<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------
FORM 10Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
<TABLE>
<S> <C>
For the Quarter Ended September 30, 1996 Commission file number 0-6355
</TABLE>
COMNET CORPORATION
<TABLE>
<S> <C>
Incorporated in Delaware IRS EI No. 52-0852578
</TABLE>
4200 Parliament Place, Suite 600, Lanham, MD 20706-1844
Telephone Number: (301) 918-0400
Indicate by check mark whether the registrant (1) has filed 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 period 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
-------------- ---------
Shares Outstanding Effective
Class November 8, 1996
- -------------------------------------- 3,346,174
Common Stock, $.50 par value
<PAGE> 2
COMNET CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
(UNAUDITED) (AUDITED)
----------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,157 $ 1,845
Marketable securities - - - 1,979
Trade and installment accounts receivable,
less allowance of $3,016 and $2,409 26,160 24,489
Deferred income taxes 2,089 1,923
Prepaid expenses and other assets 4,228 2,793
------------- -------------
Total current assets: 33,634 33,029
Installment accounts receivable, long-term 5,673 5,985
Property and equipment, net 3,304 3,269
Computer software, net 25,209 22,426
Other assets 2,378 2,483
------------- -------------
Total assets $ 70,198 $ 67,192
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-Term Borrowings $ 4,228 $ -----
Accounts payable 4,491 2,483
Current portion of long-term debt 514 565
Accrued expenses 5,421 6,761
Accrued compensation 2,831 3,744
Current deferred revenues 10,378 12,647
------------- -------------
Total current liabilities 27,863 26,200
Long-term debt, net of current portion 86 320
Deferred revenues, long-term 4,940 4,363
Deferred income taxes 4,084 3,147
Minority interest in net earnings of consolidated subsidiary 5,748 5,729
------------- -------------
Total liabilities 42,721 39,759
------------- -------------
Commitments and contingent liabilities
Stockholders' equity:
6% cumulative convertible preferred stock 2,846 2,846
Common stock, $0.50 par value 10,000 shares
authorized, 3,583 and 3,563 issued and outstanding 1,791 1,781
Capital contributed in excess of par value 17,617 17,472
Retained earnings 7,185 7,285
Unrealized losses on investments, net - - - (2)
Cumulative foreign currency translation 53 66
------------- -------------
29,492 29,448
Less treasury stock at cost, 316 shares (2,015) (2,015)
------------- -------------
Total stockholders' equity 27,477 27,433
------------- -------------
Total liabilities and stockholders' equity $ 70,198 $ 67,192
============= =============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 3
COMNET CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Month Period For the Six Month Period
Ended September 30, Ended September 30,
------------------------------ ----------------------------
1996 1995 1996 1995
(FY97) (FY96) (FY97) (FY96)
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Software licenses and related revenue $ 7,125 $ 5,084 $ 12,535 $ 9,801
Maintenance and service revenue 5,934 4,997 11,244 9,664
----------- ------------ ----------- -----------
Total revenue 13,059 10,081 23,779 19,465
----------- ------------ ----------- -----------
Costs and expenses:
Software licenses expenses 2,234 1,671 4,093 3,450
Maintenance and service expense 2,834 1,963 5,552 3,890
Research, development and indirect support 905 540 1,614 1,000
Selling and marketing 4,949 3,386 9,257 6,420
General and administrative 1,266 1,088 2,288 2,313
Provision for doubtful accounts 456 357 836 593
----------- ------------ ----------- -----------
Total costs and expenses 12,644 9,005 23,640 17,666
----------- ------------ ----------- -----------
Operating earnings 415 1,076 139 1,799
Non-operating income, net (169) 117 (126) 218
----------- ------------ ----------- -----------
Earnings from operations before provision for
income taxes 246 1,193 13 2,017
Provision for income taxes 41 437 4 744
Minority interest in net earnings of
consolidated subsidiary 51 152 19 254
----------- ------------ ----------- -----------
Net earnings 154 604 (10) 1,019
Preferred stock dividend requirements 44 44 88 88
----------- ------------ ----------- -----------
Net earnings available to common stockholders $ 110 $ 560 $ (98) $ 931
=========== ============ =========== ===========
Earnings per share of common stock: $ .03 $ 0.18 $ (0.03) $ 0.30
=========== ============ =========== ===========
Weighted average number of common and common
equivalent shares outstanding 3,265 3,104 3,257 3,092
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
COMNET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED SEPTEMBER 30,
------------------------------------
1996 1995
(FY97) (FY96)
---------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ (10) $ 1,019
Adjustments to reconcile earnings from operations
to net cash from operating activities:
Amortization expense 2,790 2,541
Depreciation expense 471 420
Provision for doubtful accounts 836 593
Deferred income taxes 771 (292)
Minority interest in earnings of consolidated subsidiary 19 254
Change in assets and liabilities:
Increase (decrease) in accounts receivable (2,357) 914
Decrease (increase) in prepaid expenses and other current assets (1,213) 33
Decrease in other assets 82 826
Increase (decrease) in accounts payable 2,008 (817)
Decrease in accrued expenses (2,254) (3,616)
Increase (decrease) in deferred revenues (1,692) 421
---------- -----------
Net cash provided by (used in) operating activities (586) 2,296
---------- -----------
Cash flows from investing activities:
Purchase and development of computer software (5,557) (3,985)
Purchase of equipment and improvements (522) (646)
Purchase of marketable securities (3,984) (4,282)
Sale of marketable securities 5,965 5,998
---------- -----------
Net cash used in investing activities (4,098) (2,915)
---------- -----------
Cash flows from financing activities:
Proceeds from short-term borrowings 10,865 4,566
Reduction of short-term borrowings (6,637) (4,566)
Proceeds from exercise of common stock options 155 400
Reduction of long-term debt (285) (289)
Dividends paid on preferred stock (89) (89)
---------- -----------
Net cash provided by financing activities 4,009 22
---------- -----------
Net decrease in cash and cash equivalents (675) (597)
Loss on currency translation
(13) (7)
Cash and cash equivalents at beginning of period 1,845 1,939
---------- -----------
Cash and cash equivalents at end of period $ 1,157 $ 1,335
========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
COMNET CORPORATION
Notes to Consolidated Financial Statements
1. The financial statements for the three and six months ended September 30,
1996 and 1995, are unaudited. In the opinion of management, all
adjustments (consisting of recurring accruals) considered necessary for a
fair presentation have been included. Limited footnote information is
presented in accordance with quarterly reporting requirements. The results
of operations for the three and six months ended September 30, 1996, are
not necessarily indicative of the results for the year ending March 31,
1997. The information contained in the audited financial statements and
the notes thereto for the year ended March 31, 1996, should be referred to
in connection with the unaudited interim financial information. Unless
otherwise indicated in the discussion in these statements, the term
"Company" will refer to the operations of COMNET and its subsidiaries.
2. Research and development expense, before the capitalization of computer
software development costs, amounted to approximately $6,513,000 and
$4,438,000 for the six months ended September 30, 1996 and 1995,
respectively.
3. Earnings per share of common stock in the accompanying financial statements
have been computed on the net earnings to stockholders, after deducting
dividends on preferred stock in fiscal year 1997, determined on the accrual
basis. Earnings per share of common stock have been computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the respective periods. Common equivalent shares result
from the dilutive effect of stock options calculated under the treasury
stock method.
4. Certain prior year amounts have been reclassified to conform with the
current year presentation.
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the quarter ended September 30, 1996 the Company's revenues of $13.1
million increased 29% from the $10.1 million reported for the comparable period
the prior year. Net earnings for the quarter ended September 30, 1996, were
$0.2 million or $0.03 per share compared with net earnings of $0.6 million or
$0.18 per share in fiscal 1996. For the six months ended September 30, 1996,
the Company's revenue was $23.8 million, an increase of 22% over revenue of
$19.5 million the prior year. The Company's net loss for the six month period
was $10,000 or $(0.03) per share compared with net earnings of $1.0 million or
$0.30 per share the prior year. The decline in profitability for both the
quarter and six months ended September 30, 1996 was due to the extraordinary
costs of distribution and service of Group 1's software associated with
implementation of the United States Postal Service's new mail classification
regulations, which became effective July 1, 1996. These regulations also caused
delays in release of new PC products which resulted in losses in the
micro-computer division during the quarter. In addition, the Company incurred
higher sales, marketing, and development expenditures associated with its
expansion into the customer information management, database marketing and
electronic document systems markets, including the recently acquired WorldTrak
and DataDesigns products. Higher interest expense also contributed to the
decline in profitability.
Software license fees and related revenues of $7.1 million for the second
fiscal quarter increased 40% over the prior year. As a percent of total
revenue, second quarter software license and related revenue was 55% in fiscal
1997 compared with 50% in fiscal 1996. For the six month period, software
license fees and related revenues of $ 12.5 million were 28% above the prior
year. For the six months ended September 30, software license and related
revenue as a percent of total revenue was 53% in fiscal 1997 compared with 50%
in fiscal 1996. Software license fees and related revenue for the second
quarter and six months ended September 30 increased over the prior year in all
market areas except PC products.
License fees from Customer Information Management Systems software for the
fiscal second quarter increased $304,000 over the prior year and for the six
month period, were $329,000 above the comparable period in the prior year. The
increases were due to sales of our WorldTrak product which was acquired in
November 1995.
License fees from Database Marketing Systems increased 27% for the fiscal
second quarter. For the six month period ended September 30, 1996, revenues
increased 11% over the comparable period of the prior year. The increase
resulted from higher sales of our DataDesigns products (acquired in August
1995) partially offset by lower sales of traditional Database Marketing
products.
Licensing of Electronic Document Systems increased 174% in the fiscal second
quarter. For the six month period ended September 30, 1996 Electronic Document
Systems license fees increased 99% over the comparable period of the prior
year. Sales of these products were strong in both domestic and international
markets.
The Company's core Mailing Efficiency software license fees for the fiscal
second quarter increased 4% over the same period the prior year. For the six
months ended September 30, 1996 revenues increased 13% over the comparable
period in the prior year. The increases were primarily due to continued growth
of the Open Systems product suite, partially offset by declines in PC product
revenue. Mainframe revenue also increased during the period.
Maintenance and other revenue of $5.9 million for the quarter increased 19%
over the prior year. For the six month period, maintenance and other revenue
of $11.2 million was 16% above the comparable period in
5
<PAGE> 7
the prior year. Maintenance and other revenue accounted for 45% and 47% of
total revenue for the quarter and six months ended September 30, 1996 compared
with 50% for both periods in the prior year. Recognized maintenance fees were
$4.6 million and $8.9 million for the quarter and six months ended September
30, 1996, increases of 6% and 7% over the comparable periods of the prior year.
Professional and educational service revenues of $1.4 million and $2.3 million
for the quarter and six months ended September 30, 1996 were 73% higher for
both periods of the prior year.
Group 1 expects maintenance renewal revenue to grow at a lower percentage than
in prior years due to the high rate of conversion to Open System products,
which conversion typically includes multi-year maintenance agreements. In
addition, as a result of the delay in releasing software which fully complied
with all new United States Postal Service reclassification regulations the
Company extended maintenance contracts by six months for users of its
Mailstream products. It is anticipated that the other service revenues will
continue to increase as a percentage of Group 1's revenue, resulting from the
growth of DOC1, WorldTrak and database marketing systems revenues which require
more consulting and professional services than the Company's traditional
products.
During the fiscal second quarter, total operating costs of $12.6 million
amounted to 97% of revenue compared with $9.0 million or 89% of revenue during
the same period the prior year. For the six months ended September 30, 1996
total operating costs of $23.6 million were 99% of revenue as compared with
$17.7 million or 91% of revenue in the prior year. Of the increase in cost,
approximately $0.9 million and $1.7 million for the quarter and six month
period, respectively, were related to DataDesigns, WorldTrak and Latin American
operations for which there were no material prior year costs.
Software license expense increased to $2.2 million for the three months ended
September 30, 1996, from $1.7 million in the comparable prior year period,
representing 31% and 33% of software license and related revenues,
respectively. For the six months ended September 30, 1996 and 1995, software
license expense represented 33% and 35% of software license and related revenue
respectively. The lower cost as a percentage of license revenue reflects the
economies of scale achieved with license support costs spread over a larger
revenue base. Group 1 expects the cost as a percentage of revenue to remain
around these levels.
Maintenance and service expense increased to $2.8 million in the current
quarter from $2.0 in the comparable period in fiscal 1996, representing 48% and
39% of maintenance and service revenue, respectively. For the six months ended
September 30, 1996 and 1995, maintenance and service expense represented 49%
and 40% of maintenance and service revenue, respectively. The increase in
expense as a percent of revenue reflects the proportionately higher percentage
of lower margin revenue derived from service versus maintenance, as well as the
costs of distribution and service of Group 1's software associated with
implementation of the United States Postal Service's new mail classification
regulations effective July 1, 1996.
Included in maintenance and service expense above are professional and
educational service costs of $0.9 million which were 68% of professional
services revenue for the second quarter compared with $.5 million and 64% for
the comparable quarter in the prior year. For the six months ended September
30, 1996 professional and educational service costs were $1.7 million and 73%
of professional service revenue compared with $1.0 million and 76% in the prior
year.
Costs of maintenance were $1.9 million for the second quarter of fiscal 1997
representing 42% of maintenance revenue compared with costs of $1.5 million and
33% of maintenance revenue in the second quarter of fiscal 1996. For the six
months ended September 30, 1996 maintenance costs of $3.9 million were 43% of
maintenance revenue compared with $2.9 million and 34% in the comparable period
of the prior year. The increased costs as a percentage of revenue were
primarily due to continued higher distribution costs and technical support
expenses for its mail classification software stemming from the
6
<PAGE> 8
United states Postal Service's new mail classification regulations which became
effective July 1, 1996. Certain of these costs were related to the new
DataDesigns and WorldTrak product lines for which there were no material costs
in the prior year. Group 1 anticipates the cost as a percentage of revenue to
decline as the incremental costs associated with the new postal regulations
decline.
Research, development and indirect support expenses (after capitalization of
certain development costs) totaled $0.9 million in the second quarter of fiscal
1997 and $0.5 million in the same quarter the prior year, representing 7% and
5% of total revenue, respectively. For the six month periods ended September
30, 1996 and 1995, research, development and indirect support expenses were 7%
and 5% of total revenue, respectively. The increases are due to increased
support requirements for Group 1's expanded computer platforms and internal
network systems, as well as expenses for DataDesigns and WorldTrak for which
there were no material amounts in the prior year. Group 1 anticipates these
costs as a percentage of revenue to increase due to the expanded product
offerings.
Selling and marketing expenses totaled $4.9 million or 38% of revenue in the
second quarter of fiscal 1997 and $3.4 million or 34% of revenue in the prior
year. For the six month period, selling and marketing expenses were 38% and
34% of total revenue in fiscal years 1997 and 1996, respectively. The current
year expenses include $1.0 million for DataDesigns, WorldTrak and Latin
America, for which there were no material costs in the prior year.
Additionally, the current year expenses reflect higher sales compensation
expense associated with the increased revenue, as well as increased staffing
and marketing for the DOC1, NADIS and Open System products. Group 1 believes
these costs as a percentage of revenue will remain around these levels.
General and administrative expenses were $1.3 million or 10% of total revenue
compared with $1.1 million or 11% for the three months ended September 30, 1996
and 1995, respectively. For the six month period ended September 30, 1996,
general and administrative expenses were $2.3 million or 10% of total revenue
compared with $2.3 million or 12% of total revenue in the prior year. The
decrease in the current year is primarily due to lower executive compensation
accruals.
The provision for doubtful accounts was $0.5 million and $0.8 million in fiscal
1997 as compared with $0.4 million and $0.6 million in fiscal year 1996 for the
three and six months periods ended September 30, respectively. The increase in
the current year provision is based upon the larger accounts receivable
balances at September 30, 1996 as compared with the same period the prior year.
Net non-operating expense was $0.2 million for the second quarter and $0.1
million for the six months ended September 30, 1996 as compared with net
non-operating income of $0.1 million and $0.2 million, respectively, for the
comparable periods in fiscal year 1996. These differences reflect higher net
interest expense of $0.1 million for both the quarter and six months ended
September 30, 1996 compared with net interest income of $11,000 and $64,000 in
the comparable periods the prior year. In addition, the Company incurred
losses on investments of $35,000 in the second quarter of fiscal 1997 compared
with investment gains of $110,000 in the prior year. For the six months ended
September 30, 1996 the company recognized investment gains of $34,000 compared
with investment gains of $163,000 in the comparable period the prior year
The Company's effective tax rate was 32% and 37% for the six month periods
ending September 30, 1996 and 1995, respectively. The current year's rate is
the net effect of a 33% effective tax rate on both domestic taxable net loss
and on foreign taxable net income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $5.8 million at September 30, 1996, as
compared with $6.8 million at March 31, 1996. The current ratio was 1.2 to 1
at September 30, 1996, and 1.3 to 1 at March 31, 1996.
7
<PAGE> 9
The Company provides for its cash requirements through cash funds generated
from operations. Additionally, its Group 1 subsidiary maintains a line of
credit facility. Subsequent to September 30, 1996, the Group 1 entered into a
new two year uncollateralized $10,000,000 line of credit arrangement with
Crestar Bank. The line of credit bears interest at the bank's prime rate minus
50 basis points or Libor plus 150 basis points at the Company's option. At
September 30, 1996 borrowings outstanding under the prior line of credit were
$4.2 million; at March 31, 1996, there were no short-term borrowings.
For the six months ended September 30, net losses of $10,000 plus non-cash
expenses of $4.9 million provided a total of $4.9 million reduced by cash used
for working capital items totaling $5.5 million resulting in net cash used by
operating activities of $0.6 million. The cash used for working capital items
includes a $2.4 million increase in accounts receivable and a $1.7 million
decrease in deferred revenue. The increase in accounts receivable is due to
higher revenues. the decrease in deferred revenue is primarily a result of the
conversion of mainframe customers to Open System products which include
multiple year maintenance contracts. Group 1 expects this trend to continue.
Investment in purchased and developed software and capital equipment of $6.1
million, partially offset by net proceeds from the sale of marketable
securities of $2.0 million, resulted in $4.1 million used by investing
activities. $4.0 million was provided by financing activities, primarily short
term borrowings under the Company's credit facility.
Group 1's practice of accepting license agreements under installment payment
arrangements substantially increases its working capital requirements.
Generally, these arrangements are for a period of one to five years after a
minimum down payment of 10% of the principal amount of the contract. Interest
currently ranges from 10% to 12%. Installment receivables included in accounts
receivable were $ 12.2 million and $11.8 million at September 30,1996, and
March 31, 1996, respectively. The installment receivable balance, in addition
to Group 1's policy of offering competitive trade terms of payment, make it
difficult to portray accurately a relationship between the outstanding accounts
receivable balance and the current period revenues.
Group 1 continually evaluates the credit and market risks associated with
outstanding receivables. In the course of this review, Group 1 considers many
factors specific to the individual client as well as the concentration of
receivables within industry groups. Group 1's installment receivables are
predominately with service bureau clients who provide computer services to the
direct marketing industry. Many of these clients have limited capital and
insufficient assets to secure their liability with the Company. The service
bureaus are highly dependent on Group 1's software and services to offer their
customers the economic benefits of postal discounts and mailing efficiency. To
qualify for the U.S. Postal Service and Canada Post Corporation postal
discounts, service bureaus require continuous regulatory product updates
(including the new software releases associated with the postal
reclassification regulations issued July 1, 1996) from Group 1. The service
bureau industry is also highly competitive and subject to general economic
cycles as they impact advertising and direct marketing expenditures. Service
bureau clients represent approximately $8.3 million, or 69% of the installment
receivables at September 30, 1996. Group 1 is aware of no current market risk
associated with the installment receivables.
As of September 30, 1996, the Company's capital resource commitments consisted
primarily of non-cancelable operating lease commitments for office space and
equipment. The Company believes that its current debt services, minimum lease
obligations and other short-term liquidity needs can be met from cash flows
from operations and current credit facilities. The Company believes that its
long-term liquidity needs, principally for continuing investment in capitalized
software development costs, can be funded from operations and current credit
facilities. Historically, the Company has been able to negotiate capital leases
for its acquisition of equipment.
8
<PAGE> 10
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
NONE
ITEM 2. Changes in Securities
NONE
ITEM 3. Defaults Upon Senior Securities
NONE
ITEM 4. The following matters were submitted to, and approved by, the
required vote of security holders of the Company at the
Company's most recent annual shareholder meeting held
September 12, 1996
1. To elect (3) directors to hold office until the third
annual meeting of stockholders of the Company following
their election and until the election and qualification of
their successors:
<TABLE>
<CAPTION>
NOMINEES FOR WITHHELD AUTHORITY
-------- --- ------------------
<S> <C> <C>
Robert S. Bowen 3,243,073 2,227
Ronald F. Friedman 3,243,073 2,227
Charles A. Crew 3,243,073 2,227
</TABLE>
ITEM 5. Other Information
NONE
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 11
No filings on Form 8-K have been made during the quarter
9
<PAGE> 11
PART IV
Listing of Exhibits
110 Computation of earnings per share.
--------------------------------------------------
Filed herewith
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COMNET Corporation
Date: November 14, 1996
/s/ Mark Funston
Mark Funston
Chief Financial Officer
11
<PAGE> 13
Index of Exhibits
Page
Number
------
11.0 Computation of earnings per share. 10
12
<PAGE> 1
EXHIBIT 11
COMNET CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Month Period For the Six Month Period
Ended September 30, Ended September 30,
------------------------------ ----------------------------
1996 1995 1996 1995
(FY97) (FY96) (FY97) (FY96)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net earnings $ 154 $ 604 $ (10) $ 1,019
Less: Preferred Stock dividend (44) (44) (88) (88)
------------ ------- ------------ ---------
Primary earnings (loss) (A) 110 560 (98) 931
Plus: Preferred Stock dividend 44 44 88 88
Plus: Excess funding, net of income taxes 80
------------ ------- ------------ ---------
Fully diluted earnings (B) 154 684 (10) 1,019
============ ======= ============ =========
Weighted average shares outstanding (C) 3,265 3,104 3,257 3,092
Dilutive common stock equivalents for primary
earnings per share - - - - - - - - -
----------- ------- ------------ ---------
Weighted average shares and common equivalent
shares outstanding for primary earnings per
share 3,265 3,104 3,257 3,092
=========== ======= ============ =========
Additional equivalent shares assuming full
dilution 147 609 148 147
----------- ------- ------------ ---------
Weighted average shares and common equivalent
shares for fully diluted earnings per share (D) 3,412 3,713 3,405 3,239
----------- ------- ------------ ---------
Earnings per share
Primary (A)(C) 0.03 (0.18) (0.03) 0.30
=========== ======= ============ =========
Fully Diluted (1) (B)(D) 0.03 (0.18) (0.03) 0.30
=========== ======= ============ =========
</TABLE>
(1) Not presented on the Consolidated Statements of Earnings because fully
diluted earnings per share had a differential less than 3% of primary
earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000023055
<NAME> COMNET CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,157,000
<SECURITIES> 0
<RECEIVABLES> 26,160,000
<ALLOWANCES> 3,016,000
<INVENTORY> 0
<CURRENT-ASSETS> 33,634,000
<PP&E> 3,304,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 70,198,000
<CURRENT-LIABILITIES> 27,863,000
<BONDS> 0
0
2,846,000
<COMMON> 1,791,000
<OTHER-SE> 22,840,000
<TOTAL-LIABILITY-AND-EQUITY> 70,198,000
<SALES> 13,059,000
<TOTAL-REVENUES> 13,059,000
<CGS> 5,973,000
<TOTAL-COSTS> 12,644,000
<OTHER-EXPENSES> 169,000
<LOSS-PROVISION> 456,000
<INTEREST-EXPENSE> 135,000
<INCOME-PRETAX> 246,000
<INCOME-TAX> 41,000
<INCOME-CONTINUING> 154,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,000
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
