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 MARCH 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
COMMISSION FILE NUMBER 0-4096
___________________________
COMSHARE, INCORPORATED
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1804887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 994-4800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of MARCH 31, 1996.
OUTSTANDING AT
CLASS OF COMMON STOCK MARCH 31, 1996
--------------------- --------------
$1.00 PAR VALUE 9,649,026 SHARES
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COMSHARE, INCORPORATED
INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
March 31, 1996 and June 30, 1995........................3
Condensed Consolidated Statement of Operations for the
Three and Nine Months Ended March 31, 1996 and 1995.....5
Condensed Consolidated Statement of Cash Flows for the
Nine Months Ended March 31, 1996 and 1995...............6
Notes to Condensed Consolidated Financial Statements.......7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................9
PART II - OTHER INFORMATION
ITEM 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)
March 31, June 30,
1996 1995
------- -------
ASSETS (unaudited) (audited)
CURRENT ASSETS
Cash and cash equivalents $27,019 $ 1,398
Accounts receivable, net 38,875 29,531
Deferred income taxes 783 783
Prepaid expenses 4,783 4,098
------- -------
Total current assets 71,460 35,810
PROPERTY AND EQUIPMENT, AT COST 28,563 27,076
Less - accumulated depreciation 24,075 23,663
------- -------
Property and equipment, net 4,488 3,413
COMPUTER SOFTWARE, NET 9,026 32,676
GOODWILL, NET 2,035 2,246
DEFERRED INCOME TAXES 6,260 -
OTHER ASSETS 5,509 5,165
------- -------
$98,778 $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)
March 31, June 30,
1996 1995
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
CURRENT LIABILITIES
Notes payable $ 421 $ -
Accounts payable 15,290 11,342
Accrued liabilities 6,768 6,418
Income taxes 2,651 1,602
Deferred revenue 19,066 18,599
------- -------
Total current liabilities 44,196 37,961
LONG-TERM DEBT 2,098 5,436
OTHER LIABILITIES 3,492 3,365
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value;
authorized 20,000,000 shares;
outstanding 9,649,026 shares as of
March 31, 1996 and 8,221,234
shares as of June 30, 1995 9,649 8,221
Capital contributed in excess of par 37,787 13,199
Retained earnings 5,919 15,500
Currency translation adjustments (3,429) (3,239)
------- -------
49,926 33,681
Less - Notes receivable 934 1,133
------- -------
Total shareholders' equity 48,992 32,548
------- -------
$98,778 $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 Nine Months Ended
March 31, March 31,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUE
Software licenses $15,586 $12,705 $ 46,740 $35,729
Software maintenance 9,232 8,895 27,494 27,104
Implementation, consulting
and other services 6,716 6,104 18,136 16,685
------- ------- -------- -------
TOTAL REVENUE 31,534 27,704 92,370 79,518
COSTS AND EXPENSES
Selling and marketing 13,144 11,375 38,205 33,121
Cost of revenue and support 8,045 6,959 22,533 18,320
Internal research and product development 4,302 3,884 12,388 11,985
Internally capitalized software (1,130) (2,845) (4,564) (8,864)
Software amortization 1,191 3,415 4,934 10,062
General and administrative 3,223 3,088 9,299 8,802
Unusual charge - - 23,167 -
------- ------- -------- -------
TOTAL COSTS AND EXPENSES 28,775 25,876 105,962 73,426
------- ------- -------- -------
INCOME (LOSS) FROM OPERATIONS 2,759 1,828 (13,592) 6,092
OTHER INCOME (EXPENSE)
Interest income (expense), net 265 (126) 178 (467)
Exchange gain (loss) 31 216 (81) 173
------- ------- -------- -------
TOTAL OTHER INCOME (EXPENSE) 296 90 97 (294)
INCOME (LOSS) BEFORE TAXES 3,055 1,918 (13,495) 5,798
Provision (benefit) for income taxes 1,017 714 (4,179) 2,162
------- ------- -------- -------
NET INCOME (LOSS) $ 2,038 $ 1,204 $ (9,316) $ 3,636
======= ======= ======== =======
WEIGHTED AVERAGE NUMBER OF COMMON
AND DILUTIVE COMMON EQUIVALENT SHARES 10,109 8,472 8,843 8,348
======= ======= ======== =======
NET INCOME (LOSS) PER COMMON SHARE $ 0.20 $ 0.14 $ (1.05) $ 0.43
======= ======= ======== =======
See accompanying notes to condensed consolidated financial statements.
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COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in thousands)
Nine Months Ended
March 31,
-----------------------
1996 1995
---- ----
OPERATING ACTIVITIES
Net income (loss) $(9,316) $ 3,636
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 6,406 12,084
Write-off of capitalized software 23,167 -
Loss on sale of property and equipment - 11
Changes in operating assets and liabilities:
Accounts receivable (9,723) 4
Prepaid expenses (812) (255)
Accounts payable 4,313 1,168
Accrued liabilities 1,423 (272)
Deferred revenue 687 (129)
Deferred income taxes (6,613) 953
Other liabilities 459 99
------- --------
Net cash provided by operating activities 9,991 17,299
INVESTING ACTIVITIES
Additions to computer software (4,756) (8,864)
Payments for property and equipment (2,075) (805)
Other (751) (915)
------- --------
Net cash used in investing activities (7,582) (10,584)
FINANCING ACTIVITIES
Net borrowings (repayments) under notes payable 428 (43)
Repayments under long-term debt (3,180) (6,037)
Stock options exercised 414 177
Issuance of common stock 25,196 -
Other 340 68
------- --------
Net cash provided by (used in) financing activities 23,198 (5,835)
EFFECT OF EXCHANGE RATE CHANGES 14 33
------- --------
NET INCREASE IN CASH 25,621 913
BALANCE AT BEGINNING OF PERIOD 1,398 1,774
------- --------
BALANCE AT END OF PERIOD $27,019 $ 2,687
======= ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 340 $ 440
======= ========
Cash paid for income taxes $ 1,295 $ 198
======= ========
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 March 31, 1996, the consolidated
statement of operations for the three and nine months ended March 31, 1996 and
1995 and the consolidated statement of cash flows for the nine months ended
March 31, 1996 and 1995.
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 nine months ended March 31,
1996 and 1995 are not necessarily indicative of the results to be expected in
future quarters or the full fiscal year. The software industry is generally
characterized by seasonal trends. 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 March 31, 1996 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 $4,300,000 at March 31, 1996.
The Company had outstanding borrowings of $2,519,000 at March 31, 1996. The
credit agreements expire on October 1, 1997. The interest rates generally vary
with the banks' base rate. Most of such borrowings are guaranteed by the
Company.
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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 a forward
contract on January 29, 1996 which matures on June 28, 1996, by selling a
$477,000 contract for Italian lire. The Company also entered into a forward
contract on March 29, 1996 by selling a $400,000 contract for Canadian dollars
with a maturity date of April 30, 1996. The carrying value of these contracts
approximates their 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 reflected 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 reflected the reduction of the estimated useful service
life of the Company's products and the amortization period for its capitalized
software costs, prompted by the Company's acceleration of its product
development cycle. The reduction of the software amortization period to two
years and a review of projected revenues over this two year service life
resulted in the write-off of unamortized capitalized software development
costs.
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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 Nine Months Ended
March 31, March 31,
---------------- ---------------
1996 1995 1996 1995
---------------- ---------------
REVENUE
Software licenses
Client/server 47.5% 42.7% 48.8 % 41.4%
Mainframe 1.9 3.2 1.8 3.5
---- ---- ---- ----
Total software license revenue 49.4 45.9 50.6 44.9
Software maintenance
Client/server 20.6 17.5 20.0 17.8
Mainframe 8.7 14.6 9.8 16.3
---- ---- ---- ----
Total software maintenance revenue 29.3 32.1 29.8 34.1
Implementation, consulting and
other services 21.3 22.0 19.6 21.0
---- ---- ---- ----
Total revenue 100.0 100.0 100.0 100.0
COSTS AND EXPENSES
Selling and marketing 41.7 41.1 41.3 41.6
Cost of revenue and support 25.5 25.1 24.4 23.0
Internal research and product development 13.6 14.0 13.4 15.1
Internally capitalized software (3.6) (10.3) (4.9) (11.2)
Software amortization 3.8 12.3 5.3 12.7
General and administrative 10.2 11.2 10.1 11.1
Unusual charge - - 25.1 -
---- ---- ---- ----
Total costs and expenses 91.2 93.4 114.7 92.3
INCOME (LOSS) FROM OPERATIONS 8.8 6.6 (14.7) 7.7
OTHER INCOME (EXPENSE)
Net interest income (expense) 0.8 (0.5) 0.2 (0.6)
Exchange gain (loss) 0.1 0.8 (0.1) 0.2
---- ---- ---- ----
Total other income (expense) 0.9 0.3 0.1 (0.4)
INCOME (LOSS) BEFORE INCOME TAXES 9.7 6.9 (14.6) 7.3
Benefit (provision) for income taxes 3.2 2.6 (4.5) 2.7
---- ---- ---- ----
NET INCOME (LOSS) 6.5% 4.3% (10.1)% 4.6%
==== ==== ==== ====
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REVENUE
Three Months Ended Nine Months Ended
March 31, Percent March 31, Percent
------------------- Change ------------------- Change
1996 1995 1996 1995
-------------------------------------------------------------
Revenue
Software licenses
Client/server $14,973 $11,838 26.5% $45,104 $32,930 37.0%
Mainframe 613 867 (29.3) 1,636 2,799 (41.6)
------- ------- ------- -------
Total software license revenue 15,586 12,705 22.7 46,740 35,729 30.8
Software maintenance
Client/server 6,491 4,855 33.7 18,482 14,163 30.5
Mainframe 2,741 4,040 (32.2) 9,012 12,941 (30.4)
------- ------- ------- -------
Total software maintenance revenue 9,232 8,895 3.8 27,494 27,104 1.4
Implementation, consulting and
other services 6,716 6,104 10.0 18,136 16,685 8.7
------- ------- ------- -------
TOTAL REVENUE $31,534 $27,704 13.8% $92,370 $79,518 16.2%
======= ======= ======= =======
The growth in total revenue for the three and nine months ended March 31, 1996
was primarily attributable to the increase in client/server software license
and maintenance revenue.
Total software license revenue increased for the three and nine months
ended March 31, 1996 as shown below:
Three Months Ended Nine Months Ended
March 31, Percent March 31, Percent
----------------- Change ----------------- Change
1996 1995 1996 1995
--------------------------------------------------------
SOFTWARE LICENSE REVENUE
EIS $10,629 $ 8,008 32.7% $29,809 $21,568 38.2%
Financial reporting applications 2,314 2,338 (1.0) 8,821 7,459 18.3
Retail decision support applications 2,643 2,359 12.0 8,110 6,702 21.0
------- ------- ------- -------
TOTAL SOFTWARE LICENSE REVENUE $15,586 $12,705 22.7% $46,740 $35,729 30.8%
======= ======= ======= =======
Software license revenue increased in the three months ended March 31, 1996
principally due to the strong demand for the Company's executive information
system (EIS) OLAP-based decision support products, including Commander Decision,
the Company's newest generation customizable decision support product
commercially released at the end of December 1995. Software license revenue
growth was flat for the Company's financial reporting application products in
the three months ended March 31, 1996 primarily due to the transitional changes
experienced as a result of combining the North American EIS and financial
reporting sales organizations during the quarter. Software license revenue grew
in all three decision support markets for the nine months ended March 31, 1996
compared with the corresponding period a year ago. The growth in software
license revenue in the nine months ended March 31, 1996 primarily reflected the
continued strong demand for the Company's EIS Commander OLAP products. In
addition, the increase in software license revenue for the Company's financial
reporting and retail decision support products in the nine months ended March
31, 1996 was principally due to sales of enhanced versions of Commander FDC,
Commander Budget and Arthur Planning products.
Software maintenance revenue increased in the three and nine months
ended March 31, 1996 as a result of client/server maintenance growth due to the
increase in client/server software license revenue during the most recent
twelve months. The decrease in mainframe software maintenance revenue in the
three and nine months ended March 31, 1996 reflected mainframe maintenance
cancellations and continued customer migration to client/server platforms.
Mainframe software revenue is expected to continue to decline.
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Implementation, consulting and other service revenue growth in the three
and nine months ended March 31, 1996 reflected the growth in client/server
software license revenue and productivity of new consultants hired earlier in
the fiscal year.
COSTS AND EXPENSES
Three Months Ended Nine Months Ended
March 31, Percent March 31, Percent
------------------ Change -------------------- Change
1996 1995 1996 1995
-------------------------------------------------------------
COST AND EXPENSES
Selling and marketing $13,144 $11,375 15.6% $ 38,205 $33,121 15.4%
Cost of revenue and support 8,045 6,959 15.6 22,533 18,320 23.0
Internal research and product development 4,302 3,884 10.8 12,388 11,985 3.4
Internally capitalized software (1,130) (2,845) (60.3) (4,564) (8,864) (48.5)
Software amortization 1,191 3,415 (65.1) 4,934 10,062 (51.0)
General and administrative 3,223 3,088 4.4 9,299 8,802 5.7
------- ------- -------- -------
Total costs and expenses
before unusual charge 28,775 25,876 11.2 82,795 73,426 12.8
Unusual charge - - - 23,167 - n/m
------- ------- -------- -------
TOTAL COSTS AND EXPENSES $28,775 $25,876 11.2% $105,962 $73,426 44.3%
======= ======= ======== =======
Total operating expenses increased 11.2% in the three months ended March
31, 1996 in support of the 13.8% growth in total revenue. Total operating
expenses increased in the nine months ended March 31, 1996 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 nine
months ended March 31, 1996 increased 12.8% compared with the same period last
year, in support of total revenue growth of 16.2 %. The operating profit margin
for the three months ended March 31, 1996 was 8.8 % compared with 6.6 % for the
three months ended March 31, 1995. The operating profit margin, excluding the
software write-off charge, for the nine months ended March 31, 1996 was 10.4 %
compared with 7.7% for the same period a year ago.
Selling and marketing expense increased in the three months ended March
31, 1996 principally due to increased employee related expenses, including
travel and compensation costs, and agency fees, incurred in support of the 22.7%
growth in total software license revenue. The increase in selling and
marketing expense in the nine months ended March 31, 1996 was mainly
attributable to increased employee and travel related costs, incurred in support
of the 30.8% growth in total software license revenue.
The increase in cost of revenue and support in the three and nine months
ended March 31, 1996 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 costs and outside consulting fees related to the
growth in implementation and consulting services revenue.
Internal research and product development expense increased in the three
months ended March 31, 1996 mainly due to outside service costs and employee
related expenses, incurred in support of new product development and on-going
enhancements to existing software products.
Internally capitalized software decreased in the three and nine months
ended March 31, 1996 primarily due to increased levels of development costs
that were not capitalizable. Software amortization expense decreased in the
three and nine months ended March 31, 1996 principally due to the reduced
levels of capitalized software following the $23.2 million write-off of
capitalized software in the second quarter ended December 31, 1995.
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Total costs and expenses for the nine months ended March 31, 1996 included
a $23.2 million non-cash charge to write off certain capitalized software. The
write-off was a result of strong customer interest in the Company's newest
generation product, Commander Decision, for customizable decision support
applications, which substantially reduced the realizable value of the Company's
older desktop products. The write-off also reflected the reduction of the
estimated useful service life of the Company's products and the amortization
period of its capitalized software costs, prompted by the Company's
acceleration of its product development cycles in response to changes in the
technological environment in the decision support applications market. See
Note F of Notes to Condensed Consolidated Financial Statements.
NON-OPERATING INCOME AND EXPENSE
Three Months Ended Nine Months Ended
March 31, March 31,
------------- --------------
1996 1995 1996 1995
----------------------------------------
OTHER INCOME (EXPENSE)
Net interest income (expense) $265 $(126) $178 $(467)
Exchange gain (loss) 31 216 (81) 173
---- ----- ---- -----
TOTAL OTHER INCOME (EXPENSE) $296 $ 90 $ 97 $(294)
==== ===== ==== =====
Interest income net of interest expense in the three and nine months ended
March 31, 1996 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 nine months ended March 31,
1996 was 33.3% and 31.0%, respectively, compared with 37.2% and 37.3% for
the same periods a year ago. The lower effective tax rate for the current
quarter was primarily the result of recognizing certain prior year research and
development tax credits. The lower tax rate on the net loss before taxes for
the nine months ended March 31, 1996 was primarily due to the lower tax benefits
from the software write-off.
FOREIGN CURRENCY
In the three and nine months ended March 31, 1996, 54% of the Company's
total revenue was from outside North America compared with 54% and 55% in the
three and nine months ended March 31, 1995. Most of the Company's
international revenue is denominated in foreign currencies. The Company
recognizes currency transaction gains and losses in the period of occurrence.
As currency rates are constantly changing, these gains and losses can, at
times, fluctuate greatly.
During the three and nine months ended March 31, 1996 foreign currency
fluctuations on revenue denominated in a foreign currency were offset by
currency fluctuations on expenses denominated in a foreign currency. For the
three months ended March 31, 1996 the increase in total revenue, at actual
exchange rates, was $171,000 less than at comparable exchange rates. As a
result of the changes in the foreign currency exchange rates, the increase in
net income before taxes, at actual exchange rates, was $89,000 less than at
comparable exchange rates. For the nine months ended March 31, 1996, the
increase in total revenue, at actual exchange rates, was $384,000 more than at
comparable exchange rates. The increase in total expenses, at actual exchange
rates, was $625,000 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, at actual exchange rates, was $241,000 more than at comparable
exchange rates.
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The Company had several forward contracts totaling $877,000 outstanding at
March 31, 1996. See Note D of Notes to Condensed Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, cash and cash equivalents were $27.0 million, compared
with cash of $1.4 million at June 30, 1995. The increase in cash and cash
equivalents was principally attributable to the $25.2 million in net proceeds
received from the public offering completed during the second quarter ended
December 31, 1995. In November 1995, the Company reduced permitted borrowings
under its lines of credit by $4.0 million.
The Company completed in the second quarter ended December 31, 1995 a
public offering of 1,293,750 newly issued shares of Common Stock. The Company
used approximately $5.0 million of the net proceeds from the public offering to
reduce long-term debt during the second quarter ended December 31, 1995. The
Company expects to use the remaining net proceeds from the offering for working
capital and general corporate purposes. Pending such uses, the Company invested
the net proceeds from the public offering in investment grade, short-term,
interest bearing instruments.
Net cash provided by operating activities was $10.0 million in the nine
months ended March 31, 1996, compared with $17.3 million in the nine months
ended March 31, 1995. 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 nine months ended March 31, 1996 and 1995 was
principally due to net income, excluding the non-cash write-off of software.
Net cash used in investing activities was $7.6 million in the nine months
ended March 31, 1996, compared with $10.6 million in the nine months ended
March 31, 1995. The decrease in net cash used in investing activities was
primarily due to a decrease in the amount of capitalized internally developed
software costs, discussed previously, partially offset by an increase in
property and equipment purchases. At March 31, 1996, the Company did not have
any material capital expenditure commitments.
Working capital as of March 31, 1996 was $27.3 million, compared with a
negative $2.2 million as of June 30, 1995. The $29.5 million increase from
June 30, 1995 to March 31, 1996 was primarily due to the increase in cash and
cash equivalents, resulting from the public offering. Deferred revenue as of
March 31, 1996 was $19.1 million. Deferred revenue principally relates to
prepaid maintenance contracts.
Total assets were $98.8 million at March 31, 1996, compared with total
assets of $79.3 million at June 30, 1995. The primary contributing factors to
the increase from June 30, 1995 to March 31, 1996 were the increases in cash
and cash equivalents and accounts receivable offset by the decrease in computer
software (net of long-term deferred income taxes), which decreased as a result
of the write-off of capitalized software.
The Company believes that the combination of present cash balances, future
operating cash flows and amounts available under credit facilities will be
sufficient to meet the Company's currently anticipated cash requirements for at
least the next twelve months.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) The exhibit included herewith 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 March 31, 1996.
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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: MAY 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
- ----------- -----------
27 Financial Data Schedule.
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