-----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, GjGwVu4hf7YpsrHyaImPRWzFpMY9Tp2bbJIU7Ux8r1Pa3LVsRm87NY6bW6wXwI3X tC0fn5mmw4QyzuqIgTNAMA== 0000950124-97-000837.txt : 19970222 0000950124-97-000837.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950124-97-000837 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMSHARE INC CENTRAL INDEX KEY: 0000201513 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 381804887 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28848 FILM NUMBER: 97534440 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-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ---------------------- X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- -----. COMMISSION FILE NUMBER 0-4096 ----------------------------- COMSHARE, INCORPORATED (Exact name of registrant as specified in its charter) MICHIGAN 38-1804887 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 994-4800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of DECEMBER 31, 1996. OUTSTANDING AT CLASS OF COMMON STOCK DECEMBER 31, 1996 -------------------------------- -------------------------------- $1.00 PAR VALUE 9,775,371 SHARES 2 COMSHARE, INCORPORATED INDEX Page No. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet as of December 31, 1996 and June 30, 1996.............................. 3 Condensed Consolidated Statement of Operations for the Three and Six Months Ended December 31, 1996 and 1995............ 5 Condensed Consolidated Statement of Cash Flows for the Six Months Ended December 31, 1996 and 1995...................... 6 Notes to Condensed Consolidated Financial Statements................ 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................ 9 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 14 SIGNATURE.............................................................. 15 INDEX TO EXHIBITS...................................................... 16 2 3 PART I. - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS COMSHARE, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except per share data)
December 31, June 30, 1996 1996 ---- ---- ASSETS (unaudited) (audited) CURRENT ASSETS Cash and cash equivalents $ 12,696 $ 27,468 Accounts receivable, net 34,468 34,853 Prepaid expenses and other current assets 10,401 6,491 ---------- ---------- Total current assets 57,565 68,812 PROPERTY AND EQUIPMENT, at cost 31,275 27,945 Less - accumulated depreciation 25,447 23,426 ---------- ---------- Property and equipment, net 5,828 4,519 COMPUTER SOFTWARE, net 9,327 9,064 GOODWILL, net 1,866 1,947 DEFERRED INCOME TAXES 7,940 7,940 OTHER ASSETS 6,849 5,956 ---------- ---------- $ 89,375 $ 98,238 ========== ==========
See accompanying notes to condensed consolidated financial statements. 3 4 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except per share data)
December 31, June 30, 1996 1996 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited) CURRENT LIABILITIES Accounts payable $ 14,603 $ 17,934 Accrued liabilities 6,530 7,956 Current portion of long-term debt 3,340 - Deferred revenue 19,979 18,364 ------------- ------------ Total current liabilities 44,452 44,254 LONG-TERM DEBT - 1,913 OTHER LIABILITIES 3,329 3,407 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 9,775,371 shares as of December 31, 1996 and 9,691,443 shares as of June 30, 1996 9,775 9,691 Capital contributed in excess of par 38,862 38,132 Retained earnings (2,822) 5,239 Currency translation adjustments (3,298) (3,586) ------------- ------------ 42,517 49,476 Less - Notes receivable 923 812 ------------- ------------ Total shareholders' equity 41,594 48,664 ------------- ------------ $ 89,375 $ 98,238 ============= ============
See accompanying notes to condensed consolidated financial statements. 4 5 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited; in thousands, except per share data)
Three Months Ended Six Months Ended December 31, December 31, ----------------------- ------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUE Software licenses $ 11,703 $ 17,234 $ 18,271 $ 31,154 Software maintenance 9,331 9,247 18,108 18,262 Implementation, Consulting and other services 5,161 5,702 9,800 11,420 -------- -------- -------- -------- TOTAL REVENUE 26,195 32,183 46,179 60,836 COSTS AND EXPENSES Selling and marketing 14,705 13,023 28,141 25,061 Cost of revenue and support 8,080 7,798 14,998 14,488 Internal research and product development 4,311 4,088 8,699 8,086 Internally capitalized software (1,702) (1,076) (3,201) (3,434) Software amortization 1,784 1,127 3,310 3,743 General and administrative 3,190 3,035 6,114 6,076 Unusual charge - 23,167 - 23,167 -------- -------- -------- -------- TOTAL COSTS AND EXPENSES 30,368 51,162 58,061 77,187 -------- -------- -------- -------- LOSS FROM OPERATIONS (4,173) (18,979) (11,882) (16,351) OTHER INCOME (EXPENSE) Interest income (expense) 102 54 313 (87) Exchange loss (148) (23) (244) (112) -------- -------- -------- -------- Total other income (expense) (46) 31 69 (199) Loss before taxes (4,219) (18,948) (11,813) (16,550) Benefit for income taxes (1,457) (6,084) (4,120) (5,196) -------- -------- -------- -------- NET LOSS $ (2,762) $(12,864) $ (7,693) $(11,354) ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE COMMON EQUIVALENT SHARES 9,742 8,678 9,723 8,456 ======== ======== ======== ======== NET LOSS PER COMMON SHARE $ (0.28) $ (1.48) $ (0.79) $ (1.34) ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited; in thousands)
Six Months Ended December 31, ---------------------------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES Net loss $ (7,693) $ (11,354) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 4,512 4,828 Write-off of capitalized software - 23,167 Changes in operating assets and liabilities: Accounts receivable 1,367 (8,235) Prepaid expenses and other assets (3,564) (362) Accounts payable (3,902) 2,391 Accrued liabilities (1,447) 549 Deferred revenue 1,082 630 Deferred income taxes - (6,593) Other liabilities (190) 513 ------------ ----------- Net cash provided by (used in) operating activities (9,835) 5,534 INVESTING ACTIVITIES Additions to computer software (3,302) (3,485) Payments for property and equipment (2,227) (1,440) Other (710) (542) ------------ ----------- Net cash used in investing activities (6,239) (5,467) FINANCING ACTIVITIES Net borrowings under notes payable 3,134 244 Repayments under long-term debt (1,913) (5,006) Stock options exercised 311 164 Issuance of common stock - 25,196 Other 25 388 ------------ ----------- Net cash provided by financing activities 1,557 20,986 EFFECT OF EXCHANGE RATE CHANGES (255) 89 ------------ ----------- NET INCREASE (DECREASE) IN CASH (14,772) 21,142 BALANCE AT BEGINNING OF PERIOD 27,468 1,398 ------------ ----------- BALANCE AT END OF PERIOD $ 12,696 $ 22,540 ============ ============ SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 119 $ 246 ============ ============ Cash paid for income taxes $ 280 $ 890 ============ ============
See accompanying notes to condensed consolidated financial statements. 6 7 COMSHARE, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A - GENERAL INFORMATION The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, required to present fairly its consolidated balance sheet as of December 31, 1996, the consolidated statement of operations for the three and six months ended December 31, 1996 and 1995 and the consolidated statement of cash flows for the six months ended December 31, 1996 and 1995. The results of operations for the three and six months ended December 31, 1996 and 1995 are not necessarily indicative of the results to be expected in future quarters or the full fiscal year. The software industry is generally characterized by seasonal trends. NOTE B - COMPUTER SOFTWARE The costs of developing and purchasing new software products and enhancements to existing software products are capitalized after technological feasibility and realizability are 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 gross product revenue, estimated economic product lives and changes in software and hardware technology. Capitalized development costs are currently amortized using the straight-line method over a two-year service life. 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. 7 8 COMSHARE, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) NOTE C - 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 December 31, 1996 and June 30, 1996, the Company had forward foreign currency exchange contracts of approximately $10,002,000 and $5,746,000 (notional amounts), respectively, denominated in foreign currencies. The contracts outstanding at December 31, 1996 mature at various dates through May 16, 1997, 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 December 31, 1996 and June 30, 1996. NOTE D - LITIGATION The Company and Arbor Software Corporation ("Arbor") disagree about certain definitions in the license agreement between the two parties related to the calculation of royalties. Comshare and Arbor were in the process of defining the procedure and legal and accounting issues to be resolved through arbitration, when on September 27, 1996, Arbor filed a lawsuit against Comshare alleging breach of contract and fraud relating to royalty calculations. Arbor's suit principally seeks monetary damages. On October 21, 1996, Comshare filed a denial of all of Arbor's claims and filed a counterclaim against Arbor for defamation, unfair competition, interference with economic relationships and breach of contract. The litigation is in its early stages, therefore the Company does not possess sufficient information to reasonably estimate the potential liability, if any. Management is contesting the Arbor suit vigorously. NOTE E - SUBSEQUENT EVENT On January 22, 1997, the Company announced its plan to take an estimated $6,000,000 pre-tax restructuring charge in the Company's third quarter ended March 31, 1997 for management actions or plans in connection with the consolidation of the Company's product development activities in Ann Arbor, Michigan and reductions in staff and non-revenue generating costs. The restructuring charge includes staff reductions of approximately 70 employees. These cost reduction actions are expected to save approximately $7,000,000 annually. The foregoing statements regarding the Company's expected cost savings from cost reduction actions 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 under Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Safe Harbor Statement". 8 9 ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis sets forth information for the three and six months ended December 31, 1996 compared to the three and six months ended December 31, 1995. 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 notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. RESULTS OF OPERATIONS The following table sets forth for the periods indicated, certain financial data as a percentage of total revenue.
Three Months Ended Six Months Ended December 31, December 31, ------------------------------- ------------------------------- 1996 1995 1996 1995 ----------- ----------- ---------- ----------- REVENUE Software licenses 44.7% 53.6% 39.6% 51.2% Software maintenance 35.6 28.7 39.2 30.0 Implementation and consulting services 19.7 17.7 21.2 18.8 ----- ----- ----- ----- Total revenue 100.0 100.0 100.0 100.0 COSTS AND EXPENSES Selling and marketing 56.1 40.5 60.9 41.2 Cost of revenue and support 30.8 24.2 32.5 23.8 Internal research and product development 16.5 12.7 18.8 13.3 Internally capitalized software (6.5) (3.3) (6.9) (5.6) Software amortization 6.8 3.5 7.2 6.2 General and administrative 12.2 9.4 13.2 10.0 Unusual charge - 72.0 - 38.0 ----- ----- ----- ----- Total costs and expenses 115.9 159.0 125.7 126.9 LOSS FROM OPERATIONS (15.9) (59.0) (25.7) (26.9) OTHER INCOME (EXPENSE) Interest income (expense) 0.4 0.2 0.6 (0.1) Exchange loss (0.6) (0.1) (0.5) (0.2) ----- ----- ---- ---- Total other income (expense) (0.2) 0.1 0.1 (0.3) LOSS BEFORE INCOME TAXES (16.1) (58.9) (25.6) (27.2) Benefit for income taxes (5.6) (18.9) (8.9) (8.5) ----- ------ ----- ----- NET LOSS (10.5)% (40.0)% (16.7)% (18.7)% ====== ====== ====== ======
9 10 REVENUE
Three Months Ended Percent Six Months Ended Percent December 31, Change December 31, Change ----------------------- ----------- --------------------- ----------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUE Software licenses $ 11,703 $ 17,234 (32.1)% $ 18,271 $ 31,154 (41.4)% Software maintenance 9,331 9,247 0.9 18,108 18,262 (0.8) Implementation and consulting 5,161 5,702 (9.5) 9,800 11,420 (14.2) -------- -------- -------- -------- TOTAL REVENUE $ 26,195 $ 32,183 (18.6)% $ 46,179 $ 60,836 (24.1)% ======== ======== ======== ========
Total revenue decreased 18.6% and 24.1% in the three and six months ended December 31, 1996 compared to the prior year primarily due to the decrease in software licenses revenue. The decline in license fee revenue in the three and six months ended December 31, 1996 was primarily due to transitional changes in the Company's sales organization and the loss of sales momentum mainly as a result of the Company's internal focus in the first quarter in connection with the expanded fiscal year-end audit and investigation into violations of the Company's revenue recognition policies. License fee revenue increased 78% in the second quarter compared to $6,568,000 for the first quarter ended September 30, 1996 reflecting improvement in the sales momentum during the quarter. Software maintenance revenue was flat in the three and six months ended December 31, 1996 compared to the same period last year. Client/server software maintenance revenue in the three and six months ended December 31, 1996 represented 74.3% and 74.4% of total software maintenance revenue and grew 10.4% and 12.3% compared with the prior year. Mainframe software maintenance revenue decreased 19.2% and 25.9% in the three and six months ended December 31, 1996 compared to last year primarily due to mainframe maintenance cancellations and continued migration to client/server platforms. Mainframe software maintenance revenue is expected to continue to decline. Implementation, consulting and other service revenue decreased 9.5% and 14.2% in the three and six months ended December 31, 1996 compared to last year primarily due to the decreased demand for such services resulting from the decline in software license revenue and to the sale of the Company's Australian business to an agent. 10 11 COSTS AND EXPENSES
Three Months Ended Percent Six Months Ended Percent December 31, Change December 31, Change ----------------------- ---------- ---------------------- ------------ 1996 1995 1996 1995 ---- ---- ---- ---- COST AND EXPENSES Selling and marketing $ 14,705 $ 13,023 12.9% $ 28,141 $ 25,061 12.3% Cost of revenue and support 8,080 7,798 3.6 14,998 14,488 3.5 Internal research and product development 4,311 4,088 5.5 8,699 8,086 7.6 Internally capitalized software (1,702) (1,076) 58.2 (3,201) (3,434) (6.8) Software amortization 1,784 1,127 58.3 3,310 3,743 (11.6) General and administrative 3,190 3,035 5.1 6,114 6,076 0.6 ---------- --------- ---------- --------- Total costs and expenses before unusual charge 30,368 27,995 8.5 58,061 54,020 7.5 Unusual charge - 23,167 * - 23,167 * ---------- --------- ---------- --------- TOTAL COSTS AND EXPENSES $ 30,368 $ 51,162 (40.6)% $ 58,061 $ 77,187 (24.8)% ========== ========= ========== =========
* % not meaningful. Selling and marketing expense increased 12.9% and 12.3% in the three and six months ended December 31, 1996 compared to the same period last year primarily due to increased spending on marketing activities to launch, promote and position the Company's new applications. The hiring of new direct sales representatives and sales support consultants during the six months ended December 31, 1996 also contributed to the increase in selling and marketing expense. Cost of revenue and support increased 3.6% and 3.5% in the three and six months ended December 31, 1996 compared to the prior year principally due to increased third party royalties on maintenance revenue, slightly offset by the decrease in implementation service costs as a result of the lower service revenue. Internal research and product development expense increased 5.5% and 7.6% in the three and six months ended December 31, 1996 compared to last year mainly due to increased spending for alternative platforms and on-going enhancements to existing software products. Internally capitalized software increased in the three months ended December 31, 1996 compared to the prior year mainly due to the increased levels of development costs that were capitalizable. Software amortization expense increased in the three months ended December 31, 1996 primarily due to the increased levels of capitalized software in the current quarter as compared to the second quarter last year in which the Company wrote off $23.2 million of capitalized software. Internally capitalized software and software amortization expense decreased in the six months ended December 31, 1996 primarily due to the reduced levels of capitalized software following the $23.2 million write-off of capitalized software. General and administrative expense increased 5.1% in the three months ended December 31, 1996 compared to the same period last year primarily due to an increase in legal fees. During the second quarter ended December 31, 1995, the Company recorded a $23.2 million non-cash charge to write off certain capitalized software. The write-off had a $15.5 negative after tax impact on net income. The write-off was the result of strong customer interest in the Company's product, Commander Decision, for customizable decision support applications, which substantially reduced the realizable value of the Company's older desktop 11 12 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. NON-OPERATING INCOME AND EXPENSE
Three Months Ended Six Months Ended December 31, December 31, ---------------------------------- --------------------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- OTHER INCOME (EXPENSE) Interest income (expense) $ 102 $ 54 $ 313 $ (87) Exchange loss (148) (23) (244) (112) ----- ----- ----- ----- TOTAL OTHER INCOME (EXPENSE) $ (46) $ 31 $ 69 $(199) ===== ===== ===== =====
The Company had interest income in the three and six months ended December 31, 1996 primarily due to investment of the net proceeds received from the public offering of the Company's common stock in the quarter ended December 31, 1995. The foreign exchange loss principally reflects the strengthening of the British pound during the three months ended December 31, 1996. BENEFIT FOR INCOME TAXES The effective income tax rate in the three and six months ended December 31, 1996 was 35%, compared with 32% and 31% for the same periods a year ago. FOREIGN CURRENCY In the three and six months ended December 31, 1996, 49% and 50% of the Company's total revenue was from outside North America compared with 55% and 54% in the three and six months ended December 31, 1995. Most of the Company's international revenue is denominated in foreign currencies. The Company 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. During the three and six months ended December 31, 1996 foreign currency fluctuations on revenue denominated in a foreign currency were offset by currency fluctuations on expenses denominated in a foreign currency. For the three months ended December 31, 1996 the decrease in total revenue, at actual exchange rates, was $673,000 less than at comparable exchange rates. The decrease in total expenses, at actual exchange rates, was $242,000 less than at comparable exchange rates. As a result of the changes in the foreign currency exchange rates, the decrease in net loss before taxes, at actual exchange rates, was $431,000 more than at comparable exchange rates. For the six months ended December 31, 1996 the decrease in total revenue, at actual exchange rates, was $570,000 less than at comparable exchange rates. The decrease in total expenses, at actual exchange rates, was $2,000 more than at comparable exchange rates. As a result of the changes in the foreign currency exchange rates, the decrease in the net loss before taxes, at actual exchange rates, was $572,000 more than at comparable exchange rates. The Company had several forward contracts totaling $10 million outstanding at December 31, 1996. See Note C of Notes to Condensed Consolidated Financial Statements. 12 13 LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, cash and cash equivalents were $12.7 million, compared with cash of $27.5 million at June 30, 1996. The decrease in cash and cash equivalents is principally due to the net cash used for operating activities in the six months ended December 31, 1996. Net cash used in operating activities was $9.8 million in the six months ended December 31, 1996, compared with net cash provided by operating activities of $5.5 million in the six months ended December 31, 1995. The decrease in net cash provided by operating activities was primarily due to the net loss from operations, and a $2.4 million payment to terminate the Company's lease obligation on its vacated London office facility. Net cash used in investing activities was $6.2 million in the six months ended December 31, 1996, compared with $5.5 million in the six months ended December 31, 1995. The increase in net cash used in investing activities was primarily due to the increase in property and equipment purchases. At December 31, 1996, the Company did not have any material capital expenditure commitments. Net cash provided by financing activities was $1.6 million in the six months ended December 31, 1996 compared with $21.0 million in the six months ended December 31, 1995. The Company completed a public offering in which it received net proceeds of $25.2 million in the second quarter ended December 31, 1995. Total assets were $89.4 million at December 31, 1996, compared with total assets of $98.2 million at June 30, 1996. Working capital as of December 31, 1996 was $13.1 million, compared with $24.6 million as of June 30, 1996. The decrease in both total assets and working capital from June 30, 1996 to December 31, 1996 was primarily due to the decline in cash and cash equivalents. 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. SUBSEQUENT EVENT On January 22, 1997, the Company announced its plan to take an estimated $6,000,000 pre-tax restructuring charge in the Company's third quarter ended March 31, 1997 for management actions or plans in connection with the consolidation of the Company's product development activities in Ann Arbor, Michigan and reductions in staff and non-revenue generating costs. The restructuring charge includes staff reductions of approximately 70 employees. These cost reduction actions are expected to save approximately $7,000,000 annually. SAFE HARBOR STATEMENT Certain information in this Form 10-Q contains "forward looking statements" within the meaning of the Securities Exchange Act of 1934, including those concerning the Company's future results and expected cost savings from cost reduction actions described under "Subsequent Event" above and in Item 1 Note E to Notes to Condensed Consolidated Financial Statements. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to, the demand for the 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; 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; variations in the amount and timing of cost savings anticipated to result from cost reduction actions; the impact of off-setting increases in operating expenses; the impact of cost reduction actions on the Company's operations; fluctuations in foreign exchange rates; and economic conditions generally or in specific industry segments. 13 14 PART II - OTHER INFORMATION ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on November 18, 1996. There was one matter voted on, which was the election of nine directors. The following table sets forth the results of the matter voted on. All director nominees were elected.
Voted For Votes Against Abstained Broker Non-votes Election of Directors ----------- -------------- --------- ---------------- Nominees: Geoffrey B. Bloom 8,446,428 - 172,451 - Daniel T. Carroll 8,437,328 - 181,551 - Richard L. Crandall 8,406,672 - 212,207 - Stanley R. Day 8,442,221 - 176,658 - W. John Driscoll 8,446,146 - 172,733 - Alan G. Merten 8,444,839 - 174,040 - George R. Mrkonic 8,449,887 - 168,992 - John F. Rockart 8,437,317 - 181,562 - T. Wallace Wrathall 8,350,477 - 268,402 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a.) The exhibits included herewith are set forth on the Index to Exhibits. (b.) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended December 31, 1996. 14 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: FEBRUARY 14, 1997 COMSHARE, INCORPORATED /s/ Kathryn A. Jehle ----------------------------------- Kathryn A. Jehle Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary
15 16 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 11.1 Computation of Net Loss per Common Share. 27 Financial Data Schedule.
16 EX-11.1 2 EX-11.1 1 EXHIBIT 11.1 COMPUTATION OF NET LOSS PER COMMON SHARE (unaudited; in thousands, except per share amounts)
Three Months Ended Six Months Ended December 31, December 31, ----------------------- -------------------- 1996 1995 1996 1995 ---- ---- ---- ---- WEIGHTED AVERAGE SHARES: Common shares outstanding 9,742 8,678 9,723 8,456 Common equivalent shares, treasury stock method - - - - -------- ------- ------ -------- 9,742 8,678 9,723 8,456 ========= ======== ======= ======== NET LOSS PER COMMON SHARE Net loss $ (2,762) $(12,864) $(7,693) $(11,354) Shares used in per common share computation 9,742 8,678 9,723 8,456 Net loss per common share $ (0.28) $ (1.48) $ (0.79) $ (1.34)
EX-27 3 EX-27
5 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 12,696,000 0 34,468,000 1,389,000 0 57,565,000 31,275,000 25,447,000 89,375,000 44,452,000 0 0 0 9,775,000 31,819,000 89,375,000 0 46,179,000 0 58,061,000 (277,000) 0 208,000 (11,813,000) (4,120,000) (7,693,000) 0 0 0 (7,693,000) (0.79) 0 Accounts receivable are stated at net of allowance for doubtful accounts. Comprised of $521,000 of interest income and $244,000 of exchange loss.
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