<PAGE>
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 Period Ended July 31, 1999.
[ ] 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 ___0-24201________________
Carreker-Antinori, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-1622836
- --------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4055 Valley View Lane, #1000
Dallas, Texas 75244
- ------------------------------------- -----------------------------
(Address of principal executive office) (Zip Code)
(972) 458-1981
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value --- 18,561,886 shares as of August 31, 1999.
<PAGE>
CARREKER-ANTINORI, INC.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at July 31, 1999 and January 31, 1999 3
Condensed Consolidated Statements of Operations
for the three and six months ended July 31, 1999
and July 31, 1998 4
Condensed Consolidated Statements of Cash Flows
for the six months ended July 31, 1999
and July 31, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARREKER-ANTINORI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
July 31, January 31,
ASSETS 1999 1999
(Unaudited)
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,994 $ 20,701
Short term investments 8,677 12,849
Accounts receivable, net 34,667 27,604
Prepaid expenses and other assets 1,125 681
Deferred income taxes 736 736
--------------- ---------------
Total current assets 63,199 62,571
Furniture, equipment, and leasehold improvements, net 3,948 2,673
Software costs capitalized, net 4,414 3,279
Other assets 344 213
--------------- ---------------
Total assets $ 71,905 $ 68,736
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,238 $ 2,045
Accrued compensation and benefits 610 700
Other accrued expenses 805 961
Income taxes payable 2,328 1,400
Deferred revenue 4,982 5,348
--------------- ---------------
Total current liabilities 9,963 10,454
Deferred income taxes 1,201 1,151
--------------- ---------------
Total liabilities 11,164 11,605
--------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 2,000 shares
authorized, none issued ---- ----
Common Stock, $.01 par value, 100,000 shares authorized,
18,563 and 18,354 shares issued, at July 31 and January
31, 1999, respectively 186 184
Additional paid-in capital 44,770 44,563
Less treasury stock, at cost:
1 shares, as of July 31, 1999 (4) ----
Deferred compensation (412) (568)
Retained earnings 16,201 12,952
--------------- ---------------
Total stockholders' equity 60,741 57,131
--------------- ---------------
Total liabilities and stockholders' equity $ 71,905 $ 68,736
=============== ===============
</TABLE>
See accompanying notes.
3
<PAGE>
CARREKER-ANTINORI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
--------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Consulting and management service fees $13,039 $ 6,589 $21,363 $ 11,603
Software license fees 2,762 4,061 5,855 7,518
Software maintenance fees 1,764 1,285 3,266 2,428
Software implementation fees 1,232 2,136 2,675 3,125
Hardware and other fees 75 227 197 558
----------- ----------- ----------- -------------
Total revenues 18,872 14,298 33,356 25,232
COSTS OF REVENUES:
Consulting and management service fees 6,162 3,905 11,433 7,549
Software license fees 380 247 848 503
Software maintenance fees 671 568 1,335 1,067
Software implementation fees 808 1,205 1,454 1,842
Hardware and other fees 60 186 161 418
----------- ----------- ----------- -------------
Total cost of revenues 8,081 6,111 15,231 11,379
----------- ----------- ----------- -------------
GROSS PROFIT 10,791 8,187 18,125 13,853
----------- ----------- ----------- -------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 6,114 4,424 10,932 8,278
Research and development 1,356 1,243 2,674 2,438
----------- ----------- ----------- -------------
Total operating costs and expenses 7,470 5,667 13,606 10,716
Income from operations 3,321 2,520 4,519 3,137
Other income 316 205 557 223
----------- ----------- ----------- -------------
Income before provision for income taxes 3,637 2,725 5,076 3,360
Provision for income taxes 1,351 1,011 1,827 1,263
----------- ----------- ----------- -------------
Net income $2,286 $ 1,714 $ 3,249 $ 2,097
=========== =========== =========== =============
Basic earnings per share $ 0.12 $ 0.10 $ 0.18 $ 0.14
=========== =========== =========== =============
Diluted earnings per share $ 0.12 $ 0.10 $ 0.17 $ 0.13
=========== =========== =========== =============
Shares used in computing basic earnings per share 18,477 16,523 18,423 14,629
Shares used in computing diluted earnings per share 19,078 17,736 18,961 16,239
</TABLE>
See accompanying notes.
4
<PAGE>
CARREKER-ANTINORI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 3,249 $ 2,097
Adjustments to reconcile net income to net cash used in operating
activities:
Amortization of capitalized software 583 221
Depreciation 1,026 617
Amortization of deferred compensation 156 126
Deferred income taxes 50 216
Changes in assets and liabilities:
Accounts receivable (7,064) (5,549)
Prepaid expenses and other (574) (139)
Accounts payable and accrued expenses (1,052) (1,300)
Taxes payable 928 939
Deferred revenue (366) (620)
------------ ------------
Net cash used in operating activities (3,064) (3,392)
INVESTING ACTIVITIES:
Purchase of short-term investments ---- (24)
Sale of short-term investments 4,172 ----
Purchase of furniture, equipment and leasehold improvements (2,301) (1,185)
Software costs capitalized (1,719) (781)
------------ ------------
Net cash provided by (used in) investing activities 152 (1,990)
FINANCING ACTIVITIES:
Purchase of treasury stock (4) (8)
Proceeds from sale of stock ---- 35,838
Proceeds from stock options exercised 209 3,069
------------ ------------
Net cash provided by financing activities 205 38,899
Net increase (decrease) in cash and cash equivalents (2,707) 33,517
Cash and cash equivalents at beginning of period 20,701 2,485
------------ ------------
Cash and cash equivalents at end of period $17,994 $36,002
============ ============
Supplemental cash flow information:
Cash paid for interest $ ---- $ 26
============ ============
Cash paid for income taxes $ 809 $ 105
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PART I
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements reflect, in the opinion of management, all adjustments
(consisting only of normal, recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows of
the Company. 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 rules and regulations promulgated by the Securities and Exchange
Commission. These statements should be read in conjunction with the
audited financial statements and notes thereto for the years ended
January 31, 1999, 1998, and 1997 included in the Company's Form 10-K
for the fiscal year ended January 31, 1999 on file with the Commission.
The results of operations for the interim periods shown herein are not
necessarily indicative of the results to be expected for any future
interim period or for the entire year.
2. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with
original maturities of three months or less from the original purchase
date to be cash equivalents. At July 31, 1999, cash equivalents
consisted principally of highly liquid debt securities of corporations
and municipalities.
3. SHORT TERM INVESTMENTS
The Company considers investments with maturities of greater
than three months, when purchased, to be short-term investments based
on the freely tradable nature of the investments, and the management's
expectation that they will not be held for greater than one year.
Short-term investments consist primarily of tax exempt municipal bonds.
Management determines the appropriate classification of debt securities
at the time of purchase and re-evaluates such designation as of each
balance sheet date. All debt securities have been determined by
management to be available for sale. Available for sale securities are
stated at amortized cost, at January 31 and July 31, 1999,
respectively, which approximates fair value. Fair value of debt
securities is determined based upon current market value price quotes
by security. As of July 31, 1999 all short-term investments mature from
one to two years.
4. EARNINGS PER SHARE
Basic earnings per share is computed by using the weighted
average number of shares of common stock outstanding during each
period. Diluted earnings per share is computed using the weighted
average number of shares of common stock outstanding during each
period, and common equivalent shares consisting of stock options (using
the treasury stock method).
6
<PAGE>
The following table sets forth the computation of basic and
diluted earnings per share for the three and six months ended July 31,
1999 and 1998 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
1999 1998 1999 1998
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income $ 2,286 $ 1,714 $3,249 $ 2,097
Weighted average shares outstanding 18,477 16,523 18,423 14,629
Basic earnings per share $ 0.12 $ 0.10 $ 0.18 $ 0.14
---------- ---------- --------- ---------
Diluted earnings per share:
Net income $ 2,286 $ 1,714 $3,249 $ 2,097
Weighted average shares outstanding 18,477 16,523 18,423 14,629
Assumed conversion of employee stock
options 601 1,213 538 1,610
---------- ---------- --------- ---------
Shares used in diluted earnings per share
calculation 19,078 17,736 18,961 16,239
========== ========== ========= =========
Diluted earnings per share $ 0.12 $ 0.10 $ 0.17 $ 0.13
========== ========== ========= =========
</TABLE>
5. MANAGEMENT SERVICES
For the three and six months ended July 31, 1999 and 1998,
the Company recognized revenue for management services provided to
related parties in the following amounts (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
---------------------------- -----------------------------
1999 1998 1999 1998
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Infiteq, LLC $ 30 $ 343 $ 51 $ 849
Payment Solutions Network,
Inc. 180 415 359 788
Electronic Check Clearing
House Organization 238 250 505 529
</TABLE>
The Company had net receivables from related parties at July 31 in the
following amounts (in thousands):
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Infiteq, LLC $ 79 $ 157
Payment Solutions Network, Inc. 330 443
Electronic Check Clearing House Organization 91 466
</TABLE>
7
<PAGE>
6. SEGMENTS
Effective with the year ended January 31, 1999, the Company
adopted the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information (Statement 131)."
The Company has three reportable segments: Revenue
Enhancement, Payment Systems, and Emerging Solutions. The segments are
unique due to the focus of the products and services being offered. The
Company evaluates performance and allocates resources based on profit
or loss from operations before income taxes, not including gains and
losses on the Company's investment portfolio.
Revenue Enhancement consists primarily of yield management
consulting, and liquidity management consulting and software. Payment
Systems consists primarily of consolidation consulting, best practices
consulting and software, risk management consulting and software, float
management consulting and software, payment electronification
consulting and software, and track and trace software. Emerging
Solutions consists primarily of enterprise information technology
consulting, and management services, ECCHO management services, and
enabling technology consulting.
Due to the solution approach to delivering products and
services from multiple business segments, contracts are broken down by
segment with few transactions between reportable segments.
Included in corporate and unallocated are costs related to
selling and marketing, unallocated corporate overhead expense, general
software management, and incentive bonuses. Business segment results
include costs for research and development as well as product royalty
expense. Receivables, property and equipment and other assets are not
included in the measures reviewed by the Company's chief operating
decision-maker. Therefore, all Company assets have been included in the
corporate and unallocated category in the following reportable segment
disclosure. Segment information for the three month periods ended July
31, 1999 and 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
For the three month period ended July 31, 1999
-------------------------------------------------------------------------
Revenue Payment Emerging Corporate
Enhancement Systems Solutions & Unallocated Total
------------ ----------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
Consulting and management service fees $ 7,017 $ 3,361 $ 2,661 $ ---- $ 13,039
Software license fees ................ 612 2,150 ---- ---- 2,762
Software maintenance fees ............ 374 1,390 ---- ---- 1,764
Software implementation fees ......... 195 1,037 ---- ---- 1,232
Hardware and other fees .............. ---- 75 ---- ---- 75
-------- -------- -------- -------- --------
Total revenues .................... $ 8,198 $ 8,013 $ 2,661 $ ---- $ 18,872
======== ======== ======== ======== ========
Income (loss) from operations $ 5,165 $ 2,363 $ 649 $ (4,856) $ 3,321
Assets .................................. ---- ------ ---- $ 71,905 $ 71,905
Depreciation and
Amortization ............................ $ 130 $ 328 $ 14 $ 340 $ 812
Capital expenditures .................... $ ---- $ ---- $ ---- $ 1,119 $ 1,119
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
For the three month period ended July 31, 1998
------------------------------------------------------------------
Revenue Payment Emerging Corporate
Enhancement Systems Solutions & Unallocated Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Consulting and management service fees $ 3,453 $ 1,999 $ 1,137 $ ---- $ 6,589
Software license fees ................. 1,171 2,890 ---- ---- 4,061
Software maintenance fees ............. 209 1,076 ---- ---- 1,285
Software implementation fees .......... 722 1,414 ---- ---- 2,136
Hardware and other fees ............... ---- 227 ---- ---- 227
-------- -------- -------- -------- --------
Total revenues ..................... $ 5,555 $ 7,606 $ 1,137 $ ---- $ 14,298
======== ======== ======== ======== ========
Income (loss) from operations $ 3,522 $ 2,111 $ 250 $ (3,363) $ 2,520
Assets ................................... $ --- $ ---- $ ---- $ 61,569 $ 61,569
Depreciation and
Amortization ............................. $ 19 $ 159 $ 8 $ 230 $ 416
Capital expenditures ..................... $ ---- $ ---- $ ---- $ 911 $ 911
</TABLE>
Segment information for the six month periods ended July 31, 1999 and
1998 is as follows (in thousands):
<TABLE>
<CAPTION>
For the six month period ended July 31, 1999
------------------------------------------------------------------------
Revenue Payment Emerging Corporate
Enhancement Systems Solutions & Unallocated Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Consulting and management service fees $ 10,855 $ 6,257 $ 4,251 $ ---- $ 21,363
Software license fees ................. 1,850 4,005 ---- ---- 5,855
Software maintenance fees ............. 713 2,553 ---- ---- 3,266
Software implementation fees .......... 423 2,252 ---- ---- 2,675
Hardware and other fees ............... 197 ---- ---- 197
-------- --------- --------- -------- ---------
Total revenues ..................... $ 13,841 $ 15,264 $ 4,251 $ ---- $ 33,356
======== ========= ========= ======== =========
Income (loss) from operations $ 8,152 $ 4,583 $ 567 $ (8,783) $ 4,519
Assets ................................... $ --- $ ---- $ ---- $ 71,905 $ 71,905
Depreciation and
Amortization ............................. $ 252 $ 676 $ 25 $ 656 $ 1,609
Capital expenditures ..................... $ --- $ ---- $ ---- $ 2,301 $ 2,301
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
For the six month period ended July 31, 1998
--------------------------------------------------------------------------------
Revenue Payment Emerging Corporate
Enhancement Systems Solutions & Unallocated Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Consulting and management service fees $ 4,369 $ 4,622 $ 2,612 ---- $11,603
Software license fees ................. 2,110 5,408 ---- ---- 7,518
Software maintenance fees ............. 384 2,044 ---- ---- 2,428
Software implementation fees .......... 1,106 2,019 ---- ---- 3,125
Hardware and other fees ............... -- 558 ---- ---- 558
-------- ------- ------- -------- --------
Total revenues ..................... $ 7,969 $14,651 $ 2,612 ---- $25,232
======== ======= ======= ======== ========
Income (loss) from operations $ 4,243 $ 4,806 $ 951 $(6,863) $ 3,137
Assets ................................... $ ---- $ ---- $ ---- $61,569 $61,569
Depreciation and
Amortization ............................. $ 37 $ 382 $ 15 $ 410 $ 844
Capital expenditures ..................... $ -- $ -- $ -- $ 1,185 $ 1,185
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of integrated consulting and
software solutions that enable banks to increase their revenues, reduce
their costs and enhance their delivery of customer services. The
Company was founded in 1978 to provide consulting services to banks,
and subsequently integrated software products into its banking
solutions. With its acquisition of Antinori Software, Inc., a Georgia
corporation ("ASI") on January 31, 1997, the Company was able to
significantly enhance its portfolio of software products. Additionally,
the Company acquired Genisys Operations, Inc. ("Genisys") on January
29, 1999 which provides incremental added-value to the Company's
product offerings. The acquisitions of ASI and Genisys were each
accounted for as a pooling-of-interests, and accordingly, the Company's
Condensed Consolidated Financial Statements and notes thereto, as well
as all other financial and statistical data presented in this Form
10-Q, have been restated to include the financial position and results
of operations for ASI and Genisys for all periods presented.
MARKETS: A substantial majority of the Company's revenues are
generated from contracts with banks with assets over $50 billion ("Tier
I Banks") and banks with assets of between $5 billion and $50 billion
("Tier II Banks"). The Company also targets smaller bank holding
companies and independent banks with assets of between $550 million and
$5 billion.
SOURCE OF REVENUES: The Company derives its revenues from
consulting and management service fees, software license fees, software
implementation fees and hardware and other sales. While many customer
contracts provide for both the performance of consulting services and
the license of related software, some customer contracts require only
the performance of consulting services or only a software license (and,
at the election of the customer, related implementation services and/or
annual software maintenance services). The company enters into these
contracts with its customers on a project-by-project basis. The Company
also derives management service fees from the performance of certain
management services on behalf of Payment Solutions Network, Inc. (PSN),
Electronic Check Clearing House Organization (ECCHO) and Infiteq, LLC.
10
<PAGE>
PRODUCTS AND SERVICES: The Company offers a wide range of
consulting services and state-of-the-art, proprietary technology
applications designed to address the unique requirements of the banking
industry. The Company's solutions are sold individually, or
complementary solutions may be sold together (similarly, software
products may be sold individually or as part of a product suite). The
following table summarizes the divisions through which the Company's
offerings are delivered. Each division consists of several groups.
<TABLE>
<CAPTION>
DIVISIONS & GROUPS SOLUTIONS DESCRIPTION
--------------------------------- ------------------------------------------
REVENUE ENHANCEMENT INCREASES CUSTOMER REVENUES
<S> <C>
Liquidity Management Reduces the amount of non-earning assets that a bank
maintains in reserve accounts or in cash-on-hand
Yield Management Improves operational work-flows, processes and pricing
structures employed by a bank
PAYMENT SYSTEMS DECREASES CUSTOMER SERVICE COSTS WHILE IMPROVING BACK OFFICE
SERVICE
Best Practices Delivery of total solutions for customer information
management
Consolidations Delivery of consulting services to help customers
reduce costs, improve operating efficiencies and
increase economies-of-scale through operations
consolidations of operations
Float Management Enhances bank float management through improved check
collection, workflow, float allocation, and pricing
Genisys Focuses on information management by utilizing the
Company's proprietary barcode track and trace
technology, coupled with utilizing the Internet as
an information delivery vehicle
Payment Electronification Facilitates the electronification of paper
checks, while reducing costs and risks associated
with the check payment process
Risk Management Reduces risk of loss from the check payment
process as a result of operational failures, check
fraud and litigation
EMERGING SOLUTIONS DEVELOPMENT OF NEW BUSINESS OPPORTUNITIES OR DELIVERY OF
MANAGEMENT SERVICES
ECCHO Management Services Focuses on management of the ECCHO organization
Enabling Technologies Focuses on developing proof of concept
for new business opportunities with the
criteria that once a solution is developed, it
can be offered across the Company's key customer base
Enterprise IT Services Offers customized, enterprise-wide
conversion, consolidation and integration consulting
solutions in areas beyond payments systems, including
subject matter and project management services, Year
2000 services and IT outsourcing services
</TABLE>
PRICING METHODS AND REVENUE RECOGNITION: The Company employs
varying pricing methods for each of its four sources of revenue,
resulting in a number of different revenue recognition practices.
Consulting and management services are priced on (i) a time and
materials basis (revenue is recognized as the services are performed),
(ii) a fixed-price basis (revenue is recognized on a
percentage-of-completion basis) and (iii) on a value-priced basis. In
the case of value-priced contracts, the Company is paid, on an agreed
upon basis with the customer, either a specified percentage of the
projected
11
<PAGE>
increased revenues or decreased costs that are expected to be
derived by the customer over a period of up to twelve months following
implementation of the Company's solution, or the actual increased
revenues and/or decreased costs experienced by the customer over a
period of up to twelve months following implementation of the Company's
solution, subject in either case to a ceiling, if any is agreed to, on
the total amount of payments to be made to the Company. Revenues
generated in connection with value-priced contracts based upon
projected results are recognized only upon completion of all services
and agreement upon the actual fee to be paid (even though billings for
such services may be delayed by mutual agreement for periods generally
not to exceed twelve months). When fees are to be paid based on a
percentage of actual revenues or savings, revenues are recognized only
upon the completion of all services and as the amounts of actual
revenues or savings are confirmed to the Company by the customer.
Software license fees are priced on a fixed-price basis (with revenue
recognized upon delivery, subject to certain conditions), on a
value-priced basis (with revenue recognized in a fashion similar to
that for consulting and management service fees) and in some cases on a
per-transaction basis (with the related revenue being recognized and
due on a monthly basis). Software maintenance and implementation fees
are priced on a time and materials basis or on a fixed-price basis, and
the related revenues are recognized on the basis consistent with that
applied to consulting and management service fees. Finally, hardware
sales are priced on the basis of the Company's cost plus a specified
percentage, and related revenues are recognized upon shipment of the
hardware.
All statements other than statements of historical fact
contained in this report, including statements in this "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" concerning the Company's financial position and liquidity,
results of operations, prospects for future growth, and other matters
are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will prove
correct. Factors that could cause the Company's results to differ
materially from the results discussed in, or contemplated by, such
forward-looking statements include the risks described under "Risk
Factors" in the Company's Form 10-K for the fiscal year ended January
31, 1999, on file with the Commission. Such risks include, without
limitation, the risks associated with the Company's dependence on the
banking industry, fluctuations in quarterly operating results, customer
concentration, customer project risks, the Company's ability to manage
growth, market acceptance of the Company's solutions, the absence of
long-term agreements with customers, the potential for software and/or
solutions defects, competition within the markets in which the Company
competes, the Company's use of independent contractors, the Company's
dependence on key personnel, the Company's ability to attract and
retain qualified personnel, the impact of technological advances on the
Company's business, the Company's dependence on proprietary technology
and the risks associated with infringement, Year 2000 issues, the
potential for liability claims, the risks associated with potential
strategic alliances or acquisitions, government regulation and the
risks associated with international operations. All forward-looking
statements in this report are expressly qualified in their entirety by
the cautionary statements in this paragraph, in "Risk Factors" (as set
forth in the aforementioned Form 10-K) and elsewhere in this report.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, the
percentages that selected items in the unaudited condensed consolidated
statements of operations bear to total revenues. The period to period
comparisons of financial results are not necessarily indicative of
future results.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
------------------------- ----------------------
1999 1998 1999 1998
------------ --------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Consulting and management service fees 69.2% 46.1% 64.0% 46.0%
Software license fees 14.6 28.4 17.6 29.8
Software maintenance fees 9.3 9.0 9.8 9.6
Software implementation fees 6.5 14.9 8.0 12.4
Hardware and other fees .4 1.6 .6 2.2
------------ ---------- ---------- ----------
Total revenues 100.0 100.0 100.0 100.0
Costs of revenues:
Consulting and management service fees 32.7 27.3 34.3 29.9
Software license fees 2.0 1.7 2.5 2.0
Software maintenance fees 3.6 4.0 4.0 4.2
Software implementation fees 4.3 8.4 4.4 7.3
Hardware and other fees .3 1.3 .5 1.7
------------ ---------- ---------- ----------
Total cost of revenues 42.9 42.7 45.7 45.1
------------ ---------- ---------- ----------
Gross profit 57.1 57.3 54.3 54.9
------------ ---------- ---------- ----------
Operating costs and expenses:
Selling general and administrative 32.4 30.9 32.7 32.8
Research and development 7.2 8.7 8.0 9.7
------------ ---------- ---------- ----------
Total operating costs and expenses 39.6 39.6 40.7 42.5
Income from operations 17.5 17.7 13.6 12.4
Other income (expense) 1.7 1.4 1.7 .9
------------ ---------- ---------- ----------
Income before provisions for income taxes 19.2 19.1 15.3 13.3
Provision from income taxes 7.2 7.1 5.5 5.0
------------ ---------- ---------- ----------
Net income 12.0% 12.0% 9.8% 8.3%
============ ========== ========== =========
</TABLE>
REVENUES
REVENUES: The Company's total revenues increased 32.0% to
$18.9 million for the quarter ended July 31, 1999 from $14.3 million
for the quarter ended July 31, 1998. The Company's total revenues
increased 32.2% to $33.4 million for the six months ended July 31, 1999
from $25.2 million for the six months ended July 31, 1998.
CONSULTING AND MANAGEMENT SERVICE FEES: Revenues from
consulting and management service fees increased 97.9% to $13.0 million
for the quarter ended July 31, 1999 from $6.6 million for the quarter
ended July 31, 1998. Revenues from consulting and management service
fees increased 84.1% to $21.4 million for the six months ended July 31,
1999 from $11.6 million for the six months ended July 31, 1998.
Consulting and management service fees have grown as a result of
continued demand for time and material services as well as value priced
revenue enhancement consulting. The Company has expanded the use of
value priced engagements due to their improved margins as well as their
favorable reception from customers. Revenues related to value priced
opportunities tend to fluctuate period-to-period and are likely to
fluctuate in future periods
13
<PAGE>
SOFTWARE LICENSE FEES: Revenues from software license fees
decreased 32.0% to $2.8 million for the quarter ended July 31, 1999
from $4.1 million for the quarter ended July 31, 1998. Revenues from
software license fees decreased 22.1% to $5.9 million for the six
months ended July 31, 1999 from $7.5 million for the six months ended
July 31, 1998. Software license fees continued at reduced levels over
the prior year periods as many of the Company's bank customers have
limited moving new systems into production as they continue to commit
resources to Year 2000 renovation and testing. Certain product
offerings requiring limited client resources continue to experience
significant demand while other, more intrusive product offerings have
experienced reduced demand in light of the Year 2000 commitments of the
Company's bank customers. To date, sales of software licenses have
principally been derived from direct sales to customers.
SOFTWARE MAINTENANCE FEES: Revenues from software maintenance
fees increased 37.3% to $1.8 million for the quarter ended July 31,
1999 from $1.3 million for the quarter ended July 31, 1998. Revenues
from software maintenance fees increased 34.5% to $3.3 million for the
six months ended July 31, 1999 from $2.4 million for the six months
ended July 31, 1998. Increases in software maintenance fees have been
driven by continued growth in the installed customer base resulting in
growth in the number of customers under maintenance contracts.
SOFTWARE IMPLEMENTATION FEES: Revenues from software
implementation fees decreased 42.3% to $1.2 million for the quarter
ended July 31, 1999 from $2.1 million for the quarter ended July 31,
1998. Revenues from software implementation fees decreased 14.4% to
$2.7 million for the six months ended July 31, 1999 from $3.1 million
for the six months ended July 31, 1998. Decreases in software
implementation fees have been driven by reduced sales levels of
software licenses, resulting in a reduction in the number of customers
requiring implementation services.
HARDWARE AND OTHER FEES: Revenues from hardware sales
decreased 67.2% to $74,000 for the quarter ended July 31, 1999 from
$227,000 for the quarter ended July 31, 1998. Revenues from hardware
sales decreased 64.7% to $197,000 for the six months ended July 31,
1999 from $558,000 for the six months ended July 31, 1998. The Company
sells hardware at the request of its customers, but does not consider
hardware sales to be a meaningful part of its business.
COST OF REVENUES
COST OF CONSULTING AND MANAGEMENT SERVICES: Cost of consulting
and management services increased 57.8% to $6.2 million for the quarter
ended July 31, 1999 from $3.9 million for the quarter ended July 31,
1998. Cost of consulting and management services increased 51.5% to
$11.4 million for the six months ended July 31, 1999 from $7.5 million
for the six months ended July 31, 1998. Cost of consulting and
management services as a percentage of consulting and management
service fees decreased to 47.3% for the three months ended July 31,
1999 from 59.3% for the three months ended July 31, 1998. Cost of
consulting and management services as a percentage of consulting and
management service fees decreased to 53.5% for the six months ended
July 31, 1999 from 65.1% for the six months ended July 31, 1998. Cost
of consulting and management services as a percentage of consulting and
management services fees reflects continued growth in value priced
engagements and a declining reliance on time and material contracts.
Cost of consulting and management services consists primarily of
personnel costs associated with time and material contracts and value
priced efforts.
COST OF SOFTWARE LICENSES: Cost of software licenses increased
53.9% to $380,000 for the quarter ended July 31, 1999 from $247,000 for
the quarter ended July 31, 1998. Cost of software licenses increased
68.5% to $848,000 for the six months ended July 31, 1999 from $503,000
for the six months ended July 31, 1998. Cost of software licenses as a
percentage of software license fees increased to 13.8% for the three
months ended July 31, 1999 from 6.1% for the three months ended July
31, 1998. Cost of the software licenses as a percentage of software
license fees increased to 14.5% for the six months ended July 31, 1999
from 6.7% for the six months ended July 31, 1998. Costs of software
licenses includes amortization costs relating to capitalized software,
as well as royalty costs associated with sales of liquidity management
and consolidation software products. Increases in cost of software
licenses as a percentage of software license fees reflect an increase
in software amortization cost.
14
<PAGE>
COST OF SOFTWARE MAINTENANCE: Cost of software maintenance
increased 18.2% to $671,000 for the quarter ended July 31, 1999 from
$568,000 for the quarter ended July 31, 1998. Cost of software
maintenance increased 25.2% to $1.3 million for the six months ended
July 31, 1999 from $1.1 million for the six months ended July 31, 1998.
Cost of software maintenance consists primarily of personnel costs
associated with providing customer support for software products sold.
Increases in costs associated with software maintenance reflect
staffing increases to support increased customer support and
maintenance revenue.
COST OF SOFTWARE IMPLEMENTATION: Cost of software
implementation decreased 32.9% to $800,000 for the quarter ended July
31, 1999 from $1.2 million for the quarter ended July 31, 1998. Cost of
software implementation decreased 21.0% to $1.5 million for the six
months ended July 31, 1999 from $1.8 million for the six months ended
July 31, 1998. Cost of software implementation consists primarily of
personnel costs associated with implementation, training, and providing
customer support for software products sold. Decreases in costs
associated with software implementation reflect reductions in staffing
required to support delivery of these services.
COST OF HARDWARE AND OTHER FEES: Cost of hardware decreased
67.9% to $60,000 for the quarter ended July 31, 1999 from $186,000 for
the quarter ended July 31, 1998. Cost of hardware decreased 61.6% to
$161,000 for the six months ended July 31, 1999 from $418,000 for the
six months ended July 31, 1998. Decreases for the quarter and six
months ended reflect reductions in the amount of hardware sold during
the respective periods over the prior year periods.
OPERATING COSTS AND EXPENSES
SELLING GENERAL AND ADMINISTRATIVE: Selling, general and
administrative expenses generally consist of personnel costs associated
with selling, marketing, general management and software management, as
well as fees for professional services and other related costs. Selling
general and administrative expenses increased 38.2% to $6.1 million for
the quarter ended July 31, 1999 from $4.4 million for the quarter ended
July 31, 1998. Selling general and administrative expenses increased
32.1% to $10.9 million for the six months ended July 31, 1999 from $8.3
million for the six months ended July 31, 1998. The increase in these
expenses reflected growth in additional management, marketing, and
administrative staff over the prior periods to support the Company's
expanding operations.
RESEARCH AND DEVELOPMENT: Research and development expenses
increased 9.1% to $1.4 million for the quarter ended July 31, 1999 from
$1.2 million for the quarter ended July 31, 1998. Research and
development expenses increased 9.7% to $2.7 million for the six months
ended July 31, 1999 from $2.4 million for the six months ended July 31,
1998. Increases in research and development expense reflect a higher
level of software development activity.
OTHER INCOME: Other income increased 54.0% to $316,000 for the
quarter ended July 31, 1999 from $205,000 for the quarter ended July
31, 1998. Other income increased 149.4% to $557,000 for the six months
ended July 31, 1999 from $223,000 for the six months ended July 31,
1998. Other income consists primarily of interest income on tax exempt
short-term investments partially offset by interest expense on the
Company's debt. The increases in the dollar amount of other income were
primarily due to interest earned on higher balances of cash, cash
equivalents and short-term investments resulting from net proceeds of
the initial public offering of the Company's common stock which was
completed in May 1998.
PROVISION FOR INCOME TAXES: The provision for income taxes is
based on the estimated annual effective tax rate, and includes federal
and state income taxes. The Company's effective income tax rate was
37.1% and 36.0% for the three and six months ended July 31, 1999.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1999, the Company had $53.2 million of working
capital, including $18.0 million in cash, and cash equivalents, as
compared to $52.1 million of working capital as of January 31,1999,
including $20.7 million of cash and cash equivalents. Operating
activities consumed $3.1 million of available cash for the six months
ended July 31, 1999 as compared to $3.4 million for the six months
ended July 31, 1998, largely through growth in accounts receivable of
$7.1 million and through reductions of accounts payable and accrued
expenses of $1.1 million.
Average days' sales outstanding fluctuate for a variety of
reasons, including the timing of billings specified by contractual
agreement, and receivables for non-revenue related activities.
The following table contains the quarterly days sales
outstanding (DSO) with a comparative column which adds reimbursed
expenses to the revenue portion of the computation:
<TABLE>
<CAPTION>
DSO Including
Expense
Quarter Ended DSO Reimbursements*
------------------------------ ------------------------ -----------------------
<S> <C> <C>
January 31, 1999 163 151
April 30, 1999 175 158
July 31, 1999 169 155
</TABLE>
* Includes reimbursements for travel and out of pocket
expenses which are not considered revenue, but are included in
outstanding receivables.
Cash provided by investing activities during the period ended
July 31, 1999, of $152,000 was generated by the sale of short-term
investments of $4.2 million, less $2.3 million used to purchase
furniture, equipment, and leasehold improvements due to growth in
staff, and $1.7 million invested in capitalized software.
Cash provided by financing activities for the period ended
July 31, 1999, was $205,000 and resulted primarily from the exercise of
stock options.
The Company no longer maintains a revolving credit facility in
light of its substantial liquid working capital.
The Company's future liquidity and capital requirements will
depend upon numerous factors. The Company believes its current cash and
cash equivalents and short-term investment balances and cash generated
from operations will be sufficient to meet the Company's operating and
capital requirement through at least July 2000. However, there can be
no assurance that the Company will not require additional financing
within this time frame. The Company's forecast of the period of time
through which its financial resources will be adequate to support its
operations is a forward-looking statement that involves risk and
uncertainties, and actual results could vary. The failure of the
Company to raise capital when needed could have a material adverse
effect on the Company's business, financial condition and results of
operation.
YEAR 2000
STATE OF READINESS
The Company has performed a company-wide evaluation to assess
the ability of its products and its information technology ("IT") and
non-IT systems to properly function and execute transactions in the
Year 2000. The Company's Year 2000 Project is divided into three major
sections: (a) Infrastructure, which includes internal management
information systems, computers, servers, networks to support the
business and any non-IT systems used in the operation of the business;
(b) Third Party Suppliers, which includes those suppliers that provide
the Company with software applications that are used in concert with
the Company's products and service suppliers, such as Internet service
providers and computer
16
<PAGE>
testing resources; and (c) Company Products and Services, which
includes those products and services that generate revenue for the
Company. The Project has been divided into six phases: (1) Awareness
and Communication; (2) Inventory; (3) Assessment; (4) Renovation; (5)
Testing; and (6) Rollout. As discussed below, the Company has
substantially completed the first four phases of the Year 2000 Project
for its Infrastructure, Third Party Suppliers and Customer Products and
Services. All phases of the Project are expected to be completed by
September 30, 1999.
INFRASTRUCTURE
The Company has completed the inventory, assessment and
renovation phases of its IT and non-IT systems and is substantially
complete with the testing phase for these systems. The Testing and
Rollout phases of the Project are expected to be completed by September
30, 1999. The Company has distributed a letter to each of its vendors
that supply systems or software for its IT and non-IT systems to
determine the vendors' Year 2000 status. A majority of the recipients
have responded to the letter, and most of the respondents have given
assurances that their products and services are able to function in the
context of the Year 2000 Problem. The Company is assessing these
responses and will continue to communicate with vendors that are
material to the Company's operations to gain satisfactory assurances.
If such assurances are not obtained, the Company will seek
alternatives, including contracting with other vendors.
THIRD PARTY SUPPLIERS
The Company has taken an inventory of the applications from
third party suppliers that are used in conjunction with the Company's
products. The Company has contacted significant third-party suppliers
in an effort to assess the state of their Year 2000 readiness. The
Company has received information, or tested all of the applications
from third-party suppliers used in the its products. Only one supplier
has not been willing to certify the Year 2000 compliance of its
application, although internal tests have disclosed no Year 2000
problems with this application. Because its bank customers require
certifications regarding Year 2000 compliance, the Company has
communicated with this supplier to determine a solution to this
certification issue. The Company has been given access to the source
code and has concluded its own remediation and risk evaluation in
conjunction with the testing already conducted.
COMPANY PRODUCTS AND SERVICES
All of the Company's software products have been tested and
confirmed as compliant. The Company has a Web site to identify each
product and its compliant release number and status. The Company also
has transmitted letters to its customers notifying them of their
current Year 2000 readiness status and outlining the steps, if any,
needed for the customer to receive Year 2000 compliant software. As a
result of the stringent requirements placed on the Company's bank
customers by the Office of Comptroller and Currency (the "OCC") and the
Federal Financial Industry Examiners Council (the "FFIEC"), these
customers are requiring documented evidence of Year 2000 Compliance of
the Company's products. The Company currently is establishing a process
to archive the results of its compliance tests and to document this
test information in a format suitable for external distribution.
COSTS
Through and including the second quarter of fiscal 1999, the
Company has spent approximately $805,000 relating to labor costs for
its Year 2000 Project. The Company has incurred no material replacement
costs for non-compliant systems because it did not accelerate its
replacement of any systems as a result of the Year 2000 issue. The
Company currently estimates that its costs remaining through January
31, 2000 relating to the Year 2000 Project will be less than $50,000,
the majority of which will be spent on the documentation process
required by the Company's bank customers. Other costs, including
replacement of non-compliant hardware and other equipment, are expected
to be less than $200,000. Funds for the Year 2000 Project are expected
to be paid for out of operations.
17
<PAGE>
RISKS
If the Company does not successfully complete its Year 2000
Project, it could have a material adverse effect on the Company's
ability to market, sell and implement its software products and
consulting services, which could have a material adverse effect on its
financial condition and results of operations. The Company's customer
base is primarily in the banking industry. Because members of this
industry are heavily regulated and audited for their Year 2000
compliance efforts, the Company does not consider the possibility of
Year 2000 noncompliance by banks to be reasonably likely. The OCC has
published guidance criteria that all banks be complete with Year 2000
renovation and unit testing by December 1998, thus allowing the entire
year of 1999 for system testing. However, the operations and financial
condition of banks is significantly dependent on the results of
operations and financial condition of the their customers. If customers
of banks experience a material adverse effect as a result of Year 2000
issues, banks, and consequently the Company, could be adversely
affected. There can be no assurance that third parties will be Year
2000 compliant in a timely manner. The Company is anticipating that
many of its bank customers will not move any new systems into
production during the last half of 1999. During this period, only
current system bug fixes and Year 2000 compliant releases will be sent
into the bank's production environment. Banks will continue to contract
for new business solutions, especially those that result in new bank
revenues. During this period, banks also will continue to initiate
efforts that precede the implementation of a new business software
solution. The Company is currently assessing the impact this will have
on the Company's operations.
CONTINGENCY PLAN
A contingency planning process is underway and is anticipated
to be complete by September 30, 1999 in preparation for Year 2000
related events.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants has issued Statement of
Position No. 98-9 "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions" ("SOP 98-9"), which
amends certain provisions of Statement of Position No. 97-2 "Software
Revenue Recognition" ("SOP 97-2"). The new SOP 98-9 will be effective
for all transactions entered into by the Company subsequent to January
31, 2000. The Company is currently reviewing the impact of applying SOP
98-9.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS and HEDGING ACTIVITIES ("SFAS 133"), which is
required to be adopted in years beginning after June 15, 2000. Because
the Company does not use derivatives, management does not anticipate
that the adoption of the new statement will have an effect on earnings
or the financial position of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATES. The Company invests its cash in a variety of
financial instruments, primarily tax advantaged variable rate and
fixed rate obligations of state and local municipalities, and
educational entities and agencies. These investments are denominated
in U.S. dollars.
The Company accounts for its investment instruments in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115"). All of the cash equivalents and short-term investments
are treated as available-for-sale under SFAS 115.
Investments in both fixed rate and floating rate interest
earning instruments carry a degree of interest rate risk. Fixed rate
securities may have their fair market value adversely impacted due to a
rise in interest rates, while floating rate securities may produce less
income than expected if interest rates fall. Due in part to these
factors, the Company's future investment income may fall short of
expectations due to changes in interest rates or the Company may suffer
losses in principal if forced to sell securities which have seen a
decline in market value due to changes in interest rates. The Company's
investment securities are held for purposes other than trading. While
certain of the investment securities had maturities in excess of one
year, the Company intends to liquidate such securities if necessary
within one year. The weighted-average interest rate on investment
securities at July 31, 1999 was 5.82%.
18
<PAGE>
Amortized costs of short-term investments held at July 31, 1999 was
$8.7 million, which approximates fair value.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NUMBER EXHIBIT DESCRIPTION
------- -----------------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CARREKER-ANTINORI, INC.
By: /s/ John D. Carreker, Jr. Date: September 14, 1999
----------------------------------------- -----------------------
John D. Carreker, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ Terry L. Gage Date: September 14, 1999
----------------------------------------- -----------------------
Terry L. Gage
Executive Vice President and
Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CARREKER-ANTINORI, INC'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE AND SIX MONTH PERIOD ENDED JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 17,994
<SECURITIES> 8,677
<RECEIVABLES> 36,071
<ALLOWANCES> 1,404
<INVENTORY> 0
<CURRENT-ASSETS> 63,199
<PP&E> 7,868
<DEPRECIATION> 3,920
<TOTAL-ASSETS> 71,905
<CURRENT-LIABILITIES> 9,963
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 60,555
<TOTAL-LIABILITY-AND-EQUITY> 71,905
<SALES> 0
<TOTAL-REVENUES> 18,872
<CGS> 0
<TOTAL-COSTS> 8,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 26
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,637
<INCOME-TAX> 1,351
<INCOME-CONTINUING> 2,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,286
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
