<PAGE> 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 DECEMBER 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 DECEMBER 31, 1996.
OUTSTANDING AT
CLASS OF COMMON STOCK DECEMBER 31, 1996
-------------------------------- --------------------------------
$1.00 PAR VALUE 9,775,371 SHARES
<PAGE> 2
COMSHARE, INCORPORATED
INDEX
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of
December 31, 1996 and June 30, 1996.............................. 3
Condensed Consolidated Statement of Operations for the
Three and Six Months Ended December 31, 1996 and 1995............ 5
Condensed Consolidated Statement of Cash Flows for the
Six Months Ended December 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 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
2
<PAGE> 3
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
---- ----
ASSETS (unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,696 $ 27,468
Accounts receivable, net 34,468 34,853
Prepaid expenses and other current assets 10,401 6,491
---------- ----------
Total current assets 57,565 68,812
PROPERTY AND EQUIPMENT, at cost 31,275 27,945
Less - accumulated depreciation 25,447 23,426
---------- ----------
Property and equipment, net 5,828 4,519
COMPUTER SOFTWARE, net 9,327 9,064
GOODWILL, net 1,866 1,947
DEFERRED INCOME TAXES 7,940 7,940
OTHER ASSETS 6,849 5,956
---------- ----------
$ 89,375 $ 98,238
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 14,603 $ 17,934
Accrued liabilities 6,530 7,956
Current portion of long-term debt 3,340 -
Deferred revenue 19,979 18,364
------------- ------------
Total current liabilities 44,452 44,254
LONG-TERM DEBT - 1,913
OTHER LIABILITIES 3,329 3,407
SHAREHOLDERS' EQUITY
Capital stock:
Preferred stock, no par value;
authorized 5,000,000 shares; none issued - -
Common stock, $1.00 par value;
authorized 20,000,000 shares; outstanding
9,775,371 shares as of December 31, 1996
and 9,691,443 shares as of June 30, 1996 9,775 9,691
Capital contributed in excess of par 38,862 38,132
Retained earnings (2,822) 5,239
Currency translation adjustments (3,298) (3,586)
------------- ------------
42,517 49,476
Less - Notes receivable 923 812
------------- ------------
Total shareholders' equity 41,594 48,664
------------- ------------
$ 89,375 $ 98,238
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Software licenses $ 11,703 $ 17,234 $ 18,271 $ 31,154
Software maintenance 9,331 9,247 18,108 18,262
Implementation, Consulting
and other services 5,161 5,702 9,800 11,420
-------- -------- -------- --------
TOTAL REVENUE 26,195 32,183 46,179 60,836
COSTS AND EXPENSES
Selling and marketing 14,705 13,023 28,141 25,061
Cost of revenue and support 8,080 7,798 14,998 14,488
Internal research and product development 4,311 4,088 8,699 8,086
Internally capitalized software (1,702) (1,076) (3,201) (3,434)
Software amortization 1,784 1,127 3,310 3,743
General and administrative 3,190 3,035 6,114 6,076
Unusual charge - 23,167 - 23,167
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 30,368 51,162 58,061 77,187
-------- -------- -------- --------
LOSS FROM OPERATIONS (4,173) (18,979) (11,882) (16,351)
OTHER INCOME (EXPENSE)
Interest income (expense) 102 54 313 (87)
Exchange loss (148) (23) (244) (112)
-------- -------- -------- --------
Total other income (expense) (46) 31 69 (199)
Loss before taxes (4,219) (18,948) (11,813) (16,550)
Benefit for income taxes (1,457) (6,084) (4,120) (5,196)
-------- -------- -------- --------
NET LOSS $ (2,762) $(12,864) $ (7,693) $(11,354)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
AND DILUTIVE COMMON EQUIVALENT SHARES 9,742 8,678 9,723 8,456
======== ======== ======== ========
NET LOSS PER COMMON SHARE $ (0.28) $ (1.48) $ (0.79) $ (1.34)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
COMSHARE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (7,693) $ (11,354)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 4,512 4,828
Write-off of capitalized software - 23,167
Changes in operating assets and liabilities:
Accounts receivable 1,367 (8,235)
Prepaid expenses and other assets (3,564) (362)
Accounts payable (3,902) 2,391
Accrued liabilities (1,447) 549
Deferred revenue 1,082 630
Deferred income taxes - (6,593)
Other liabilities (190) 513
------------ -----------
Net cash provided by (used in) operating activities (9,835) 5,534
INVESTING ACTIVITIES
Additions to computer software (3,302) (3,485)
Payments for property and equipment (2,227) (1,440)
Other (710) (542)
------------ -----------
Net cash used in investing activities (6,239) (5,467)
FINANCING ACTIVITIES
Net borrowings under notes payable 3,134 244
Repayments under long-term debt (1,913) (5,006)
Stock options exercised 311 164
Issuance of common stock - 25,196
Other 25 388
------------ -----------
Net cash provided by financing activities 1,557 20,986
EFFECT OF EXCHANGE RATE CHANGES (255) 89
------------ -----------
NET INCREASE (DECREASE) IN CASH (14,772) 21,142
BALANCE AT BEGINNING OF PERIOD 27,468 1,398
------------ -----------
BALANCE AT END OF PERIOD $ 12,696 $ 22,540
============ ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 119 $ 246
============ ============
Cash paid for income taxes $ 280 $ 890
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
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, required to present fairly its consolidated balance
sheet as of December 31, 1996, the consolidated statement of operations for
the three and six months ended December 31, 1996 and 1995 and the consolidated
statement of cash flows for the six months ended December 31, 1996 and 1995.
The results of operations for the three and six months ended December 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.
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. The establishment of
technological feasibility and the ongoing assessment of the recoverability of
these costs require considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated gross product
revenue, estimated economic product lives and changes in software and hardware
technology. Capitalized development costs are currently amortized using the
straight-line method over a two-year service life. On an ongoing basis,
management reviews the valuation and amortization of capitalized development
costs. As part of this review, the Company considers the value of future cash
flows attributable to the capitalized development costs in evaluating potential
impairment of the asset.
7
<PAGE> 8
COMSHARE, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE C - FINANCIAL INSTRUMENTS
The Company at various times enters into forward exchange contracts to
hedge certain exposures related to identifiable foreign currency transactions
that are relatively certain as to both timing and amount. Gains and losses on
the forward contracts are recognized concurrently with the gains and losses
from the underlying transactions. The forward exchange contracts used are
classified as "held for purposes other than trading." The Company does not use
any other types of derivative financial instruments to hedge such exposures,
nor does it use derivatives for speculative purposes. At December 31, 1996 and
June 30, 1996, the Company had forward foreign currency exchange contracts of
approximately $10,002,000 and $5,746,000 (notional amounts), respectively,
denominated in foreign currencies. The contracts outstanding at December 31,
1996 mature at various dates through May 16, 1997, and are intended to hedge
various foreign currency commitments due from foreign subsidiaries and the
Company's agents and distributors. Due to the short term nature of these
financial instruments, the fair value of these contracts is not materially
different than their notional amount at December 31, 1996 and June 30, 1996.
NOTE D - LITIGATION
The Company and Arbor Software Corporation ("Arbor") disagree about
certain definitions in the license agreement between the two parties related to
the calculation of royalties. Comshare and Arbor were in the process of
defining the procedure and legal and accounting issues to be resolved through
arbitration, when on September 27, 1996, Arbor filed a lawsuit against Comshare
alleging breach of contract and fraud relating to royalty calculations.
Arbor's suit principally seeks monetary damages. On October 21, 1996, Comshare
filed a denial of all of Arbor's claims and filed a counterclaim against Arbor
for defamation, unfair competition, interference with economic relationships
and breach of contract. The litigation is in its early stages, therefore the
Company does not possess sufficient information to reasonably estimate the
potential liability, if any. Management is contesting the Arbor suit
vigorously.
NOTE E - SUBSEQUENT EVENT
On January 22, 1997, the Company announced its plan to take an estimated
$6,000,000 pre-tax restructuring charge in the Company's third quarter ended
March 31, 1997 for management actions or plans in connection with the
consolidation of the Company's product development activities in Ann Arbor,
Michigan and reductions in staff and non-revenue generating costs.
The restructuring charge includes staff reductions of approximately 70
employees. These cost reduction actions are expected to save approximately
$7,000,000 annually.
The foregoing statements regarding the Company's expected cost savings
from cost reduction actions contain "forward looking statements" within the
meaning of the Securities Exchange Act of 1934. Actual results could differ
materially from those in the forward looking statements due to a number of
uncertainties, including, but not limited to, those described under Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Safe Harbor Statement".
8
<PAGE> 9
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis sets forth information for the three
and six months ended December 31, 1996 compared to the three and six months
ended December 31, 1995. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain financial
data as a percentage of total revenue.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------- -------------------------------
1996 1995 1996 1995
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUE
Software licenses 44.7% 53.6% 39.6% 51.2%
Software maintenance 35.6 28.7 39.2 30.0
Implementation and consulting services 19.7 17.7 21.2 18.8
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
COSTS AND EXPENSES
Selling and marketing 56.1 40.5 60.9 41.2
Cost of revenue and support 30.8 24.2 32.5 23.8
Internal research and product development 16.5 12.7 18.8 13.3
Internally capitalized software (6.5) (3.3) (6.9) (5.6)
Software amortization 6.8 3.5 7.2 6.2
General and administrative 12.2 9.4 13.2 10.0
Unusual charge - 72.0 - 38.0
----- ----- ----- -----
Total costs and expenses 115.9 159.0 125.7 126.9
LOSS FROM OPERATIONS (15.9) (59.0) (25.7) (26.9)
OTHER INCOME (EXPENSE)
Interest income (expense) 0.4 0.2 0.6 (0.1)
Exchange loss (0.6) (0.1) (0.5) (0.2)
----- ----- ---- ----
Total other income (expense) (0.2) 0.1 0.1 (0.3)
LOSS BEFORE INCOME TAXES (16.1) (58.9) (25.6) (27.2)
Benefit for income taxes (5.6) (18.9) (8.9) (8.5)
----- ------ ----- -----
NET LOSS (10.5)% (40.0)% (16.7)% (18.7)%
====== ====== ====== ======
</TABLE>
9
<PAGE> 10
REVENUE
<TABLE>
<CAPTION>
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
----------------------- ----------- --------------------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Software licenses $ 11,703 $ 17,234 (32.1)% $ 18,271 $ 31,154 (41.4)%
Software maintenance 9,331 9,247 0.9 18,108 18,262 (0.8)
Implementation and consulting 5,161 5,702 (9.5) 9,800 11,420 (14.2)
-------- -------- -------- --------
TOTAL REVENUE $ 26,195 $ 32,183 (18.6)% $ 46,179 $ 60,836 (24.1)%
======== ======== ======== ========
</TABLE>
Total revenue decreased 18.6% and 24.1% in the three and six months ended
December 31, 1996 compared to the prior year primarily due to the decrease in
software licenses revenue. The decline in license fee revenue in the three and
six months ended December 31, 1996 was primarily due to transitional changes in
the Company's sales organization and the loss of sales momentum mainly as a
result of the Company's internal focus in the first quarter in connection with
the expanded fiscal year-end audit and investigation into violations of the
Company's revenue recognition policies. License fee revenue increased 78% in
the second quarter compared to $6,568,000 for the first quarter ended
September 30, 1996 reflecting improvement in the sales
momentum during the quarter.
Software maintenance revenue was flat in the three and six months ended
December 31, 1996 compared to the same period last year. Client/server
software maintenance revenue in the three and six months ended December 31,
1996 represented 74.3% and 74.4% of total software maintenance revenue and grew
10.4% and 12.3% compared with the prior year. Mainframe software maintenance
revenue decreased 19.2% and 25.9% in the three and six months ended December
31, 1996 compared to last year primarily due to mainframe maintenance
cancellations and continued migration to client/server platforms. Mainframe
software maintenance revenue is expected to continue to decline.
Implementation, consulting and other service revenue decreased 9.5% and
14.2% in the three and six months ended December 31, 1996 compared to last year
primarily due to the decreased demand for such services resulting from the
decline in software license revenue and to the sale of the Company's Australian
business to an agent.
10
<PAGE> 11
COSTS AND EXPENSES
<TABLE>
<CAPTION>
Three Months Ended Percent Six Months Ended Percent
December 31, Change December 31, Change
----------------------- ---------- ---------------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
COST AND EXPENSES
Selling and marketing $ 14,705 $ 13,023 12.9% $ 28,141 $ 25,061 12.3%
Cost of revenue and support 8,080 7,798 3.6 14,998 14,488 3.5
Internal research and product development 4,311 4,088 5.5 8,699 8,086 7.6
Internally capitalized software (1,702) (1,076) 58.2 (3,201) (3,434) (6.8)
Software amortization 1,784 1,127 58.3 3,310 3,743 (11.6)
General and administrative 3,190 3,035 5.1 6,114 6,076 0.6
---------- --------- ---------- ---------
Total costs and expenses
before unusual charge 30,368 27,995 8.5 58,061 54,020 7.5
Unusual charge - 23,167 * - 23,167 *
---------- --------- ---------- ---------
TOTAL COSTS AND EXPENSES $ 30,368 $ 51,162 (40.6)% $ 58,061 $ 77,187 (24.8)%
========== ========= ========== =========
</TABLE>
* % not meaningful.
Selling and marketing expense increased 12.9% and 12.3% in the three and six
months ended December 31, 1996 compared to the same period last year primarily
due to increased spending on marketing activities to launch, promote and
position the Company's new applications. The hiring of new direct sales
representatives and sales support consultants during the six months ended
December 31, 1996 also contributed to the increase in selling and marketing
expense.
Cost of revenue and support increased 3.6% and 3.5% in the three and six
months ended December 31, 1996 compared to the prior year principally due to
increased third party royalties on maintenance revenue, slightly offset by the
decrease in implementation service costs as a result of the lower service
revenue.
Internal research and product development expense increased 5.5% and 7.6% in
the three and six months ended December 31, 1996 compared to last year mainly
due to increased spending for alternative platforms and on-going enhancements
to existing software products.
Internally capitalized software increased in the three months ended December
31, 1996 compared to the prior year mainly due to the increased levels of
development costs that were capitalizable. Software amortization expense
increased in the three months ended December 31, 1996 primarily due to the
increased levels of capitalized software in the current quarter as compared to
the second quarter last year in which the Company wrote off $23.2 million of
capitalized software. Internally capitalized software and software
amortization expense decreased in the six months ended December 31, 1996
primarily due to the reduced levels of capitalized software following the $23.2
million write-off of capitalized software.
General and administrative expense increased 5.1% in the three months ended
December 31, 1996 compared to the same period last year primarily due to an
increase in legal fees.
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
was the result of strong customer interest in the Company's product, Commander
Decision, for customizable decision support applications, which substantially
reduced the realizable value of the Company's older desktop
11
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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.
NON-OPERATING INCOME AND EXPENSE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------------- ---------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OTHER INCOME (EXPENSE)
Interest income (expense) $ 102 $ 54 $ 313 $ (87)
Exchange loss (148) (23) (244) (112)
----- ----- ----- -----
TOTAL OTHER INCOME (EXPENSE) $ (46) $ 31 $ 69 $(199)
===== ===== ===== =====
</TABLE>
The Company had interest income in the three and six months ended
December 31, 1996 primarily due to investment of the net proceeds received from
the public offering of the Company's common stock in the quarter ended December
31, 1995. The foreign exchange loss principally reflects the strengthening of
the British pound during the three months ended December 31, 1996.
BENEFIT FOR INCOME TAXES
The effective income tax rate in the three and six months ended December
31, 1996 was 35%, compared with 32% and 31% for the same periods a year ago.
FOREIGN CURRENCY
In the three and six months ended December 31, 1996, 49% and 50% of the
Company's total revenue was from outside North America compared with 55% and 54%
in the three and six months ended December 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 six months ended December 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 December 31, 1996 the decrease in total revenue, at actual
exchange rates, was $673,000 less than at comparable exchange rates. The
decrease in total expenses, at actual exchange rates, was $242,000 less than at
comparable exchange rates. As a result of the changes in the foreign currency
exchange rates, the decrease in net loss before taxes, at actual exchange
rates, was $431,000 more than at comparable exchange rates. For the six months
ended December 31, 1996 the decrease in total revenue, at actual exchange rates,
was $570,000 less than at comparable exchange rates. The decrease in total
expenses, at actual exchange rates, was $2,000 more than at comparable exchange
rates. As a result of the changes in the foreign currency exchange rates, the
decrease in the net loss before taxes, at actual exchange rates, was $572,000
more than at comparable exchange rates.
The Company had several forward contracts totaling $10 million
outstanding at December 31, 1996. See Note C of Notes to Condensed Consolidated
Financial Statements.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, cash and cash equivalents were $12.7 million,
compared with cash of $27.5 million at June 30, 1996. The decrease in cash and
cash equivalents is principally due to the net cash used for operating
activities in the six months ended December 31, 1996.
Net cash used in operating activities was $9.8 million in the six months
ended December 31, 1996, compared with net cash provided by operating
activities of $5.5 million in the six months ended December 31, 1995. The
decrease in net cash provided by operating activities was primarily due to the
net loss from operations, and a $2.4 million payment to terminate the Company's
lease obligation on its vacated London office facility.
Net cash used in investing activities was $6.2 million in the six months
ended December 31, 1996, compared with $5.5 million in the six months ended
December 31, 1995. The increase in net cash used in investing activities was
primarily due to the increase in property and equipment purchases. At December
31, 1996, the Company did not have any material capital expenditure
commitments.
Net cash provided by financing activities was $1.6 million in the six
months ended December 31, 1996 compared with $21.0 million in the six months
ended December 31, 1995. The Company completed a public offering in which it
received net proceeds of $25.2 million in the second quarter ended December 31,
1995.
Total assets were $89.4 million at December 31, 1996, compared with total
assets of $98.2 million at June 30, 1996. Working capital as of December 31,
1996 was $13.1 million, compared with $24.6 million as of June 30, 1996. The
decrease in both total assets and working capital from June 30, 1996 to
December 31, 1996 was primarily due to the decline in cash and cash
equivalents.
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.
SUBSEQUENT EVENT
On January 22, 1997, the Company announced its plan to take an estimated
$6,000,000 pre-tax restructuring charge in the Company's third quarter ended
March 31, 1997 for management actions or plans in connection with the
consolidation of the Company's product development activities in Ann Arbor,
Michigan and reductions in staff and non-revenue generating costs.
The restructuring charge includes staff reductions of approximately 70
employees. These cost reduction actions are expected to save approximately
$7,000,000 annually.
SAFE HARBOR STATEMENT
Certain information in this Form 10-Q contains "forward looking
statements" within the meaning of the Securities Exchange Act of 1934,
including those concerning the Company's future results and expected cost
savings from cost reduction actions described under "Subsequent Event" above
and in Item 1 Note E to Notes to Condensed Consolidated Financial Statements.
Actual results could differ materially from those in the forward looking
statements due to a number of uncertainties, including, but not limited to, the
demand for the Company's products and services; the size, timing and
recognition of revenue from significant orders; increased competition; the
Company's success in and expense associated with developing, introducing and
shipping new products; new product introductions and announcements by the
Company's competitors; changes in Company strategy; product life cycles; the
cost and continued availability of third party software and technology
incorporated into the Company's products; the impact of rapid technological
advances, evolving industry standards and changes in customer requirements; the
impact of recent transitional changes in North American and international
management and sales personnel; the impact of the investigation into violations
of the Company's revenue recognition policies on the Company's ongoing
operations; cancellations of maintenance and support agreements; software
defects; variations in the amount and timing of cost savings anticipated to
result from cost reduction actions; the impact of off-setting increases in
operating expenses; the impact of cost reduction actions on the Company's
operations; fluctuations in foreign exchange rates; and economic conditions
generally or in specific industry segments.
13
<PAGE> 14
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, 1996.
There was one matter voted on, which was the election of nine directors. The
following table sets forth the results of the matter voted on. All director
nominees were elected.
<TABLE>
<CAPTION>
Voted For Votes Against Abstained Broker Non-votes
Election of Directors ----------- -------------- --------- ----------------
<S> <C> <C> <C> <C>
Nominees:
Geoffrey B. Bloom 8,446,428 - 172,451 -
Daniel T. Carroll 8,437,328 - 181,551 -
Richard L. Crandall 8,406,672 - 212,207 -
Stanley R. Day 8,442,221 - 176,658 -
W. John Driscoll 8,446,146 - 172,733 -
Alan G. Merten 8,444,839 - 174,040 -
George R. Mrkonic 8,449,887 - 168,992 -
John F. Rockart 8,437,317 - 181,562 -
T. Wallace Wrathall 8,350,477 - 268,402 -
</TABLE>
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.
There were no reports on Form 8-K filed during the quarter ended
December 31, 1996.
14
<PAGE> 15
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.
<TABLE>
<S> <C>
Date: FEBRUARY 14, 1997 COMSHARE, INCORPORATED
/s/ Kathryn A. Jehle
-----------------------------------
Kathryn A. Jehle
Senior Vice President,
Chief Financial Officer,
Treasurer and Assistant Secretary
</TABLE>
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<S> <C>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
11.1 Computation of Net Loss per Common Share.
27 Financial Data Schedule.
</TABLE>
16
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF NET LOSS PER COMMON SHARE
(unaudited; in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES:
Common shares outstanding 9,742 8,678 9,723 8,456
Common equivalent shares, treasury stock method - - - -
-------- ------- ------ --------
9,742 8,678 9,723 8,456
========= ======== ======= ========
NET LOSS PER COMMON SHARE
Net loss $ (2,762) $(12,864) $(7,693) $(11,354)
Shares used in per common share computation 9,742 8,678 9,723 8,456
Net loss per common share $ (0.28) $ (1.48) $ (0.79) $ (1.34)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,696,000
<SECURITIES> 0
<RECEIVABLES> 34,468,000<F1>
<ALLOWANCES> 1,389,000
<INVENTORY> 0
<CURRENT-ASSETS> 57,565,000
<PP&E> 31,275,000
<DEPRECIATION> 25,447,000
<TOTAL-ASSETS> 89,375,000
<CURRENT-LIABILITIES> 44,452,000
<BONDS> 0
0
0
<COMMON> 9,775,000
<OTHER-SE> 31,819,000
<TOTAL-LIABILITY-AND-EQUITY> 89,375,000
<SALES> 0
<TOTAL-REVENUES> 46,179,000
<CGS> 0
<TOTAL-COSTS> 58,061,000
<OTHER-EXPENSES> (277,000)<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208,000
<INCOME-PRETAX> (11,813,000)
<INCOME-TAX> (4,120,000)
<INCOME-CONTINUING> (7,693,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,693,000)
<EPS-PRIMARY> (0.79)
<EPS-DILUTED> 0
<FN>
<F1>Accounts receivable are stated at net of allowance for doubtful accounts.
<F2>Comprised of $521,000 of interest income and $244,000 of exchange loss.
</FN>
</TABLE>
