. As of June 30, 1996 and 1995, the net assets available for benefits included $808,841 and $508,634, respectively, for benefits payable that were due but undistributed to participants as a result of termination of employment or retirement. (i) Allocation to Participants' Accounts The Trustee maintains the detailed accounts of the net assets available for benefits in the Plan. The Trustee values the fund for each investment option at market value on a daily basis. The net change in each fund's market value for the period is allocated to the accounts of participants within that fund in the same proportion that the balance of each participant's account bears to the total of the fund on the last day of the period. Interest income on loans to participants is credited directly to the individual participant's account. Company discretionary contributions and forfeitures are allocated to eligible participants' accounts in the same proportion that the participant's eligible compensation bears to the total eligible compensation of all participants for the year. (j) Plan Termination In the event the Plan is terminated, the participants will become fully vested and will receive the balances in their individual accounts. (k) Federal Income Tax Status The Plan obtained its latest determination letter dated September 16, 1996, in which the Internal Revenue Service stated that the Plan, as amended and restated effective July 1, 1994, was in compliance with the applicable requirements of the Internal Revenue Code (the "Code"). The Plan has been amended and restated again effective October 1, 1995 to reflect the merger with the ESOP. The Plan administrator is applying for a new determination letter. The Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. 13 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) Therefore, they believe that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. (l) Forfeitures Non-vested account balances of terminated employees are forfeited at the end of the quarter following the date of termination. Forfeitures were $62,517, $26,714 and $53,894 for the years ended June 30, 1996, 1995 and 1994, respectively. Forfeitures are allocated on a pro-rata basis to remaining participants. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Accounting The financial statements have been prepared on the accrual basis of accounting. (b) Investments Investment transactions are recorded by the Trustee on a trade date basis. Investments are stated in the Statement of Net Assets Available for Benefits at market value. Realized gains and losses on sale of investments and unrealized appreciation (depreciation) of investments are computed based on the difference between the market value of the investments at the beginning of the year, or at the time of purchase if acquired during the year, and the market value of investments when sold or at Plan year end. (3) REPORTABLE TRANSACTIONS Transactions, or a series of transactions, in excess of 5% of Net Assets Available for Benefits at the beginning of the Plan year are reportable transactions under the provisions of ERISA. A list of such transactions is included in Schedule II. (4) SUBSEQUENT EVENTS As of September 13, 1996, the Company's stock was trading at $18.375 per share compared to $31 per share at June 30, 1996. The investments in the Comshare Stock Fund consist primarily of the Company's stock which are valued in the accompanying statement of net assets at the June 30, 1996 share price. 14 Schedule I PROFIT SHARING PLAN OF COMSHARE, INCORPORATED EIN: 38-1804887 PN: 001 ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF JUNE 30, 1996
(c) Description of Investment (a) (b) Identity of Issue, Including Maturity Date, (e) Borrower, Lessor, Rate of Interest, Collateral, (d) Current or Similar Party Par or Maturity Value Cost Value ------------------------------ -------------------------------- ---------- ---------- MUTUAL FUNDS: * Vanguard Money Market 3,065,717 units $3,065,717 $3,065,717 Reserves - Prime Portfolio * Vanguard Bond Index Fund 174,112 units 1,702,277 1,687,144 * Vanguard Index 500 Portfolio 165,293 units 7,393,010 10,395,281 * Vanguard Wellington Fund 91,674 units 1,977,532 2,309,281 * Vanguard U.S. Growth Portfolio 128,745 units 2,316,295 2,999,767 * Vanguard Trustees' Equity - International Portfolio 33,564 units 1,090,280 1,083,123 * Comshare Stock Fund 250,496 units 794,233 3,960,341 ----------- ----------- Total Mutual Funds 18,339,344 25,500,654 ----------- ----------- LOANS: Loans to plan participants Interest rates range 635,662 635,662 from 6.5% to 12.75%; ----------- ----------- maturing through June, 2016 TOTAL INVESTMENTS $18,975,006 $26,136,316 =========== ===========
* Represents a party-in-interest 15 SCHEDULE II PROFIT SHARING PLAN OF COMSHARE, INCORPORATED EIN: 38-1804887 PN: 001 ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED JUNE 30, 1996
(a) (b) (c) (d) (g) Identity of Party Description of Purchase Selling Cost of Involved Asset Price Price Asset -------- ----- ----- ----- ----- Vanguard Group 91 purchases of shares of Vanguard $1,325,812 N/A N/A Money Market Reserves - Prime Portfolio Vanguard Group 76 purchases of shares of Vanguard Index 2,595,851 N/A N/A 500 Portfolio Vanguard Group 40 purchases of shares of Vanguard Trustees' 518,102 N/A N/A Equity - International Portfolio Vanguard Group 53 purchases of shares of Vanguard 1,235,934 N/A N/A U.S. Growth Portfolio Vanguard Group 58 purchases of shares of 1,103,793 N/A N/A Vanguard Wellington Fund Vanguard Group 61 purchases of shares of Vanguard 512,080 N/A N/A Bond Index - Total Bond Market Vanguard Group 23 purchases of shares of Comshare Stock Fund 3,414,970 N/A N/A Vanguard Group 73 sales of shares of Vanguard Money N/A $1,932,899 $1,932,899 Market Reserves - Prime Portfolio Vanguard Group 49 sales of shares of Vanguard Index 500 Portfolio N/A 1,887,795 1,745,867 Vanguard Group 25 sales of shares of Vanguard Trustees' N/A 321,569 316,039 Equity - International Portfolio Vanguard Group 24 sales of shares of Vanguard U.S. Growth N/A 335,527 304,409 Portfolio Vanguard Group 30 sales of shares of Vanguard Wellington Fund N/A 878,710 831,507 Vanguard Group 39 sales of shares of Vanguard Bond Index - Total N/A 399,283 398,346 Bond Market Vanguard Group 47 sales of shares of Comshare Stock Fund N/A 1,056,572 879,327 (h) (a) (b) Current Value (i) Identity of Party Description of of Asset on Net Gain Involved Asset Transaction Date or (Loss) -------- ----- ---------------- --------- Vanguard Group 91 purchases of shares of Vanguard $1,325,812 N/A Money Market Reserves - Prime Portfolio Vanguard Group 76 purchases of shares of Vanguard Index 2,595,851 N/A 500 Portfolio Vanguard Group 40 purchases of shares of Vanguard Trustees' 518,102 N/A Equity - International Portfolio Vanguard Group 53 purchases of shares of Vanguard 1,235,934 N/A U.S. Growth Portfolio Vanguard Group 58 purchases of shares of 1,103,793 N/A Vanguard Wellington Fund Vanguard Group 61 purchases of shares of Vanguard 512,080 N/A Bond Index - Total Bond Market Vanguard Group 23 purchases of shares of Comshare Stock Fund 3,414,970 N/A Vanguard Group 73 sales of shares of Vanguard Money 1,932,899 $ 0 Market Reserves - Prime Portfolio Vanguard Group 49 sales of shares of Vanguard Index 500 Portfolio 1,887,795 141,928 Vanguard Group 25 sales of shares of Vanguard Trustees' 321,569 5,530 Equity - International Portfolio Vanguard Group 24 sales of shares of Vanguard U.S. Growth 335,527 31,118 Portfolio Vanguard Group 30 sales of shares of Vanguard Wellington Fund 878,710 47,203 Vanguard Group 39 sales of shares of Vanguard Bond Index - Total 399,283 937 Bond Market Vanguard Group 47 sales of shares of Comshare Stock Fund 1,056,572 177,245
The accompanying notes are an integral part of this statement. 16 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our report on the June 30, 1996 financial statements of the Profit Sharing Plan of Comshare, Incorporated dated September 20, 1996, included in this Form 11-K into the Company's previously filed Form S-8 and S-3 registration statements (File No. 33-6730, File No. 33-9755-3, File No. 33-28437, File No. 33-27002, File No. 33-37564, File No. 33-85720, File No. 33-87706, File No. 33-87708, File No. 33-86908 and File No. 33-65109). Arthur Andersen LLP Detroit, Michigan September 27, 1996 17 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED FINANCIAL STATEMENTS AS OF OCTOBER 11, 1995 AND JUNE 30, 1995 AND FOR THE PERIOD ENDED OCTOBER 11, 1995 AND FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 TOGETHER WITH AUDITORS' REPORT 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of the Employee Stock Ownership Plan of Comshare, Incorporated: We have audited the accompanying statement of net assets available for benefits of the EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED (the "Plan") as of October 11, 1995 and June 30, 1995, and the related statement of changes in net assets available for benefits for the period ended October 11, 1995 and the years ended June 30, 1995 and 1994. These financial statements and the schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of October 11, 1995 and June 30, 1995 and the changes in net assets available for benefits for the period ended October 11, 1995 and the years ended June 30, 1995 and 1994 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Detroit, Michigan, September 20, 1996 19 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED INDEX TO FINANCIAL STATEMENTS AND SCHEDULES EXHIBITS 1. Statement of Net Assets Available for Benefits as of October 11, 1995 and June 30, 1995 2. Statement of Changes in Net Assets Available for Benefits for the Period Ended October 11, 1995, and the Years Ended June 30, 1995 and 1994 Notes to Financial Statements SCHEDULES I. Item 27a - Schedule of Assets Held for Investment Purposes as of October 11, 1995 II. Item 27d - Schedule of Reportable Transactions for the Period Ended October 11, 1995 20 EXHIBIT 1 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF OCTOBER 11, 1995 AND JUNE 30, 1995
October 11, 1995 June 30, 1995 ------------------- --------------- RECEIVABLES: Employer contributions $ --- $ 219,883 Participants' contributions --- 3,487 ------------------- --------------- $ --- $ 223,370 =================== =============== INVESTMENTS, at market: Short term fund $ --- $ 104 Comshare common stock - allocated, 125,055 shares at cost of $939,014 for year ended June 30, 1995 --- 2,594,663 ------------------- --------------- $ --- $ 2,594,767 =================== =============== LIABILITIES: Accrued interest $ --- $ (18,923) Note due to Comshare --- (199,185) ------------------- --------------- $ --- $ (218,108) =================== =============== NET ASSETS AVAILABLE FOR BENEFITS: Allocated $ --- $ 2,600,029 Unallocated --- --- ------------------- --------------- $ --- $ 2,600,029 =================== ===============
The accompanying notes are an integral part of this statement. 21 EXHIBIT 2 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE PERIOD ENDED OCTOBER 11, 1995 AND THE YEARS ENDED JUNE 30, 1995 AND 1994
October 11, 1995 June 30, 1995 ----------------------------------------- ----------------------------------------- Allocated Unallocated Total Allocated Unallocated Total ----------- ----------- ----------- ----------- ----------- ---------- Beginning Balance $ 2,600,029 $ --- $ 2,600,029 $1,331,861 $ 174,429 $1,506,290 Net unrealized appreciation of investments 861,423 --- 861,423 828,291 286,236 1,114,527 Net realized gain/(loss) on investment 167,406 --- 167,406 (62,496) --- (62,496) Employer contributions 5,956 --- 5,956 17,836 218,191 236,027 Participants' contributions 25,280 --- 25,280 78,443 --- 78,443 Interest income 444 --- 444 189 --- 189 Distributions to participants (477,205) --- (477,205) (254,028) --- (254,028) Interest expense --- --- --- --- (18,923) (18,923) Transferred to other plan (3,183,333) --- (3,183,333) --- --- --- Allocation of shares released --- --- --- 659,933 (659,933) --- ----------- ---------- ---------- ---------- ---------- ---------- Ending Balance $ --- $ --- $ --- $2,600,029 $ --- $2,600,029 ----------- ---------- ---------- ---------- ---------- ---------- June 30, 1994 --------------------------------------------- Allocated Unallocated Total ----------- ----------- ---------- Beginning Balance $ 755,064 $ 16,750 $ 771,814 Net unrealized appreciation of investments 589,423 170,008 759,431 Net realized gain/(loss) on investment 57,980 --- 57,980 Employer contributions 17,934 18,923 36,857 Participants' contributions 85,647 --- 85,647 Interest income 68 --- 68 Distributions to participants (186,584) --- (186,584) Interest expense --- (18,923) (18,923) Transferred to other plan --- --- --- Allocation of shares released 12,329 (12,329) --- ---------- -------- ---------- Ending Balance $1,331,861 $174,429 $1,506,290 ---------- -------- ----------
The accompanying notes are an integral part of this statement. 22 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (1) DESCRIPTION OF THE PLAN The information discussed below is a summary only and reference should be made to the Employee Stock Ownership Plan of COMSHARE, Incorporated (the "Plan") or inquiries made of the Plan Administrator for more complete information. (a) General The Plan was established effective June 28, 1985. It is a defined contribution plan covering eligible employees of COMSHARE, Incorporated (the "Company"). The Plan provides retirement benefits and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company administers the Plan and pays all administration costs, including fees paid to Comerica Bank (the "Trustee"). The Plan was merged into the Profit Sharing Plan of Comshare, Incorporated and the transfer of plan assets was completed on October 11, 1995. The Plan ceased to exist following the merger. All Plan participants retained their accrued benefits under the merged plan. (b) Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. (c) Trustee In accordance with the Trust Agreement, the Trustee holds and administers the Plan's assets and executes transactions therewith for the purpose of providing benefits as described in the Plan. (d) Contributions The Plan provides for annual contributions as determined by the Company's Board of Directors, subject to Internal Revenue Service limitations. However, the Company is required to contribute amounts sufficient to enable the Plan to pay principal and interest on borrowings by the Plan when due. Company contributions may be paid to the Trustee in cash and/or shares of Comshare, Incorporated common stock valued at fair market value. Company contributions are used first to pay interest and principal due on any borrowings by the Plan. Participants may make before-tax contributions, subject to Internal Revenue Service limitations. Participants are eligible for employer matching contributions equal to 50% of the participant's before-tax contributions up to 6% of compensation, less such contributions to the Profit Sharing Plan of COMSHARE, Incorporated. 23 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (CONTINUED) Company contributions to the Plan for the plan years shown below were as follows:
October 11, 1995 June 30, 1995 June 30, 1994 ---------------- ------------- ------------- Employer Discretionary $ --- $218,191 $18,923 Employer Matching 5,956 17,836 17,934
(e) Investments The Plan invests solely in the Company's common stock. Contributions to the Plan are invested temporarily by the Trustee in a short term fund. The Trustee purchases the Company's stock in the open market whenever funds permit. (f) Vesting and Eligibility All full-time U.S. employees are eligible to participate in the Plan after completing one year of service. The Plan was amended effective July 1, 1994 to allow full time employees to begin before tax contributions at the beginning of the calendar quarter following their date of hire. As of October 11, 1995 and June 30, 1995 there were 286 active participants, respectively. Participants are vested in employer discretionary contributions according to a seven-year schedule. Participants completing at least 1,000 hours of service in a given plan year are credited with an increase in vesting for such plan year. Full vesting also occurs upon retirement at age 65 or after death or total disability. Employer matching contributions are vested according to a seven-year schedule for participants with targeted compensation greater than the social security wage base. All other participants are fully vested in employer matching contributions. Employee contributions are always fully vested. (g) Benefit Distributions Upon retirement, death, disability or termination of employment, distribution of a participant's entire account is made as of the next valuation date. Distributions are made at the option of the participant in whole shares of the Company's common stock and cash for fractional shares or entirely in cash. As of October 11, 1995 and June 30, 1995 the net assets available for benefits included $0 and $396,551, respectively, of benefits payable to participants who have withdrawn from the Plan. (h) Forfeitures Unvested account balances of terminated employees are forfeited in the plan year in which the employee is credited with less than 501 hours of service. Forfeitures were $0 in the period ended October 11, 1995, $10,547 for the year ended June 30, 1995, and $1,245 for the year ended June 30, 1994. All forfeitures are reallocated to eligible participants' accounts. 24 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (i) Allocation of Participants' Accounts The Trustee maintains the detail accounts of the net assets available for benefits in the Plan. After the close of the plan year, the Trustee values the number of shares of the Company's common stock in each participant's account at market value. Company discretionary contributions and forfeitures are allocated to eligible participants' accounts in the same proportion that the participants' eligible compensation bears to the total eligible compensation of all participants for the year. The Plan has the right to borrow funds to purchase the Company's common stock for future allocation to participants. The borrowings are secured by the shares purchased with the proceeds of such borrowings. No shares purchased as a result of borrowings will be allocated to participants' accounts until such time as the Company makes contributions to the Plan to repay the borrowings. The unallocated shares are allocated to participants as the borrowings and interest thereon are repaid. Shares allocated to participant accounts due to repayments on the promissory note (see note 4) were 31,804 and 2,759 for the years ended June 30, 1995 and 1994 respectively. (j) Voting Rights Shares of the Company's common stock allocated to participants' accounts are voted by the Trustee at the participants' direction. Unallocated shares of the Company's common stock held by the Plan are voted by the Trustee in the same proportion as those shares voted by participants. (k) Plan Termination In the event the Plan is terminated, the participants will become fully vested and will receive the shares in their individual accounts. (l) Tax Status The Plan obtained its latest determination letter dated September 16, 1996, in which the Internal Revenue Service stated that the Plan, as amended and restated effective July 1, 1994, was in compliance with the applicable requirements of the Internal Revenue Code (the "Code"). The Plan Administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. They believe that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. Company contributions and employee before-tax contributions are not taxable to participants when contributed to the Plan. Any earnings on such contributions are also not taxable to participants when earned by the Plan. 25 EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Accounting The financial statements have been prepared on the accrual basis of accounting. (b) Investments Investments are purchased on the open market by the Trustee and transactions are recorded on the trade date basis. Investments are stated in the Statement of Net Assets Available for Benefits at current value, which equals market value. The market value of the Company's common stock, the principal investment, was the closing price on the valuation dates, October 11, 1995, and June 30, 1995 and 1994, as quoted on the NASDAQ National Market System. Unrealized appreciation/(depreciation) of investments is the change in market values during the year of investments held as of the reporting date and is reflected in the accompanying Statement of Changes in Net Assets Available for Benefits as a separate line item. Realized gains and losses and unrealized appreciation/(depreciation) are based on the value of the assets at the beginning of the Plan year or date of purchase. Included in the unrealized appreciation/(depreciation) of investments is the transfer of appreciation corresponding to the transfer of cost of the shares released from unallocated equity. The unrealized appreciation transferred was $ 0 for the period ended October 11, 1995, $286,236 and $4,914 for the years ended June 30, 1995 and 1994 respectively. (3) PARTICIPANTS' CONTRIBUTIONS RECEIVABLE Participants' contributions receivable represents amounts received from participants by the Company and credited to each participant's account. These amounts were remitted by the Company to the Trustee subsequent to year-end. (4) RELATED PARTY TRANSACTIONS The principal amount of the promissory note to the Company due July 1, 1995, was repaid in full subsequent to the June 30, 1995 plan year end including any accrued interest on the promissory note. 26 SCHEDULE I EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED EIN: 38-1804887 PN: 002 ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF OCTOBER 11, 1995
(e) (d) Current (a) (b) Identity of Issuer, Borrower, etc. (c) Description of Investment Cost Value - --- -------------------------------------- ---------------------------------- ----- * None None $ -- $ --
* Represents a party-in-interest. 27 SCHEDULE II EMPLOYEE STOCK OWNERSHIP PLAN OF COMSHARE, INCORPORATED EIN: 38-1804887 PN: 002 ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE PERIOD ENDED OCTOBER 11, 1995 (h) (i) (c) (d) (g) Market Net Purchase Selling Cost of Value of Gain (a) Identity of Party (b) Description of Asset Price Price Asset Asset (Loss) - --------------------- ----------------------------------- -------- --------- --------- ----------- ---------- Comerica Bank Twelve aggregate purchases $269,192 N/A N/A $269,192 N/A of 269,192 units of Short term fund, $1 par Comerica Bank Thirteen aggregate sales of N/A $269,296 $269,296 N/A -- 269,296 units of Short term fund, $1 par Comerica Bank Four aggregate transfers of 108,260 N/A N/A $841,539 $3,183,333 N/A shares of Comshare, Inc. Common Stock to the Profit Sharing Plan Open Market Twenty aggregate purchases $100,194 N/A N/A $ 100,194 N/A of 7,383 shares of Comshare, Inc. Common Stock Open Market Two aggregate sales of 9,412 N/A $233,035 $ 81,579 N/A $151,456 shares of Comshare, Inc. Common Stock Plan Participants Forty-seven aggregate distributions N/A $259,275 $ 74,212 N/A $185,063 of 8,609 shares of Comshare, Inc. Common Stock
28 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our report on the June 30, 1996 financial statements of the Profit Sharing Plan of Comshare, Incorporated dated September 20, 1996, included in this Form 11-K into the Company's previously filed Form S-8 and S-3 registration statements (File No. 33-6730, File No. 33-9755-3, File No. 33-28437, File No. 33-27002, File No. 33-37564, File No. 33-85720, File No. 33-87706, File No. 33-87708, File No. 33-86908 and File No. 33-65109). Arthur Andersen LLP Detroit, Michigan September 27, 1996 -----END PRIVACY-ENHANCED MESSAGE-----