-----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, QzmmYzmfwfBcCmnGLycMP4Wi8IZl0Nt1HHbdB19lmIvBA7h0U4qwXsStDwhtKrRs KBbl/eJZ3WLWE7YCWHA1AQ== 0000950124-99-006135.txt : 19991117 0000950124-99-006135.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950124-99-006135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMSHARE INC CENTRAL INDEX KEY: 0000201513 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 381804887 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28848 FILM NUMBER: 99755585 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-Q 1 QUARTERLY REPORT ENDED 9/30/99 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ----------------------------- X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------------- ----------------- COMMISSION FILE NUMBER 0-4096 ----------------------------- COMSHARE, INCORPORATED (Exact name of registrant as specified in its charter) MICHIGAN 38-1804887 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (734) 994-4800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of SEPTEMBER 30, 1999. OUTSTANDING AT CLASS OF COMMON STOCK SEPTEMBER 30, 1999 --------------------- ------------------ $1.00 PAR VALUE 9,642,033 SHARES 1 2 COMSHARE, INCORPORATED INDEX Page No. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 1999 and 1998..........3 Consolidated Statement of Comprehensive Income For the Three Months Ended September 30, 1999 and 1998..........4 Condensed Consolidated Balance Sheets as of September 30, 1999 and June 30, 1998............................5 Condensed Consolidated Statement of Cash Flows for the Three Months Ended September 30, 1999 and 1998..................7 Notes to Condensed Consolidated Financial Statements................8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....18 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................18 SIGNATURE..............................................................19 INDEX TO EXHIBITS......................................................20 2 3 PART I. - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS COMSHARE, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited; in thousands, except per share data)
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 ---- ---- REVENUE Software licenses $ 5,302 $ 6,126 Software maintenance 5,748 7,114 Implementation, consulting and other services 3,456 3,919 -------- -------- TOTAL REVENUE 14,506 17,159 Costs and expenses Selling and marketing 5,817 6,938 Cost of revenue and support 5,238 6,406 Internal research and product development 2,150 2,247 General and administrative 1,479 1,977 -------- -------- TOTAL COSTS AND EXPENSES 14,684 17,568 -------- -------- LOSS FROM OPERATIONS (178) (409) OTHER INCOME (EXPENSE) Interest income 386 569 Interest expense (22) (87) Exchange gain (loss) (104) 7 -------- -------- TOTAL OTHER INCOME 260 489 INCOME BEFORE TAXES 82 80 Provision for income taxes 30 28 -------- -------- NET INCOME $ 52 $ 52 ======== ======== SHARES USED IN BASIC EPS COMPUTATION 9,642 9,998 ======== ======== SHARES USED IN DILUTED EPS COMPUTATION 9,642 9,998 ======== ======== NET INCOME PER COMMON SHARE - BASIC AND DILUTED EPS $ 0.01 $ 0.01 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 COMSHARE, INCORPORATED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited, in thousands)
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 ---- ---- Net income $ 52 $ 52 Other comprehensive income (loss): Currency translation adjustment (32) 377 ---- ---- COMPREHENSIVE INCOME $ 20 $429 ==== ====
See accompanying notes to condensed consolidated financial statements. 4 5 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
SEPTEMBER 30, JUNE 30, 1999 1999 ---- ---- ASSETS (unaudited) (audited) CURRENT ASSETS Cash and cash equivalents $26,715 $31,794 Accounts receivable, net 18,469 14,723 Deferred income taxes 654 654 Prepaid expenses and other current assets 2,322 5,003 ------- ------- TOTAL CURRENT ASSETS 48,160 52,174 Property and equipment, at cost Computers & other equipment 11,245 11,099 Leasehold improvements 3,039 2,893 ------- ------- 14,284 13,992 Less - Accumulated depreciation 11,831 11,354 ------- ------- Property and equipment, net 2,453 2,638 Goodwill, net 1,311 1,330 Deferred income taxes 6,094 5,067 Other assets 2,179 2,246 ------- ------- TOTAL ASSETS $60,197 $63,455 ======= =======
See accompanying notes to condensed consolidated financial statements. 5 6 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
SEPTEMBER 30, JUNE 30, 1999 1999 ---- ---- LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited) CURRENT LIABILITIES Current portion of long-term debt $ 753 $ 882 Accounts payable 5,346 8,293 Accrued liabilities: Payroll 1,767 2,423 Taxes 1,205 810 Other 5,760 3,701 -------- -------- Total Accrued Liabilities 8,732 6,934 Deferred revenue 10,401 11,611 -------- -------- TOTAL CURRENT LIABILITIES 25,232 27,720 Long-term debt 691 1,198 Other liabilities 2,988 3,271 SHAREHOLDERS' EQUITY Capital stock: Preferred stock, no par value; authorized 5,000,000 shares; none issued -- -- Common stock, $1.00 par value; authorized 20,000,000 shares; outstanding 9,642,033 shares as of September 30, 1999 and 9,642,033 shares as of June 30, 1999 9,642 9,642 Capital contributed in excess of par value 38,650 38,650 Retained deficit (8,434) (8,486) Accumulated other comprehensive income: Pension liability, net of tax (3,262) (3,262) Cumulative translation adjustment (4,912) (4,880) -------- -------- 31,684 31,664 Less - Notes receivable 398 398 -------- -------- TOTAL SHAREHOLDERS' EQUITY 31,286 31,266 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 60,197 $ 63,455 ======== ========
See accompanying notes to condensed consolidated financial statements. 6 7 COMSHARE, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited; in thousands)
THREE MONTHS ENDED SEPTEMBER 30, --------------------------- 1999 1998 ---- ---- OPERATING ACTIVITIES Net income $ 52 $ 52 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 385 539 Changes in operating assets and liabilities: Accounts receivable (3,452) 2,168 Prepaid expenses and other assets (108) (572) Accounts payable (3,076) (1,896) Accrued liabilities 1,747 (5,098) Deferred revenue (1,360) (1,640) Income taxes receivable 2,888 -- Deferred income taxes (1,027) -- Other liabilities (283) (232) -------- -------- NET CASH USED IN OPERATING ACTIVITIES (4,234) (6,679) INVESTING ACTIVITIES Payments for property and equipment (79) (183) Other (38) -- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (117) (183) FINANCING ACTIVITIES Net borrowings (repayments) under debt agreements, capital lease agreements and notes payable (684) 2,181 Common stock repurchased and retired -- (387) Other -- 66 -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (684) 1,860 Effect of exchange rate changes (44) (269) -------- -------- NET DECREASE IN CASH (5,079) (5,271) CASH AT BEGINNING OF PERIOD 31,794 49,102 -------- -------- CASH AT END OF PERIOD $ 26,715 $ 43,831 ======== ======== SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 23 $ 42 ======== ======== Cash paid for income taxes $ 168 $ 3,150 ======== ========
See accompanying notes to condensed consolidated financial statements. 7 8 COMSHARE, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE A - GENERAL INFORMATION The condensed consolidated financial statements included herein have been prepared by Comshare, Incorporated (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's most recent Annual Report on Form 10-K. Certain amounts in the fiscal 1999 financial statements have been reclassified to conform with fiscal 2000 presentations. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, required to present fairly its consolidated statement of operations and the consolidated statement of comprehensive income for the three months ended September 30, 1999 and 1998, the consolidated balance sheet as of September 30, 1999 and the consolidated statement of cash flows for the three months ended September 30, 1999 and 1998. The results of operations for the three months ended September 30, 1999 and 1998 are not necessarily indicative of the results to be expected in future quarters or the full fiscal year. The software industry is generally characterized by seasonal trends. NOTE B - COMPUTER SOFTWARE 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 various external factors. In the last several years, product upgrades for the Company's products have been released regularly with an almost continuous product development cycle. This has reduced the time between establishing technological feasibility and general release to the public. Based on these continuous product life cycles, software costs qualifying for capitalization will be insignificant. Accordingly, the Company has not capitalized any software development costs during the three months ended September 30, 1999 and does not anticipate capitalizing future software development costs. NOTE C - BORROWINGS The Company has a $10 million credit agreement which expires on September 30, 2001. 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. Borrowings under this credit agreement were approximately $0.7 million and total available borrowings were $10 million at September 30, 1999. Borrowings available at any time are based on the lower of $10 million or a percentage of worldwide eligible accounts receivable and cash. At September 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 1.8% and 2.9%. 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 of $0.3 million under this agreement at September 30, 1999, which are classified as a capital lease. The interest rate was 10.4% at September 30, 1999. 8 9 COMSHARE, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) NOTE D - 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 September 30, 1999 and June 30, 1999, the Company had forward foreign currency exchange contracts outstanding of approximately $1.4 million and $2.9 million (notional amounts), respectively, denominated in foreign currencies. The contracts outstanding at September 30, 1999 mature at various dates through January 14, 2000 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 September 30, 1999 and June 30, 1999. NOTE E - FINANCIAL ACCOUNTING STANDARDS 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. NOTE F - 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 three months ended September 30, 1999 and 1998. In addition, the Company is not dependent on any single customer or group of customers. Geographic segment information is as follows: 9 10 COMSHARE, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 --------- -------- REVENUE FROM EXTERNAL CUSTOMERS: United States $ 7,501 $ 8,352 United Kingdom 3,193 3,481 Other countries 3,812 5,326 -------- -------- TOTAL REVENUE $ 14,506 $ 17,159 ======== ======== OPERATING INCOME: United States $ (1,120) $ 92 United Kingdom 1,064 (332) Other countries 2,611 2,608 -------- -------- Total operating income 2,555 2,368 Unallocated expenses (2,473) (2,288) -------- -------- INCOME BEFORE TAXES $ 82 $ 80 ======== ======== IDENTIFIABLE ASSETS: United States $ 48,433 $ 52,038 United Kingdom and other countries 11,764 29,983 -------- -------- TOTAL IDENTIFIABLE ASSETS $ 60,197 $ 82,021 ======== ========
Unallocated expenses consist of general corporate expenses, internal research and product development expenses, interest expense and interest income. 10 11 ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis sets forth information for the three months ended September 30, 1999 compared to the three months ended September 30, 1998. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999. RESULTS OF OPERATIONS The following table sets forth for the periods indicated, certain financial data as a percentage of total revenue.
THREE MONTHS ENDED SEPTEMBER 30, --------------------- 1999 1998 ---- ---- REVENUE Software licenses 36.6% 35.7% Software maintenance 39.6 41.5 Implementation, consulting and other services 23.8 22.8 ----- ----- TOTAL REVENUE 100.0 100.0 COSTS AND EXPENSES Selling and marketing 40.1 40.4 Cost of revenue and support 36.1 37.3 Internal research and product development 14.8 13.1 General and administrative 10.2 11.5 ----- ----- TOTAL COSTS AND EXPENSES 101.2 102.3 LOSS FROM OPERATIONS (1.2) (2.3) OTHER INCOME (EXPENSE) Interest income 2.7 3.3 Interest expense (0.2) (0.5) Exchange loss (0.7) -- ----- ----- TOTAL OTHER INCOME 1.8 2.8 INCOME BEFORE TAXES 0.6 0.5 Provision for income taxes 0.2 0.2 ----- ----- NET INCOME 0.4% 0.3% ===== =====
11 12 REVENUE
THREE MONTHS ENDED PERCENT SEPTEMBER 30, CHANGE ------------------------- ------------ 1999 1998 ---- ---- (in thousands) REVENUE Software licenses $ 5,302 $ 6,126 (13.5)% Software maintenance 5,748 7,114 (19.2) Implementation, consulting and other services 3,456 3,919 (11.8) ------- ------- TOTAL REVENUE $14,506 $17,159 (15.5)% ======= =======
Total revenue decreased 15.5% in the three months ended September 30, 1999, compared to the prior year, primarily due to the sale of the Company's French and German operations and their conversion to distributorships during the quarter ended December 31, 1998. As a result of the sales of these operations, software licenses revenue, software maintenance revenue and implementation, consulting and other services revenue decreased. Revenue for the three months ended September 30, 1998, reflecting the Company's French and German operations as distributors ("on a comparable basis"), was $16 million. Software license fees were $5.3 million for the three months ended September 30, 1999 and $5.8 million for the three months ended September 30, 1998, on a comparable basis. The decrease in license fees, on a comparable basis, was primarily due to a decline in sales of the Company's older products, which was partially offset by sales of newer products. License fees for BudgetPLUS grew 76%, or $0.8 million, compared to the year ago quarter. In addition, FDC license fees grew 26%, or $0.3 million and Decision license fees grew 22%, or $0.3 million, compared to the year ago quarter. Software maintenance revenue was $5.7 million for the three months ended September 30, 1999 and $6.7 million for the same period a year ago, on a comparable basis. The Company experienced growth in maintenance revenue from newer products, primarily BudgetPLUS, offset by a decline in maintenance revenue from older desktop products and mainframe software. Total mainframe software maintenance revenue decreased 28% in the three months ended September 30, 1999 compared to last year, primarily due to expected mainframe maintenance cancellations and continued migration to client/server platforms. Implementation, consulting and other services revenue was $3.5 million for the three months ended September 30, 1999 and 1998, on a comparable basis. COSTS AND EXPENSES
THREE MONTHS ENDED PERCENT SEPTEMBER 30, CHANGE --------------------------- ---------- 1999 1998 ---- ---- (in thousands) COST AND EXPENSES Selling and marketing $ 5,817 $ 6,938 (16.2)% Cost of revenue and support 5,238 6,406 (18.2) Internal research and product development 2,150 2,247 (4.3) General and administrative 1,479 1,977 (25.2) ------- ------- TOTAL COSTS AND EXPENSES $14,684 $17,568 (16.4)% ======= =======
12 13 Total costs and expenses decreased 16.4% in the three months ended September 30, 1999 compared to the prior year, primarily due to the Company's sale of its French and German operations and their conversion to distributorships during the quarter ended December 31, 1998. As a result of these sales, all operating costs were favorably impacted. On a comparable basis, total costs and expenses were $16.0 million for the three months ended September 30, 1998. The decrease from the same period one year ago is primarily due to cost reduction actions taken to lower administrative and marketing costs and reduced cost of sales due to improved distribution procedures. OTHER INCOME AND EXPENSE
THREE MONTHS ENDED SEPTEMBER 30, ------------------------- 1999 1998 ---- ---- (in thousands) OTHER INCOME (EXPENSE) Interest income $ 386 $ 569 Interest expense (22) (87) Exchange gain (loss) (104) 7 ----- ----- TOTAL OTHER INCOME $ 260 $ 489 ===== =====
Lower average cash balances during the three months ended September 30, 1999 resulted in decreased interest income compared to the three months ended September 30, 1998. FOREIGN CURRENCY For the three months ended September 30, 1999, 48.3% of the Company's total revenue was from outside North America compared with 51.3% for the three months ended September 30, 1998. Most of the Company's international revenue is denominated in foreign currencies. The Company recognizes currency transaction gains and losses in the period of occurrence. As currency rates are constantly changing, these gains and losses can, at times, fluctuate greatly. The Company's future operating results may be adversely impacted by the overall strengthening of the U.S. dollar against foreign currencies of countries where the Company conducts business; conversely, future operating results may be favorably impacted by an overall weakening of the U.S. dollar against foreign currencies. For the three months ended September 30, 1999, foreign currency fluctuations did not have a material impact on the Company's revenues, operating expenses or net income. The Company had several forward exchange contracts totaling a notional amount of $1.4 million, outstanding at September 30, 1999. See Note D of Notes to Condensed Consolidated Financial Statements. PROVISION FOR INCOME TAXES The effective income tax rate in the three months ended September 30, 1999 and 1998 was approximately 35%, as the Company recorded a provision for income taxes on its operating income in the first quarter of fiscal 2000 and fiscal 1999. 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. The assessment could be impacted by a combination of 13 14 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. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Safe Harbor Statement" for discussion of uncertainties relating to such statements. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1999, cash and cash equivalents were $26.7 million, compared with cash and cash equivalents of $31.8 million at June 30, 1999. The decrease in cash and cash equivalents is principally due to increased accounts receivables, primarily due to the slow payment by several foreign distributors during the three months ended September 30, 1999. Net cash used in operating activities was $4.2 million in the three months ended September 30, 1999, compared with $6.7 million in the three months ended September 30, 1998. The decrease in net cash used in operating activities was primarily due an income tax refund of $1.9 million, decreased accounts payable and increased accounts receivable, during the three months ended September 30, 1999. Net cash used in investing activities was $0.1 million in the three months ended September 30, 1999, compared with $0.2 million in the three months ended September 30, 1998. The Company purchases most of its computer equipment under operating leases. At September 30, 1999, the Company did not have any material capital expenditure commitments. Net cash used in financing activities was $0.7 million in the three months ended September 30, 1999, compared with net cash provided by financing activities of $1.9 million in the same period one year ago. The net cash used in financing activities was primarily due to the repayment of borrowings under debt agreements and capital leases compared to net borrowings during the quarter ended September 30, 1998. Total assets were $60.2 million at September 30, 1999, compared with total assets of $63.5 million at June 30, 1999. Working capital as of September 30, 1999 was $22.9 million, compared with $24.5 million as of June 30, 1999. The decrease in total assets from June 30, 1999 to September 30, 1999 was primarily due to the decline in cash and cash equivalents during the three months ended September 30, 1999. The Company has a $10 million credit agreement which expires on September 30, 2001. 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. Borrowings under this credit agreement were approximately $0.7 million and total available borrowings were $10 million at September 30, 1999. Borrowings available at any time are based on the lower of $10 million or a percentage of worldwide eligible accounts receivable and cash. At September 30, 1999, the interest rate on borrowings denominated in Japanese yen Swiss francs, which were used to hedge receivables in those currencies, varied between 1.8% and 2.9%. Separately, in August 1997, the Company's European subsidiary entered into a $1.2 million loan agreement, which matures on May 31, 2000. The Company had outstanding borrowings of $0.3 million under this agreement at September 30, 1999, which are classified as a capital lease. The interest rate was 10.4% at September 30, 1999. 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 and 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 "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Safe Harbor Statement." 14 15 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. 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 September 30, 1999 and June 30, 1999, the Company had forward contracts of approximately $1.4 million and $2.9 million (notional amounts), respectively, denominated in foreign currencies. The contracts outstanding at September 30, 1999 mature through January 14, 2000 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 September 30, 1999 and June 30, 1999. 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 September 30, 1999 market rates would increase the unrealized value of the Company's forward contracts and a hypothetical 10 percent depreciation of the U.S. dollar from September 30, 1999 market rates would decrease the unrealized value of the Company's forward contracts. In either scenario, the gains or losses on the forward contracts would be largely offset by the gains or losses on the underlying transactions. 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 Disclosure" 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. Any issues that are identified are addressed on an ongoing basis. 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. 15 16 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 products 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. 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. 16 17 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 and less than $0.1 million in the first quarter of fiscal 2000 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 September 30, 1999, including replacement systems, will be approximately $0.2 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. SAFE HARBOR STATEMENT Certain information in this Form 10-Q 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; 17 18 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 cancelled. 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) The exhibit included with this Form 10-Q is set forth on the Index to Exhibits. (B) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended September 30, 1999. 18 19 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: NOVEMBER 9, 1999 COMSHARE, INCORPORATED (Registrant) /s/ Kathryn A. Jehle --------------------- Kathryn A. Jehle Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary 19 20 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.01 Second Amendment and Waiver to Credit Agreement 10.01 First Amendment to the Comshare, Incorporated Employee Stock Purchase Plan 10.02 Second Amendment to the Comshare, Incorporated Employee Stock Purchase Plan 10.03 Third Amendment to the Comshare, Incorporated Employee Stock Purchase Plan 10.04 First Amendment to the Comshare, Incorporated 1998 Global Employee Stock Option Plan 10.05 First Amendment to the Comshare, Incorporated Directors' Stock Option Plan 27 Financial Data Schedule 20 EX-4.01 2 SECOND AMENDMENT & WAIVER TO CREDIT AGREEMENT 1 EXHIBIT 4.01 SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT Harris Trust and Savings Bank Chicago, Illinois Gentlemen: Reference is hereby made to that certain Credit Agreement (the "Credit Agreement"), dated as of September 23, 1997, by and among Comshare, Incorporated (the "Company") and Comshare Limited (the "Borrowing Subsidiary") (together the "Borrowers") and Harris Trust and Savings Bank (the "Bank"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. The Borrowers have requested that the Bank extend the Termination Date of, waive the Company's past noncompliance with, and amend certain provisions of, the Credit Agreement and the Bank will do so under the terms and conditions set forth in this Amendment. 1. WAIVER. The Company has informed the Bank that, as of September 30, 1999, the Company was not in compliance with Section 8.8 of the Credit Agreement. The Bank hereby agrees to waive compliance with Section 8.8 of the Credit Agreement as of September 30, 1999, provided that this waiver shall not become effective unless and until the conditions precedent set forth in Section 3 hereof have been satisfied. 2. AMENDMENTS. (a) The definition of "Termination Date" appearing in Section 5 of the Credit Agreement shall be amended and as so amended shall be restated to read as follows: "Termination Date" means September 30, 2001, or such earlier date on which the Commitment is terminated in whole pursuant to Section 3.4, 9.2 or 9.3 hereof, or such later date to which the Termination Date is extended pursuant to Section 12.4 hereof. (b) "Sections 8.8 and 8.9 of the Credit Agreement shall be amended and restated in their entirety and so amended shall be restated to read as follows: "Section 8.8. Fixed Charge Coverage Ratio. The Company shall not, as of each date set forth below (commencing on September 30, 1998), permit the Fixed Charge Coverage Ratio to be less than indicated below for such period: 2 FIXED CHARGE DURING THE PERIOD COVERAGE RATIO FOR SUCH PERIOD SHALL NOT BE LESS THAN: The three calendar months 9/30/99 1.05 to 1 ending The six calendar months 12/31/99 0.90 to 1 ending The nine calendar months 3/31/00 1.05 to 1 ending The twelve calendar months 6/30/00 and 1.25 to 1 ending each calendar quarter thereafter Section 8.9. Minimum EBITDAL. The Company will earn an EBITDAL for each period set forth below in an amount not less than indicated below for such period: EBITDAL FOR DURING THE PERIOD SUCH PERIOD SHALL NOT BE LESS THAN: The three calendar months 9/30/99 $1,500,000 ending The six calendar months 12/31/99 $2,300,000 ending The nine calendar months 3/31/00 $4,000,000 ending The twelve calendar months 6/30/00 $6,300,000 ending The three calendar months 9/30/00 and $1,875,000" ending each calendar quarter thereafter -2- 3 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent: (a) The Borrowers and the Bank shall have executed and delivered this Amendment. (b) The Guarantors and each party signatory to that certain Debt Subordination Agreement dated September 23, 1997 shall have each executed and delivered to the Bank their consent to this Amendment in the forms set forth below. (c) Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Bank and its counsel. 4. REPRESENTATIONS. In order to induce the Bank to execute and deliver this Amendment, the Borrowers hereby represent to the Bank that as of the date hereof the representations and warranties set forth in Section 6 of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrowers delivered to the Bank) and, except as waived herein, the Borrowers are in compliance with the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment. 5. MISCELLANEOUS. 5.1. The Borrowers heretofore executed and delivered to the Bank the Security Agreement, Pledge Agreement and certain other Collateral Documents. The Borrowers hereby acknowledge and agree that the Liens created and provided for by the Collateral Documents continue to secure, among other things, the Obligations arising under the Credit Agreement as amended hereby; and the Collateral Documents and the rights and remedies of the Bank thereunder, the obligations of the Borrowers thereunder, and the Liens created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Collateral Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment. 5.2. Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Note, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. -3- 4 5.3. The Borrowers agree to pay on demand all costs and expenses of or incurred by the Bank in connection with the negotiation, preparation, execution and delivery of this Amendment, including the fees and expenses of counsel for the Bank. 5.4. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGE TO FOLLOW] -4- 5 Dated as of this 10th day of October, 1999. COMSHARE, INCORPORATED By: /s/ Kathryn A. Jehle -------------------------------------- Name: Kathryn. A. Jehle ---------------------------------- Title: Senior Vice President and CFO --------------------------------- COMSHARE LIMITED By:: /s/ Kathryn A. Jehle ------------------------------------- Name: Kathryn. A. Jehle -------------------------------- Title: Director ------------------------------ Accepted and agreed to as of the date last above written. HARRIS TRUST AND SAVINGS BANK By: /s/ Kirby M. Law -------------------------------------- Name: Kirby M. Law ---------------------------------- Title: Vice President ------------------------------- 6 GUARANTORS' ACKNOWLEDGEMENT AND CONSENT Each of the undersigned Guarantors heretofore executed and delivered to the Bank a separate Guaranty Agreement each dated September 23, 1997. Each of the undersigned hereby consent to the Second Amendment and Waiver to Credit Agreement as set forth above and confirm that its Guaranty Agreement and all of the undersigned's obligations thereunder remain in full force and effect. Each of the undersigned further agree that the consent of the undersigned to any further amendments to the Credit Agreement shall not be required as a result of this consent having been obtained, except to the extent, if any, required by the Guaranty Agreement referred to above. COMSHARE (U.S.), INC. COMSHARE LIMITED (CANADA) COMSHARE HOLDINGS COMPANY By: /s/ Kathryn A. Jehle -------------------------------------- Name: Kathryn. A. Jehle ---------------------------------- Title: Senior Vice President and CFO --------------------------------- 7 SUBORDINATED CREDITORS' ACKNOWLEDGEMENT AND CONSENT Each of the undersigned heretofore executed in favor of the Bank a Debt Subordination Agreement dated September 23, 1997. Each of the undersigned hereby consent to the Second Amendment and Waiver to Credit Agreement as set forth above and confirms that the Debt Subordination Agreement and all of the undersigned's obligations thereunder remain in full force and effect. Each of the undersigned further agree that the consent of the undersigned to any further amendments to the Credit Agreement shall not be required as a result of this consent having been obtained, except to the extent, if any, required by the Debt Subordination Agreement referred to above. COMSHARE, INCORPORATED COMSHARE (U.S.), INC. COMSHARE INTERNATIONAL B.V. COMSHARE LIMITED COMSHARE HOLDINGS COMPANY COMSHARE LIMITED By: /s/ Kathryn A. Jehle -------------------------------------- Name: Kathryn. A. Jehle ---------------------------------- Title: Senior Vice President and CFO --------------------------------- -2- EX-10.01 3 FIRST AMEND TO COMSHARE, INC EMP STOCK PURCHASE 1 EXHIBIT 10.01 FIRST AMENDMENT TO THE COMSHARE, INCORPORATED EMPLOYEE STOCK PURCHASE PLAN Effective January 1, 1997, Section 7 of the Plan shall be amended and restated in its entirety as follows: "7. Option Price. The option price of the shares shall be 85% of the average of the fair market value of the Company's Common Stock the ten business trading days immediately preceding the six month Purchase Period. For purposes of this section of the Plan, the fair market value of the shares shall be determined by the last sale price of the shares of the Company's Common Stock on the NASDAQ National Market, as reported in The Wall Street Journal for the applicable dates." This amendment to the Comshare, Incorporated Employee Stock Purchase Plan is hereby executed on November 11, 1996. COMSHARE, INCORPORATED BY: /s/ Kathryn A. Jehle -------------------- Kathryn A. Jehle Senior Vice President and Chief Financial Officer BOARD APPROVAL: 11/8/96 21 EX-10.02 4 SECOND AMEND TO COMSHARE, INC EMP STOCK PURCHASE 1 EXHIBIT 10.02 SECOND AMENDMENT TO THE COMSHARE, INCORPORATED EMPLOYEE STOCK PURCHASE PLAN Effective January 1, 1998, Section 7 of the Plan shall be amended in its entirety and restated as follows: "7. Option Price. The option price of the shares shall be 85% of the lower of: a) The fair market value of the Company's Common Stock on the first day of the applicable six month Purchase Period, or b) The fair market value of the Company's Common Stock on the last day of the applicable six month Purchase Period. For purposes of this section of the Plan, the fair market value of the shares shall be determined by the last sale price of the shares of the Company's Common Stock on the NASDAQ National Market, as reported in The Wall Street Journal for the applicable days described above. If there is no sale on such dates, then the fair market value will be determined on the last date immediately preceding on which there were sales." This amendment to the Comshare, Incorporated Employee Stock Purchase Plan is hereby executed on November 6, 1997. COMSHARE, INCORPORATED BY: /s/ Kathryn A. Jehle -------------------- Kathryn A. Jehle Senior Vice President and Chief Financial Officer BOARD APPROVAL: 11/6/97 22 EX-10.03 5 THIRD AMEND TO COMSHARE, INC EMP STOCK PURCHASE 1 EXHIBIT 10.03 THIRD AMENDMENT TO THE COMSHARE, INCORPORATED EMPLOYEE STOCK PURCHASE PLAN Pursuant to resolutions adopted by the Board of Directors of Comshare, Incorporated on June 24, 1999 and subject to shareholder approval at the Annual Meeting of Shareholders on November 22, 1999, the Comshare, Incorporated Employee Stock Purchase Plan (the "Plan") is amended as set forth below. 1. Effective November 22, 1999, the Section 1 of the Plan "Purpose" shall be amended with the addition of a new sentence at the end of the Section to read as follows: On and after November 22, 1999, non-employee directors of the Company may purchase Common Stock under the Plan in lieu of a portion or all of their cash compensation from the Company. Stock purchases by non-employee directors shall not constitute purchases under Code Section 423. The inclusion of non-employee directors under the Plan is intended to attract qualified non-employee directors and further align their interests with those of shareholders. 2. Effective November 22, 1999, the second sentence in Section 3 of the Plan ("Stock") shall be amended and restated in its entirety to read as follows: The total amount of Common Stock on which options may be granted under the Plan shall not exceed 800,000 shares, subject to adjustment in accordance with Section 12. 3. Effective November 22, 1999, Section 5 of the Plan "Participants" shall be amended by the addition of a new sentence at the end of the Section to read as follows: On and after November 22, 1999, non-employee directors of the Company also may participate in the Plan for purposes of purchasing Common Stock in accordance with Section 20; provided, however, that such purchases shall not constitute purchases under Code Section 423. 4. Effective November 22, 1999, a new Section 20, entitled "Director Stock Purchases" shall be added to the Plan as set forth below. 20. DIRECTOR STOCK PURCHASES. (a) ELIGIBILITY. Effective November 22, 1999, a non-employee director of the Company may 2 purchase shares of Common Stock under the Plan from either 50% or 100% of his or her base directors' fees (comprising semi-annual retainer and Board/Committee meeting fees) on behalf of services for which the non-employee director has not yet received payment. (b) ELECTIONS. Elections to purchase Common Stock under the Plan in lieu of cash compensation may be submitted to the Company semi-annually, prior to the end of December and June of each calendar year. An election covers base cash compensation for the six-month period ending on the June 30 or December 31 next following the date on which the election is submitted. (c) PURCHASE PRICE. Common Stock purchased by a non-employee director hereunder shall have a purchase price equal to 100% of the fair market value of the Company's Common Stock on the date of issuance, which shall be February 15th or August 15th (or, if later, two business days after the release of the Company's earnings for the prior fiscal quarter), as applicable. Fair market value for purposes of this paragraph shall be determined by the last sale price of the shares of the Company's Common Stock on the NASDAQ National Market, as reported in The Wall Street Journal, for the date prior to the date of issuance or, if there are no sales on such date, on the last date immediately preceding the issuance date on which there were sales. (d) TERMINATION OF SERVICES. If a non-employee director ceases to remain on the Board for any reason, including but not limited to, voluntary or forced resignation, death, disability or retirement, within a reasonable time after notice of the termination, the Company shall issue a check to the former non-employee director (or executor, administrator or legal representative, if applicable) in the aggregate amount of any accrued but unpaid non-employee directors fees that had not yet been paid in the form of Company Common Stock as of the non-employee director's date of termination on the Board. 3 (e) NON-ASSIGNABILITY. Any non-employee director Common Stock purchase right granted hereunder shall be exercised by the non-employee director only and is nontransferable. Upon the death of a non-employee director, any unpaid directors' fees on behalf of such individual shall be paid to the non-employee director's executor, administrator or legal representative in accordance with paragraph (d), above. (f) ADJUSTMENTS. The total amount of Common Stock available for purchase under the Plan shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Common Stock resulting from payment of a stock dividend on Common Stock, a subdivision or combination of shares of Common Stock, or a reclassification of Common Stock and, in the event of a merger in which the Company shall be the surviving corporation. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustment may provide for the elimination of any fractional share. (g) TERMINATION AND AMENDMENT OF NON-EMPLOYEE DIRECTOR PURCHASE RIGHTS. The Board may amend or terminate the Plan or this Section 20 of the Plan at any time. No Common Stock may be issued under Section 20 of the Plan after July 31, 2004. (h) RULE 16B-3 REQUIREMENTS. Notwithstanding any provision of the Plan, the Committee may impose such conditions on the purchase of shares of Common Stock hereunder as may be required to satisfy the requirements of Rule 16b-3 of the Exchange Act, as amended from time to time (or any successor rule). (i) RIGHTS PRIOR TO DELIVERY OF SHARES. No participant shall have any rights as a shareholder with respect to shares covered by a purchase right until the issuance of a stock certificate or electronic 4 transfer to the non-employee director or his brokerage account of such shares. No adjustment shall be made for dividends or other rights with respect to such shares for which the record date is prior to the date the certificate is issued or the shares electronically delivered to a brokerage account. (j) SECURITIES LAWS. Anything to the contrary herein notwithstanding, the Company's obligation to sell and deliver stock pursuant to a purchase right hereunder is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Company deems necessary or advisable. The Company shall not be required to sell and deliver stock unless and until it receives satisfactory assurance that the issuance or transfer of such shares shall not violate any of the provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934, or the rules and regulations of the Securities Exchange Commission promulgated thereunder or those of any stock exchange on which the stock may be listed, the provisions of any state laws governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and laws. (k) EFFECT ON SERVICES. Neither the adoption of Section 20 of the Plan nor the Common Stock purchase rights granted hereunder shall be deemed to create any right in any non-employee director to be retained or continued on the Board. (l) ADMINISTRATION AND DEFINITIONS. This Section 20 of the Plan shall be administered in conformance with Section 4 of the Plan and definitions set forth in other Sections of the Plan shall apply to Section 20. For purposes of Section 4 of the Plan, the term "employees" shall include non-employee directors. THIS THIRD AMENDMENT to the Comshare, Incorporated Employee Stock Purchase Plan is hereby executed on this the 14th day of October, 1999. 5 COMSHARE, INCORPORATED By: /s/ KATHRYN A. JEHLE -------------------------------------- Kathryn A. Jehle Senior Vice President and Chief Financial Officer EX-10.04 6 FIRST AMEND TO COMSHARE, INC 1998 GLOBAL EMP STOCK 1 EXHIBIT 10.04 FIRST AMENDMENT TO THE COMSHARE, INCORPORATED 1998 GLOBAL EMPLOYEE STOCK OPTION PLAN Pursuant to resolutions adopted by the Board of Directors of Comshare, Incorporated on June 24, 1999 and subject to shareholder approval at the Annual Meeting of Shareholders on November 22, 1999, the 1998 Global Employee Stock Option Plan (the "Plan") is hereby amended as set forth below. Effective November 22, 1999, the second sentence in Paragraph 3 of the Plan is amended and restated in its entirety to read as follows: The total amount of stock on which options may be granted under the Plan shall not exceed 1,400,000 shares, subject to adjustment as provided in Paragraph 13 hereof. THIS FIRST AMENDMENT to the Comshare, Incorporated 1998 Global Employee Stock Option Plan is hereby executed on this the 14th day of October, 1999. COMSHARE, INCORPORATED By: /s/ KATHRYN A. JEHLE ------------------------------------ Kathryn A. Jehle Senior Vice President and Chief Financial Officer EX-10.05 7 FIRST AMEND TO COMSHARE, INC DIRECTORS' STOCK OPT 1 EXHIBIT 10.05 FIRST AMENDMENT TO THE COMSHARE, INCORPORATED DIRECTORS' STOCK OPTION PLAN Pursuant to resolutions adopted by the Board of Directors of Comshare, Incorporated on June 24, 1999 and subject to shareholder approval at the Annual Meeting of Shareholders on November 22, 1999, the Comshare, Incorporated Directors' Stock Option Plan (the "Plan") is hereby amended as set forth below. 1. Effective November 22, 1999, the first sentence in Section 1.4 of the Plan ("Stock") is amended and restated in its entirety to read as follows: The total number of shares of Common Stock available for grants under the Plan shall not, in the aggregate, exceed 200,000 shares of Common Stock, as adjusted from time to time in accordance with Article IV. 2. Effective November 22, 1999, paragraph (b) ("Subsequent Grants") of Section 2.1 ("Automatic Grants of Options") shall be amended and restated in its entirety to read as follows: (b) SUBSEQUENT GRANTS. After the initial grant and during the term of the Plan, a Nonemployee Director who has been a Director for six months before the January 1 following the date of an Annual Meeting of Stockholders, automatically shall be granted, as of the January 1 following the Annual Meeting, an additional Option to purchase 5,000 shares of the Company's Common Stock, provided that the Nonemployee Director is still serving on the Board as of such January 1. Notwithstanding the foregoing, a Nonemployee Director is elected at the 1999 Annual Meeting shall receive a one-time accelerated grant of 10,000 shares on the first business day after the 1999 Annual Meeting, representing the January 1, 2000 and January 1, 2001 grants. A Nonemployee Director who first becomes eligible for Option grants after January 1, 2000 shall receive Option grants in accordance with the regular terms of the Plan. A Participant may hold more than one Option under the Plan. THIS FIRST AMENDMENT to the Comshare, Incorporated Directors' Stock Option Plan is executed on this the 14th day of October, 1999. COMSHARE, INCORPORATED By: /s/ KATHRYN A. JEHLE ------------------------------------ 2 Kathryn A. Jehle Senior Vice President and Chief Financial Officer EX-27 8 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-30-2000 JUL-01-1999 SEP-30-1999 26,715,000 0 18,469,000 1,558,000 0 48,160,000 14,284,000 11,831,000 60,197,000 25,232,000 691,000 0 0 9,642,000 21,644,000 60,197,000 0 14,506,000 0 14,684,000 (282,000) 0 22,000 82,000 30,000 52,000 0 0 0 52,000 0.01 0.01 Accounts receivable are stated at Net of Allowance for Doubtful Accounts. Comprised of $386,000 of Interest Income and $104,000 of Exchange Loss.
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