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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
---
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
----- -----
COMMISSION FILE NUMBER 0-4096
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COMSHARE, INCORPORATED
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1804887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 994-4800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (DECEMBER 31, 1995).
OUTSTANDING AT
CLASS OF COMMON STOCK DECEMBER 31, 1995
--------------------- -----------------
$1.00 PAR VALUE 9,596,567 SHARES
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COMSHARE, INCORPORATED
INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
December 31, 1995 and June 30, 1995........................... 3
Condensed Consolidated Statement of Income for the
Three and Six Months Ended December 31, 1995 and 1994......... 5
Condensed Consolidated Statement of Cash Flows for the
Six Months Ended December 31, 1995 and 1994................... 6
Notes to Condensed Consolidated Financial Statements............ 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS......................... 9
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........ 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 14
SIGNATURE........................................................... 15
INDEX TO EXHIBITS................................................... 16
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PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
December 31, June 30,
1995 1995
ASSETS (unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $22,540 $ 1,398
Accounts receivable, net 37,744 29,531
Deferred income taxes 783 783
Prepaid expenses 4,400 4,098
------- -------
Total current assets 65,467 35,810
PROPERTY AND EQUIPMENT, at cost 28,200 27,076
Less - accumulated depreciation 24,215 23,663
------- -------
Property and equipment, net 3,985 3,413
COMPUTER SOFTWARE, net 9,138 32,676
GOODWILL, net 2,124 2,246
DEFERRED INCOME TAXES 6,279 -
OTHER ASSETS 5,464 5,165
------- -------
$92,457 $79,310
======= =======
See accompanying notes to condensed consolidated financial statements.
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COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
December 31, June 30,
1995 1995
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
CURRENT LIABILITIES
Notes payable $ 244 $ --
Accounts payable 13,625 11,342
Accrued liabilities 6,487 6,418
Income taxes 2,117 1,602
Deferred revenue 19,138 18,599
------- -------
Total current liabilities 41,611 37,961
LONG-TERM DEBT 347 5,436
OTHER LIABILITIES 3,573 3,365
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value;
authorized 20,000,000 shares;
outstanding 9,596,567 shares as of
December 31, 1995 and 8,221,234
shares as of June 30, 1995 9,597 8,221
Capital contributed in excess of par 37,579 13,199
Retained earnings 3,940 15,500
Currency translation adjustments (3,256) (3,239)
------- -------
47,860 33,681
Less - Notes receivable 934 1,133
------- -------
Total shareholders' equity 46,926 32,548
------- -------
$92,457 $79,310
======= =======
See accompanying notes to condensed consolidated financial statements.
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COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited; in thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -----------------
1995 1994 1995 1994
REVENUE
Software licenses $17,234 $13,018 $31,154 $23,024
Software maintenance 9,247 9,237 18,262 18,209
Implementation, consulting
and other services 5,702 5,401 11,420 10,581
------- ------- ------- -------
TOTAL REVENUE 32,183 27,656 60,836 51,814
COSTS AND EXPENSES
Selling and marketing 13,023 11,514 25,061 21,746
Cost of revenue and support 7,798 5,979 14,488 11,361
Internal research and product development 4,088 4,031 8,086 8,101
Internally capitalized software (1,076) (2,940) (3,434) (6,019)
Software amortization 1,127 3,262 3,743 6,647
General and administrative 3,035 2,964 6,076 5,714
Unusual charge 23,167 - 23,167 -
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 51,162 24,810 77,187 47,550
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS (18,979) 2,846 (16,351) 4,264
OTHER INCOME (EXPENSE)
Interest income (expense), net 54 (175) (87) (341)
Exchange gain (loss) (23) (6) (112) (43)
------- ------- ------- -------
TOTAL OTHER INCOME (EXPENSE) 31 (181) (199) (384)
------- ------- ------- -------
INCOME (LOSS) BEFORE TAXES (18,948) 2,665 (16,550) 3,880
Provision (benefit) for income taxes (6,084) 984 (5,196) 1,448
------- ------- ------- -------
NET INCOME (LOSS) $(12,864) $1,681 $(11,354) $2,432
========= ======= ========= ======
WEIGHTED AVERAGE NUMBER OF COMMON
AND DILUTIVE COMMON EQUIVALENT SHARES 8,678 8,325 8,456 8,283
======== ======= ======== ======
NET INCOME (LOSS) PER COMMON SHARE ($1.48) $0.20 ($1.34) $0.29
========= ======= ========= ======
See accompanying notes to condensed consolidated financial statements.
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COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in thousands)
Six Months Ended
December 31,
--------------------------------
1995 1994
---- ----
OPERATING ACTIVITIES
Net income (loss) $ (11,354) $ 2,431
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 4,828 8,042
Provision for losses on accounts receivable 49 (72)
Write-off of capitalized software 23,167 -
Loss on sale of property and equipment - 11
Changes in operating assets and liabilities:
Accounts receivable (8,284) (696)
Prepaid expenses (362) 190
Accounts payable 2,391 (173)
Accrued liabilities 549 (1,063)
Deferred revenue 630 (1,265)
Deferred income taxes (6,593) 804
Other liabilities 513 83
------------ --------
Net cash provided by operating activities 5,534 8,292
INVESTING ACTIVITIES
Additions to computer software (3,485) (6,019)
Payments for property and equipment (1,440) (433)
Other (542) (652)
---------- ---------
Net cash used in investing activities (5,467) (7,104)
FINANCING ACTIVITIES
Net borrowings under notes payable 244 159
Repayments under long-term debt (5,006) (2,748)
Stock options exercised 164 41
Issuance of common stock 25,196 -
Other 388 132
---------- ---------
Net cash provided by financing activities 20,986 2,416
EFFECT OF EXCHANGE RATE CHANGES 89 (12)
---------- ---------
NET INCREASE (DECREASE) IN CASH 21,142 (1,240)
BALANCE AT BEGINNING OF PERIOD 1,398 1,774
---------- ---------
BALANCE AT END OF PERIOD $ 22,540 $ 534
========== =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 246 $ 270
========== =========
Cash paid for income taxes $ 890 $ 119
========== =========
See accompanying notes to condensed consolidated financial statements.
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COMSHARE, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - GENERAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's latest annual
report on Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments, consisting only of
normal recurring items except as discussed in Note F below, required to present
fairly its consolidated balance sheet as of December 31, 1995, the consolidated
statements of operations for the three and six months ended December 31, 1995
and 1994 and cash flows for the six months ended December 31, 1995 and 1994.
The Company changed its presentation of cash flows from operating
activities from the direct method to the indirect method.
The Company considers all highly liquid debt instruments with a maturity
of ninety days or less at the time of acquisition to be cash equivalents.
The prior period condensed consolidated financial statements have been
reclassified to conform with the current presentation.
The results of operations for the three and six months ended December 31,
1995 and 1994 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. Such trends may cause higher revenue in the
Company's last fiscal quarter as a result of efforts to exceed sales quotas,
and in the second fiscal quarter as many customers complete annual budgetary
cycles. In addition, lower revenue in the first quarter may be principally due
to the impact of slower sales during the summer months, particularly in Europe.
NOTE B - COMPUTER SOFTWARE
The costs of developing and purchasing new software products and
enhancements to existing software products are capitalized after technological
feasibility and realizability are established. In the first quarter of fiscal
1996, capitalized development costs were amortized using the straight-line
method over a four-year service life. Beginning October 1, 1995, capitalized
development costs were amortized using the straight-line method over a two-year
service life. The policy is reevaluated and adjusted as necessary at the end
of each accounting period.
NOTE C - BORROWINGS
At December 31, 1995 and June 30, 1995, the permitted borrowings available
under the Company's amended and restated domestic credit agreement were
$10,000,000 and $14,000,000, of which $0 and $3,500,000 were outstanding,
respectively.
Separately, certain of the Company's subsidiaries entered into local
currency credit agreements or overdraft facilities in various currencies with
banks providing permitted borrowings totaling $4,374,500 at December 31, 1995.
The Company had outstanding borrowings of $347,000 in Swedish kroner and
$244,000 in British pounds at December 31, 1995. The credit agreements expire
on October 1, 1997. The interest rates generally vary with the banks' base
rate. Most of such borrowings are guaranteed by the Company.
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COMSHARE, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE D - FINANCIAL INSTRUMENTS
The Company at various times has entered into forward exchange contracts
to hedge exposures related to foreign currency transactions. The Company does
not use any other types of derivatives to hedge such exposures nor does it
speculate in foreign currency. The Company only uses forward exchange
contracts to hedge against large selective transactions that present the most
exposure to exchange rate fluctuations. The Company entered into several
forward contracts on December 29, 1995 which mature on or before January 31,
1996, by purchasing a $1,000,000 contract for British pounds, a $735,000
contract for Japanese yen and a $651,000 contract for German marks. The
Company also entered into a forward contract on December 29, 1995 by selling a
$500,000 contract for Canadian dollars with a maturity date of January 31,
1996. The carrying value of these contracts approximates the fair market
value.
NOTE E - SHAREHOLDERS' EQUITY
On October 9, 1995, the Board of Directors declared a three-for-two stock
split of the Company's Common Stock distributable to shareholders of record on
November 13, 1995. Capital in excess of par value was charged and common stock
was credited for the par value of $2,749,000 issued in connection with the
split. This stock split was effective November 20, 1995 after the Company
received approval from its shareholders at the Annual Shareholders Meeting held
November 18, 1995 which increased the number of authorized shares of Common
Stock from 10,000,000 to 20,000,000 shares. All share and per share data
included in the condensed consolidated financial statements and accompanying
notes have been adjusted to reflect this stock split.
In December 1995, the Company completed a public offering of its Common
Stock which resulted in the issuance of 1,293,750 shares at $21.00 per share.
NOTE F - UNUSUAL CHARGE
During the second quarter ended December 31, 1995, the Company recorded a
$23.2 million non-cash charge to write off certain capitalized software. The
net after tax charge was $15.5 million. The write-off resulted from the strong
customer interest in Commander Decision, the Company's newest generation
product for customizable decision support applications, which substantially
reduced the realizable value of the Company's older Commander desktop products,
and the Company's acceleration of its product development cycles in response to
changes in the technological environment in the decision support application
market.
The write-off principally reflects the Company's decision, following its
Users Conference held during the second quarter, to focus its sales efforts on
Commander Decision, which was released in December 1995. The Company will no
longer market the front-ends offered with Commander OLAP with the release of
Commander Decision. Commander Decision was introduced at the Company's Users
Conference and generated greater interest than originally anticipated by the
Company. This strong customer interest, combined with the Company's recent
decision to offer the new Commander Decision end-user front-end to existing
maintenance-paying Commander OLAP customers at no charge, is expected to result
in rapid migration from Commander OLAP front-ends to the Commander Decision
front-end.
The write-off also reflects the reduction of the estimated useful service
life of the Company products and the amortization period for its capitalized
software costs, prompted by the Company's acceleration of its product
development cycle. The reduction of the software amortization period to two
years and a review of projected revenues over this two year service life
resulted in the write-off of unamortized capitalized software development
costs.
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ITEM 2. - 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.
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -----------------
1995 1994 1995 1994
REVENUE ------------------ -----------------
Software licenses
Client/Server 52.0% 44.2% 49.5% 40.7%
Mainframe 1.6 2.9 1.7 3.7
------------------ -----------------
Total software license fee revenue 53.6 47.1 51.2 44.4
Software maintenance
Client/Server 19.5 17.5 19.7 18.0
Mainframe 9.2 15.9 10.3 17.2
------------------- -----------------
Total software maintenance revenue 28.7 33.4 30.0 35.1
Implementation and consulting services 17.7 19.5 18.8 20.4
------------------- -----------------
Total revenue 100.0 100.0 100.0 100.0
COSTS AND EXPENSES
Selling and marketing 40.5 41.6 41.2 42.0
Cost of revenue and support 24.2 21.6 23.8 21.9
Internal research and product development 12.7 14.6 13.3 15.6
Internally capitalized software (3.3) (10.6) (5.6) (11.6)
Software amortization 3.5 11.8 6.2 12.8
General and administrative 9.4 10.7 10.0 11.0
Unusual charge 72.0 - 38.1 -
------------------- -----------------
Total costs and expenses 159.0 89.7 126.9 91.8
INCOME (LOSS) FROM OPERATIONS (59.0) 10.3 (26.9) 8.2
OTHER INCOME (EXPENSE)
Net interest income (expense) 0.2 (0.6) 0.1 (0.7)
Exchange gain (loss) (0.1) (0.0) (0.2) (0.1)
-------------------- -----------------
Total other income (expense) 0.1 (0.6) (0.3) (0.8)
INCOME (LOSS) BEFORE INCOME TAXES (58.9) 9.7 (27.2) 7.5
Benefit (provision) for income taxes 18.9 (3.6) 8.5 (2.8)
-------------------- -----------------
NET INCOME (LOSS) (40.0)% 6.1% (18.7)% 4.7%
==================== =================
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REVENUE
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
-------------------------- -------------------------
1995 1994 1995 1994
---------------------------------------------------------------------------
REVENUE
Software licenses
Client/Server $16,736 $12,229 36.9% $30,131 $21,092 42.9%
Mainframe 498 789 (36.8) 1,023 1,932 (47.1)
------------ ------------ ------------ ------------
Total software license fee revenue 17,234 13,018 32.4 31,154 23,024 35.3
============ ============ ============ ============
Software maintenance
Client/Server 6,274 4,848 29.4 11,991 9,307 28.8
Mainframe 2,973 4,389 (32.3) 6,271 8,902 (29.6)
------------ ------------ ------------ ------------
Total software maintenance revenue 9,247 9,237 0.1 18,262 18,209 0.3
Implementation and consulting services 5,702 5,401 5.6 11,420 10,581 7.9
------------ ------------ ------------ ------------
TOTAL REVENUE $32,183 $27,656 16.4% $60,836 $51,814 17.4%
============ ============ ============ ============
The growth in total revenue for the three and six months ended December
31, 1995 was primarily attributable to the strong increase in client/server
software license and maintenance revenue.
Total software license revenue increased for the three and six months
ended December 31, 1995 as shown below:
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
-------------------------- --------------------------
1995 1994 1995 1994
------------------------------------------------------------------------------
SOFTWARE LICENSE REVENUE:
EIS $11,150 $7,798 43.0% $19,180 $13,560 41.4%
Financial reporting applications 3,230 3,089 4.6 6,507 5,121 27.1
Retail decision support applications 2,854 2,130 34.0 5,467 4,343 25.9
------------ ------------ ------------ ------------
TOTAL SOFTWARE LICENSE REVENUE $17,234 $13,018 32.4% $31,154 $23,024 35.3%
============ ============ ============ ============
Software license revenue increased in all three decision support market
areas for the three and six month periods ending December 31, 1995 compared
with the corresponding periods a year ago. The software license revenue growth
in the three and six months ended December 31, 1995 primarily reflected the
continued strong demand for the Company's EIS Commander OLAP product and the
recently released enhanced version of Arthur Planning products. In addition,
the increase in software license fee revenue for the Company's financial
reporting products in the three and six months ended December 31, 1995 was
principally due to sales of enhanced versions of Commander FDC and Commander
Budget products.
Software maintenance revenue was flat compared with last year as a result
of client/server maintenance growth being offset by the mainframe maintenance
decline. The increase in client/server software maintenance revenue was
principally due to the increase in client/server license revenue during the
most recent twelve months. The decrease in mainframe software maintenance
revenue in the three and six months ended December 31, 1995 reflected mainframe
maintenance cancellations and continued customer migration to client/server
platforms. Mainframe software revenue is expected to continue to decline.
Implementation, consulting and other service revenue has benefited from
the growth in client/server software license revenue in all three decision
support markets.
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COSTS AND EXPENSES
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
-------------------------- -----------------------
1995 1994 1995 1994
------------------------------------------------------------------------------
COST AND EXPENSES
Selling and marketing $13,023 $11,514 13.1% $25,061 $21,746 15.2%
Cost of revenue and support 7,798 5,979 30.4 14,488 11,361 27.5
Internal research and product development 4,088 4,031 1.4 8,086 8,101 (0.2)
Internally capitalized software (1,076) (2,940) (63.4) (3,434) (6,019) (42.9)
Software amortization 1,127 3,262 (65.5) 3,743 6,647 (43.7)
General and administrative 3,035 2,964 2.4 6,076 5,714 6.3
Total costs and expenses ________ ________ ________ ________
before unusual charge 27,995 24,810 12.8 54,020 47,550 13.6
Unusual charge 23,167 - * 23,167 - *
------------ ------------ -------------- --------------
TOTAL COSTS AND EXPENSES $51,162 $24,810 106.2% $77,187 $47,550 62.3%
============ ============ ============== ==============
* % not meaningful.
Total operating expenses increased in the three and six months ended
December 31, 1995 primarily as a result of the $23.2 million non-cash charge to
write off capitalized software. Excluding the software write-off charge,
total operating expenses for the second quarter increased 12.8% compared with
the same period last year, in support of total revenue growth of 16.4%.
Excluding the software write-off charge, total operating expenses for the six
months ended December 31, 1995 increased 13.6% compared with the same period
last year, in support of total revenue growth of 17.4%. The operating profit
margin, excluding the software write-off charge, for the three months ended
December 31, 1995 was 13.0% compared with 10.3% for the three months ended
December 31, 1994. The operating profit margin, excluding the software
write-off charge, for the six months ended December 31, 1995 was 11.2%
compared with 8.2% for the same period a year ago.
Selling and marketing expense increased in the three and six months ended
December 31, 1995 principally due to increased employee related costs, and to a
lesser extent travel related costs, incurred in support of the significant
increase in software license revenue.
The increase in cost of revenue and support in the three and six months
ended December 31, 1995 was primarily attributable to increased royalty fees
payable to Arbor Software Corporation ("Arbor") as a result of increased
software license revenue from certain Comshare products which use Arbor's
Essbase and higher employee-related costs and, to a lesser extent, outside
service costs related to implementation and consulting services revenue.
Internally capitalized software decreased in the three and six months
ended December 31, 1995 primarily due to the increased levels of development
costs that were not capitalizable. Software amortization expense decreased in
the three and six months ended December 31, 1995 principally due to the reduced
levels of capitalized software following the $23.2 million write-off of
capitalized software.
During the second quarter ended December 31, 1995 , the Company recorded a
$23.2 million non-cash charge to write off certain capitalized software. The
write-off had a $15.5 negative after tax impact on net income. The write-off
is a result of strong customer interest in the Company's newest generation
product, Commander Decision, for customizable decision support applications,
which substantially reduced the realizable value of the Company's older desktop
products. The write-off also reflects the reduction of the estimated useful
service life of the Company's products and the amortization period of its
capitalized software costs, prompted by the Company's acceleration of its
product development cycles in response to changes in the technological
environment in the decision support applications market. See Note F of Notes
to Condensed Consolidated Financial Statements.
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NONOPERATING INCOME AND EXPENSE
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
-------------------------- --------------------------
1995 1994 1995 1994
----------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Net interest income (expense) $ 54 $ (175) * $ (87) $ (341) *
Exchange gain (loss) (23) (6) * (112) (43) *
------- ------ ------- ------
TOTAL OTHER INCOME (EXPENSE) 31 (181) * (199) (384) *
======= ====== ====== ======
* % not meaningful.
Interest income net of interest expense in the three and six months ended
December 31, 1995 increased due to investment of the net proceeds received from
the public offering (see Note E of Notes to Condensed Consolidated Financial
Statements) and the reduced loan balances outstanding.
PROVISION FOR INCOME TAXES
The effective income tax rate in the three and six months ended December
31, 1995 was 32.1% and 31.4%, respectively, compared with 36.9% and 37.3% for
the same periods a year ago. The lower tax rate on the net loss before taxes
for the three and six months ended December 31, 1995 was primarily due to the
lower tax benefits from the software write-off.
FOREIGN CURRENCY
In the three and six months ended December 31, 1995, 54.5% and 54.3% of
the Company's total revenue was from outside North America compared with 55.5%
in the three and six months ended December 31, 1994. Most of the Company's
international revenue is denominated in foreign currencies. The Company
recognizes currency transaction gains and losses in the period of occurrence.
As currency rates are constantly changing, these gains and losses can, at
times, fluctuate greatly.
During the three and six months ended December 31, 1995 foreign currency
fluctuations on revenue denominated in a foreign currency were offset by
currency fluctuations on expenses denominated in a foreign currency. At actual
exchange rates, the increase in total revenue was $80,000 more than at
comparable exchange rates. At actual exchange rates, the increase in total
expenses was $114,000 more than at comparable exchange rates. As a result of
the changes in the foreign currency exchange rates, the increase in the net
loss before taxes was $34,000 more at actual exchange rates, than at comparable
exchange rates. For the six months ended December 31, 1995, at actual exchange
rates, the increase in total revenue was $555,000 more than at comparable
exchange rates. At actual exchange rates, the increase in total expenses was
$707,000 more than at comparable exchange rates. As a result of the changes in
the foreign currency exchange rates, the increase in the net loss before taxes
was $152,000 more at actual exchange rates, than at comparable exchange rates.
The Company had several forward contracts totaling $2.9 million
outstanding at December 31, 1995. See Note D of Notes to Condensed
Consolidated Financial Statements.
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LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, cash and cash equivalents were $22.5 million and
available borrowings under the Company's lines of credit were $13.8 million,
compared with cash of $1.4 million and available borrowings under the Company's
lines of credit of $12.2 million at June 30, 1995. The increase in cash was
principally attributed to the $25.2 million in net proceeds received from the
public offering completed during the second quarter. In November 1995, the
Company reduced permitted borrowings under its lines of credit by $4.0 million.
The Company completed in the second quarter a public offering of 1,293,750
newly issued shares of Common Stock offered by the Company. The Company used
approximately $5.0 million of the net proceeds from the public offering to
reduce long-term debt. The Company expects to use the remaining net proceeds
from the offering for working capital and general corporate purposes. Pending
such uses, the Company invested the net proceeds from the public offering in
investment grade, short-term, interest bearing instruments.
Net cash provided by operating activities was $5.5 million in the six
months ended December 31, 1995, compared with $8.3 million in the six months
ended December 31, 1994. The decrease in net cash provided by operating
activities was principally due to the increase in accounts receivable balances,
which increased primarily as a result of the growth in revenue. The positive
cash flow generated in the six months ended December 31, 1995 and 1994 was
principally due to net income, excluding the non-cash write-off of software.
Net cash used in investing activities was $5.5 million in the six months
ended December 31, 1995, compared with $7.1 million in the six months ended
December 31, 1994. The decrease in net cash used in investing activities was
primarily due to a decrease in the amount of capitalized internally developed
software costs, discussed previously, partially offset by an increase in
property and equipment purchases. At December 31, 1995, the Company did not
have any material capital expenditure commitments.
Working capital as of December 31, 1995 was $23.9 million, compared with a
negative $2.2 million as of June 30, 1995. The $26.1 million increase from
June 30, 1995 to December 31, 1995 was primarily due to the increases in cash
and cash equivalents and accounts receivable. Deferred revenue as of December
31, 1995 was $19.1 million, compared with $18.6 million as of June 30, 1995.
Deferred revenue, which is included in current liabilities, principally relates
to prepaid maintenance contracts.
Total assets were $92.5 million at December 31, 1995, compared with total
assets of $79.3 million at June 30, 1995. The primary contributing factors to
the increase from June 30, 1995 to December 31, 1995 were the increases in
cash and cash equivalents and accounts receivable offset by the decrease in
computer software (net of long-term deferred income taxes), which decreased
as a result of the write-off of capitalized software.
The Company believes that the combination of present cash balances, future
operating cash flows and credit facilities will be sufficient to meet the
Company's currently anticipated cash requirements for at least the next twelve
months.
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PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on November 18, 1995.
There were two matters voted on:
(1) The election of nine directors.
(2) A proposal to amend the Articles of Incorporation to
increase the number of shares of Common stock authorized for
issuance from 10,000,000 to 20,000,000.
The following table sets forth the results of the matters voted on.
All director nominees were elected and the proposal was passed.
Voted For Votes Against Abstained Broker Non-votes
--------- ------------- --------- ----------------
(1) Election of Directors
Nominees:
Geoffrey B. Bloom 4,840,874 29,010 - -
Daniel T. Carroll 4,842,374 27,510 - -
Richard L. Crandall 4,847,612 22,272 - -
Stanley R. Day 4,842,624 27,260 - -
W. John Driscoll 4,847,424 22,460 - -
Alan G. Merten 4,844,324 25,560 - -
George R. Mrkonic 4,839,698 30,186 - -
John F. Rockart 4,846,724 23,160 - -
T. Wallace Wrathall 4,836,199 33,685 - -
(2) Amend the Articles of Incorporation 4,765,827 68,291 35,766 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) The exhibits included herewith are set forth on the Index to
Exhibits.
(b.) Reports on Form 8-K.
1.) Form 8-K filed November 3, 1995 regarding the
Company recording a non-cash charge of $23.2 million
during the three months ended December 31, 1995 to write
off certain capitalized software.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: FEBRUARY 14, 1996 COMSHARE, INCORPORATED
(Registrant)
/s/ Kathryn A. Jehle
-------------------------------------
Kathryn A. Jehle
Senior Vice President,
Chief Financial Officer,
Treasurer and Assistant Secretary
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(i) Restated Articles of Incorporation of the Registrant.
4.05 Third Amendment to Comshare, Incorporated Amended and Restated
Credit Agreement between Comshare, Incorporated and NBD Bank,
formerly known as NBD Bank, N.A., Michigan dated November 19, 1995.
27 Financial Data Schedule.
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