-----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, QYhQGumJc5KNsvIgwsGU9J/vxoSBbIl9CwQRYk/sivaQqJfw4/SXykbSkIMfdFAI geNzfx52FkClLCeVeEWiUA== 0000950124-99-005286.txt : 19991227 0000950124-99-005286.hdr.sgml : 19991227 ACCESSION NUMBER: 0000950124-99-005286 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990928 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: SEC FILE NUMBER: 000-28848 FILM NUMBER: 99718269 BUSINESS ADDRESS: STREET 1: 555 BRIARWOOD CIRCLE STREET 2: P O BOX 1588 CITY: ANN ARBOR STATE: MI ZIP: 48108 BUSINESS PHONE: 3139944800 MAIL ADDRESS: STREET 1: P O BOX 1588 STREET 2: 555 BRIARWOOD CIRCLE CITY: ANN ARBOR STATE: MI ZIP: 48108 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1999 [ ] 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 (IRS 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: (734) 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 a definitive proxy or information statement 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 31, 1999 based on $3.00 per share, the last sale price for the Common Stock on such date as reported on the NASDAQ Stock Market - National Market System, was approximately $27,639,000. As of August 31, 1999 the Registrant had 9,642,033 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Document Part of Form 10-K Report -------- into which it is incorporated Portions of Proxy Statement for the ----------------------------- 1999 Annual Meeting of Shareholders III (The "1999 Proxy Statement") 2 UNDERTAKING The Company will furnish any exhibit to this report on Form 10-K to a shareholder upon payment of 10 (cents) per page for photo copying, postage and handling expenses and upon written request made to: Investor Relations Comshare, Incorporated 555 Briarwood Circle Ann Arbor, MI 48108 2 3 PART I 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 Related to Forward Looking Statements." GENERAL Comshare, Incorporated and its subsidiaries (collectively referred to as "Comshare" or the "Company") develop, market and support client/server and web architected financial analytic applications software for management planning and control. The Company targets its products and services to the chief financial officer's ("CFO") organization across a broad range of industries, offering software for budgeting, consolidation, management reporting and performance measurement. Comshare's software is differentiated by its robust multi-dimensional guided analysis capabilities, which allow end-users to quickly identify and analyze problem areas, particularly in very large databases. The Company's software products enable the enterprise-wide integration of data from multiple data sources, complementing underlying transaction systems. The Company delivers complete software solutions by providing implementation, consulting, training and support services in addition to its software products. BUSINESS STRATEGY The Company's objective is to be a leading software provider of management planning and control applications. The key elements of the Company's strategy include the following: 1. Focus on management planning and control applications which complement Enterprise Resource Planning (ERP) systems by bringing the data captured in ERP systems to management in a form that can be understood and acted upon. Management planning and control encompasses the full management cycle of strategic planning, budgeting, forecasting and management reporting. 2. Differentiate Comshare products with best-of-breed financial functionality and analytical capability. Comshare software is designed to support enterprise-wide applications and can be easily configured to meet the unique needs of customers. The advanced visualization features within the software enable managers to easily identify exceptions in large applications for follow-up. This allows management to plan and budget more effectively, analyze performance and improve decision making. 3. Support both web-architected and client/server platforms, giving the customer the choice of platform or a mixture of both. Increasingly, companies are seeking web-architected solutions to reduce the cost of deploying and maintaining applications across a large and dispersed user group and to provide better access to remote users. Comshare was an early leader in providing web-architected software and its newer applications support a mix of web and client/server platforms. 4. Provide multi-dimensional business perspectives using mainstream database technologies. Many businesses are best understood in a multi-dimensional context, (e.g., by geography, product and market). Comshare delivers this multi-dimensional business perspective using both relational and OLAP database technologies. Support for relational technology is new for Comshare, and expands the market for the potential of the Company's applications because such technology is considered mainstream by many companies. 5. Distribute worldwide to a range of customers from medium-sized to the largest companies, through multiple channels. Customers in over 35 countries have Comshare products and Comshare supports worldwide deployment by companies through a network of direct and indirect channels. Recently, Comshare broadened its distribution within its direct territories to add resellers to focus on the middle market or specific vertical markets. 6. Provide an integrated management planning and control application suite using a common technology platform, the Comshare Application Architecture. Use of a common technology platform provides easy linkages between applications and permits new technology features to become quickly available. 3 4 PRODUCTS The Company offers management planning and control applications designed for use by customers in a broad range of industries and primarily targets the finance organizations of large to medium-sized corporations. Comshare's software products are generally licensed to end-use customers under non-exclusive perpetual license agreements. Software license fees for the Company's software applications vary widely depending upon the product, platform and number of users supported. The initial amount paid by customers purchasing the Company's products 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 percent of the license fee. In addition, customers frequently purchase additional software to expand the number of users for an application. The Company currently offers three main products: Comshare BudgetPLUS ("BudgetPLUS"), Comshare Decision and DecisionWeb ("DecisionWeb"), and Comshare FDC ("FDC"). In addition, the Company supports a number of legacy products. 1. BUDGETPLUS Comshare's flagship application is BudgetPLUS, a client/server and web-architected planning, budgeting, management reporting and analysis application. BudgetPLUS is designed to shorten budget cycles, reduce the time and cost of budgeting and improve key management planning and reporting processes. BudgetPLUS supports enterprise-wide budgeting, by offering the flexibility of a spreadsheet combined with the control and accounting intelligence of a general ledger package. BudgetPLUS provides a single financial database that integrates budgeted, actual and forecasted financial information to enhance the integrity and usability of the data. Easy ad-hoc analysis and reporting across the enterprise is available to business managers and analysts, either through the use of a web-browser or through the customer's internal network. Data collection for budgeting and forecasting is either through a web-browser or the use of Excel spreadsheets in a secure environment, enabling the budget process to be distributed out to business managers, yet with a centrally administered database for easy consolidation and reporting. BudgetPLUS provides the ability to customize data entry screens; load bulk transaction data; track multiple versions of budgeted, actual and forecasted financial information; translate currencies; perform consolidations and quickly handle reorganizations. BudgetPLUS supports both relational and OLAP database technology platforms. The relational databases supported are Microsoft SQL Server and Oracle, with IBM DB2 planned for late calendar year 1999. Hyperion's OLAP database, Essbase, is also supported. BudgetPLUS offers management reporting and analysis capabilities similar to those described below for DecisionWeb because they share the common Comshare Application Architecture Application. 2. DECISIONWEB DecisionWeb is the latest of the Company's products to provide business users with easy, yet powerful access to OLAP databases for reporting and analysis (formerly known as executive information systems, or "EIS"). DecisionWeb provides advanced development and analytical features for creating customized OLAP reporting and analysis applications such as product and customer profitability analysis, sales analysis, balanced scorecards and key performance indicator applications. DecisionWeb capitalizes on the increased use of multi-dimensional analysis by business professionals to solve business problems. Using multi-dimensional analysis, business professionals view information in a way that is consistent with their perspective on the underlying business, (e.g., across time periods, business measures, geographies, products and markets). DecisionWeb includes software necessary to deliver an enterprise-wide reporting and analysis application, including software which 1) gathers and consolidates data from multiple, disparate data sources, 2) uses server-based technology to facilitate computer-intensive functions such as sorting and ad-hoc calculations and 3) provides analysis capabilities and front end presentation for end-users. For companies with very large databases, Comshare offers advanced exception alerting capabilities including a graphic overview of very large hierarchies and monitors. End-users can use this exception alerting capability to define the data to be monitored and the acceptable data ranges that they want to be alerted on. 4 5 DecisionWeb supports both client/server and web-enabled implementations using IBM DB2 OLAP Server, Essbase and Microsoft SQL Server OLAP Services databases, as well as other OLAP databases supporting the Microsoft OLAP standard. 3. FDC FDC is a statutory consolidation and management reporting application that collects and consolidates financial data from different general ledgers and other sources within a multi-divisional or multi-location organization. It produces consolidated financial reports for management, public and statutory reporting. With FDC, a customer can reduce their financial closing time and provide financial results more quickly, thus freeing up time for improved financial analysis. FDC offers the financial intelligence and control found in general ledgers. Information can be integrated from multiple general ledger systems without re-entering data. FDC handles currency translations, intercompany eliminations and account reclassifications. A major strength of FDC is its ability to be distributed across multiple geographically dispersed operations. This allows distributed operations to collect, report and analyze their data, while making sure that information for corporate financial consolidations is timely and accurate. A new Management Reporting and Analysis module for FDC provides both client/server and web-enabled management reporting and analysis, with all of the reporting capabilities of DecisionWeb. This allows key financial performance reporting and analysis to be broadly deployed to management and business analysts, thus eliminating time-consuming custom reports. 4. LEGACY PRODUCTS Comshare continues to support Commander OLAP, the predecessor to DecisionWeb, older desktop EIS and modeling products and System W and IFPS products for use on mainframe and UNIX-based computers. Customers use System W and IFPS for applications similar to those developed with DecisionWeb, although the multi-dimensional 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 business have declined significantly in recent years. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." IMPLEMENTATION AND CONSULTING SERVICES Implementation and consulting services are offered for all of the Company's software products and include application design and modification, installation assistance, implementation and troubleshooting support. Comshare complements its services through partnership arrangements with value added consultants and is implementing a certification process to recognize consultants qualified in the use of Comshare applications. The certification process is also designed to help Comshare's customers receive quality service, support, training and project oversight and to help Comshare monitor the services provided by its certified consultants. In addition, distributors and resellers of the Company offer implementation and consulting services for their direct customers, similar to the services offered by the Company. SOFTWARE MAINTENANCE AND SUPPORT The Company provides customer telephone helpline support staffed with experienced professionals. Customers under maintenance agreements receive product enhancements and updates, bug fixes and access to Comshare's telephone helpline and helpline web pages. Maintenance customers pay an annual maintenance fee, which is typically 15 to 20 percent of the software license fee. CUSTOMER TRAINING Comshare offers a training program to customers and third party consultants. Training classes are provided by the Company at customer sites and at its local sales offices. The Company's training program is designed for end-users and system support staff and includes a variety of training classes covering software application use, application building and system administration. 5 6 CUSTOMERS Comshare and its distributors are currently providing maintenance at over 2,100 corporate and public sector customer sites in 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's products and services are sold on a worldwide basis by direct sales operations, an extensive worldwide distributor network and a new reseller channel that targets mid-sized companies and industry-specific markets. Comshare distributors and resellers leverage the Company's software and application expertise and offer presale and postsale implementation, consulting, customer support and services. The Company sells and markets its software products and services in the U.S., Canada and the U.K. through its direct sales organizations. Direct sales operations are organized geographically. The Company has an extensive distributor network covering 37 countries not directly served by the Company. The Company has selected established software application vendors to act as distributors to market, implement and support Comshare products in their respective geographic areas. Revenue from the Company's distributors was $17.5 million, or approximately 27% of total revenue, in fiscal 1999. In fiscal 1999, the Company initiated efforts to build a network of resellers and OEM distributors focused on the middle market and specific vertical markets in the Company's direct territories. This initiative expands the market potential for the Company's products beyond the large company market, into which the direct sales force had traditionally sold. The Company currently has nine resellers and distributors under this new program. To generate sales, the Company conducts comprehensive marketing programs that include direct mail, a corporate Web site, public relations, advertising, seminars, trade shows, teleweb briefings and ongoing 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 prospect's needs and makes one or more presentations. 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 ranges from six to nine months. RESEARCH AND PRODUCT DEVELOPMENT The Company's product development strategies are to: (1) provide a suite of integrated applications for management planning and control; (2) deliver the integrated suite on a common application architecture; (3) deploy the applications on industry standard databases; (4) employ Microsoft standards and (5) differentiate Comshare products by their ease of implementation, deployment and use. Management planning and control applications encompass a closed-loop set of processes that enable an enterprise to plan, budget, execute, report, evaluate, analyze and respond to strategic initiatives. Towards this end, Comshare is currently delivering and developing a set of integrated budgeting and planning, statutory and group consolidation, and management reporting and analysis applications in support of these closed-loop processes. The integrated suite of applications rests on the Comshare Application Architecture ("CAA"). This architecture, which has evolved over the last three years, is a multi-tiered design with a back-end database tier, an application server tier consisting of an innovative set of application objects and components and a client-side presentation tier. The CAA enables Comshare's applications to run on a variety of back-end databases and supports both client/server and web desktops. Previously, the CAA enabled delivery of web-based management reporting and analysis applications. This fiscal year, the CAA was used as the foundation for a new, web-enabled version of BudgetPLUS, providing for direct budget input for users of the application through the web. BudgetPLUS and DecisionWeb are now fully web-enabled. To broaden the market potential for BudgetPLUS, the Company developed relational technology versions which run on mainstream relational databases. During fiscal 1999, Microsoft SQL Server and Oracle relational versions of BudgetPLUS were released. The Company plans to release an IBM DB2 relational version of BudgetPLUS during fiscal 2000. 6 7 All of Comshare's products run on NT on the server and NT and Windows '98 on the desktop. Comshare's web-based offerings utilize Microsoft's Internet Information Server (IIS) and support both Microsoft's Internet Server Application Programming Interface (ISAPI) and Active Server Page (ASP) technologies. The Company plans to continue to focus on Microsoft's platforms and to replace proprietary components over time with Microsoft technologies. Comshare's applications are distinguished by their innovative guided analysis capabilities that enabled customers to quickly and easily identify problem areas hidden within very large multi-dimensional databases. In the future, these applications will also be distinguished by a variety of innovative techniques called Ready-to-Go, that are designed to simplify the implementation and deployment of Comshare's applications and to guide end-users through the closed-loop of management planning and control processes. During the fiscal years ended June 30, 1999, 1998 and 1997, worldwide internal research and product development expenses were (in thousands):
1999 1998 1997 Internal research and product development $9,059 $12,398 $15,719 As a % of total revenue 14.2% 14.2% 17.5%
The decrease in internal research and product development from fiscal 1998 to fiscal 1999 is primarily due to the sale of the Company's Retail Business. The decrease from fiscal 1997 to 1998 is primarily due to the consolidation of the Company's product development activities. 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 needs of the marketplace and achieve market acceptance or that developments by others will not render the Company's products obsolete or non-competitive. The foregoing statements regarding the Company's product development efforts 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 described above and under "Business - Uncertainties Relating to Forward Looking Statements". 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 that generally grant customers a non-exclusive 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, generally by 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 Comshare(R), Comshare BudgetPLUS, Comshare Decision, Comshare EIS, Guided Analysis, Comshare FDC, The Decision Support Company(R), Comshare DecisionWeb, Overview and Comshare Application Architecture, as well as various other trademarks associated with its legacy products. The Company's software contains the statutory 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 7 8 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. These licenses are non-exclusive and provide for varying royalty payments and expiration dates. In addition, the Company designs its products to work with third party products that are not incorporated in the Comshare product, for example, Microsoft's Excel. 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 are either incorporated into or used with the Company's products include Hyperion Solution Corporation's ("Hyperion") Essbase, Inxight's Hyperbolic Tree, Pervasive Software, Inc.'s Btrieve database, Microsoft's Excel, Oracle's Express and Strategic Mapping, Inc.'s Atlas View SDK. During fiscal 1999, the Company was substantially dependent upon Hyperion's Essbase as the database underlying Decision and BudgetPLUS. The Company's worldwide license for Essbase was extended in September 1998 and expires December 31, 2002. The license agreement may be terminated earlier in the event of an uncured material breach. The Company may extend the license if certain minimum revenues are achieved. In addition, the Company may continue to maintain and support its customer base after termination of the license agreement with Hyperion. The Company has developed versions of its products that run on databases other than Essbase. During fiscal year 1999, the Company released versions of BudgetPLUS for use with the Microsoft SQL Server database and Oracle's relational database. The Company also released a version of DecisionWeb that runs on Microsoft's OLAP Services, and the DecisionWeb product now supports databases that utilize the Microsoft OLAP standard. The Company's strategy is to support multiple databases through the use of Comshare Application Architecture. 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 needs; (2) functionality, which includes the breadth and depth of features and functions, ease-of-use and deployment; (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 database platform, distributed/network architecture (such as web support) and ease of integration with other applications and (6) product pricing in relation to perceived value. The Company believes it competes favorably with respect to these factors, although it may be at a competitive disadvantage against its principal competitors because of their significantly larger market share and greater financial, technical, marketing and other resources. The analytical applications software market is highly competitive, highly fragmented and subject to rapid change and evolving industry standards. The Company competes primarily with Oracle's product Oracle Financial Analyzer and Hyperion Solutions, which was formed as a result of the merger of Hyperion Software Corporation and Arbor Software Corporation. 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 financial analytic applications. Among the Company's current and potential competitors are a number of large software companies, including developers of spreadsheets, database query and reporting tools, transaction processing-based applications and database technologies, that may elect to increase the financial analytic 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 the Company. There can be no assurance that the Company will be able to compete successfully against current and future competitors. 8 9 INTERNATIONAL OPERATIONS The Company derived 50.4%, 52.7% and 45.8% of its total revenue from outside North America in fiscal 1999, 1998 and 1997, 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 currencies has the effect of reducing the Company's reported revenue and profits from international sales denominated in such currencies. Conversely, a weakening in the value of the U.S. dollar relative to foreign currencies has the effect of increasing 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 "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 of the Notes to Consolidated Financial Statements. For a description of certain financial information regarding the Company by geographic area, see Note 10 of the Notes to Consolidated Financial Statements. EMPLOYEES Comshare employed 353 full-time employees as of June 30, 1999 including: 109 in sales and marketing, 72 in consulting and implementation services, 68 in research and product development and 104 in customer support and administration. None of the Company's employees are 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 Report 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 "Research and Product Development", "Intellectual Property and Proprietary Rights", "Licensed Technologies", "Competition" and "International Operations" above and in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Sensitivity Analysis and Year 2000". 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 and pricing pressures from competitors; 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, including the impact on the Company's revenues of Microsoft's OLAP database; the impact of recent changes in North American and international sales personnel and the overall competition for key employees; cancellations of maintenance and support agreements; software defects; changes in operating expenses; variations in the amount of cost savings anticipated to result from cost reduction actions; the impact of cost reduction actions on the Company's operations; fluctuations in foreign exchange rates; the impact of undetected 9 10 errors or defects associated with the Year 2000 date functions on the Company's current products and internal systems; the ability of the Company to generate sufficient future taxable income or to execute available tax strategies required to realize deferred tax assets; economic conditions generally or in specific industry segments; risks inherent in seeking and consummating acquisitions, including the diversion of management attention to the assimilation of the operations and personnel of acquired businesses, the ability of the Company to successfully integrate acquired businesses and the impact on the Company's results and financial condition from debt issued, liabilities acquired and additional expenses incurred in connection with such acquisitions. 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. ITEM 2. PROPERTIES Comshare leases sales offices and general office space in 12 major cities throughout the United States, Canada and the United Kingdom. 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 70,000 and Customer Support February 2005 * Sales, Marketing London, and Implementation England 34,000 Services January 2008
* Option to cancel February 2002. ITEM 3. LEGAL PROCEEDINGS In August and September 1996, a shareholder class action suit (In Re Comshare, Incorporated Securities Litigation) was filed against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Michigan. The suit was filed following the Company's announcement of certain violations of the Company's revenue recognition policies and alleged that the plaintiffs sustained losses as a result of the defendants' alleged untrue statements of material facts and alleged ommissions to state material facts necessary in order to make the statements not misleading. The complaint sought unspecified damages and costs. On September 18, 1997, the Court dismissed all related claims. The plaintiffs appealed the dismissal of the action to the U.S. Court of Appeals for the Sixth Circuit. On July 8, 1999, the Court of Appeals affirmed the dismissal of the action by the District Court. The plaintiffs sought a rehearing before the entire Sixth Circuit Court of Appeals, which was denied on August 23, 1999. The plaintiffs have the right to petition the U.S. Supreme Court to hear an appeal of the dismissal. The Company will vigorously oppose any such appeal. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 10 11 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, Inc.'s National 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, Inc.'s National Market.
FISCAL YEAR MARKET PRICES ------------------- ENDING JUNE 30 HIGH LOW -------------- ---- --- 1997 First Quarter $ 31.63 $ 11.63 Second Quarter 17.50 13.00 Third Quarter 18.75 13.00 Fourth Quarter 14.38 11.25 1998 First Quarter 12.38 8.00 Second Quarter 8.19 4.81 Third Quarter 9.81 6.13 Fourth Quarter 8.88 7.00 1999 First Quarter 7.88 2.88 Second Quarter 5.25 3.00 Third Quarter 3.88 2.97 Fourth Quarter 3.38 3.00 2000 First Quarter 3.50 3.00 (through August 31, 1999)
At August 31, 1999, there were approximately 994 holders of record of the Company's common stock. 11 12 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. The Company's credit agreement contains 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. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected financial data for the five fiscal years ended June 30 are derived from the audited Consolidated Financial Statements of the Company. This information should be read in conjunction with "Item 7. 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 YEARS ENDED JUNE 30, ------------------------------------------------------------- 1999 1998 1997 1996 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Revenue $ 63,972 $ 87,203 $ 89,801 $ 115,353 $ 105,371 Income (loss) from operations before restructuring and unusual charges (2,985) (4,034) (19,727) 6,375 8,850 Income (loss) from operations (3,952) (14,724) (25,972) (16,792) 2,485 Net income (loss) (1,136) 5,266 (17,117) (9,891) 5,328 Per common share - Basic EPS $ (0.12) $ 0.53 $ (1.75) $ (1.09) $ 0.63 Average shares (thousands) 9,700 9,903 9,770 9,048 8,398
JUNE 30, ------------------------------------------------------------- 1999 1998 1997 1996 1995 (IN THOUSANDS) CONSOLIDATED BALANCE SHEET DATA: Cash & cash equivalents $ 31,794 $ 49,102 $ 11,651 $ 27,468 $ 1,398 Total assets 63,455 88,692 80,751 98,238 79,310 Long-term debt 1,198 1,434 343 1,913 5,436 Total shareholders' equity $ 31,266 $ 38,405 $ 31,959 $ 48,664 $ 32,548 ADDITIONAL DATA: Number of employees at year end 353 405 579 695 686
NOTES: (1) The income (loss) from operations for the fiscal years ended June 30, 1999, 1998, 1997, 1996 and 1995 includes restructuring and unusual charges of $967,000, $10,690,000, $6,245,000, $23,167,000 and $6,365,000, respectively. See Note 2 of the Notes to Consolidated Financial Statements for information regarding restructuring and unusual charges. (2) Net loss for the fiscal year ended June 30, 1999 includes a $1,102,000 income tax benefit, recognizing the availability of an income tax refund. (3) Net income for the fiscal year ended June 30, 1998, includes an after-tax gain of $19,986,000 from the sale of the Company's Retail Business. The Retail Business accounted for approximately $17,800,000 of the Company's 1998 revenue. 12 13 (4) The fiscal year ended June 30, 1996 includes 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. (5) The fiscal year ended June 30, 1995 includes 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. 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:
YEARS ENDED JUNE 30, --------------------------------------------- 1999 1998 1997 ---------- ----------- ---------- REVENUE Software licenses 36.4 % 36.3 % 39.0 % Software maintenance 41.0 38.4 38.3 Implementation, consulting and other services 22.6 25.3 22.7 ---------- ----------- ---------- TOTAL REVENUE 100.0 100.0 100.0 COSTS AND EXPENSES Selling and marketing 40.2 45.0 56.3 Cost of revenue and support 37.9 33.1 34.1 Internal research and product development 14.2 14.2 17.5 General and administrative 12.4 12.3 14.1 Restructuring and unusual charges 1.5 12.3 7.0 ---------- ----------- ---------- TOTAL COSTS AND EXPENSES 106.2 116.9 129.0 ---------- ----------- ---------- LOSS FROM OPERATIONS (6.2) (16.9) (29.0) OTHER INCOME (EXPENSE) Interest income 3.0 0.7 0.9 Interest expense (0.1) (0.6) (0.4) Gain on sale of Retail Business - 40.6 - Exchange loss (0.1) (0.1) (0.3) ---------- ----------- ---------- TOTAL OTHER INCOME 2.8 40.6 0.2 INCOME (LOSS) BEFORE TAXES (3.4) 23.7 (28.8) ---------- ----------- ---------- Provision (benefit) for income taxes (1.6) 17.7 (9.7) ---------- ----------- ---------- NET INCOME (LOSS) (1.8) % 6.0 % (19.1)% ========== =========== ==========
Total revenue decreased 26.6% in fiscal 1999 compared with fiscal 1998 primarily due to the Company's sale of its Retail Business during June, 1998, as well as the sale of the Company's French and German operations and their conversion to distributor operations, during the quarter ended December 31, 1998. As a result of the sales of these operations, software license revenue, software maintenance revenue and implementation, consulting and other services revenue decreased. Without revenue from the Retail Business and reflecting revenue from the Company's French and German operations as distributors in both fiscal 1998 and 1999 ("on a comparable basis"), total revenue was $62.6 million in fiscal 1999 and $63.5 million in fiscal 1998. The decrease in comparable revenue from fiscal 1998 to fiscal 1999 was primarily due to decreased implementation, consulting and other services revenue in fiscal 1999. Total revenue decreased 2.9% in fiscal 1998 compared with fiscal 1997 primarily due to the decline in software license revenue and to a lesser extent, the Company's sale of its Retail Business. 13 14 SOFTWARE LICENSES REVENUE On a comparable basis, software licenses revenues were $23.0 million and $23.3 million for the years ended June 30, 1999 and 1998, respectively. Licenses of the Company's flagship product, BudgetPLUS, increased 50% in fiscal 1999 to $5.7 million. Sales of the Company's older legacy desktop products, however, declined and more than offset the growth in BudgetPLUS license fees. Software licenses revenue decreased 9.5% in fiscal 1998 compared with fiscal 1997. The decrease in software license fee revenue reflects the sale of the Company's Retail Business during the fourth quarter of fiscal 1998 and the effect of staff turnover in the domestic sales force as a result of transitional changes in the sales organization. SOFTWARE MAINTENANCE REVENUE On a comparable basis, software maintenance revenues were $25.7 million and $25.5 million for the years ended June 30, 1999 and 1998, respectively. During fiscal 1999, the Company experienced growth in maintenance revenue from newer products such as BudgetPLUS and DecisionWeb. This increase was offset primarily by a decline in maintenance revenue from older legacy desktop and mainframe products. Software maintenance revenues decreased 2.8% in fiscal 1998 compared to fiscal 1997. The decrease in fiscal 1998 was primarily due to the decline in software maintenance revenue from mainframe products and to a lesser extent by the sale of the Company's Retail Business. The 25.3% decline in mainframe maintenance revenue in fiscal 1998 was partially offset by a 4% increase in client/server maintenance revenue. The declines in mainframe software maintenance revenue is primarily due to mainframe maintenance cancellations and continued customer migration to client/server platforms. On a comparable basis, mainframe software maintenance revenue represented 12.6% of total software maintenance revenue for fiscal 1999 as compared to 21.2% for fiscal 1998. IMPLEMENTATION AND CONSULTING SERVICES REVENUE On a comparable basis, implementation, consulting and other services revenues were $13.9 million and $14.7 million for the years ended June 30, 1999 and 1998, respectively. The decrease in implementation, consulting and other services revenue for fiscal 1999 compared to fiscal 1998 was primarily due to several large implementation and consulting engagements during fiscal 1998, which were not recurring in fiscal 1999. Implementation, consulting and other services revenue increased 8.2% in fiscal 1998 compared to fiscal 1997 primarily due to several large implementation and consulting engagements during fiscal 1998. COSTS AND EXPENSES Total costs and expenses before restructuring and unusual charges decreased from fiscal 1998 to fiscal 1999. The decrease was primarily due to the Company's sale of its Retail Business and the sale of the Company's French and German operations and their conversion to distributor operations. The remaining decrease was primarily due to streamlining of the sales management structure, consolidation of financial functions and lower facility costs, offset by increased customer service costs. Total costs and expenses before restructuring and unusual charges decreased 16.7% from fiscal 1997 to fiscal 1998 as a result of broad based actions to reduce costs in light of the revenue decline in fiscal 1997 and fiscal 1998. In addition, the sale of the Company's Retail Business in early June, 1998 contributed to the cost reduction. Selling and marketing expenses decreased in fiscal 1999 compared to fiscal 1998, primarily due to the sales of the Retail Business and French and German operations. To a lesser extent, the decrease was the result of streamlining the Company's sales management structure. Selling and marketing expenses decreased 22.4% in fiscal 1998 compared to fiscal 1997 primarily due to staff reductions resulting from a streamlining of the sales management structure and reductions in marketing expenditures resulting from the targeting of direct lead generating activities. 14 15 Cost of revenue and support expenses decreased in fiscal 1999 compared to fiscal 1998, primarily due to the sales of the Retail Business and French and German operations, offset by additional expenses associated with the Company's customer services program in fiscal 1999. Cost of revenue and support expenses decreased 5.6% in fiscal 1998 compared with fiscal 1997 principally due to lower royalties on reduced license fees and reduced production and distribution costs arising from the move to delivery of products on compact discs. Internal research and product development expenses decreased in fiscal 1999 compared to fiscal 1998, primarily due to the Company's sale of its Retail Business. As a percentage of total revenue, product development expenses were relatively flat between fiscal 1999 and fiscal 1998, as there was no reduction in product development spending for the Company's financial applications. Internal research and product development expenses in fiscal 1998 decreased 21.1% compared with fiscal 1997. The decrease represents the full effect of the cost reduction actions taken in fiscal 1997 and the Company's sale of its Retail Business. General and administrative expenses decreased in fiscal 1999 compared to fiscal 1998. The decrease was primarily due to the consolidation of administrative functions at the Company's headquarters and reduced legal expenses. General and administrative expenses decreased 15.4% in fiscal 1998 compared to fiscal 1997 primarily due to cost reduction actions taken to lower administrative costs and reduce legal fees. In fiscal 1999, the Company recorded a $1.0 million pretax restructuring charge related to staff reduction related to the consolidation of the Company's financial and marketing activities and the consolidation of certain facilities. The restructuring charges included total staff reductions of 14 employees. In fiscal 1998, the Company recorded a $10.7 million pretax charge for restructuring and unusual charges related to the write off of capitalized software, termination costs for certain executives, staff reduction and facility costs related to the consolidation of the Company's helpline activities and planned actions to reduce facility and other costs. The restructuring charges included total staff reductions of 27 employees. In fiscal 1997, the Company recorded a $6.2 million restructuring charge 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. This $6.2 million pre-tax charge was composed of $2.4 million for personnel reductions, $2.6 million in space and office costs and $1.2 million for non-compete and consulting agreements. The restructuring charge included staff reductions of 70 employees. See Note 2 of the Notes to Consolidated Financial Statements. OTHER INCOME (EXPENSE) Due to the cash received from the sale of the Retail Business in June, 1998, the Company had higher average cash balances in fiscal 1999 as compared to fiscal 1998, resulting in increased interest income in fiscal 1999. Lower average cash balances for most of the 1998 fiscal year resulted in a decrease in interest income in fiscal 1998 compared to fiscal 1997. Interest expense decreased in fiscal 1999 as compared to fiscal 1998 due to decreased average borrowings during fiscal 1999. Interest expense increased in fiscal 1998 as compared to fiscal 1997 due to increased average borrowings during fiscal 1998. On June 4, 1998, the Company sold certain software products, accounts receivable, customer contracts, intellectual property, intangibles, permits and business records related to its Arthur (TM) strategic merchandise management applications for the retail industry and its Boost Sales and Margin Planning software product for the consumer packaged goods industry to JDA Software, Inc. for $44 million in cash and the assumption of certain liabilities related to the Retail Business. The Company also received $1 million of prepaid royalties. The sale of the Retail Business resulted in a pre-tax gain of $35,386,000 and an after-tax gain of $19,986,000. FOREIGN CURRENCY In fiscal 1999, 1998, and 1997, 50.4%, 52.7% and 45.8% 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 15 16 greatly. The $56,000 foreign exchange loss in fiscal 1999 principally reflected the weakening of certain foreign currencies against the British pound during the twelve months ended June 30, 1999. The Company had exchange losses of $71,000 and $310,000 in fiscal 1998 and 1997, respectively, principally due to the weakening of certain foreign currencies against the British pound. Foreign currency fluctuations in fiscal 1999, 1998 and 1997 impacted operating income as currency fluctuations on revenue denominated in a foreign currency were partially offset by currency fluctuations on expenses denominated in a foreign currency. In fiscal 1999, the decrease in total revenue, at actual exchange rates, was $0.3 million greater than at comparable exchange rates. The decrease in total expenses in fiscal 1999, at actual exchange rates, was $0.6 million greater 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 1999, at actual exchange rates, was $0.3 million less than at comparable exchange rates. In fiscal 1998, the increase in total revenue at actual exchange rates, was $0.6 million less than at comparable exchange rates. The decrease in total expense in fiscal 1998, at actual exchange rates, was $1.4 million greater than at comparable exchange rates. As a result of the changes in foreign currency exchange rates, the increase in net income before taxes in fiscal 1998, at actual exchange rates, was $0.8 million greater than at comparable exchange rates. Management believes that the adoption by European business of the Euro will not have a material impact on the Company's operations. Inflation did not have a material impact on the Company's revenue or income from operations in fiscal 1999, 1998 or 1997. INCOME TAXES The Company recorded an $1.1 million income tax benefit in fiscal 1999, recognizing the availability of an income tax refund. The income tax provision in fiscal 1998 of $15.5 million was related to the Company's sale of its Retail Business. No tax benefit was recognized on the Company's operating loss or restructuring and unusual charges in fiscal 1998 or fiscal 1999, other than the income tax refund, due to the uncertainties associated with the realization of benefits in excess of deferred tax assets recorded on the Company's balance sheet. The benefit from income taxes in fiscal 1997 was $8.7 million, which related to the Company's operating loss for the year. Realization of deferred tax assets associated with the Company's future deductible temporary differences, net operating loss carryforwards and tax credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration. Although realization of the deferred tax assets is not assured, management believes it is more likely than not that the deferred tax assets will be realized through future taxable income or by using a tax strategy currently available to the Company. On a quarterly basis, management will assess whether it remains more likely than not that the deferred tax assets will be realized. This assessment could be impacted by a combination of continuing operating losses and a determination that the tax strategy is no longer sufficient to realize some or all of the deferred tax assets. The foregoing statements regarding the realization of deferred tax assets are "forward looking statements" within the meaning of the Securities Exchange Act of 1934, as amended. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Safe Harbor Statement" for discussion of uncertainties relating to such statements. A comparative analysis of the factors influencing the effective income tax rate is presented in Note 8 of the Notes to Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, cash and cash equivalents were $31.8 million, compared with cash and cash equivalents of $49.1 million at June 30, 1998. The decrease in cash and cash equivalents was principally due to the payment of taxes and other costs related to the sale of the Company's Retail Business, fiscal 1998 and prior years restructuring related items, the Company's stock repurchase program and other cash used in operating activities. Net cash used in operating activities was $13.1 million in fiscal 1999 compared with $0.8 million in fiscal 1998. The increase in net cash used in operating activities was primarily the result of the change made related to internal development costs. During fiscal 1998 and prior years, certain internal development costs were capitalized and such costs were amortized. In fiscal 1998, net cash used in operating activities was reduced by $6.4 million of software amortization. During fiscal year 1999, the Company did not capitalize, nor amortize software development costs. In addition, in fiscal 1999, net cash used in operating activities included the payment of income taxes during fiscal 1999 and other expenses related to the sale of the Company's Retail Business and restructuring related items from prior years. Net cash used in investing activities was $1.2 million in fiscal 1999, compared to net cash provided by investing activities of $39.0 million in fiscal 1998. The decrease in cash related to investing activities for the year ended 16 17 June 30, 1999 compared to the year ended June 30, 1998, was principally due to the proceeds received from the sale of the Company's Retail Business during fiscal 1998, offset by capitalized computer software costs. As previously noted, the Company did not capitalize software development costs during fiscal 1999. At June 30, 1999, the Company did not have material capital expenditure commitments. In fiscal 2000, property and equipment purchases are expected to be comparable to fiscal 1999. Net cash used in financing activities was $2.6 million in fiscal 1999, compared with $0.6 million in fiscal 1998. The decrease in cash related to financing activities was primarily due to the Company's stock repurchase program and the repayment of debt agreements and capital leases during fiscal 1999. Working capital as of June 30, 1999 was $24.5 million, compared with $29.5 million as of June 30, 1998. The decrease in working capital was primarily due to the decline in cash and cash equivalents and accounts receivable from fiscal 1998 to fiscal 1999. The decline in accounts receivable is primarily the result of the sales of the Retail Business and French and German operations. These amounts were offset by decreases in accrued liabilities and accounts payable from fiscal 1998 to fiscal 1999, primarily due to the payment of taxes and other accruals related to the Retail Business sale and payment of fourth quarter fiscal 1998 restructuring related items. Total assets were $63.5 million at June 30, 1999, compared with total assets of $88.7 million at June 30, 1998. The decrease in total assets was primarily due to the decrease in cash and cash equivalents during the fiscal year. The Company has a $10 million credit agreement which matures on October 1, 2000. Borrowings are secured by accounts receivable and the credit agreement contains covenants regarding among other things, earnings, leverage, net worth and payment of dividends. Under the terms of the credit agreement, the Company is not permitted to pay cash dividends on its common stock. Permitted borrowings available as of June 30, 1999 under this credit agreement were $10 million, of which $1,198,000 was outstanding. Borrowings available at any time are based on the lower of $10 million or a percentage of worldwide eligible accounts receivable and cash. At June 30, 1999, the interest rate on borrowings denominated in Japanese yen and Swiss francs, which were used to hedge receivables in those currencies, varied between 1.09% and 2.20%. Separately, in August 1997, the Company's United Kingdom subsidiary entered into a $1.2 million loan agreement, which matures on May 31, 2000. The Company had outstanding borrowings under this agreement of $434,000 at June 30, 1999, which are classified as a capital lease. The interest rate was 10.4% at June 30, 1999. In September 1998, the Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company's outstanding Common Stock. Pursuant to this repurchase program, the Company has repurchased 617,850 shares of the Company's Common Stock for a total cost of approximately $2,834,800 as of August 31, 1999. The Company has stopped purchasing outstanding Common Stock at this time and has no present plans to purchase additional shares. The Company believes that the combination of present cash balances 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. The foregoing statement is a "forward looking statement" within the meaning of the Securities Exchange Act of 1934, as amended. The extent to which such sources will be sufficient to meet the Company's anticipated cash requirements is subject to a number of uncertainties including the ability of the Company's operations to generate sufficient cash to support operations, and other uncertainties described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Safe Harbor Statement." MARKET SENSITIVITY ANALYSIS The Company is exposed to market risk from changes in foreign exchange and interest rates. To reduce the risk from changes in foreign exchange rates, the Company selectively uses financial instruments. The Company does not hold or issue financial instruments for trading purposes. FOREIGN CURRENCY 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 uses forward exchange contracts to hedge against large selective transactions that present the most exposure to exchange rate fluctuations. At June 30, 1999 and June 30, 1998, the Company had forward contracts of approximately $2.9 million and $3.1 million (notional amounts), respectively, denominated in foreign currencies. The contracts outstanding at June 30, 17 18 1999 mature through October 15, 1999 and are intended to hedge various foreign currency commitments due from the Company's distributors. Due to the short term nature of these financial instruments, the fair value of these contracts is not materially different than their notional amounts at June 30, 1999 and 1998. Gains and losses on the forward contracts are largely offset by gains and losses on the underlying exposure. The Company conducts business in approximately 13 foreign currencies, predominately British pounds and Japanese yen. A hypothetical 10 percent appreciation of the U.S. Dollar from June 30, 1999 market rates would increase the unrealized value of the Company's forward contracts by an immaterial amount and a hypothetical 10 percent depreciation of the U.S. Dollar from June 30, 1999 market rates would decrease the unrealized value of the Company's forward contracts by an immaterial amount. In either scenario, the gains or losses on the forward contracts are largely offset by the gains or losses on the underlying transactions. INTEREST RATES The Company maintains its cash and cash equivalents in highly liquid investments with maturities of ninety days or less. The Company has the ability to hold its fixed income investments until maturity, and therefore the Company would not expect its operating results or cash flows to be affected to any significant degree by the effect of a hypothetical 10 percent change in market interest rates on its cash and cash equivalents. YEAR 2000 The following discussion contains information regarding Year 2000 readiness, and constitutes a "Year 2000 Readiness" as defined in the Year 2000 Information and Readiness Disclosure Act of 1998. Many existing computer programs use only the last two digits to refer to a year. Therefore, these computer programs do not properly recognize a year that begins with "20" instead of the familiar "19". If not corrected, many computer applications could fail or create erroneous results. Programs that will operate in the Year 2000 unaffected by the change in year from 1999 to 2000 are referred to herein as "Year 2000 compliant". Certain portions of the discussion set forth below contain "forward looking statements" within the meaning of the Securities and Exchange Act of 1934, as amended, including, but not limited to, those relating to the Year 2000 compliance of the Company's products and systems, future costs to remediate Year 2000 issues, the timetable in which such remediation is to occur, the alternatives available to the Company to become fully Year 2000 compliant, the Company's mission critical requirements and the impact on the Company of an inability of it or its key suppliers to become fully Year 2000 compliant. Actual results could differ materially from those in the forward looking statement due to a number of uncertainties set forth below. The Company has tested and modified the most current versions of its products to be Year 2000 compliant. The Company believes that all of its current client/server and web-architected products are Year 2000 compliant (including BudgetPLUS, Decision, DecisionWeb and FDC). The Company has released new versions of its principal mainframe and desktop products that it believes are Year 2000 compliant. The Company has no plans to make earlier versions of its products Year 2000 compliant and has made substantial efforts to contact customers informing them of this decision. Not all of the Company's customers are running product versions that are Year 2000 compliant. The Company has encouraged and will continue to encourage these customers to migrate to its current product versions. Some of these customers may not be willing to migrate to current product versions because of the cost and time required to do so, including the need to rewrite custom applications which are not Year 2000 compliant. For non-compliant direct customers that have maintenance contracts, the Company has proactively shipped them the latest version of its products to ensure their compliance, and is encouraging its distributors to do the same in indirect territories. A significant portion of the Company's maintenance revenue in fiscal 1999 was derived from customers running versions of the Company's products which are not Year 2000 compliant; however, customers paying maintenance are entitled to obtain Year 2000 compliant versions of licensed products at no additional cost. Certain of the Company's older product will not be made Year 2000 complaint in any version. The Company has ceased providing further maintenance services for those products and has not renewed maintenance contracts with customers using these products for periods after September, 1999. The Company incorporates a number of third party software tools into its products. The Company has performed limited testing of the current versions of these software tools as part of the testing of its products and believes they are Year 2000 compliant. In addition, with respect to certain of these software tools, the Company has received written representations or warranties from the vendor that these products are Year 2000 compliant. Nevertheless, if one of the databases supported by the Company is not fully Year 2000 compliant, sales of the Company's products could be impacted. 18 19 If any of the Company's customers are unable to make their information technology systems Year 2000 compliant in a timely fashion, they may suspend further product purchases from the Company until their systems are Year 2000 compliant. Because the Company's customers are generally large and medium sized businesses and the Company has received numerous communications from customers about their Year 2000 compliance efforts, the Company expects most of its customers will become Year 2000 compliant in a timely fashion, although the Company is not in a position to monitor their progress. The Company also plans to provide extended support for its customers during early January 2000. The Company has developed and implemented a plan to determine whether its vendors, distributors and leased facilities (all of which are referred to as "Third Party Suppliers") are Year 2000 compliant. The plan includes the identification of principal Third Party Suppliers, including those which are mission critical, contact with those Third Party Suppliers to determine their level of Year 2000 compliance, review of materials provided or published by Third Party Suppliers regarding their Year 2000 compliance efforts and, with respect to mission critical Third Party Suppliers, some form of additional verification of compliance and internal testing. The Company initiated this process before the end of calendar year 1998. Contingency plans have been or are being developed for those not expected to be Year 2000 compliant. The Company believes it has a limited number of mission critical Third Party Suppliers for which it can reasonably arrange alternatives (excluding utilities and similar providers) and believes that there are multiple alternatives for most of its mission critical requirements, including handling certain of these functions internally. The Company has developed a disaster contingency plan for its corporate headquarters to maintain communications, computer and network access and limited helpline support for its customers in the event of a short-term power failure. In the event of a long-term power or communications failure, the failure of a mission critical application or the unavailability of a principal Third Party Supplier, the Company's operations could be materially, adversely affected. The Company has completed the assessment of its principal internal information technology systems for Year 2000 compliance. With respect to these eight principal systems, the Company has upgraded or replaced all of these systems with Year 2000 compliant versions. The Company engaged a third party to assess the Company's personal computer and network hardware and software for Year 2000 compliance and to help develop a plan to make necessary modifications. The assessment began in the fourth quarter of calendar year 1998 and was completed in the first half of calendar year 1999. Remediation of any non-compliant personal computer and network hardware and software was substantially completed in the first half of calendar year 1999. The Company believes that all mission critical desktop and network systems have now been remediated and are currently Year 2000 compliant, but the Company has contingency plans in the event that these systems encounter problems. A failure of one or more of these internal systems to be Year 2000 compliant, particularly the Company's principal internal information technology systems, could require the Company to manually process information or could prevent or limit access to mission critical information. The Company's non-information technology systems consist principally of telephone and data communication systems. The Company has completed the assessment of these systems for Year 2000 compliance and remediation has been completed. Most of the costs incurred by the Company to date on Year 2000 compliance issues have been internal staff costs and costs relating to normal product upgrades, which would have been incurred in any event. The Company estimates that it has spent approximately $1.4 million in fiscal 1999 on personnel, upgrades and consulting, which are directly or indirectly related to Year 2000 compliance. The Company presently expects that its future costs relating to Year 2000 compliance for periods after June 30, 1999, including replacement systems, will be approximately $0.3 million. These cost estimates are subject to a number of uncertainties, which could result in actual costs exceeding the estimated amounts including, but not limited to, undetected errors or defects discovered in connection with the remediation process, or operation of the Company's systems after December 31, 1999, resulting in the need to either replace more of the systems than originally expected and/or hire more personnel or third party firms to assist in the remediation process, or the failure of a Third Party Supplier to become Year 2000 compliant, resulting in the need for the Company to implement contingency plans, the cost of which are not included in the above estimates. Some commentators have stated that a significant amount of litigation will arise out of Year 2000 compliance issues. While the Company believes that its efforts to address Year 2000 issues for which it is responsible should be successful, a description of its most reasonably likely worst case Year 2000 scenarios have been described above. In addition, it is possible that there will be undetected errors or defects associated with Year 2000 date functions in the Company's current products and internal systems or those of its key vendors. If any of the foregoing scenarios should occur, it is possible that the Company could be involved in litigation. Further, although the Company does not believe that it has any obligation to continue to support prior versions of its products after the termination of maintenance contracts covering those products, nor any obligation to make prior versions of its products, including custom applications written by the Company, Year 2000 compliant, it is possible that its customers may take a contrary position and initiate litigation. Because of the unprecedented nature of the litigation in this area, it is uncertain how the Company may be affected by it. In the event of such litigation or the occurrence of one or more of the most reasonably likely worst case scenarios, the Company's revenues, net income or financial condition could be materially, adversely affected. 19 20 SAFE HARBOR STATEMENT Certain information in this Form 10-K Report contains "forward looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, including those concerning the Company's future results, strategy and product releases. 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 and pricing pressures from competitors; 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, including the impact on the Company's revenues of Microsoft's OLAP database; the impact of recent changes in North American and international sales personnel and the overall competition for key employees; cancellations of maintenance and support agreements; software defects; changes in operating expenses; variations in the amount of cost savings anticipated to result from cost reduction actions; the impact of cost reduction actions on the Company's operations; fluctuations in foreign exchange rates; the impact of undetected errors or defects associated with the Year 2000 date functions on the Company's current products and internal systems; the ability of the Company to generate sufficient future taxable income or to execute available tax strategies required to realize deferred tax assets; economic conditions generally or in specific industry segments; risks inherent in seeking and consummating acquisitions, including the diversion of management attention to the assimilation of the operations and personnel of acquired businesses, the ability of the Company to successfully integrate acquired businesses and the impact on the Company's results and financial condition from debt issued, liabilities acquired and additional expenses incurred in connection with such acquisitions. 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Sensitivity Analysis". ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and schedule filed herewith are set forth on the Index to Consolidated Financial Statements and Schedule on page 24 and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable. 20 21 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 1999 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 1999 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 1999 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 1999 Proxy Statement under the captions "Certain Relationships and Related Transactions." 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 24. 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 24. 3. The exhibits filed with this report are listed in the Exhibits which appears on page 48. 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 Report: EXHIBIT NO. DESCRIPTION 10.01 Benefit Adjustment Plan of Comshare, Incorporated, effective June 1, 1986, as amended and restated November 6, 1997. 10.02 First Amendment to the Benefit Adjustment Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.01 to the Registrant's Form 10-Q Report for the quarter ended March 31, 1999. 10.03 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. 10.04 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. 21 22 10.05 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 Report for the fiscal year ended June 30, 1994. 10.06 Non-Competition Agreement between Comshare, Incorporated and Richard L. Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K Report 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). 10.07 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 Report for the fiscal year ended June 30, 1994. 10.08 Description of Incentive Arrangements for certain executive officers for fiscal years 1995-1997 - incorporated by reference to Exhibit 10.09 to the Registrants Form 10-K Report for the fiscal year ended June 30, 1998. 10.09 Stock Option Agreement, effective as of March 10, 1997, between Comshare, Incorporated and Daniel T. Carroll - incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter ended March 31, 1997. 10.10 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. 10.11 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 Report for the fiscal year ended June 30, 1994. 10.12 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. 10.13 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. 10.14 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. 10.15 Executive Bonus Program, effective October 1, 1997 - incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q Report for the quarter ended December 31, 1997. 10.16 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Dennis G. Ganster - incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.17 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Kathryn A. Jehle - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.18 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and David King - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.19 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Stanley Starkey - incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 22 23 10.20 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Norman Neuman - incorporated by reference to Exhibit 10.23 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.21 Comshare, Incorporated 1998 Global Employee Stock Option Plan - incorporated by reference to Exhibit 10.25 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.22 Summary of 1998 Senior Executive Incentive Plan - incorporated by reference to Exhibit 10.26 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.23 Summary of 1999 Senior Executive Incentive Plan - incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.24 Summary of 2000 Senior Executive Incentive Plan. (b) Reports on Form 8-K. Since the end the fiscal quarter ended March 31, 1999, the Registrant has not filed any reports on Form 8-K. 23 24 COMSHARE, INCORPORATED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
PAGE ---- Report of Independent Public Accountants 25 Consolidated Statements of Operations for the Fiscal Years Ended June 30, 1999, 1998 and 1997 26 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended June 30, 1999, 1998 and 1997 27 Consolidated Balance Sheets as of June 30, 1999 and 1998 28-29 Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 1999, 1998 and 1997 30 Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended June 30, 1999, 1998 and 1997 31 Notes to Consolidated Financial Statements 32-45
SCHEDULE II. Consolidated Schedule of Valuation & Qualifying Accounts 46 24 25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Comshare, Incorporated: We have audited the accompanying consolidated balance sheets of COMSHARE, INCORPORATED (a Michigan corporation) and subsidiaries as of June 30, 1999 and 1998, and the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1999 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. /s/ ARTHUR ANDERSEN LLP Detroit, Michigan, September 17, 1999. 25 26 COMSHARE, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEARS ENDED JUNE 30, 1999 1998 1997 ------------ ------------- ------------ REVENUE Software licenses $23,299 $ 31,679 $ 34,988 Software maintenance 26,228 33,490 34,448 Implementation, consulting and other services 14,445 22,034 20,365 ------------ ------------- ------------ TOTAL REVENUE 63,972 87,203 89,801 COSTS AND EXPENSES Selling and marketing 25,724 39,217 50,522 Cost of revenue and support 24,215 28,883 30,594 Internal research and product development 9,059 12,398 15,719 General and administrative 7,959 10,739 12,693 Restructuring and unusual charges 967 10,690 6,245 ------------ ------------- ------------ TOTAL COSTS AND EXPENSES 67,924 101,927 115,773 LOSS FROM OPERATIONS (3,952) (14,724) (25,972) OTHER INCOME (EXPENSE) Interest income 1,901 632 826 Interest expense (63) (488) (332) Gain on sale of Retail Business - 35,386 - Exchange loss (56) (71) (310) ------------ ------------- ------------ TOTAL OTHER INCOME 1,782 35,459 184 INCOME (LOSS) BEFORE TAXES (2,170) 20,735 (25,788) Provision (benefit) for income taxes (1,034) 15,469 (8,671) ------------ ------------- ------------ NET INCOME (LOSS) $(1,136) $ 5,266 $(17,117) ============ ============= ============ SHARES USED IN BASIC EPS COMPUTATION 9,700 9,903 9,770 ============ ============= ============ SHARES USED IN DILUTED EPS COMPUTATION 9,700 10,074 9,770 ============ ============= ============ NET INCOME (LOSS) PER COMMON SHARE - BASIC EPS $ (0.12) $ 0.53 $ (1.75) ============ ============= ============ NET INCOME (LOSS) PER COMMON SHARE - DILUTED EPS $ (0.12) $ 0.50 $ (1.75) ============ ============= ============
The accompanying notes are an integral part of these consolidated statements. 26 27 COMSHARE, INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS)
FISCAL YEARS ENDED JUNE 30, 1999 1998 1997 ------------ ------------- ------------ Net income (loss) $ (1,136) $ 5,266 $ (17,117) Other comprehensive loss: Currency translation adjustment (848) (11) (435) Increase in pension liability, net of tax (3,262) -- -- ------------ ------------- ------------ Other comprehensive loss, net of tax (4,110) (11) (435) ------------ ------------- ------------ COMPREHENSIVE INCOME (LOSS) $ (5,246) $ 5,255 $ (17,552) ============ ============= ============
The accompanying notes are an integral part of these consolidated statements. 27 28 COMSHARE, INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
AS OF JUNE 30, 1999 1998 ------------ ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 31,794 $ 49,102 Accounts receivable, less allowance for doubtful accounts of $1,327 and $1,830 as of June 30, 1999 and 1998, respectively 14,723 21,354 Deferred income taxes 654 1,256 Prepaid expenses and other current assets 5,003 3,322 ------------ ------------- TOTAL CURRENT ASSETS 52,174 75,034 Property and equipment, at cost Computers and other equipment 11,099 16,781 Leasehold improvements 2,893 2,293 ------------ ------------- 13,992 19,074 Less - Accumulated depreciation 11,354 15,792 ------------ ------------- Property and equipment, net 2,638 3,282 Goodwill, net of accumulated amortization of $1,571 and $1,525 as of June 30, 1999 and 1998, respectively 1,330 1,500 Deferred income taxes 5,067 5,377 Other assets 2,246 3,499 ------------ ------------- TOTAL ASSETS $ 63,455 $ 88,692 ============ =============
The accompanying notes are an integral part of these consolidated balance sheets. 28 29 COMSHARE, INCORPORATED CONSOLIDATED BALANCE SHEETS - (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA)
AS OF JUNE 30, 1999 1998 ------------ ------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 882 $ 1,238 Accounts payable 8,293 14,398 Accrued liabilities - Payroll 2,423 2,964 Taxes 810 5,035 Other 3,701 7,034 ------------ ------------- Total accrued liabilities 6,934 15,033 Deferred revenue 11,611 14,834 ------------ ------------- TOTAL CURRENT LIABILITIES 27,720 45,503 Long-term debt 1,198 1,434 Other liabilities 3,271 3,350 ------------ ------------- TOTAL LIABILITIES 32,189 50,287 SHAREHOLDERS' EQUITY Capital stock: Preferred stock, no par value; authorized 5,000,000 shares; none issued - - Common stock, $1 par value; authorized 20,000,000 shares; outstanding 9,642,033 shares as of June 30, 1999 and 10,003,167 as of June 30, 1998 9,642 10,003 Capital contributed in excess of par value 38,650 40,335 Retained deficit (8,486) (7,350) Accumulated other comprehensive income: Pension liability, net of tax (3,262) - Cumulative translation adjustment (4,880) (4,032) ------------ ------------- 31,664 38,956 Less - Notes receivable 398 551 ------------ ------------- Total shareholders' equity 31,266 38,405 ------------ ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 63,455 $ 88,692 ============ =============
The accompanying notes are an integral part of these consolidated balance sheets. 29 30 COMSHARE, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FISCAL YEARS ENDED JUNE 30, 1999 1998 1997 ------------ ------------- ------------ OPERATING ACTIVITIES Net income (loss) $ (1,136) $ 5,266 $ (17,117) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,982 9,023 9,582 Gain on sale of Retail Business - (35,386) - Noncash restructuring and unusual charges 641 10,176 1,317 Changes in operating assets and liabilities: Accounts receivable 6,360 2,848 10,226 Prepaid expenses and other assets 103 (112) 537 Accounts payable (6,303) 1,864 (5,728) Accrued liabilities (8,468) (3,539) (160) Deferred revenue (3,312) (4,928) 1,314 Income taxes payable (2,836) (52) - Deferred income taxes 2,142 14,602 (8,829) Other liabilities (2,242) (556) 427 ------------ ------------- ------------ Net cash used in operating activities (13,069) (794) (8,431) INVESTING ACTIVITIES Additions to computer software - (6,546) (6,966) Payments for property and equipment (1,578) (601) (2,835) Proceeds from sale of Retail Business and prepaid royalties - 45,000 - Other 378 1,103 (883) ------------ ------------- ------------ Net cash provided by (used in) investing activities (1,200) 38,956 (10,684) FINANCING ACTIVITIES Net borrowings (repayments) under debt agreements, capital lease agreements and notes payable (747) (2,023) 2,650 Stock options exercised - 753 878 Common stock repurchased and retired (2,835) - - Employee stock purchase plan 626 423 351 Other 315 268 (382) ------------ ------------- ------------ Net cash provided by (used in) financing activities (2,641) (579) 3,497 EFFECT OF EXCHANGE RATE CHANGES (398) (132) (199) ------------ ------------- ------------ NET INCREASE (DECREASE) IN CASH (17,308) 37,451 (15,817) CASH AT BEGINNING OF PERIOD 49,102 11,651 27,468 ------------ ------------- ------------ CASH AT END OF PERIOD $ 31,794 $ 49,102 $ 11,651 ============ ============= ============ SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 88 $ 215 $ 169 ============ ============= ============ Cash paid for taxes $ 3,863 $ 862 $ 740 ============ ============= ============
The accompanying notes are an integral part of these consolidated statements. 30 31 COMSHARE, INCORPORATED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
FISCAL YEARS ENDED JUNE 30, 1999 1998 1997 ------------ ------------- ------------ COMMON STOCK Balance beginning of year $ 10,003 $ 9,871 $ 9,691 Employee Stock Purchase Plan 207 61 18 1994 Executive Stock Purchase Program 50 - 21 Retirement of shares - (9) (39) Stock repurchased (618) - - Stock options exercised - 80 180 ------------ ------------- ------------ Balance end of year 9,642 10,003 9,871 ------------ ------------- ------------ CAPITAL CONTRIBUTED IN EXCESS OF PAR Balance beginning of year 40,335 39,528 38,132 Employee Stock Purchase Plan 419 362 333 1994 Executive Stock Purchase Program 113 - 392 Retirement of shares - (240) (160) Stock repurchased (2,217) - - Stock options exercised - 685 831 ------------ ------------- ------------ Balance end of year 38,650 40,335 39,528 ------------ ------------- ------------ RETAINED DEFICIT Balance beginning of year (7,350) (12,363) 5,239 Net income (loss) (1,136) 5,266 (17,117) Retirement of shares - (253) (485) ------------ ------------- ------------ Balance end of year (8,486) (7,350) (12,363) ------------ ------------- ------------ ACCUMULATED OTHER COMPREHENSIVE INCOME Balance beginning of year (4,032) (4,021) (3,586) Comprehensive income (4,110) (11) (435) ------------ ------------- ------------ Balance end of year (8,142) (4,032) (4,021) ------------ ------------- ------------ LESS - NOTES RECEIVABLE Balance beginning of year 551 1,056 812 Loan for executive stock purchase - - 244 Payments on executive loans (153) (505) - ------------ ------------- ------------ Balance end of year 398 551 1,056 ------------ ------------- ------------ Total shareholders' equity $ 31,266 $ 38,405 $ 31,959 ============ ============= ============
The accompanying notes are an integral part of these consolidated statements. 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 financial analytic applications software for management planning and control. The Company also provides services such as maintenance, training, consulting and support services. Comshare is currently providing maintenance at over 2,100 corporate and public sector customer sites. The Company markets its products through a direct sales force and channel partners in the United States, Canada and the United Kingdom and has an extensive distributor network in 37 other countries. The Company was incorporated in Michigan in February, 1966 and commenced operations at that time. 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 licenses, software maintenance and implementation, consulting and other services revenue. Software licenses revenue is recognized when a customer contract is fully executed and the software has been shipped. Software maintenance revenue, whether bundled with a 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 expenses primarily include employee costs, travel costs, facilities expenses and advertising. 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. 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, 1999 and 1998, the Company had forward foreign currency exchange contracts of $2.9 million and $3.1 million (notional amounts), respectively. The contracts outstanding at June 30, 1999 mature through October 15, 1999 and are intended to hedge various foreign currency commitments due from foreign subsidiaries and the Company's 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, 1999 and 1998. CASH AND CASH EQUIVALENTS. Cash and cash equivalents includes highly liquid investments with maturities of ninety days or less. COMPUTER SOFTWARE. In prior years, the costs of developing and purchasing new software products and enhancements to existing software products were capitalized after technological feasibility was established. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs required 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. In the last several years, product upgrades for the Company's products are being released by the Company on a more rapid basis. The rapid increase in product version updates has led to an almost continuous product development cycle and has reduced the time between establishing technological feasibility and general release to the public. In the current and future years, based on continuous product life cycles noted, the period between establishing technological feasibility and the general availability of such software will be short, and software costs qualifying for capitalization will be insignificant. Accordingly, the Company has not capitalized any software development costs during the fiscal year ended June 30, 1999 and does not anticipate capitalizing future software development costs. Software amortization for the years ended June 30, 1998 and 1997 is included in internal research and product development in the accompanying consolidated statements of operations. 32 33 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 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. There was no adjustment to the Company's financial statements as a result of this evaluation. OTHER ASSETS. In fiscal 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires an evaluation of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. There was no adjustment to the Company's financial statements as a result of this evaluation. INCOME TAXES. The Company accounts for estimated income taxes under the provisions SFAS 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. In fiscal 1998, the Company adopted SFAS No. 128, "Earnings per Share." STOCK PLANS. The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (APB) No. 25 "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the stock at grant date over the amount an employee must pay to acquire the stock. The Company has provided pro forma disclosure of the fair value of stock options granted during fiscal 1999 and 1998 in accordance with the requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." See Note 5 of Notes to Consolidated Financial Statements. COMPREHENSIVE INCOME. The Financial Accounting Standards Board has issued SFAS No. 130 "Reporting Comprehensive Income," which establishes standards for reporting comprehensive income and its components in a full set of financial statements. Comprehensive income is defined as the total of net income and all other non-owner changes in equity. The Company adopted this Statement for the fiscal year ended June 30, 1999. SEGMENTS OF AN ENTERPRISE. The Financial Accounting Standards Board has issued SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for disclosures of certain segment information based on the "management approach," which organizes segments within a company the way the chief operating decision maker of that company manages them. The Company adopted this Statement for the fiscal year ended June 30, 1999. ACCOUNTING FOR PENSIONS. The Financial Accounting Standards Board has issued SFAS No. 132 "Employers' Disclosures about Pensions and Other Post-retirement Benefits," which requires additional information on changes in benefit obligations and fair values of plan assets. The Company adopted this Statement for the fiscal year ended June 30, 1999. See Note 7 of Notes to Consolidated Financial Statements. ACCOUNTING FOR DERIVATIVES AND HEDGING. The Financial Accounting Standards Board has issued SFAS No. 137, a deferral of SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The Company has not yet adopted this Statement, but is required to adopt the Statement for the fiscal year ended June 30, 2001. Management has not yet quantified the effect of adopting this Statement. 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 1997 and 1998 financial statements have been reclassified to conform with 1999 presentations. 2. RESTRUCTURING AND UNUSUAL CHARGES In fiscal 1999, the Company recorded a $1.0 million pre-tax charge for restructuring related to the consolidation of the Company's financial and marketing activities and the consolidation of certain facilities. The restructuring charges included total staff reductions of 14 employees. In fiscal 1998, the Company recorded a $10.7 million pretax charge for restructuring and unusual charges related to the write-off of capitalized software, termination costs for certain executives, staff reduction and facility costs related to the consolidation of the Company's helpline activities and planned actions to reduce facility and other costs. The restructuring charges included total staff reductions of 27 employees. In fiscal 1997, the Company recorded a $6.2 million pre-tax restructuring charge 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. This $6.2 million pre-tax charge was composed of $2.4 million for personnel reductions, $2.6 million in space and office costs and $1.2 million for non-compete and consulting agreements. The restructuring charge includes staff reductions of 70 employees. 3. BORROWINGS (IN THOUSANDS)
1999 1998 Line of credit and overdraft facilities $ 1,518 $ 1,470 Capital lease obligations 562 1,202 ------------ ------------- Total debt outstanding 2,080 2,672 Less: current portion 882 1,238 ------------ ------------- Long-term debt $ 1,198 $ 1,434 ============ =============
The Company has a $10 million credit agreement which matures on October 1, 2000. Borrowings are secured by accounts receivable and the credit agreement contains covenants regarding among other things, earnings, leverage, net worth and payment of dividends. Under the terms of the credit agreement, the Company is not permitted to pay cash dividends on its common stock. Permitted borrowings available as of June 30, 1999 under the credit agreement were $10 million, of which $1,198,000 was outstanding. Borrowings available at any time are based on the lower of $10 million or a percentage of worldwide eligible accounts receivable and cash. At June 30, 1999, the interest rate on borrowings denominated in Japanese yen and Swiss francs, which were used to hedge receivables in those currencies, varied between 1.09% and 2.20%. Separately, in August 1997, the Company's United Kingdom subsidiary entered into a $1.2 million loan agreement, which matures on May 31, 2000. The Company has outstanding borrowings under this agreement of $434,000 at June 30, 1999, which are classified as a capital lease. The interest rate was 10.4% at June 30, 1999. See Note 9 of Notes to Consolidated Financial Statements regarding capital lease obligations. 34 35 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 4. SHAREHOLDERS' EQUITY PREFERRED STOCK 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. In September 1996, the Company's Board of Directors 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 as of June 30, 1999. 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 acquirer) to purchase the Company's common stock, or stock of the acquirer, at a discount to market prices. The rights, which do not have voting rights, expire on September 30, 2006. COMMON STOCK The shareholders approved the 1994 Executive Stock Purchase Program (the "1994 Plan"), which enables certain executives to purchase the Company's common stock at then current market prices directly from the Company. A total of 300,000 shares of the Company's common stock has been reserved for issuance under the 1994 Plan. Shares purchased under this program during fiscal 1999 totaled 50,000; no shares were purchased in fiscal 1998. Prior to fiscal 1998, executives eligible under the 1994 Plan were able to purchase shares directly from the Company via a promissory note. The promissory note is secured by the related common stock issued by the Company and 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. For the year ended June 30, 1997, a total of 30,813 shares at prices ranging from $11.50 to $16 were issued in exchange for notes totaling $413,000. The aggregate principal balance of these promissory notes outstanding and due to the Company was $398,000 and $551,000 at June 30, 1999 and 1998, respectively. 5. STOCK OPTIONS The Company has four stock option plans: The 1988 Stock Option Plan (the "1988 Plan"), the 1994 Directors Stock Option Plan (the "Directors Plan"), the 1997 Global Employee Stock Option Plan (the "1997 Plan") and the 1998 Global Employee Stock Option Plan (the "1998 Plan"). Separately, on March 10, 1997, the Company granted an option for 10,000 shares to the Company's Chairman at an exercise price of $15.75 per share, which was the closing price of the common stock on that date. The option vests on the date the current Chairman ceases to be Chairman of the Board of the Company or in the event of a change in control of the Company. The option expires thirty months from the grant date. 1988 STOCK OPTION PLAN The 1988 Plan, which expired on June 26, 1998, provided for the grant of both incentive stock options and non-qualified options to officers and key employees. Options under the 1988 Plan were 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. No stock appreciation rights were granted under the 1988 Plan. 35 36 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The number of options outstanding and exercisable under the 1988 Plan was 488,384 and 161,574 at June 30, 1999, respectively, and no further grants can be made under the 1988 Plan. 1994 DIRECTORS STOCK OPTION PLAN The Directors Plan provides for the grant 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, 1999 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 84,000 and 55,875 at June 30, 1999, respectively. 1997 GLOBAL EMPLOYEE STOCK OPTION PLAN The 1997 Plan provides for the issuance of options to purchase 500,000 shares of the Company's common stock to non-officer employees of the Company. Options under the 1997 Plan were granted at 100% of the market price on the date of grant, exercisable at a rate of 25% per year after one year from the date of grant and have a term of five years. With the adoption of the 1998 Global Employees Stock Option Plan by shareholders on November 23, 1998, no future grants under the 1997 Plan are permitted. At June 30, 1999, the Company has not reserved any shares of common stock for the exercise of employee stock options. The number of options outstanding and exercisable under the 1997 Global Employee Stock Option Plan was 201,313 and 23,578, respectively, at June 30, 1999. 1998 GLOBAL EMPLOYEE STOCK OPTION PLAN The 1998 Plan provides for the issuance of options to purchase 900,000 shares of the Company's common stock to all employees including officers, key employees and non-officer employees of the Company, which includes any outstanding options under the 1997 plan. Options under the 1998 Plan are granted at 100% of the market price on the date of grant, exercisable at a rate of 25% per year after one year from the date of grant and have a term of 10 years. At June 30, 1999, the Company has reserved 900,000 shares of common stock for the exercise of employee stock options. The number of options outstanding under the 1998 Stock Option Plan was 713,150 at June 30, 1999. SUMMARY OF ACTIVITY Stock option activity under all plans is summarized below: 36 37 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1999 1998 1997 ----------------------- ----------------------- ----------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------ --------- ----------- ---------- ------------ ---------- Outstanding at beginning of year 976,234 $ 10.51 675,384 $13.45 762,756 $10.70 Granted 858,200 3.48 772,150 7.61 265,500 18.01 Exercised - - (79,625) 4.63 (179,501) 5.63 Cancelled (337,587) 11.86 (391,675) 10.95 (173,371) 16.36 ------------ ----------- ------------ Outstanding at end of year 1,496,847 $ 6.20 976,234 $10.51 675,384 13.45 ============ =========== ============ Options exercisable at end of year 241,027 182,260 247,511 Weighted average fair value of options granted during the year $ 2.04 $ 3.69 $ 7.91
A summary of outstanding and exercisable stock options as of June 30, 1999 is as follows:
Options Outstanding Options Exercisable ----------------------------------------------------- ------------------------------- Weighted Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price ----------------- ---------------- ------------- -------------- ------------- $ 3.00 to $ 3.09 548,900 9.98 $ 3.09 - $ - 3.44 to 3.44 12,000 4.50 3.44 - - 3.50 to 5.06 264,100 7.62 4.14 - - 5.13 to 27.25 671,847 3.04 9.60 241,027 11.02 - ----------- ---------- ----------------- ---------------- ------------- -------------- ------------- $ 3.00 to $ 27.25 1,496,847 6.40 $ 6.20 241,027 $ 11.02 ================= ================ ============= ============== =============
PRO FORMA DISCLOSURE UNDER SFAS 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" Using the intrinsic value method of accounting for the value of stock options granted during fiscal 1999 and 1998, no compensation cost was recorded in the accompanying consolidated statement of operations. Had compensation costs been determined based on the fair value at the date of grant for awards in fiscal 1999 and 1998 consistent with the provisions of SFAS 123, net income and net income per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share amounts):
1999 1998 --------------- ------------ Net income (loss) - as reported $ (1,136) $ 5,266 Net income (loss) - pro forma (1,630) 4,774 Net income (loss) per share - as reported (0.12) 0.53 Net income (loss) per share - pro forma $ (0.17) $ 0.48
37 38 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. Because the SFAS 123 method of accounting has not been applied to options granted prior to July 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The following weighted average assumptions were used in valuing the option grants:
1999 1998 ------------ ------------ STOCK OPTION PLANS: Expected life (years) 4.84 3.32 Risk free interest rate 5.42 % 5.65 % Expected stock price volatility 0.85 0.65 Expected dividend yield - - EMPLOYEE STOCK PURCHASE PLAN: Expected life (years) 0.50 0.50 Risk free interest rate 5.42 % 5.65 % Expected stock price volatility 0.85 0.65 Expected dividend yield - -
6. EMPLOYEE STOCK PURCHASE PLAN Under the Employee Stock Purchase Plan (the "ESPP"), 300,000 shares of the Company's common stock have been reserved for issuance. The ESPP allows participating employees to purchase shares of the Company's common stock through payroll deductions at 85% of the lower of fair market value at the beginning or the end of the six month period beginning either July 1 or January 1. Substantially all employees are eligible to participate in the ESPP. Under the ESPP, 206,716 shares, 60,576 shares and 18,233 shares were issued in fiscal 1999, 1998 and 1997, 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 Company contribution of 2% of an employee's qualified compensation and matching contributions based on employee 401(k) contributions. 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's contributions, other than the above, are discretionary and are determined by the Board of Directors. The total contributions for both plans were $642,000, $589,000 and $826,000 in fiscal 1999, 1998 and 1997, respectively. A subsidiary in the United Kingdom maintains a defined contribution plan for all United Kingdom employees. The plan provides a minimum annual company contribution of 2.5% of the employee's compensation and matching contributions up to an additional 2.5% of compensation, based on employee contributions. The United Kingdom subsidiary also has a defined benefit plan, which covered substantially all of its employees hired prior to January 1, 1994. This plan was frozen on April 1, 1997 with no further benefits accruing under the plan. The components of pension expense for the fiscal years ended June 30 are as follows (in thousands): 38 39 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1999 1998 ------------ ------------ CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 21,099 $ 19,224 Interest cost 1,357 1,486 Actuarial gain 2,919 892 Benefits paid (1,735) (503) ------------ ------------ Benefit obligation at end of year 23,640 21,099 ============ ============ CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 21,167 20,668 Actual return on plan assets 3,024 1,002 Actuarial loss (1,058) - Benefits paid (1,735) (503) ------------ ------------ Fair value of plan assets at end of year 21,398 21,167 ============ ============ Funded status (2,242) 68 Unrecognized actuarial loss 4,564 2,240 ------------ ------------ Net amount recognized 2,322 2,308 ============ ============ AMOUNTS RECOGNIZED IN THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS: Prepaid benefit cost 2,322 2,308 Accrued benefit liability (4,564) - Accumulated other comprehensive income 4,564 - ------------ ------------ Net amount recognized $ 2,322 $ 2,308 ============ ============ WEIGHTED -AVERAGE ASSUMPTIONS AS OF JUNE 30: Discount rate 6.25 % 6.85 % Expected return on plan assets 7.50 % 8.50 % Rate of compensation increase - - COMPONENTS OF NET PERIODIC BENEFIT COST: Interest cost $ 1,357 $ 1,486 Expected return on plan assets (1,491) (1,752) Recognized actuarial loss 5 - ------------ ------------ Net periodic benefit cost $ (129) $ (266) ============ ============
39 40 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 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):
1999 1998 1997 ------------ ------------ ------------- Income (loss) before provision (benefit) for income taxes: Domestic $(5,558) $ 23,217 $ (8,650) Foreign 3,388 (2,482) (17,138) ------------ ------------ ------------- $(2,170) $ 20,735 $(25,788) ============ ============ ============= Domestic provision (benefit) for income taxes: Current $(2,888) $ 3,650 - Deferred (1,176) 11,800 $ (2,907) Foreign provision (benefit) for income taxes: Current 713 - - Deferred 2,317 19 (5,764) ------------ ------------ ------------- Provision (benefit) for income taxes $(1,034) $ 15,469 $ (8,671) ============ ============ =============
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):
Federal statutory provision (benefit) $ (760) $ 7,257 $ (8,768) Non-deductible meals and entertainment 121 119 181 State income taxes, net of federal tax benefit - 33 22 Change in valuation reserve (2,112) 9,084 - Tax reserves released - - (312) Tax rate difference (135) (850) - Effect of sale of foreign subsidiaries 1,813 - - Other, net 39 (174) 206 ------------ ------------ ------------ Actual income tax provision (benefit) $ (1,034) $ 15,469 $ (8,671) ============ ============ ============
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): 40 41 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1999 1998 ------------- ------------- Deferred income tax assets: Research and development $ 1,902 $ 2,774 Tax credits 384 366 Depreciation and amortization 356 421 Net operating loss 4,672 7,492 Deferred revenue - 128 Employee benefits 521 773 Accrued liabilities 997 856 Capitalized software 2,563 3,453 Other 3,916 2,084 ------------- ------------- $15,311 $ 18,347 Valuation allowance (8,566) (10,678) ------------- ------------- $ 6,745 $ 7,669 Deferred income tax liabilities: Employee benefits (698) (681) Other (326) (355) ------------- ------------- (1,024) (1,036) ------------- ------------- Net deferred income tax asset $ 5,721 $ 6,633 ============= =============
Realization of deferred tax assets associated with the Company's future deductible temporary differences, net operating loss carryforwards and tax credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration. Although realization of the deferred tax assets is not assured, management believes it is more likely than not that the deferred tax assets will be realized through future taxable income or by using a tax strategy currently available to the Company. On a quarterly basis, management will assess whether it remains more likely than not that the deferred tax assets will be realized. This assessment could be impacted by a combination of continuing operating losses and a determination that the tax strategy is no longer sufficient to realize some or all of the deferred tax assets. At June 30, 1999, for income tax purposes, certain of the Company's foreign subsidiaries had available net operating loss carryforwards of approximately $13 million, which do not expire. In addition, the Company has general business credits, which will expire between 2010 and 2019. 9. LEASES The Company leases office space, transportation and computer equipment under non-cancelable capital and operating leases. Initial lease terms vary in length and several of the leases contain renewal options. The Company leases certain equipment under long-term lease agreements that are classified as capital leases, and the leased assets are included in "Property and equipment" in the accompanying Consolidated Balance Sheets. These capital leases terminate at various dates through fiscal 2000. Future minimum lease payments under all non-cancelable capital and operating leases are as follows (in thousands): 41 42 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CAPITAL OPERATING FISCAL YEARS ENDING JUNE 30, LEASE LEASE TOTAL - ------------------------------------------------------------- ------------- ------------ ------------ 2000 $ 604 $ 4,400 $ 5,004 2001 - 4,146 4,146 2002 - 3,798 3,798 2003 - 3,341 3,341 2004 - 3,039 3,039 2005 and thereafter - 5,754 5,754 ------------- ------------ ------------ Total minimum payments * $ 604 $ 24,478 $ 25,082 ------------- ============ ============ Less: amount representing interest (42) ------------- Present value of capital lease obligations 562 Less: current portion (562) ------------- Long-term capital lease obligations $ - =============
* Minimum payments under operating leases have not been reduced by minimum sublease rentals of $1,662,388 due in the future under noncancelable subleases. Total rental expense was $6,118,100 in fiscal 1999, $9,162,600 in fiscal 1998 and $7,818,000 in fiscal 1997. 10. SEGMENT REPORTING The Company has only one reportable segment - the development, marketing and support of client/server financial analytic applications software for management planning and control. Revenue is derived from the licensing of software and the provision of related services, that include product implementation, consulting, training and support. No single customer accounted for more that 10% of the Company's total revenue in the fiscal years ended June 30, 1999, 1998 and 1997. In addition, the Company is not dependent on any single customer or group of customers. The accounting policies for the geographic information are the same as those described in Note 1 of the Notes to the Consolidated Financial Statements. Geographic segment information is as follows: 42 43 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FISCAL YEARS ENDED JUNE 30, ----------------------------------------------- 1999 1998 1997 ------------ ------------ ------------- Revenue from external customers: United States $ 31,744 $ 41,709 $ 48,619 United Kingdom 12,492 19,276 15,307 Other countries 19,736 26,218 25,875 ------------ ------------ ------------- TOTAL REVENUE $ 63,972 $ 87,203 $ 89,801 ============ ============ ============= Operating income: United States $ (1,590) $ 2,935 $ 6,829 United Kingdom 420 2,545 (5,070) Other countries 10,023 7,315 1,194 ------------ ------------ ------------- Total operating income 8,853 12,795 2,953 Unallocated expenses (11,023) (27,446) (28,741) Gain on sale of Retail Business - 35,386 - ------------ ------------ ------------- INCOME (LOSS) BEFORE TAXES $ (2,170) $ 20,735 $(25,788) ============ ============ ============= Identifiable assets: United States $ 52,874 $ 59,242 $ 39,048 United Kingdom and other countries 10,581 29,450 32,628 ------------ ------------ ------------- Total identifiable assets $ 63,455 $ 88,692 $ 71,676 Computer software - - 9,075 ------------ ------------ ------------- TOTAL ASSETS $ 63,455 $ 88,692 $ 80,751 ============ ============ =============
Unallocated expenses consist of general corporate expenses, internal research and product development expenses, interest expense and interest income. Unallocated amounts in fiscal 1999 include $967,000 of restructuring and unusual related expenses. Unallocated amounts in fiscal 1998 include $10,690,000 of restructuring and unusual related expenses. Unallocated expenses include $6,245,000 of restructuring and unusual charges in fiscal 1997. 43 44 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 ----------- ------------- ----------- ------------- 1999 First Quarter $ 17,159 $ (409) $ 52 $ 0.01 Second Quarter 16,925 (379) 80 0.01 Third Quarter 14,798 (1,782) (1,422) (0.15) Fourth Quarter 15,090 (1,382) 154 0.02 ----------- ------------- ----------- ------------- Year Ended June 30 $ 63,972 $ (3,952) $ (1,136) $ (0.12) =========== ============= =========== ============= 1998 First Quarter $ 20,962 $ (3,438) $ (3,505) $ (0.36) Second Quarter 23,334 74 83 0.01 Third Quarter 23,298 56 73 0.01 Fourth Quarter 19,609 (11,416) 8,615 0.87 ----------- ------------- ----------- ------------- Year Ended June 30 $ 87,203 $ (14,724) $ 5,266 $ 0.53 =========== ============= =========== ============= 1997 First Quarter $ 19,442 $ (7,709) $ (4,931) $ (0.51) Second Quarter 25,307 (4,173) (2,762) (0.28) Third Quarter 23,356 (10,198) (6,923) (0.71) Fourth Quarter 21,696 (3,892) (2,501) (0.25) ----------- ------------- ----------- ------------- Year Ended June 30 $ 89,801 $ (25,972) $ (17,117) $ (1.75) =========== ============= =========== =============
During the quarter ended June 30, 1999, the Company recorded $967,000 of restructuring charges related to staff reduction due to the consolidation of the Company's financial and marketing activities and the consolidation of certain facilities. During the quarter ended June 30, 1998, the Company realized an after-tax gain of $19,986,000 from the sale of the Company's Retail Business. The Company also recorded $9,076,000 of restructuring and unusual charges. During the quarter ended September 30, 1997, the Company recorded $1,614,000 of pre-tax restructuring and unusual charges for the cost of termination of certain executives and other employees. During the quarter ended March 31, 1997, the Company recorded $6,245,000 of restructuring charges 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. 44 45 COMSHARE, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 12. LITIGATION During fiscal 1996, a shareholder class action suit (In Re Comshare, Incorporated Securities Litigation) was filed against the Company and certain of its officers and directors. On September 18, 1997, the Court dismissed all related claims. The plaintiffs appealed the dismissal of the action to the U.S. Court of Appeals for the Sixth Circuit. On July 8, 1999, the Court of Appeals affirmed the dismissal of the action by the District Court. The plaintiffs sought a rehearing before the entire Sixth Circuit Court of Appeals, which was denied by that Court on August 23, 1999. The plaintiffs have the right to petition the U.S. Supreme Court to hear an appeal of the dismissal. The Company will vigorously oppose any such appeal. 45 46 COMSHARE, INCORPORATED SCHEDULE II CONSOLIDATED SCHEDULE OF VALUATION & QUALIFYING ACCOUNTS
Additions/ Balance Charged to Deductions Balance DESCRIPTION Beginning Costs and from Translation Other End of of Period Expenses Reserve Adjustments Related Period ------------ ------------ ------------ -------------- --------- ---------- Allowance for doubtful accounts for the years ended June 30: 1999 $ 1,830 $ 302 $ (816) $ 11 $ - $ 1,327 ============ ============ ============ ============== ========= ========== 1998 $ 1,053 $ 762 $ 29 $ (14) $ - $ 1,830 ============ ============ ============ ============== ========= ========== 1997 $ 1,411 $ 526 $ (916) $ 32 $ - $ 1,053 ============ ============ ============ ============== ========= ==========
46 47 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 27, 1999 By: /s/ Kathryn A. Jehle -------------------- Kathryn A. Jehle Senior Vice President, Chief Financial Officer, Treasurer, Assistant Secretary and a Director Pursuant to the requirement of the Securities Exchange Act of 1934,as amended, 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/ Dennis G. Ganster President, Chief Executive September 27, 1999 --------------------- Officer and a Director ------------------ Dennis G. Ganster (Principal Executive Officer) /s/ Kathryn A. Jehle Senior Vice President, September 27, 1999 -------------------- Chief Financial Officer, ------------------ Kathryn A. Jehle Treasurer, Assistant Secretary and a Director (Principal Financial Officer) /s/ Brian J. Jarzynski Corporate Controller and September 27, 1999 --------------------- Chief Accounting Officer ------------------ Brian J. Jarzynski (Principal Accounting Officer) /s/ Daniel T. Carroll Chairman of the Board September 27, 1999 --------------------- and a Director ------------------ Daniel T. Carroll /s/ Geoffrey B. Bloom Director September 27, 1999 --------------------- ------------------ Geoffrey B. Bloom /s/ Richard L. Crandall Director September 27, 1999 ----------------------- ------------------ Richard L. Crandall /s/ Stanley R. Day Director September 27, 1999 ------------------ ------------------ Stanley R. Day /s/ W. John Driscoll Director September 27, 1999 -------------------- ------------------ W. John Driscoll Alan G. Merten Director September 27, 1999 ------------------ ------------------ Alan G. Merten /s/ John F. Rockart Director September 27, 1999 -------------------- ------------------ John F. Rockart
47 48 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 2.01 Asset Purchase Agreement by and among JDA Software Group, Inc., and JDA Software, Inc., and Comshare, Incorporated, dated as of June 4, 1998 - incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K Report filed June 19, 1998. 2.02 Software License Agreement by and between JDA Software, Inc., and Comshare, Incorporated, dated as of June 4, 1998 - incorporated by reference to Exhibit 2.2 to the Registrant's Form 8-K Report filed June 19, 1998. 3.01 Restated Articles of Incorporation of the Registrant, as amended - incorporated by reference to Exhibit 3.01 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 3.02 Bylaws of the Registrant, as amended - incorporated by reference to Exhibit 3.02 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 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 Credit agreement dated September 23, 1997, among Comshare, Incorporated, its Borrowing Subsidiary (as defined therein) and Harris Trust and Savings Bank - incorporated by reference to Exhibit 4.02 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1997. 4.03 First Amendment to Credit Agreement, dated September 23, 1998, between the Registrant, Comshare, Limited and Harris Trust and Savings Bank - incorporated by reference to Exhibit 4.01 to the Registrant's Form 10-Q Report for the quarter ended September 30, 1998. 4.04 Rights Agreement, dated as of September 16, 1996, between Comshare, Incorporated and Key Bank 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. 4.05 Form of certificate representing Rights (included as Exhibit B to the form of Rights Agreement filed as Exhibit 4.04). 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 and restated November 6, 1997. 10.02 First Amendment to the Benefit Adjustment Plan of Comshare, Incorporated - incorporated by reference to Exhibit 10.01 to the Registrant's Form 10-Q Report for the quarter ended March 31, 1999. 10.03 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. 10.04 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. 48 49 10.05 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 Report for the fiscal year ended June 30, 1994. 10.06 Non-Competition Agreement between Comshare, Incorporated and Richard L. Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's Form 10-K Report 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). 10.07 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 Report for the fiscal year ended June 30, 1994. 10.08 Description of Incentive Arrangements for certain executive officers for fiscal years 1994 and 1995-1997-incorporated by reference to Exhibit 10.09 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.09 Stock Option Agreement, effective as of March 10, 1997, between Comshare, Incorporated and Daniel T. Carroll-incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter ended March 31, 1997. 10.10 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. 10.11 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 Report for the fiscal year ended June 30, 1994. 10.12 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. 10.13 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. 10.14 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. 10.15 Executive Bonus Program, effective October 1, 1997 - incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q Report for the quarter ended December 31, 1997. 10.16 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Dennis G. Ganster - incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.17 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998 between Comshare, Incorporated and Kathryn A. Jehle - incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.18 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and David King - incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 49 50 10.19 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Stanley Starkey - incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.20 Comshare, Incorporated Change in Control Severance Agreement dated as of June 1, 1998, between Comshare, Incorporated and Norman Neuman - incorporated by reference to Exhibit 10.23 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.21 Comshare, Incorporated 1998 Global Employee Stock Option Plan - incorporated by reference to Exhibit 10.25 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.22 Summary of 1998 Senior Executive Incentive Plan - incorporated by reference to Exhibit 10.26 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.23 Summary of 1999 Senior Executive Incentive Plan - incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. 10.24 Summary of 2000 Senior Executive Incentive Plan. 10.25 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. 10.26 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. 10.27 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). 10.28 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). 10.29 Second Amendment to License Agreement by and between Arbor Software Corporation and Comshare, Incorporated-incorporated by reference to Exhibit 10 of the Registrant's Form 8-K Report filed on December 24, 1997. (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-02). 10.30 Third Amendment to License Agreement by and between Hyperion and Comshare, Incorporated - incorporated by Reference to Exhibit 10.33 to the Registrant's Form 10-K Report for the fiscal year ended June 30, 1998. (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-02.) 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, as amended, for the fiscal year ended June 30, 1999. 50 EX-10.1 2 BENEFIT ADJUSTMENT PLAN OF COMSHARE, INC. 1 EXHIBIT 10.01 BENEFIT ADJUSTMENT PLAN OF COMSHARE, INCORPORATED As Amended and Restated Effective November 6, 1997 Dykema Gossett PLLC 400 Renaissance Center Detroit, Michigan 48243-1668 2 TABLE OF CONTENTS
PAGE ARTICLE I PREAMBLES..............................................................................1 Section 1.01 Establishment of Plan................................................1 Section 1.02 Purpose..............................................................1 Section 1.03 Interpretation and Governing Law.....................................1 ARTICLE II DEFINITIONS............................................................................2 Section 2.01 "Account"............................................................2 Section 2.02 "Beneficiary"........................................................2 Section 2.03 "Cause"..............................................................2 Section 2.04 "Change in Control"..................................................2 Section 2.05 "Code"...............................................................3 Section 2.06 "Company"............................................................3 Section 2.07 "Company Contribution Account".......................................3 Section 2.08 "Compensation".......................................................3 Section 2.09 "Compensation Deferral Agreement"....................................3 Section 2.10 "Deferred Compensation Account"......................................3 Section 2.11 "Disability".........................................................4 Section 2.12 "Early Retirement Age"...............................................4 Section 2.13 "Employee"...........................................................4 Section 2.14 "ERISA"..............................................................4 Section 2.15 "Excess Benefits"....................................................4 Section 2.16 "Normal Retirement Age"..............................................4 Section 2.17 "Participant"........................................................4 Section 2.18 "Plan"...............................................................4 Section 2.19 "Plan Administrator".................................................4 Section 2.20 "Plan Year"..........................................................4 Section 2.21 "Restricted Benefits"................................................4 Section 2.22 "Social Security Integration Benefits"...............................4 Section 2.23 "Supplemental Compensation Account"..................................4 Section 2.24 "Tax-Qualified Retirement Plan"......................................5 Section 2.25 "Trustee"............................................................5 Section 2.26 "Valuation Date".....................................................5
i 3 ARTICLE III PARTICIPATION .......................................................................................6 Section 3.01 Eligibility..........................................................6 Section 3.02 Meaning of Participation.............................................6 Section 3.03 Termination of Participation.........................................6 ARTICLE IV DEFERRED COMPENSATION ACCOUNT..........................................................7 Section 4.01 Eligibility..........................................................7 Section 4.02 Elective Compensation Deferral.......................................7 Section 4.03 Vesting..............................................................7 Section 4.04 Investment...........................................................7 Section 4.05 Distributions of Account.............................................7 ARTICLE V COMPANY CONTRIBUTION ACCOUNT...........................................................8 Section 5.01 Eligibility..........................................................8 Section 5.02 Code Section 415 Excess Benefits.....................................8 Section 5.03 Code Sections 401(a)(17), 401(k) and 401(m) Restricted Benefits......8 Section 5.04 Discontinuance of Social Security Integration Benefits...............8 Section 5.05 Vesting..............................................................9 Section 5.06 Investment...........................................................9 Section 5.07 Distributions of Account.............................................9 ARTICLE VI SUPPLEMENTAL COMPENSATION ACCOUNT.....................................................10 Section 6.01 Discontinuance......................................................10 Section 6.02 Vesting.............................................................10 Section 6.03 Investment..........................................................10 Section 6.04 Distribution of Account.............................................10 ARTICLE VII DISTRIBUTION OF DEFERRED AND COMPANY CONTRIBUTION ACCOUNTS.........................................................11 Section 7.01 Payment of Deferred and Company Contribution Accounts...............11 Section 7.02 Lump Sum Payment....................................................12
ii 4 ARTICLE VIII DISTRIBUTION OF SUPPLEMENTAL COMPENSATION ACCOUNT ......................................................................................13 Section 8.01 Payment of Supplemental Compensation Account........................13 Section 8.02 Purchase of Annuity From an Insurer.................................13 ARTICLE IX UNFUNDED ACCOUNTS.....................................................................14 Section 9.01 Unfunded Accounts...................................................14 Section 9.02 General Creditor....................................................14 Section 9.03 Establishment of Rabbi Trust and Selection of Trustee...............14 Section 9.04 Assignment..........................................................14 Section 9.05 Withholding.........................................................14 ARTICLE X MISCELLANEOUS.........................................................................15 Section 10.01 Agreement Binding...................................................15 Section 10.02 Entire Agreement....................................................15 Section 10.03 No Guarantee of Employment..........................................15 Section 10.04 "Compensation" For Other Purposes...................................15 Section 10.05 Indemnification.....................................................15 Section 10.06 Amendment and Termination...........................................15 ARTICLE XI PLAN ADMINISTRATION...................................................................17 Section 11.01 Claims Submission and Review Procedure.............................17 Section 11.02 Recordkeeper........................................................17 Section 11.03 Payment of Expenses.................................................17 SCHEDULE A - COMPENSATION DEFERRAL AGREEMENT...................................................A-1
iii 5 ARTICLE I PREAMBLES SECTION 1.01 ESTABLISHMENT OF PLAN. Effective June 1, 1986, Comshare, Incorporated (the "Company") adopted the Benefit Adjustment Plan of Comshare, Incorporated to provide designated Employees with a program of deferred compensation. The plan has been amended from time to time and is hereby amended and restated effective November 6, 1997 (the "Plan"). SECTION 1.02 PURPOSE. The Company desires to retain certain of its Employees by designating them as Participants in a program which will (i) provide them with the opportunity to defer a portion of the Compensation which otherwise would be paid to them currently ("Deferred Compensation"); (ii) provide for the payment of benefits which otherwise would be currently funded by the Company under its Tax-Qualified Retirement Plans but for the limitations of Section 415 of the Internal Revenue Code of 1986, as amended ("Code") ("Excess Benefits"); and (iii) provide for the payment of benefits which otherwise would be currently funded by the Company under its Tax-Qualified Retirement Plans but for the restrictions of Sections 401(a)(17), 401(k) and 401(m) of the Code ("Restricted Benefits"). Prior to August 14, 1997 the Company also (a) provided benefits based on a Social Security integration formula ("Social Security Integration Benefits"); and (b) provided discretionary supplemental compensation benefits based on set percentages of a Participant's Compensation in excess of $100,000, as indexed from time to time in accordance with Section 6.02 ("Supplemental Compensation"). Participants with vested Social Security Integration Benefits and Supplemental Compensation Benefits on August 14, 1997 shall continue to retain vested rights to such amounts after August 14, 1997. SECTION 1.03 INTERPRETATION AND GOVERNING LAW. This Plan is intended to constitute an unfunded program maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees consistent with the requirements of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). In part, the Plan is also intended to constitute an "excess benefit plan" as defined in ERISA Section 3(36). 6 ARTICLE II DEFINITIONS SECTION 2.01 "ACCOUNT" shall mean the record keeping interest of a Participant in the Plan as determined as of each Valuation Date. Where appropriate, a Participant's Account also means the various record keeping subaccounts that may be established under the Plan on his or her behalf, including (i) a Deferred Compensation Account, (ii) a Company Contribution Account comprised of a Participant's Excess Benefits, Restricted Benefits and Social Security Integration Benefits, and (iii) a Supplemental Compensation Account. SECTION 2.02 "BENEFICIARY" shall mean that person or persons designated by the Participant to receive a distribution of any amounts remaining in the Participant's Account upon the death of the Participant and shall be determined by the written designation in effect at the time of death under the Profit Sharing Plan of Comshare, Incorporated. SECTION 2.03 "CAUSE" shall mean a Participant's (i) willful gross misconduct, (ii) willful and material breach of duties, (iii) act of material dishonesty or fraud that is injurious to the Company or its subsidiaries, or (iv) conviction of a felony involving moral turpitude. SECTION 2.04 "CHANGE IN CONTROL" shall mean for purposes of this Plan the occurrence of any of the following events: (i) the election of a Board of Directors of the Company, a majority of the members of which were nominees of a person (including an individual, a corporation, partnership, joint venture, trust or other entity) or a group of persons acting together (other than persons who were members of the Board of Directors or officers of the Company as of November 6, 1997 or a tax-qualified retirement plan approved by the Board of Directors of the Company (including at least a majority of the Incumbent Directors ("Exempted Persons")), following the acquisition by such person, group of persons or plan of ownership (directly or indirectly, beneficially or of record) of twenty-five (25%) percent, or more, of the outstanding Common Stock of the Company; (ii) the acquisition of ownership by a person or group of persons described in subparagraph (i) above (other than Exempted Persons) of fifty-one (51%) percent, or more of the outstanding Common Stock of the Company; (iii) a sale of all or substantially all of the assets of the Company to any entity not controlled by persons who were members of the Board of Directors or officers of the Company as of November 6, 1997, or by any tax-qualified retirement plan for the benefit of employees of the Company; or 2 7 (iv) a merger, consolidation or other similar transaction between the Company and another entity if a majority of the members of the Board of Directors of the surviving company are not Continuing Members. The term "Incumbent Directors" means members of the Board of Directors of the Company as of November 6, 1997 or new directors whose election by the Board of Directors, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors in office at the time of such election or nomination, who either were directors as of November 6, 1997, or whose election or nomination was previously approved as provided above. In the event that a majority of the Incumbent Directors do not approve the tax-qualified retirement plan or there are no Incumbent Directors, the tax-qualified retirement plan shall not be an Exempted Person. The term "Continuing Directors" means persons (a) who are members of the Board of Directors immediately before the change in control and (b) who also were members of the Board of Directors of the Company as of November 6, 1997 or are new directors whose election by the Board of Directors, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors in office at the time of such election or nomination who either were directors as of November 6, 1997 or whose election or nomination for election was previously approved as provided above. SECTION 2.05 "CODE" shall mean the Internal Revenue Code of 1986, as amended. SECTION 2.06 "COMPANY" shall mean Comshare, Incorporated - U.S. and, for purposes other than Plan Administration, each wholly owned subsidiary thereof incorporated in the United States. SECTION 2.07 "COMPANY CONTRIBUTION ACCOUNT" shall mean the individual record keeping subaccount established pursuant to the provisions of Article V for the purpose of accumulating a Participant's Excess Benefits, Restricted Benefits and Social Security Integration Benefits. SECTION 2.08 "COMPENSATION" shall mean a Participant's annual gross income from the Company during the fiscal year of the Company ending each June 30th, including a Participant's base salary, commissions, bonuses, and certain cash fringe benefits. Effective June 30, 1996, Company contributions under Plan Sections 5.02 (Excess Benefits), 5.03 (Restricted Benefits), and 6.02 (Supplemental Compensation Benefits) shall be calculated using a Participant's base salary only. SECTION 2.09 "COMPENSATION DEFERRAL AGREEMENT" shall mean the written agreement pursuant to which a Participant elects to defer receipt of Compensation which otherwise would have been paid currently. SECTION 2.10 "DEFERRED COMPENSATION ACCOUNT" shall mean the individual record keeping subaccount established pursuant to the provisions of Article IV for the purpose of accumulating a Participant's Deferred Compensation amounts. 3 8 SECTION 2.11 "DISABILITY" shall be determined pursuant to the definition accorded such term under the Profit Sharing Plan of Comshare, Incorporated. SECTION 2.12 "EARLY RETIREMENT AGE" shall mean a Participant's attainment of age 55. SECTION 2.13 "EMPLOYEE" shall mean any key common law employee of the Company. SECTION 2.14 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. SECTION 2.15 "EXCESS BENEFITS" shall mean that portion of a Participant's Company Contribution Account comprised of the amounts that would have been contributed on his or her behalf under the Company's Tax-Qualified Retirement Plans without the limitations of Code Section 415. SECTION 2.16 "NORMAL RETIREMENT AGE" shall mean a Participant's attainment of age 65. SECTION 2.17 "PARTICIPANT" shall mean those U.S. Employees of the Company who satisfy the requirements for Compensation deferrals or benefit allocations hereunder. SECTION 2.18 "PLAN" shall mean the Benefit Adjustment Plan of Comshare, Incorporated, as amended and restated effective November 6, 1997, and as amended thereafter. SECTION 2.19 "PLAN ADMINISTRATOR" shall mean the Company or the person(s) or organization(s) specifically designated by the Company to serve as administrator of the Plan. SECTION 2.20 "PLAN YEAR" shall mean the twelve month period beginning October 1 and ending on September 30. SECTION 2.21 "RESTRICTED BENEFITS" shall mean that portion of a Participant's Company Contribution Account comprised of the amounts that would have been contributed on his or her behalf to the Company's Tax-Qualified Retirement Plans without the restrictions under Sections 401(a)(17), 401(k) and 401(m) of the Code. SECTION 2.22 "SOCIAL SECURITY INTEGRATION BENEFITS" shall mean that portion of a Participant's Company Contribution Account comprised of discretionary Company allocations based on the Social Security integration formula set forth in Article V. SECTION 2.23 "SUPPLEMENTAL COMPENSATION ACCOUNT" shall mean a Participant's individual subaccount established for record keeping purposes pursuant to the provisions of Article VI to credit a Participant with discretionary Company allocations based on set percentages of a Participant's Compensation in excess of $100,000, as indexed from time to time. 4 9 SECTION 2.24 "TAX-QUALIFIED RETIREMENT PLAN" shall mean the Profit Sharing Plan of Comshare, Incorporated and all other employee pension plans qualified under Section 401(a) of the Code, as may be maintained by the Company at any time. SECTION 2.25 "TRUSTEE" shall mean the person(s) or organization(s) acting as the trustee under the Plan in accordance with any trust instrument(s) executed with the Company. SECTION 2.26 "VALUATION DATE" shall mean March 31, June 30, September 30 and December 31 of each Plan Year as of which date the fair market value of a Participant's Account shall be determined for the purpose of making distributions under the Plan. In the event of a Change in Control, a special Valuation Date shall be called no later than the 15th day of the month (or first business day thereafter) in the first full calendar month commencing after the Change in Control. 5 10 ARTICLE III PARTICIPATION SECTION 3.01 ELIGIBILITY. Only those Employees who (i) satisfy the requirements for voluntary Compensation deferrals or the allocation of Company contributions hereunder, and (ii) are officers of the Company, shall be eligible to participate in the Plan. Each designated Employee shall furnish such information and perform such acts as the Company may require in order to maintain such eligibility. SECTION 3.02 MEANING OF PARTICIPATION. A Participant in the Plan shall have an Account maintained on his or her behalf to which various amounts, as provided for in Articles IV through VI, and earnings and losses thereon, shall be credited. Participation in Article IV of the Plan shall enable an eligible Employee to enter into a Compensation Deferral Agreement, in the form attached as Schedule A hereto, with the Company. A Participant who satisfies the requirements to participate in Article V of the Plan shall be eligible to have amounts credited to his or her Account equal to contributions and forfeitures which otherwise would have been allocated to the Participant under the terms of the Company's Tax-Qualified Retirement Plan, but for the limitations of Code Section 415 ("Excess Benefits"), and the restrictions of Code Sections 401(a)(17), 401(k) and 401(m) ("Restricted Benefits"). SECTION 3.03 TERMINATION OF PARTICIPATION. An otherwise eligible Employee shall cease to actively participate in the Plan following the earlier of the Participant's retirement, Disability, death, termination of employment, or receipt of written notification that he or she is no longer eligible to participate. Thereafter, participation shall continue only for the purpose of receiving a distribution of accumulated benefits in an individual's Account at retirement, death, Disability or termination of employment pursuant to the provisions of Articles VII and VIII. A Participant's entire Account shall be vested and payable within a reasonable period of time following the special Valuation Date called due to a Change in Control. 6 11 ARTICLE IV DEFERRED COMPENSATION ACCOUNT SECTION 4.01 ELIGIBILITY. An Employee who is an officer of the Company may participate in the Deferred Compensation Account portion of the Plan. SECTION 4.02 ELECTIVE COMPENSATION DEFERRAL. Each Participant shall be permitted to elect annually in writing, prior to the beginning of any calendar year, to have a designated whole percentage of his or her Compensation to be earned during the year credited to his or her Deferred Compensation Account established pursuant to the provisions of this Article IV. This election shall be made by submitting a completed Compensation Deferral Agreement to the Company. An eligible Employee who has not elected to defer Compensation pursuant to this Section 4.02 for a given calendar year shall be permitted to commence participation at any time during the calendar year by submitting a completed Compensation Deferral Agreement prior to the beginning of the pay period for which the election is to be effective. A Participant's deferral election shall remain in effect until revoked in writing. Any such revocation shall become effective with respect to the next pay period after receipt by the Company. Once having revoked an election, an Employee shall be precluded from deferring Compensation under this Section 4.02 until the beginning of the next calendar year. SECTION 4.03 VESTING. A Participant shall at all times have a 100% vested interest in amounts credited to his or her Deferred Compensation Account pursuant to Section 4.02. SECTION 4.04 INVESTMENT. The amount credited to a Participant's Deferred Compensation Account shall be invested by the Trustee in a money market account chosen by the Plan Administrator, and gains and losses (if applicable) shall be credited to the Participant's Deferred Compensation Account as of the Valuation Dates. A Participant, subject to the discretion of the Trustee, may direct the Trustee to invest the amount credited to his or her Deferred Compensation Account in various mutual funds selected by the Plan Administrator; provided, however, that such investments shall be in 1% increments of the aggregate amount credited to the Participant's Deferred Compensation Account. SECTION 4.05 DISTRIBUTIONS OF ACCOUNT. A Participant's distribution of the amount credited to his or her Deferred Compensation Account shall be distributed in accordance with the provisions of Article VII. 7 12 ARTICLE V COMPANY CONTRIBUTION ACCOUNT SECTION 5.01 ELIGIBILITY. An Employee who is an officer of the Company and has been credited with one year of service under the Profit Sharing Plan of Comshare, Incorporated is eligible to participate in the Company Contribution Account portion of the Plan. SECTION 5.02 CODE SECTION 415 EXCESS BENEFITS. Contributions and other additions to the account of an Employee maintained pursuant to the terms of certain Tax-Qualified Retirement Plans maintained by the Company may be limited by Code Section 415. In the event Code Section 415 prevents a Participant from receiving an allocation of either Company contributions or forfeitures under any such Tax-Qualified Retirement Plan, the Company shall credit an amount equivalent to the amount of such contributions and forfeitures to the Company Contribution Account maintained on behalf of the Participant pursuant to the provisions of this Article V. Such Excess Benefits amounts shall be calculated as of each June 30th and paid into the Plan by the end of the calendar year. An Employee shall be entitled to an Excess Benefits allocation during the Plan Year only if the Employee is employed by the Company on the June 30th as of which the Excess Benefits amounts are calculated; provided, however, that in a Plan Year of an Employee's retirement, Disability or death, employment with the Company on June 30th shall be waived. SECTION 5.03 CODE SECTIONS 401(a)(17), 401(k) AND 401(m) RESTRICTED BENEFITS. Contributions and other additions to the account of an Employee maintained pursuant to the terms of any Tax-Qualified Retirement Plan maintained by the Company may be limited by the restrictions of Code Sections 401(a)(17), 401(k) and 401(m). In the event any of the aforementioned Code Sections prevents a Participant from receiving either Company contributions or forfeitures under any such Tax-Qualified Retirement Plan, the Company shall credit an amount equal to the amount of such contributions or forfeitures of such Restricted Benefits to the Company Contribution Account maintained on behalf of the Participant pursuant to the provisions of this Article V. Such Restricted Benefits amounts shall be calculated as of each June 30th and paid into the Plan by the end of the calendar year. An Employee shall be entitled to a Restricted Benefits allocation during the Plan Year only if the Employee is employed by the Company on the June 30th as of which the Restricted Benefits amounts are calculated; provided, however, that in a Plan Year of an Employee's retirement, Disability or death, employment with the Company on June 30th shall be waived. SECTION 5.04 DISCONTINUANCE OF SOCIAL SECURITY INTEGRATION BENEFITS. No Social Security Integration Benefit contributions shall be made by the Company after August 13, 1997, although investment gains and losses shall continue to accrue after August 13, 1997 on undistributed Social Security Integration Benefit amounts contributed on behalf of Participants prior to such date. 8 13 SECTION 5.05 VESTING. (i) ON OR AFTER JANUARY 1, 1998. A Participant who is credited with one or more Hours of Service under the Profit Sharing Plan of Comshare, Incorporated on or after January 1, 1998, shall be 100% vested in the Participant's Company Contribution Account and shall acquire a 100% vested interest in past and future Company contributions to the Participant's Company Contribution Account at the time such contributions are made by the Company. (ii) PRIOR TO JANUARY 1, 1998. A Participant who is not credited with one or more Hours of Service under the Profit Sharing Plan of Comshare, Incorporated after December 31, 1997, shall acquire a vested interest in the amount credited to his or her Company Contribution Account pursuant to the provisions of Article V, determined on the same basis as his or her vested status for Company Discretionary Contributions under the terms of the Profit Sharing Plan of Comshare, Incorporated. Additionally, a Participant shall acquire a 100% vested and nonforfeitable right to the amount credited to his or her Company Contribution Account in the event of a Change in Control, the attainment of Normal Retirement Age or upon the death or Disability of the Participant. In the event of a forfeiture of any amount credited to a Participant's Company Contribution Account, no other Participant shall acquire any right to such forfeited amount. SECTION 5.06 INVESTMENT. The amount credited to a Participant's Company Contribution Account shall be invested by the Trustee in a money market account chosen by the Plan Administrator, and gains and losses (if applicable) shall be credited to the Participant's Company Contribution Account as of the Valuation Dates. A Participant, subject to the discretion of the Trustee, may direct the Trustee to invest the amount credited to his or her Company Contribution Account in various mutual funds selected by the Plan Administrator; provided, however, that such investments shall be in 1% increments of the aggregate amount credited to the Participant's Company Contribution Account. SECTION 5.07 DISTRIBUTIONS OF ACCOUNT. A Participant may direct the distribution of the amount credited to his or her Company Contribution Account in accordance with the provisions of Article VII. 9 14 ARTICLE VI SUPPLEMENTAL COMPENSATION ACCOUNT SECTION 6.01 DISCONTINUANCE. Effective August 14, 1997, no additional Supplemental Compensation Account contributions shall be made by the Company. SECTION 6.02 VESTING. A Participant shall acquire a vested interest in the amount credited to his or her Supplemental Compensation Account upon termination of employment (i) due to death or Disability, (ii) on or after Early Retirement Age, or (iii) upon a Change in Control, as defined in Section 2.04. A Participant shall forfeit any amount credited to his or her Supplemental Compensation Account if the Participant terminates employment with the Company for any other reason, or if the Participant no longer satisfies the Plan participation requirements. In the event of a forfeiture of any amount credited to a Participant's Supplemental Compensation Account, no other Participant shall acquire any right to such forfeited amount. Effective August 14, 1997, all unvested Supplemental Compensation Accounts shall be forfeited. A Participant with a vested Supplemental Contribution Account, whether or not in pay status on August 14, 1997, shall retain all rights to such Supplemental Contribution Account, which shall be distributed in accordance with the provisions of Article VIII. SECTION 6.03 INVESTMENT. A Participant shall have no right to direct the investment of the amount credited to his or her Supplemental Compensation Account. Such amounts shall be invested at the discretion of the Company, and gains and losses (if applicable) shall be credited to the Participant's Supplemental Compensation Account only on applicable Valuation Dates. SECTION 6.04 DISTRIBUTION OF ACCOUNT. A Participant's Supplemental Compensation Account shall be distributed in accordance with the provisions of Article VIII. 10 15 ARTICLE VII DISTRIBUTION OF DEFERRED AND COMPANY CONTRIBUTION ACCOUNTS SECTION 7.01 PAYMENT OF DEFERRED AND COMPANY CONTRIBUTION ACCOUNTS. Vested amounts credited to a Participant's Deferred Compensation and Company Contribution Accounts shall be paid to the Participant within a reasonable time following the first Valuation Date after (i) his or her termination of employment due to attainment of Early or Normal Retirement Age, death, Disability or other termination of employment or (ii) upon a Change in Control, as follows: (a) UPON TERMINATION AFTER ATTAINMENT OF RETIREMENT AGE. After attainment of either Early or Normal Retirement Age, the Company shall distribute the nonforfeitable portion of the amount accumulated in the Participant's Deferred Compensation and Company Contribution Accounts. Provided, that a Participant who continues his or her employment after attainment of Early Retirement Age shall defer distribution until his or her termination of employment. If the Participant should die prior to complete distribution of his or her vested Deferred Compensation or Company Contribution Accounts, the unpaid balance shall be paid to the Participant's Beneficiary in a lump sum amount. (b) UPON DEATH, DISABILITY OR FOLLOWING A CHANGE IN CONTROL. In the event a (i) Participant's employment with the Company shall be terminated by reason of death or Disability before reaching Early or Normal Retirement Age or (ii) in the event of a Change in Control, the Company shall make payment to the Participant (in the event of termination following Disability or upon a Change in Control) or to the designated Beneficiary (in the event of death) in the same manner and to the same extent as provided in subsection (a) above, as if the Participant had retired on the date of death, termination of employment due to Disability, or upon a Change in Control. (c) UPON OTHER TERMINATION OF EMPLOYMENT. In the event a Participant's employment with the Company shall be terminated for any reason other than retirement on or after Early or Normal Retirement Age, death or Disability, the vested portion of a Participant's Deferred Compensation and Company Contribution Accounts shall be paid after the Participant's termination of employment in the same manner and to the same extent as provided in subsection (a) above as if the Participant had retired on the date of termination. (d) SPECIAL EARLY DISTRIBUTION. In accordance with the Release and Settlement Agreement between the Company and Mr. W.T. Wrathall, dated October 24, 1997, Mr. Wrathall shall be entitled to a special early lump sum distribution of his Deferred and Company Contribution Accounts, valued as of September 30, 1997. 11 16 SECTION 7.02 LUMP SUM PAYMENT. Distributions from a Participant's Deferred Compensation and Company Contribution Accounts shall be made in the form of a single, lump-sum payment. 12 17 ARTICLE VIII DISTRIBUTION OF SUPPLEMENTAL COMPENSATION ACCOUNT SECTION 8.01 PAYMENT OF SUPPLEMENTAL COMPENSATION ACCOUNT. (a) UPON TERMINATION AFTER ATTAINMENT OF RETIREMENT AGE. Within a reasonable time following the first Valuation Date after the termination of the Participant's employment with the Company for reasons other than Cause on or after attainment of Early or Normal Retirement Age, the Company shall pay the Participant 180 monthly level installments of an amount determined by annuitizing the amount credited to the Participant's Supplemental Compensation Account assuming an 8% fixed rate of return during the payout period. If the Participant should die on or after the commencement of installment payments but prior to receipt of all 180 installments, the remaining installments shall be paid on regularly scheduled monthly payment dates to the Participant's Beneficiary. (b) UPON DEATH, DISABILITY PRIOR TO RETIREMENT AGE OR FOLLOWING A CHANGE IN CONTROL. If a Participant's employment with the Company is terminated by reason of death or Disability prior to attainment of Early or Normal Retirement Age or in the event of a Change in Control, the Company shall pay 180 installments to the Participant (in the event of Disability) or the Participant's Beneficiary (in the event of death) in the same manner and to the same extent as provided in (a) above, as if the Participant had retired on the date of his death, termination due to Disability or upon a Change in Control. (c) UPON OTHER TERMINATION OF EMPLOYMENT. If a Participant shall terminate employment with the Company without satisfying the conditions of (a) or (b) above, or shall terminate employment for Cause before satisfying the vesting provisions of Article VI, the amount credited to the Participant's Supplemental Compensation Account shall be forfeited. SECTION 8.02 PURCHASE OF ANNUITY FROM AN INSURER. To the extent that the Company purchases an annuity from an insurance company in the name of a Participant to satisfy in full the Company's obligations regarding the payment of a Participant's Supplemental Compensation Account, the Company shall be relieved of any further obligations to provide payments to such Participant under Article VIII, and the Participant shall have recourse against the insurer and not the Company to provide any future payments. 13 18 ARTICLE IX UNFUNDED ACCOUNTS SECTION 9.01 UNFUNDED ACCOUNTS. Amounts credited to a Participant's Account under the Plan shall accumulate in a reserve account established on the books of the Company. Amounts credited thereto shall be adjusted by a rate of earnings or losses consistent with the before-tax rate of return realized upon any assets used in satisfying the Company's obligations under this Plan. SECTION 9.02 GENERAL CREDITOR. A Participant shall be regarded as an unsecured general creditor of the Company with respect to any rights derived by the Participant from the existence of this Plan or the existence or aggregated amount credited to a Participant's Account. Title to and beneficial ownership of any Company assets whether cash, money market or mutual fund investments, life insurance contracts or other assets which may be used by the Company from time to time to satisfy all or any portion of its obligations for benefit payments under the Plan, shall remain solely the property of the Company and no Participant shall have any right to specific assets owned by the Company. SECTION 9.03 ESTABLISHMENT OF RABBI TRUST AND SELECTION OF TRUSTEE. The Company may establish a Rabbi Trust by a trust agreement with a Trustee to carry out the purposes of the Plan. The Company shall select any such trustee, who shall be an independent third party, or corporate trustee. The Company may modify any such trust agreement to accomplish the purposes of the Plan. Subject to notice provisions, if any, in the Rabbi Trust agreement, the trustee may resign by delivering a written resignation to the Company; similarly, the Trustee may be removed by the Company at any time, upon written notice to the Trustee. Any Rabbi Trust established hereunder shall not make the Plan "funded" for purposes of ERISA or the Code. SECTION 9.04 ASSIGNMENT. No rights under this Plan may be assigned, transferred, pledged or encumbered by the Company, Participant or Beneficiary except by will or by the intestate laws or other laws of descent and distribution. The obligations and rights of this Plan may be assigned by the Company if the Company or its assets are purchased by another Corporation or are merged into the assets of another corporation. SECTION 9.05 WITHHOLDING. The Trustee shall withhold from a Participant's distribution hereunder, and the Company also shall have the right (i) to withhold from a Participant's compensation, or (ii) to require a Participant or Beneficiary to tender a sufficient amount of cash to the Company to satisfy any applicable federal, state and local income and employment tax withholding obligations derived from benefit payments hereunder. In the case of an annuity purchased from an insurer under Article VIII, the insurer shall withhold from the annuity a sufficient amount to satisfy any federal, state and local income and employment tax withholding obligations derived from the benefit payments hereunder. 14 19 ARTICLE X MISCELLANEOUS SECTION 10.01 AGREEMENT BINDING. This Plan shall be binding upon and inure to the benefit of the Company, participating Employees and their respective successors, assigns, heirs, personal representatives, executors, administrators, and legatees. The Company shall not merge or consolidate with any other Corporation or reorganize unless and until such succeeding Corporation agrees to assume and discharge the obligations and rights of the Company under this Plan. Upon such assumption, the term "Company" as used in this Plan shall be deemed to refer to such successor Corporation, and the Company is relieved of all obligations under this Plan. SECTION 10.02 ENTIRE AGREEMENT. This document constitutes the entire agreement and no representations or other actions by a Company employee or representative may modify the rights and obligations set forth in the Plan. SECTION 10.03 NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan shall be construed as an employment contract or as a guarantee of employment for any period of time. SECTION 10.04 "COMPENSATION" FOR OTHER PURPOSES. Any compensation deferred under this Plan shall be deemed to constitute compensation to the Participant for the purpose of any Tax-Qualified Retirement Plans maintained by the Company and for the purpose of any other fringe benefit obligations of the Company. SECTION 10.05 INDEMNIFICATION. The Company shall, to the extent not inconsistent with or in violation of its bylaws and the laws of its state of incorporation, indemnify and hold harmless any corporate officer or employee involved in the administration of the Plan as may be deemed "fiduciaries" (as that term is defined in ERISA or otherwise) with respect to the Plan from any and all claims, loss, damages, expenses (including reasonable counsel fees approved by the Company), and liability (including any reasonable amounts paid in settlement with the Company's approval) arising out of any act or omission of such fiduciaries incurred in the capacity of "fiduciary" of the Plan as that term is defined in ERISA or otherwise. The Company shall not indemnify any fiduciary whose conduct is finally adjudicated by a court of competent jurisdiction to be due to the knowing or willful misconduct of such fiduciary. The Company may additionally purchase such policy or policies of fiduciary liability insurance as it shall deem necessary or appropriate to protect any person acting as a "fiduciary" of the Plan, as that term is defined in ERISA or otherwise, from any liability which may be incurred as a result of the performance of fiduciary duties with respect to the Plan, other than liability arising out of the knowing or willful misconduct of such fiduciary. SECTION 10.06 AMENDMENT AND TERMINATION. The Company reserves the right to amend in whole or in part and to discontinue the Plan completely within the conditions set forth below. Any amendment shall not act to reduce or impair a Participant's right to deferred compensation account benefits already accrued and vested as of the date such amendment is made. Upon the 15 20 amendment or termination of the Plan, each Participant shall receive written notice of such event describing the action taken in detail. 16 21 ARTICLE XI PLAN ADMINISTRATION SECTION 11.01 CLAIMS SUBMISSION AND REVIEW PROCEDURE. Any claim for benefits must initially be submitted in writing to the Company. In the event that any claim for benefits is denied (in whole or in part) hereunder, the claimant shall receive from the Company a notice in writing within 90 days after receipt of the claim, written in a manner calculated to be understood by the claimant, setting forth the specific reasons for denial, with specific reference to pertinent provisions of this Plan, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of the initial period. The Participant may make a written request for review of any such denial by the Board of Directors within 60 days following the date of such denial. The claimant shall be entitled to submit such issues or comments, in writing or otherwise, as he shall consider relevant to a determination of his claim, and may include a request for a hearing in person before the Board of Directors. Prior to submitting his request, the claimant shall be entitled to review such documents as the Company shall agree are pertinent to his claim. The Board of Directors shall notify the claimant of its decision in writing no later than 60 days following receipt of the claimant's request, unless special circumstances require an extension of time for processing, in which case the Board of Director's decision shall be rendered no later than 120 days after receipt of such request for review. The interpretations and construction of the Plan by the Board of Directors shall be binding and conclusive on all persons and for all purposes. Any other disagreements shall be submitted to the Compensation Committee for determination, provided that all interested parties agree to be bound by its decision. No member of the Board of Directors or other member of management shall be liable to any person for any action taken hereunder except those actions undertaken with lack of good faith. SECTION 11.02 RECORDKEEPER. The Company shall have the authority to appoint one or more recordkeepers for purposes of administering the Participant Accounts hereunder. The services of any recordkeepers appointed hereunder may be terminated at any time by the Company. SECTION 11.03 PAYMENT OF EXPENSES. Payment of expenses pursuant to the administration of the Plan shall be paid by the Employer. This Amended and Restated Plan is hereby executed as of November 6, 1997. COMSHARE, INCORPORATED By: /s/ Kathryn A. Jehle ------------------------------- Kathryn A. Jehle Senior Vice President and Chief Financial Officer 17 22 A-1 SCHEDULE A BENEFIT ADJUSTMENT PLAN OF COMSHARE, INCORPORATED ("PLAN") COMPENSATION DEFERRAL AGREEMENT I hereby elect and instruct the Company to credit my Deferred Compensation Account with an amount equal to percent of the Compensation (as defined in the Plan) which otherwise would be payable to me for each pay period beginning on and after the date of this Agreement. I understand that all amounts hereby deferred shall be subject, in all respects, to the provisions of the Plan. This Agreement shall remain in effect until revoked by written notice of the Participant. Dated: ------------- ------------------------------------- Signature of Participant A-1 EX-10.24 3 SUMMARY OF 2000 SENIOR EXECUTIVE INCENTIVE PLAN 1 EXHIBIT 10.24 SUMMARY OF 2000 SENIOR EXECUTIVE INCENTIVE PLAN A bonus equal to 50% of Dennis Ganster's base compensation and 40% of the base compensation of the other senior executives is payable for the fiscal year 2000 upon achievement of performance goals. Fifty percent of the bonus is payable upon achievement of targeted revenue growth and fifty percent is payable upon achievement of targeted earnings per share levels. Participating senior executives must be employed by the Company at the date of the payment of the bonus. EX-11.1 4 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE 1 EXHIBIT 11.1 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
Years Ended June 30, -------------------------------------- 1999 1998 1997 ---- ---- ---- (In thousands, except per share amounts) NET INCOME (LOSS) Net income (loss) - Basic EPS $(1,136) $ 5,266 $(17,117) Net income (loss) - Diluted EPS (1,136) 5,048 (17,117) SHARES USED IN PER COMMON SHARE Basic EPS 9,700 9,903 9,770 Diluted EPS 9,700 10,047 9,770 NET INCOME (LOSS) PER COMMON SHARE Basic EPS (0.12) 0.53 (1.75) Diluted EPS $ (0.12) $ 0.50 $ (1.75)
EX-21.01 5 SUBSIDIARIES OF COMSHARE, INC. 1 EXHIBIT 21.01 SUBSIDIARIES OF COMSHARE, INCORPORATED Subsidiaries of the Incorporated Registrant(a) In ------------ Comshare (U.S.), Inc. Michigan Comshare, Ltd. Canada Comshare International B.V. (b) Netherlands Comshare Holdings Company United Kingdom Comshare, Ltd. United Kingdom Comshare International Ltd. United Kingdom (a) All subsidiaries are wholly owned by their immediate parent. (b) Currently being liquidated. EX-23.01 6 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 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, 1999 consolidated financial statements of Comshare, Incorporated and subsidiaries dated September 17, 1999, included in this Form 10-K Report, 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 23, 1999 EX-27 7 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1999 31,794,000 0 14,723,000 1,327,000 0 52,174,000 13,992,000 11,354,000 63,455,000 27,720,000 1,198,000 0 0 9,642,000 21,624,000 63,455,000 0 63,972,000 0 67,924,000 (1,845,000) 0 63,000 (2,170,000) (1,034,000) (1,136,000) 0 0 0 (1,136,000) (0.12) (0.12) Accounts receivable are stated at net of allowance for doubtful accounts. Comprised of $1,901,000 of interest income and $56,000 of exchange loss.
EX-99 8 PRESS RELEASE 1 EXHIBIT 99.00 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE X SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) ----- FOR THE FISCAL YEAR ENDED JUNE 30, 1999 ------------- 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, 1999 AND 1998 AND FOR THE THREE YEARS ENDED JUNE 30, 1999 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Plan Administrator of the Profit Sharing Plan of Comshare, Incorporated: We have audited the accompanying statements of net assets available for benefits of the PROFIT SHARING PLAN OF COMSHARE, INCORPORATED (the Plan) as of June 30,1999 and 1998, and the related statements of changes in net assets available for benefits for the years ended June 30, 1999, 1998 and 1997. 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, 1999 and 1998, and the changes in its net assets available for benefits for the years ended June 30, 1999, 1998 and 1997, 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 purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's 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 14,1999. 4 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Pages ----- Report of Independent Public Accountants Statements of Net Assets Available for Benefits as of 2-3 June 30, 1999 and 1998 Statements of Changes in Net Assets Available for Benefits 4-6 for the Years Ended June 30, 1999, 1998 and 1997 Notes to Financial Statements 7-10 SCHEDULES - --------- I. Item 27a-Schedule of Assets Held 11 for Investment Purposes as of June 30, 1999 II. Item 27d-Schedule of Reportable Transactions 12 for the Year Ended June 30, 1999 Consent of Independent Public Accountants 13 5 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF JUNE 30, 1999
Vanguard Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index Index 500 Wellington U.S. Growth Prime Portfolio Fund Portfolio Fund Portfolio --------------- ---- --------- ---- --------- RECEIVABLES: Employer's contribution $ 3,250 $ 1,444 $ 11,668 $ 3,240 $ 6,211 Participants' contributions 11,458 6,032 42,436 12,338 28,203 Accrued loan repayments 2,255 502 4,783 1,045 1,724 ----------- ----------- ----------- ----------- ----------- 16,963 7,978 58,887 16,623 36,138 INVESTMENTS, at market: Registered Investment Companies 2,307,680 1,306,079 13,946,147 3,098,870 3,964,045 Company Stock Fund -- -- -- -- -- Loans to participants -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- 2,307,680 1,306,079 13,946,147 3,098,870 3,964,045 NET ASSETS AVAILABLE FOR BENEFITS 2,324,643 $ 1,314,057 $14,005,034 $ 3,115,493 $ 4,000,183 =========== =========== =========== =========== =========== Vanguard International Value Comshare Loan Portfolio Stock Fund Fund Other --------- ---------- ---- ----- RECEIVABLES: Employer's contribution $ 1,031 $ 898 -- $ 259,891 Participants' contributions 5,533 4,258 -- -- Accrued loan repayments 290 763 -- -- ----------- ------------- ----------- ----------- 6,854 5,919 -- 259,891 INVESTMENTS, at market: Registered Investment Companies 636,110 -- -- -- Company Stock Fund -- 1,115,166 -- -- Loans to participants -- -- 429,902 -- ----------- ----------- ----------- ----------- 636,110 1,115,166 429,902 -- NET ASSETS AVAILABLE FOR BENEFITS $ 642,964 $ 1,121,085 $ 429,902 $ 259,891 =========== =========== =========== =========== 1999 Total ----- RECEIVABLES: Employer's contribution $ 287,633 Participants' contributions 110,258 Accrued loan repayments 11,362 ----------- 409,253 INVESTMENTS, at market: Registered Investment Companies 25,258,931 Company Stock Fund 1,115,166 Loans to participants 429,902 ----------- 26,803,999 NET ASSETS AVAILABLE FOR BENEFITS $27,213,252 ===========
The accompanying notes are an integral part of this statement. 2 6 PROFIT SHARING PLAN OF COMSHARE INCORPORATED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF JUNE 30, 1998
Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index Index 500 Wellington Prime Portfolio Fund Portfolio Fund --------------- ---- --------- ---- RECEIVABLES: Employer's contribution $ 35,303 $ 22,020 $ 135,376 $ 47,014 Participants' contributions 12,950 7,476 54,180 17,467 Accrued loan repayments 2,337 1,245 5,589 2,159 ----------- ----------- ----------- ----------- 50,590 30,741 195,145 66,640 INVESTMENTS, at market: Registered Investment Companies 2,175,116 2,037,147 14,142,676 3,063,642 Company Stock Fund -- -- -- -- Loans to participants -- -- -- -- ----------- ----------- ----------- ----------- 2,175,116 2,037,147 14,142,676 3,063,642 NET ASSETS AVAILABLE FOR BENEFITS 2,225,706 $ 2,067,888 $14,337,821 $ 3,130,282 =========== =========== =========== =========== Vanguard Vanguard International U.S. Growth Value Comshare Portfolio Portfolio Stock Fund --------- --------- ---------- RECEIVABLES: Employer's contribution $ 81,956 $ 20,911 $ 17,077 Participants' contributions 30,458 6,565 3,122 Accrued loan repayments 1,567 117 994 ----------- ----------- ----------- 113,981 27,593 21,193 INVESTMENTS, at market: Registered Investment Companies 4,139,597 1,162,573 -- Company Stock Fund -- -- 1,967,236 Loans to participants -- -- -- ----------- ----------- ----------- 4,139,597 1,162,573 1,967,236 NET ASSETS AVAILABLE FOR BENEFITS $ 4,253,578 $ 1,190,166 $ 1,988,429 =========== =========== =========== Loan 1998 Fund Total ---- ----- RECEIVABLES: Employer's contribution $ -- $ 359,657 Participants' contributions -- 132,218 Accrued loan repayments -- 14,008 ----------- ----------- -- 505,883 INVESTMENTS, at market: Registered Investment Companies -- 26,720,751 Company Stock Fund -- 1,967,236 Loans to participants 613,565 613,565 ----------- ----------- 613,565 29,301,552 NET ASSETS AVAILABLE FOR BENEFITS $ 613,565 $29,807,435 =========== ===========
The accompanying notes are an integral part of this statement. 3 7 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1999
Vanguard Vanguard Vanguard Money Market- Bond Index Index 500 Prime Portfolio Fund Portfolio --------------- ---- --------- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ -- $ (48,385) $ 2,305,471 Interest and dividend income 105,390 85,983 239,282 Realized gain(loss) on investments -- 2,448 88,850 ------------ ------------ ------------ 105,390 40,046 2,633,603 CONTRIBUTIONS: Employer Participants 59,605 22,537 144,055 139,298 79,965 597,867 ------------ ------------ ------------ 198,903 102,502 741,922 TRANSFER OF ASSETS TO OTHER PLANS -- -- -- LOAN ORIGINATIONS (5,424) (5,340) (54,822) LOAN REPAYMENTS 49,084 13,996 117,256 INTERFUND TRANSFERS, NET 14,574 (10,577) (480,102) DISTRIBUTIONS TO PARTICIPANTS (263,590) (894,458) (3,290,644) ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits 98,937 (753,831) (332,787) NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 2,225,706 2,067,888 14,337,821 ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 2,324,643 $ 1,314,057 $ 14,005,034 ============ ============ ============ Vanguard Vanguard Vanguard International Wellington U.S. Growth Value Fund Portfolio Portfolio ---- --------- --------- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ (27,081) $ 428,614 $ 47,355 Interest and dividend income 335,967 221,945 31,267 Realized gain(loss) on investments (22,568) 38,064 (587) ------------ ------------ ------------ 286,318 688,623 78,035 CONTRIBUTIONS: Employer 46,119 68,416 8,996 Participants 220,349 451,218 93,668 ------------ ------------ ------------ 266,468 519,634 102,664 TRANSFER OF ASSETS TO OTHER PLANS -- -- -- LOAN ORIGINATIONS (23,377) (52,718) (7,742) LOAN REPAYMENTS 40,261 63,095 4,306 INTERFUND TRANSFERS, NET 207,433 (253,858) (51,475) DISTRIBUTIONS TO PARTICIPANTS (791,892) (1,218,171) (672,990) ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits (14,789) (253,395) (547,202) NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,130,282 4,253,578 1,190,166 ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 3,115,493 $ 4,000,183 $ 642,964 ============ ============ ============ Comshare Loan Stock Fund Fund Other ---------- ---- ----- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ (1,025,726) $ -- $ -- Interest and dividend income -- 42,577 -- Realized gain(loss) on investments (73,810) -- -- ------------ ------------ ------------ (1,099,536) 42,577 -- CONTRIBUTIONS: Employer 6,830 -- 259,891 Participants 68,272 -- -- ------------ ------------ ------------ 75,102 -- 259,891 TRANSFER OF ASSETS TO OTHER PLANS -- (49,750) -- LOAN ORIGINATIONS (5,582) 155,005 -- LOAN REPAYMENTS 10,798 (298,796) -- INTERFUND TRANSFERS, NET 574,005 -- -- DISTRIBUTIONS TO PARTICIPANTS (422,131) (32,699) -- ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits (867,344) (183,663) 259,891 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 1,988,429 613,565 -- ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 1,121,085 $ 429,902 $ 259,891 ============ ============ ============ 1999 Total ----- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ 1,680,248 Interest and dividend income 1,062,411 Realized gain(loss) on investments 32,397 ------------ 2,775,056 CONTRIBUTIONS: Employer 616,449 Participants 1,650,637 ------------ 2,267,086 TRANSFER OF ASSETS TO OTHER PLANS (49,750) LOAN ORIGINATIONS -- LOAN REPAYMENTS -- INTERFUND TRANSFERS, NET -- DISTRIBUTIONS TO PARTICIPANTS (7,586,575) ------------ Increase(decrease) in Net Assets Available for Benefits (2,594,183) NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 29,807,435 ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 27,213,252 ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT. 4 8 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1998
Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index Index 500 Wellington Prime Portfolio Fund Portfolio Fund --------------- ---- --------- ---- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ -- $ 47,812 $ 2,862,094 $ 212,265 Interest and dividend income 124,206 100,370 288,750 225,350 Realized gain(loss) on investments -- 7,799 435,455 37,457 ------------ ------------- ------------ ------------ 124,206 155,981 3,586,299 475,072 CONTRIBUTIONS: Employer 77,475 52,477 308,122 104,902 Participants 154,792 99,246 683,480 227,131 ------------ ------------ ------------ ------------ 232,267 151,723 991,602 332,033 LOAN ORIGINATIONS (25,941) (32,490) (60,753) (31,662) LOAN REPAYMENTS 42,235 18,861 91,026 42,569 INTERFUND TRANSFERS, NET (549,030) 564,764 (1,836,406) 328,025 DISTRIBUTIONS TO PARTICIPANTS (397,310) (220,550) (1,917,769) (549,742) ------------ ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits (573,573) 638,289 853,999 596,295 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 2,799,279 1,429,599 13,483,822 2,533,987 ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 2,225,706 $ 2,067,888 $ 14,337,821 $ 3,130,282 ============ ============ ============ ============ Vanguard Vanguard International U.S. Growth Value Comshare Loan Portfolio Portfolio Stock Fund Fund --------- --------- ---------- ---- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ 803,392 $ (53,849) $ (353,282) $ -- Interest and dividend income 114,946 86,000 -- 58,693 Realized gain(loss) on investments 92,904 (29,857) (85,949) -- ------------ ------------ ------------ ------------ 1,011,242 2,294 (439,231) 58,693 CONTRIBUTIONS: Employer 175,660 42,866 29,363 -- Participants 451,792 104,965 65,310 -- ------------ ------------ ------------ ------------ 627,452 147,831 94,673 -- LOAN ORIGINATIONS (12,979) (2,587) (11,280) 177,692 LOAN REPAYMENTS 35,538 5,401 13,762 (249,392) INTERFUND TRANSFERS, NET 360,978 382,613 749,056 -- DISTRIBUTIONS TO PARTICIPANTS (1,179,827) (231,582) (170,567) (91,995) ------------ ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits 842,404 303,970 236,413 (105,002) NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,411,174 886,196 1,752,016 718,567 ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 4,253,578 $ 1,190,166 $ 1,988,429 $ 613,565 ============ ============ ============ ============ 1998 Total ----- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ 3,518,432 Interest and dividend income 998,315 Realized gain(loss) on investments 457,809 ------------ 4,974,556 CONTRIBUTIONS: Employer 790,865 Participants 1,786,716 ------------ 2,577,581 LOAN ORIGINATIONS -- LOAN REPAYMENTS -- INTERFUND TRANSFERS, NET -- DISTRIBUTIONS TO PARTICIPANTS (4,759,342) ------------ Increase(decrease) in Net Assets Available for Benefits 2,792,795 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 27,014,640 ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 29,807,435 ============
The accompanying notes are an integral part of this statement. 5 9 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED JUNE 30, 1997
Vanguard Vanguard Vanguard Vanguard Money Market- Bond Index Index 500 Wellington Prime Portfolio Fund Portfolio Fund --------------- ---- --------- ---- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ -- $ 13,776 $ 2,988,259 $ 292,461 Interest and dividend income 158,926 99,058 257,917 180,140 Realized gain(loss) on investments -- 3,367 147,785 22,078 ------------ ------------ ------------ ------------ 158,926 116,201 3,393,961 494,679 CONTRIBUTIONS: Employer 109,690 59,534 321,794 111,672 Participants 193,117 114,355 715,440 279,178 ------------ ------------ ------------ ------------ 302,807 173,889 1,037,234 390,850 LOAN ORIGINATIONS (79,667) (23,769) (135,939) (48,973) LOAN REPAYMENTS 77,471 19,113 95,655 36,872 INTERFUND TRANSFERS, NET 843,753 (422,305) (363,905) (449,832) DISTRIBUTIONS TO PARTICIPANTS (1,640,541) (185,293) (1,246,043) (323,371) ------------ ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits (337,251) (322,164) 2,780,963 100,225 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,136,530 1,751,763 10,702,859 2,433,762 ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 2,799,279 $ 1,429,599 $ 13,483,822 $ 2,533,987 ============ ============ ============ ============ Vanguard Vanguard International U.S. Growth Value Comshare Loan Portfolio Portfolio Stock Fund Fund --------- --------- ---------- ---- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ 486,517 $ (10,758) $ (1,581,935) $ -- Interest and dividend income 260,689 188,680 -- 67,303 Realized gain(loss) on investments 57,140 (59,278) (749,905) -- ------------ ------------ ------------ ------------ 804,346 118,644 (2,331,840) 67,303 CONTRIBUTIONS: Employer 152,579 41,359 22,063 -- Participants 442,913 136,118 89,656 -- ------------ ------------ ------------ ------------ 595,492 177,477 111,719 -- LOAN ORIGINATIONS (53,371) (7,120) (58,658) 407,497 LOAN REPAYMENTS 42,061 18,271 34,110 (323,553) INTERFUND TRANSFERS, NET 308,703 (199,170) 282,756 -- DISTRIBUTIONS TO PARTICIPANTS (1,408,716) (342,947) (267,340) (68,342) ------------ ------------ ------------ ------------ Increase(decrease) in Net Assets Available for Benefits 288,515 (234,845) (2,229,253) 82,905 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 3,122,659 1,121,041 3,981,269 635,662 ------------ ------------ ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 3,411,174 $ 886,196 $ 1,752,016 $ 718,567 ============ ============ ============ ============ 1997 Total ----- INVESTMENT INCOME: Unrealized appreciation (depreciation) of investments $ 2,188,320 Interest and dividend income 1,212,713 Realized gain(loss) on investments (578,813) ------------ 2,822,220 CONTRIBUTIONS: Employer 818,691 Participants 1,970,777 ------------ 2,789,468 LOAN ORIGINATIONS -- LOAN REPAYMENTS -- INTERFUND TRANSFERS, NET -- DISTRIBUTIONS TO PARTICIPANTS (5,482,593) ------------ Increase(decrease) in Net Assets Available for Benefits 129,095 NET ASSETS AVAILABLE FOR BENEFITS BEGINNING OF YEAR 26,885,545 ------------ NET ASSETS AVAILABLE FOR BENEFITS END OF YEAR $ 27,014,640 ============
The accompanying notes are an integral part of this statement. 6 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. (b) Trustee and Investment Advisor As of June 30, 1999 the Plan held all investments with Vanguard Fiduciary Trust Company (the Trustee and Investment Advisor). In accordance with the related 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 or 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. There were no discretionary contributions in 1999, 1998 or 1997. 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. 7 11 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) The annual employer fixed contribution for 1999 is scheduled to be paid to the Plan by the Company on September 27, 1999 in the amount of $259,891 and is shown as an unallocated receivable on the Statement of Net Assets Available for Benefits for the Year Ended June 30, 1999. Upon receipt of the employer fixed contribution, the Plan will allocate the contribution to eligible participants based on the participants then current investment elections. Participants may make before-tax contributions to the Plan, 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, 1999 the investment options available to participants are as follows: (1) Vanguard Money Market - 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 International Value Portfolio, an international equity fund, consisting of investments in stocks of companies based outside the United States; and (7) Comshare Stock Fund, a fund investing in the common stock of the Company. There are no guaranteed rates of returns for any of these funds. Participants may change their investment election daily for new contributions 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, 1999 there were 307 active participants. Participants vest in employer discretionary contributions according to a five 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 five year schedule (prior to l/l/98 a seven year schedule was in effect) for participants with targeted compensation greater than the social security wage base. All other participants are fully vested in employer matching contributions. 8 12 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) Employee contributions and employer fixed contributions are always fully vested. (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 typically mature within five years with a maximum maturity of twenty 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 to exceed ten. (i) Benefits Payable As of June 30, 1999 and 1998, the net assets available for benefits included $1,233,413 and $6,046,158, respectively, for benefits payable that were due but undistributed to participants as a result of termination of employment or retirement. These amounts are shown as liabilities on Form 5500 and are the only reconciling items between the financial statements and Form 5500. (j) 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. (k) Plan Termination Although it has not expressed the intent to do so, the Company has the right to terminate the Plan subject to the provisions of ERISA. In the event the Plan is terminated, the participants will become fully vested and will receive the balances in their individual accounts. 9 13 PROFIT SHARING PLAN OF COMSHARE, INCORPORATED NOTES TO FINANCIAL STATEMENTS (continued) (l) 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 subsequently been amended and restated effective October 1, 1995. 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 and that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. (m) Forfeitures Non-vested account balances of terminated employees are forfeited at the end of the quarter following the date of termination. Forfeitures were $61,758, $61,836 and $33,657 for the years ended June 30, 1999, 1998 and 1997, 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 Statements of Net Assets Available for Benefits at market value. Realized gains and losses on sale of investments and unrealized appreciation (depreciation) of investments arc 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. 10 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 30,1999
(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 Group 2,307,680 units of Money $ 2,307,680 $ 2,307,680 Market - Prime Portfolio - - Vanguard Group 133,137 units of Bond 1,317,946 1,306,079 Index Fund - - Vanguard Group 109,959 units of Index 6,497,939 13,946,147 500 Portfolio - - Vanguard Group 99,867 units of Wellington 2,683,186 3,098,870 Fund - - Vanguard Group 98,928 units of U.S. Growth 2,621,808 3,964,045 Portfolio - - Vanguard Group 22,718 units of International 630,255 636,110 Value Portfolio - - Vanguard Group 733,661 units of Comshare Stock 2,172,731 1,115,166 Fund ----------- ---------- Total Mutual Funds 18,231,545 26,374,097 ----------- ---------- LOANS: Loans to plan participants Interest rates range 429,902 429,902 from 7.55% to 12.25%; ----------- ---------- maturing through December, 2016 TOTAL INVESTMENTS $ 18,661,447 $26,803,999 =========== ==========
* Represents a party-in-interest 11 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, 1999
(a) (b) (c) (d) Identity of Party Description of Purchase Selling Involved Asset Price Price -------- ----- ----- ----- Vanguard Group Vanguard Money Market-Prime Portfolio $1,152,121 N/A Vanguard Group Vanguard Index 500 Portfolio 1,814,326 N/A Vanguard Group Vanguard U.S. Growth Portfolio 1,269,269 N/A Vanguard Group Vanguard Wellington Fund 1,187,237 N/A Vanguard Group Vanguard Money Market-Prime Portfolio N/A $1,019,556 Vanguard Group Vanguard Index 500 Portfolio N/A 4,405,176 Vanguard Group Vanguard U.S. Growth Portfolio N/A 1,911,500 Vanguard Group Vanguard Wellington Fund N/A 1,102,359 (h) (a) (g) Current Value Identity of Party Cost of of Asset on (i) Involved Asset Transaction Date Net Gain(Loss) -------- ----- ---------------- -------------- Vanguard Group N/A $1,152,121 N/A Vanguard Group N/A 1,814,326 N/A Vanguard Group N/A 1,269,269 N/A Vanguard Group N/A 1,187,237 N/A Vanguard Group $1,019,556 1,019,556 -- Vanguard Group 2,573,465 4,405,176 $1,831,711 Vanguard Group 1,427,382 1,911,500 484,118 Vanguard Group 951,237 1,102,359 151,122
12 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, 1999 financial statements of the Profit Sharing Plan of Comshare, Incorporated dated September 14, 1999; 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 23, 1999. 13 -----END PRIVACY-ENHANCED MESSAGE-----