<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
For the Quarter Ended December 31, 1997 Commission file number 0-6355
COMNET CORPORATION
Incorporated in Delaware IRS EI No. 52-0852578
4200 Parliament Place, Suite 600, Lanham, MD 20706-1860
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 February 13, 1998
- ----------------------------- 3,276,541
Common Stock, $.50 par value
<PAGE> 2
COMNET CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
(UNAUDITED) (AUDITED)
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 708 $ 1,629
Trade and installment accounts receivable,
less allowance of $2,669 and $3,208 27,434 32,460
Deferred income taxes 2,186 2,385
Prepaid expenses and other current assets 3,876 4,533
-------- --------
Total current assets 34,204 41,007
Installment accounts receivable, long-term 4,429 6,170
Property and equipment, net 3,402 3,667
Computer software, net 23,844 22,306
Other assets 2,550 2,707
-------- --------
Total assets $ 68,429 $ 75,857
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 5,083 $ 7,097
Accounts payable 1,814 3,168
Current portion of long-term debt 179 164
Accrued expenses 3,543 5,932
Accrued compensation 3,377 3,984
Current deferred revenues 15,171 16,170
-------- --------
Total current liabilities 29,167 36,515
Long-term debt, net of current portion 419 304
Deferred revenues, long-term 4,045 4,606
Deferred income taxes 3,493 2,801
Minority interest in net earnings of consolidated subsidiary 5,459 5,419
-------- --------
Total liabilities 42,583 49,645
-------- --------
Commitments and contingent liabilities
Stockholders' equity:
6% cumulative convertible preferred stock, $0.25 par value 148 shares issued
and outstanding 2,846 2,846
Common stock, $0.50 par value 10,000 shares
authorized, 3,592 and 3,588 issued and outstanding 1,796 1,794
Capital contributed in excess of par value 17,752 17,728
Retained earnings 5,371 5,508
Cumulative foreign currency translation 96 351
-------- --------
27,861 28,227
Less treasury stock at cost, 316 shares (2,015) (2,015)
-------- --------
Total stockholders' equity 25,846 26,212
-------- --------
Total liabilities and stockholders' equity $ 68,429 $ 75,857
======== ========
</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 NINE MONTH PERIOD
ENDED DECEMBER 31, ENDED DECEMBER 31,
-------------------------- -------------------------
1997 1996 1997 1996
(FY98) (FY97) (FY98) (FY97)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Software licenses and related revenue $ 8,989 $ 8,376 $ 22,425 $ 20,911
Maintenance and service revenue 6,870 6,255 20,668 17,498
-------- -------- -------- --------
Total revenue 15,859 14,631 43,093 38,409
-------- -------- -------- --------
Costs and expenses:
Software licenses expense 2,774 2,294 7,569 5,506
Maintenance and service expense 2,920 3,271 9,540 9,430
Research, development and indirect support 822 574 2,099 1,863
Selling and marketing 5,210 5,447 15,576 14,489
General and administrative 2,118 1,792 5,587 4,894
Provision for doubtful accounts receivable 1,000 475 2,105 1,311
-------- -------- -------- --------
Total costs and expenses 14,844 13,853 42,476 37,493
-------- -------- -------- --------
Operating earnings 1,015 778 617 916
Non-operating expense, net (104) (138) (418) (263)
-------- -------- -------- --------
Earnings from operations before provision for
income taxes and minority interest 911 640 199 653
Provision for income taxes 356 234 163 238
Minority interest in net earnings of consolidated
subsidiary 132 90 40 109
-------- -------- -------- --------
Net earnings (loss) 423 316 (4) 306
Preferred stock dividend requirements 44 44 133 133
-------- -------- -------- --------
Net earnings (loss) available to common
stockholders $ 379 $ 272 $ (137) $ 173
======== ======== ======== ========
Basic earnings (loss) per share of
common stock $ 0.12 $ 0.08 $ (0.04) $ 0.05
======== ======== ======== ========
Diluted earnings (loss) per share of
common stock $ 0.12 $ 0.08 $ (0.04) $ 0.05
======== ======== ======== ========
Basic weighted average number of common shares outstanding 3,273 3,268 3,272 3,261
Diluted weighted average number of common and
common equivalent shares outstanding 3,290 3,283 3,272 3,282
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
COMNET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE-MONTH
PERIOD ENDED DECEMBER 31,
-------------------------
1997 1996
(FY98) (FY97)
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (4) $ 306
Adjustments to reconcile earnings from operations
to net cash from operating activities:
Amortization expense 5,338 4,478
Depreciation expense 776 719
Provision for doubtful accounts receivable 2,105 1,311
Deferred income taxes 891 9
Loss on disposal of assets 13 - - -
Minority interest in earnings of consolidated subsidiary 40 109
Change in assets and liabilities:
(Increase) decrease in accounts receivable 4,662 (4,992)
(Increase) decrease in prepaid expenses and other current assets 657 (341)
Decrease in other assets 58 119
Increase (decrease) in accounts payable (1,354) 1,325
Decrease in accrued expenses and compensation (3,041) (2,232)
Decrease in deferred revenues (1,560) (1,049)
-------- --------
Net cash provided by (used in) operating activities 8,581 (238)
-------- --------
Cash flows from investing activities:
Purchase and development of computer software (6,726) (7,925)
Purchase of equipment and improvements (575) (721)
Purchase of marketable securities - - - (3,984)
Sale of marketable securities - - - 5,965
-------- --------
Net cash used in investing activities (7,301) (6,665)
-------- --------
Cash flows from financing activities:
Proceeds from short-term borrowings 11,854 18,865
Reduction of short-term borrowings (13,868) (11,365)
Proceeds from exercise of common stock options 26 158
Proceeds from acquisition of debt 199 - - -
Reduction of long-term debt (68) (552)
Dividends paid on preferred stock (89) (88)
-------- --------
Net cash provided by (used in) financing activities (1,946) 7,018
-------- --------
Net increase (decrease) in cash and cash equivalents (666) 115
Effect of exchange rate changes on cash and cash equivalents (255) 2
Cash and cash equivalents at beginning of period 1,629 1,845
-------- --------
Cash and cash equivalents at end of period $ 708 $ 1,962
======== ========
</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 nine months ended December 31,
1997 and 1996, and as of December 31, 1997, are unaudited. In the opinion
of management, all adjustments 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 nine months ended December 31, 1997, are not
necessarily indicative of the results for the year ending March 31, 1998.
The information contained in the audited financial statements and the
notes thereto for the year ended March 31, 1997, 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 $9,549,000 and
$8,983,000 for the nine months ended December 31, 1997 and 1996,
respectively.
3. The Financial Accounting Standards Board issued SFAS No. 128 regarding
earnings per share, which the Company has adopted for the presentation of
earnings per share. Prior periods have also been restated. 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. Basic earnings per share have been computed using the
weighted average number of common shares outstanding during the respective
periods. Diluted 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. Subsequent to December 31, 1997, Group 1 granted an exclusive license to
Datatech Enterprises, Inc. (Datatech) for the distribution of certain of
Group 1's PC based products for a period of 60 months. Group 1 will
receiver certain guaranteed payments as well as contingent royalties
during the 60 month period. The royalties are payable on a graduated scale
once sales of the PC products exceed $2,000,000 during any year.
Additionally, Datatech assumed the software maintenance and technical
support obligations for existing customers of the licensed products and
assumed certain accounts receivable and inventories associated with those
products. Ownership of the licensed products will transfer to Datatech at
the end of the 60 month period or upon payment of $2,600,000 in royalties,
whichever occurs first.
5. 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
Any statements in this quarterly report on Form 10-Q concerning the
Company's business outlook or future economic performance; anticipated
profitability, revenues, expenses or other financial items; together with
other statements that are not historical facts, are ?forward-looking
statements? as that term is defined under the Federal Securities Laws.
Forward-looking statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from those
stated in such statements. Such risks, uncertainties and factors include,
but are not limited to, changes in currency exchange rates, changes and
delays in new product introduction, customer acceptance of new products,
changes in government regulations, changes in pricing or other actions by
competitors and general economic conditions, as well as other risks
detailed in the Company's filings with the Securities and Exchange
Commission.
For the quarter ended December 31, 1997, the Company's revenues of $15.9
million increased 8% from the $14.6 million reported for the comparable
period the prior year. Net earnings for the quarter ended December 31,
1997, were $0.4 million or $0.12 per share compared with net earnings of
$0.3 million or $0.08 per share in fiscal 1997. For the nine months ended
December 31, 1997, the Company's revenue was $43.1 million, an increase of
12% over revenue of $38.4 million the prior year. The Company had a net
loss for the nine month period of $0.1 million or $0.04 per share compared
with earnings of $0.2 million or $0.05 per share the prior year. The
decline in profitability for the nine month period was due to first
quarter fiscal 1998 losses arising from increased sales and marketing,
general and administrative and maintenance and professional services
costs, partially offset by an increase in revenue. The increase in net
earnings for the quarter was primarily due to higher revenue partially
offset by higher royalty and bad debt expenses.
Software license fees and related revenues of $9.0 million for the third
fiscal quarter increased 7% over the prior year. Third quarter software
license and related revenue was 57% of total revenue in both fiscal 1998
and fiscal 1997. For the nine month period, software license fees and
related revenues of $22.4 million were 7% above the prior year. For the
nine month period, software license and related revenue was 52% of total
revenue in fiscal 1998 compared with 54% in fiscal 1997. License fees
increased in all market areas except Mailing Efficiency.
License fees from Customer Information Management Systems software for the
fiscal third quarter increased $242,000 over the prior year and for the
nine month period, were $487,000 above the comparable period in the prior
year. The increases were due to sales of NADIS offset by lower sales of
the WorldTrak product.
License fees from Database Marketing Systems increased 115% for the fiscal
third quarter versus the prior year. For the nine month period ended
December 31, 1997, revenues increased 94% over the comparable period the
prior year. The increase resulted from higher sales of Model 1 and
Geographic Coding products partially offset by lower sales of our
DataDesigns products.
Licensing of Electronic Document Systems increased 221% in the fiscal
third quarter. For the nine month period ended December 31, 1997,
Electronic Document Systems license fees increased 40% over the
5
<PAGE> 7
comparable period the prior year. The increases were due to sales of our
DOC1 Product in the U.S. and Europe.
The Company's core Mailing Efficiency software license fees for the fiscal
third quarter decreased 44% compared with the same period the prior year.
For the nine months ended December 31, 1997, revenues decreased 18% over
the comparable period in the prior year. The decrease was primarily due to
lower sales of our mainframe and PC products partially offset by higher
sales of our Open Systems products suite.
Maintenance and other revenue of $6.9 million for the quarter increased
10% over the prior year. For the nine month period, maintenance and other
revenue of $20.7 million was 18% above the comparable period in the prior
year. Maintenance and other revenue accounted for 43% and 48% of total
revenue for the quarter and nine months ended December 31, 1997, compared
with 43% and 46%, respectively in the prior year. Recognized maintenance
fees included in maintenance and other revenue above, were $5.4 million
and $15.8 million for the quarter and nine months ended December 31, 1997,
increases of 21% and 19% over the comparable periods of the prior year.
Professional and educational service revenues of $1.5 million and $4.8
million for the quarter and nine months ended December 31, 1997,
represented a decrease of 18% for the quarter and an increase of 17% for
the nine month period. The decrease in revenue in the third quarter of
fiscal 1998 was due to lower professional services revenue for the mailing
efficiency/database marketing products. The increase year over year is due
to higher professional services revenue for the Electronic Document
Systems products during the first six months of fiscal 1998.
Effective September 5, 1997, Group 1 granted an exclusive license to
InterTrak Corporation for the distribution of the WorldTrak products for a
period of 36 months. At the end of the 36 month period, ownership of the
product will pass to InterTrak. Group 1 will receive a 30% royalty on all
sales of the WorldTrak product during the 36 month period. In addition,
Group 1 has contracted with InterTrak for the maintenance and support of
all existing WorldTrak customers during the remaining terms of the
maintenance contracts.
During the fiscal third quarter, total operating costs of $14.6 million
amounted to 92% of revenue compared with $13.7 million or 94% of revenue
during the same period the prior year. For the nine months ended December
31, 1997, total operating costs of $42.1 million were 98% of revenue as
compared with $37.1 million or 97% of revenue in the prior year.
Software license expense increased to $2.8 million for the three months
ended December 31, 1997, from $2.3 million in the comparable prior year
period, representing 31% and 27% of software license and related revenues,
respectively. For the nine months ended December 31, 1997 and 1996,
software license expense represented 34% and 26% of software license and
related revenue respectively. The increased expense primarily relates to
higher royalty costs from increased sales of Database Marketing products
and Customer Information Management Systems in fiscal 1998.
Maintenance and service expense decreased to $2.9 million from $3.3
million in fiscal 1997, representing 43% and 52% of maintenance and
service revenue, respectively. For the nine months ended December 31, 1997
and 1996, maintenance and service expense represented 46% and 54% of
maintenance and service revenue, respectively. The decrease in expense as
a percent of revenue reflects higher margins in both maintenance and
service, as described below.
Included in maintenance and service expense above are professional and
educational service costs of $1.2 million which were 80% of professional
services revenue for the third quarter compared with $1.3 million and 73%
for the comparable quarter in the prior year. For the nine months ended
December 31, 1997, professional and educational service costs were $3.9
million and 81% of professional service revenue compared with $3.4 million
and 82% in the prior year. The Company expects these margins to increase
as professional services revenue grows.
6
<PAGE> 8
Costs of maintenance were $1.7 million for the third quarter of fiscal
1998, representing 32% of maintenance revenue compared with costs of $2.0
million and 44% of maintenance revenue in the third quarter of fiscal
1997. For the nine months ended December 31, 1997, maintenance costs of
$5.6 million were 35% of maintenance revenue compared with $6.0 million
and 45% in the comparable period of the prior year. The lower cost as a
percentage of maintenance revenue reflects economies of scale achieved
with maintenance support costs spread over a larger revenue base, as well
as cost reductions primarily in fulfillment.
Research, development and indirect support expenses (after capitalization
of certain development costs) totaled $0.8 million in the third quarter of
fiscal 1998 and $0.6 million in the same quarter the prior year,
representing 5% and 4% of total revenue respectively. For both the nine
month periods ended December 31, 1997 and 1996, research, development and
indirect support expenses were 5% of total revenue. The Company
anticipates that these costs, as a percentage of revenue, will increase
due to expanded product offerings.
Selling and marketing expenses totaled $5.2 million or 33% of total
revenue in the third quarter of fiscal 1998 and $5.4 million or 37% of
total revenue in the prior year. For the nine month periods ending
December 31, 1997 and 1996, selling and marketing expenses were 36% and
38% of total revenue respectively. The Company believes these costs, as a
percentage of revenue, will remain around these levels.
General and administrative expenses were $2.1 million or 13% of total
revenue compared with $1.8 million or 12% of total revenue for the three
months ended December 31, 1997 and 1996, respectively. For the nine month
period ended December 31, 1997, general and administrative expenses were
$5.6 million or 13% of total revenue compared with $4.9 million which also
represents 13% of total revenue in the prior year.
For the three and nine month periods ended December 31, the provision for
doubtful accounts was $1.0 million and $2.1 million in fiscal 1998 as
compared with $0.5 million and $1.3 million in fiscal year 1997. The
increase in the current year provision is based upon higher revenues and
specific accounts identified by management whose collectability has become
doubtful.
Net non-operating expense was $0.1 million for the third quarter and $0.4
million for the nine months ended December 31, 1997 as compared with net
non-operating expense of $0.1 million and $0.3 million, respectively, for
the comparable periods in fiscal year 1997. The Company expects interest
expense to decrease in future periods because of lower borrowings under
its line of credit.
The Company's effective tax rate was 82% and 35% for the nine month
periods ending December 31, 1997 and 1996, respectively. The higher rate
in fiscal 1998 reflects a lower benefit from cumulative domestic taxable
losses offset by foreign taxable income. The current year's rate is the
net effect of a 25% effective tax rate on domestic taxable net loss and a
33% effective tax rate on foreign taxable net.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $5.0 million at December 31, 1997, as
compared with $4.5 million at March 31, 1997. The current ratio was 1.2 to
1 at December 31, 1997 and 1.1 to 1 at March 31, 1997.
The Company provides for its cash requirements through cash funds
generated from operations. Additionally, the Company's Group 1 subsidiary
maintains a two year $10,000,000 line of credit arrangement with Crestar
Bank, expiring August 31, 1998. As amended, effective September 30, 1997,
the line of credit bears interest at the bank's prime rate, or Libor plus
175 basis points at Group 1's option. The line of credit is collateralized
by trade accounts receivable (excluding installment accounts receivable)
and maintenance renewal accounts receivable and among other things,
requires Group 1 to maintain an EBIT (earnings before interest and taxes)
to interest ratio of at least 1.5 to 1 through March
7
<PAGE> 9
31, 1998, and at least 2.0 to 1 thereafter. The arrangement also requires
Group 1 to maintain a total liabilities to EBITDA (earnings before
interest, taxes, depreciation and amortization) ratio of no more than 5.0
to 1 through March 31, 1998, and no more than 4.0 to 1 thereafter. At
December 31, 1997, borrowings outstanding under the line of credit were
$5.1 million and at March 31, 1997, borrowings were $7.1 million.
Aggregate borrowings under the arrangement are limited to the lesser of
$10,000,000 or 85% of the trade accounts receivable (excluding
installment accounts receivable) and 50% of the maintenance renewal
accounts receivable.
For the nine months ended December 31, net losses plus non-cash expenses
of $9.1 million provided a total of $9.1 million cash from operating
activities. This amount was reduced by cash used for working capital items
totaling $0.9 million resulting in net cash provided by operating
activities of $8.6 million. The cash used for working capital items
includes a $4.7 million decrease in accounts receivable, offset by a $1.6
million decrease in deferred revenue, a $3.0 million decrease in accrued
expense and a $1.4 million decrease in accounts payable. The decrease in
accounts receivable is due to increased cash collections along with the
sale of certain receivables to a third party financier. Investment in
purchased and developed software of $6.7 million, and capital equipment of
$0.6 million, resulted in $7.3 million used by investing activities. $1.9
million was used in financing activities, primarily payment on short term
borrowings under Group 1'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% to 20% of the principal
amount of the contract. Interest currently ranges from 10% to 20%.
Installment receivables included in accounts receivable were $8.6 million
and $11.9 million at December 31, 1997 and March 31, 1997, respectively.
The installment receivable balance, in addition to Group 1's policy of
offering competitive trade terms for 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 $5.3 million, or 62% of the installment
receivables at December 31, 1997. Group 1 is aware of no current market
risk associated with the installment receivables.
As of December 31, 1997, 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. Submission of Matters to a Vote of Security Holders
NONE
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
11.0 Computation of earnings per share.
--------------------------------
Filed herewith
10
<PAGE> 12
EXHIBIT 11
COMNET CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Month Period For the Nine Month Period
Ended December 31, Ended December 31,
---------------------------- ------------------------
1997 1996 1997 1996
(FY98) (FY97) (FY98) (FY97)
-------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net earnings (loss) $ 423 $ 316 $ (4) $ 306
Less: Preferred Stock dividend (44) (44) (133) (133)
------- ------- ------- -------
Basic earnings (loss) (A) 379 272 (137) 173
Plus: Preferred Stock dividend (1) - - - - - - - - - - - -
Diluted earnings (loss) (B) $ 379 272 $ (137) 173
======= ======= ======= =======
Weighted average shares outstanding for basic
Earnings per share (C) 3,273 3,268 3,272 3,261
Dilutive common stock equivalents for diluted
earnings per share 17 15 - - - 21
Additional equivalent shares assuming full
dilution (1) - - - - - - - - - - - -
------- ------- ------- -------
Weighted average shares and common
equivalent shares for diluted (D) 3,290 3,283 3,272 3,282
earnings per share ------- ------- ------- -------
Earnings (loss) per share
(A)/(C)$ 0.12 $ 0.08 $ (0.04) $ 0.05
Basic ======= ======= ======= =======
(B)/(D)$ 0.12 $ 0.08 $ (0.04) $ 0.05
Diluted ======= ======= ======= =======
</TABLE>
1) The convertible preferred stock for the three month and nine month periods
ended December 31, 1997 and 1996, were anti-dilutive and therefore
additional equivalent shares are not shown and preferred stock dividends
are not added back.
11
<PAGE> 13
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: February 17, 1998
/s/ Mark Funston
Mark Funston
Chief Financial Officer
12
<PAGE> 14
Index of Exhibits
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
11.0 Computation of earnings per share. 11
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 708
<SECURITIES> 0
<RECEIVABLES> 31,863
<ALLOWANCES> 2,269
<INVENTORY> 0
<CURRENT-ASSETS> 34,204
<PP&E> 3,402
<DEPRECIATION> 0
<TOTAL-ASSETS> 68,429
<CURRENT-LIABILITIES> 29,167
<BONDS> 0
0
2,846
<COMMON> 1,796
<OTHER-SE> 63,787
<TOTAL-LIABILITY-AND-EQUITY> 68,429
<SALES> 15,859
<TOTAL-REVENUES> 15,859
<CGS> 14,844
<TOTAL-COSTS> 14,948
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 911
<INCOME-TAX> 356
<INCOME-CONTINUING> 423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 379
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
