<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995.
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______.
Commission File Number 0-16376
TIMBERLINE SOFTWARE CORPORATION
(Name of small business issuer in its charter)
Oregon 93-0748489
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9600 S.W. Nimbus Avenue, Beaverton, Oregon 97008
(Address of principal executive offices) (Zip code)
(503) 626-6775
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter 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 [ ]
At August 4, 1995, 3,431,161 shares of common stock of the
registrant were outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [x]
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
TABLE OF CONTENTS
- ---------------------------------------------------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheets, June 30, 1995 and
December 31, 1994 ............................... 3
Condensed statements of operations for the three
months ended June 30, 1995 and 1994 ............. 4
Condensed statements of operations for the six
months ended June 30, 1995 and 1994 ............. 5
Condensed statements of cash flows for the six
months ended June 30, 1995 and 1994 ............. 6
Notes to condensed financial statements ........... 7
Item 2. Management's Discussion and Analysis or
Plan of Operation ............................... 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders ............................... 12
Item 6. Exhibits and Reports on Form 8-K ................. 12
SIGNATURES ................................................. 12
EXHIBIT INDEX .............................................. 13
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
TIMBERLINE SOFTWARE CORPORATION
CONDENSED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
- ----------------------------------------------------------------
<TABLE><CAPTION>
June 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 2,457,919 $ 1,411,611
Temporary cash investments 3,942,290 3,484,282
Accounts receivable, less allowance
for doubtful accounts
(June 30, 1995, $227,552;
December 31, 1994, $251,982) 2,404,770 3,489,521
Other receivables 119,575 84,366
Inventories 207,981 215,655
Other current assets 704,845 515,819
----------- -----------
Total current assets 9,837,380 9,201,254
----------- -----------
Property and equipment 5,719,871 5,392,571
Less accumulated depreciation
and amortization 3,334,159 3,039,283
------------ -----------
Property and equipment - net 2,385,712 2,353,288
----------- -----------
Capitalized software costs - net 345,937 480,272
Purchased software - net 243,175 189,629
Other assets 110,161 126,054
----------- -----------
Total $12,922,365 $12,350,497
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 910,411 $ 644,545
Accrued commissions/royalties 201,734 166,543
Accrued income taxes - 588,685
Deferred revenues 5,332,118 4,514,684
Accrued employee expenses 680,528 975,919
Other current liabilities 189,557 241,091
----------- -----------
Total current liabilities 7,314,348 7,131,467
----------- -----------
Accrued rent expense 66,935 76,979
Deferred income taxes 410,000 398,000
Shareholders' equity:
Common stock, without par value
authorized, 8,000,000 shares;
issued - June 30, 1995,
3,426,361 shares; December 31,
1994, 3,419,040 shares 342,636 341,904
Additional paid in capital 1,083,181 897,690
Retained earnings 3,705,265 3,504,457
----------- -----------
Total shareholders' equity 5,131,082 4,744,051
----------- -----------
Total $12,922,365 $12,350,497
=========== ===========
See notes to condensed financial statements.
/TABLE
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net revenue $5,971,222 $4,901,163
---------- ----------
Cost and expenses:
Cost of revenue 720,830 704,643
Customer support 1,205,616 915,815
Product development 1,280,961 933,185
Sales and marketing 1,509,326 1,289,560
General and administrative 893,701 798,901
---------- ----------
Total cost and expenses 5,610,434 4,642,104
---------- ----------
Income from operations 360,788 259,059
Other income 100,075 30,314
---------- ----------
Income before income taxes 460,863 289,373
Provision for income taxes 173,000 110,000
---------- ----------
Net income $ 287,863 $ 179,373
========== ==========
Earnings per share $ .08 $ .05
========== ==========
Weighted average common shares
outstanding 3,604,106 3,474,704
========== ==========
See notes to condensed financial statements.
</TABLE>
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Net revenue $11,864,781 $9,584,152
----------- ----------
Cost and expenses:
Cost of revenue 1,370,592 1,298,090
Customer support 2,401,633 1,874,356
Product development 2,529,734 1,820,393
Sales and marketing 2,927,240 2,605,280
General and administrative 1,980,027 1,701,632
----------- ----------
Total cost and expenses 11,209,226 9,299,751
----------- ----------
Income from operations 655,555 284,401
Other income 184,888 76,242
----------- ----------
Income before income taxes 840,443 360,643
Provision for income taxes 319,000 137,000
----------- ----------
Net income $ 521,443 $ 223,643
=========== ==========
Earnings per share $ .15 $ .06
=========== ==========
Weighted average common shares
outstanding 3,585,001 3,477,878
=========== ==========
See notes to condensed financial statements.
</TABLE>
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net cash provided by
operating activities $2,119,139 $2,333,813
---------- ----------
Cash flows from investing
activities:
Payments for property
and equipment (472,892) (739,533)
Capitalized software costs (20,281) (152,031)
Proceeds from temporary
cash investments 3,000,000
Purchase of temporary
cash investments (3,458,009)
Other investing activities 12,763 3,936
---------- ----------
Net cash used in investing
activities (938,419) (887,628)
---------- ----------
Cash flows from financing
activities:
Proceeds from issuance of
common stock 196,434 126,785
Common stock reacquired (160,098)
Dividends paid (170,748)
---------- ----------
Net cash provided by (used in)
financing activities (134,412) 126,785
---------- ----------
Net increase in cash
and cash equivalents 1,046,308 1,572,970
Cash and cash equivalents,
beginning of the year 1,411,611 2,336,471
---------- ----------
Cash and cash equivalents,
end of period $2,457,919 $3,909,441
========== ==========
Supplemental information:
Cash paid during the period for:
Income taxes $ 736,827 $ 190,705
Interest expense 129 209
See notes to condensed financial statements.
</TABLE>
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
1. Condensed financial statements
Certain information and note disclosures normally included
in financial statements prepared in accordance with
generally accepted accounting principles have been omitted
from these condensed financial statements. These condensed
financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1994.
The balance sheet at December 31, 1994 has been condensed
from the audited balance sheet as of that date. The results
of operations for the three and six month periods ended June
30, 1995 and 1994 are not necessarily indicative of the
operating results for the full year.
In the opinion of management, all adjustments, consisting of
normal recurring adjustments, have been made to present
fairly the Company's financial position at June 30, 1995 and
the results of its operations and its cash flows for the
three and six month periods ended June 30, 1995 and 1994.
2. Stock split
On April 25, 1995, the Company's Board of Directors approved
a three-for-two stock split to shareholders of record on
May 5, 1995. The number of shares issued as of December 31,
1994 as shown on the condensed balance sheets and the
earnings per share amounts and weighted common shares
outstanding shown on the condensed statements of operations
for the three and six month periods ended June 30, 1995 and
1994 have been retroactively adjusted to reflect this
change.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
Operation
TIMBERLINE SOFTWARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ----------------------------------------------------------------
Results of Operations
- ---------------------
NET REVENUE. Net revenue increased 22 percent to $5,971,000 in
the three months ended June 30, 1995 compared to $4,901,000 in
the comparable period in 1994. The major component of net
revenue, software sales, increased 18 percent to $3,230,000 in
the 1995 period from $2,734,000 in the 1994 period, primarily due
to increased sales of construction accounting software, particu-
larly Construction Gold. Construction Gold sales increased 36
percent in the three months ended June 30, 1995 over the same
period in 1994. Sales of estimating software also increased
during the three months ended June 30, 1995, but were partially
offset by a slight decrease in sales of architect and engineer
and property management software. Software sales represented 54
percent of net revenue in the three months ended June 30, 1995
compared to 56 percent of net revenue in the same period in 1994.
Service fees from maintenance, support and training, which
represented 44 and 43 percent of net revenue for the three months
ended June 30, 1995 and 1994, respectively, increased 27 percent
to $2,656,000 in the 1995 period from $2,087,000 in the 1994
period. The increase in service fees was due principally to
increased maintenance and support fees resulting from the
Company's larger customer base. The Company anticipates that
service fees will continue to represent a significant percentage
of net revenue as the Company's installed customer base continues
to increase.
For the six months ended June 30, 1995, net revenue increased 24
percent to $11,865,000 from $9,584,000 for the six months ended
June 30, 1994. Software sales increased 16 percent to $6,292,000
compared to $5,423,000 in the same period for 1994, primarily due
to increased sales of construction accounting software,
particularly Construction Gold, and estimating software.
Construction Gold software sales increased 43 percent and
estimating software sales increased 12 percent in the six months
ended June 30, 1995 over the same period in 1994. Property
management software sales in the first six months of 1995
remained relatively flat compared to the same period in 1994
while architect and engineer software sales decreased slightly.
Software sales represented 53 percent of net revenue during the
first six months of 1995 compared to 57 percent of net revenue
during the first six months of 1994.
Service fees, which represented 45 percent and 42 percent of net
revenue for the six months ended June 30, 1995 and 1994,
respectively, increased 35 percent to $5,385,000 in the 1995
period from $3,984,000 in the 1994 period. The increase in
service fees was principally due to increased maintenance and
support fees resulting from the Company's larger customer base,
and to a lesser degree, an expanded number of training classes
offered by the Company and increased demand for on-site
consulting services.
COST OF REVENUE. Cost of revenue decreased to 12 percent of net
revenue for the three and six month periods ended June 30, 1995
from 14 percent for the comparable periods in 1994. This
decrease primarily resulted from service fees representing a
greater percentage of net revenue in 1995 and lower costs (as a
percentage of software sales) related to software sales.
OPERATING EXPENSES. Operating expenses increased 24 percent to
$4,890,000 for the three months ended June 30, 1995 from
$3,937,000 for the same period in 1994. Operating expenses
increased 23 percent to $9,839,000 for the six months ended June
30, 1995 from $8,002,000 for the comparable period in 1994.
Customer support expenses increased 32 percent to $1,206,000 for
the three months ended June 30, 1995 from $916,000 for the same
period in 1994. Customer support expenses increased 28 percent
to $2,402,000 for the six months ended June 30, 1995 from
$1,874,000 for the comparable period in 1994. The increases were
primarily due to increased personnel, equipment, and telephone
costs required to handle the increased demand for support,
consulting and training services resulting from increased sales
of Construction Gold software. The Company anticipates continued
increases in customer support expenses in order to meet the
demands of its customers and to maintain a high quality level of
service.
Product development expenses increased 37 percent to $1,281,000
for the three months ended June 30, 1995 from $933,000 for the
same period in 1994. Product development expenses increased 39
percent to $2,530,000 for the six months ended June 30, 1995 from
$1,820,000 for the same period in 1994. The increases were
primarily due to additional personnel necessary to maintain the
Company's existing products and to develop and test new software
products in the graphical user interface ("GUI") environment.
Additional personnel were also needed to meet the Company's
software development schedule due to the complexity involved in
developing and testing GUI software products. The Company
anticipates that eventually all of its products will operate in
the GUI environment and that additional personnel will be
required in the product development area in 1995.
Sales and marketing expenses increased 17 percent to $1,509,000
in the three months ended June 30, 1995 from $1,290,000 for the
same period in 1994. Sales and marketing expenses increased 12
percent to $2,927,000 for the six months ended June 30, 1995 from
$2,605,000 in the comparable period in 1994. The increases were
primarily due to increased personnel costs in the sales and
telemarketing areas. As a percent of net revenue, sales and
marketing expenses declined to 25 percent in the three months
ended June 30, 1995 from 26 percent in the comparable 1994
period. As a percent of net revenue, these expenses declined to
25 percent in the first six months of 1995 from 27 percent in the
comparable 1994 period.
General and administrative expenses increased 12 percent to
$894,000 for the three months ended June 30,1995 from $799,000
for the same period in 1994, but declined, as a percentage of net
revenue, to 15 percent in the three months ended June 30, 1995
from 16 percent in the comparable period in 1994. The increase
in general and administrative expenses was due primarily to an
increase in bad debt expense and equipment costs.
General and administrative expenses increased 16 percent to
$1,980,000 for the six months ended June 30, 1995 from $1,702,000
for the same period in 1994. This was primarily due to a
$214,000 increase in bad debt expense over the prior year as the
Company wrote off a large amount owed from a Canadian customer in
1995. Despite this, general and administrative expenses, as a
percent of net revenue, declined to 17 percent in 1995 from 18
percent in the first six months of 1994.
OTHER INCOME. Other income increased to $100,000 for the three
months ended June 30, 1995 from $30,000 for the comparable period
in 1994. For the six months ended June 30, 1995, other income
increased to $185,000 from $76,000 for the comparable period in
1994. These increases were due to increased interest income as a
result of higher interest rates and larger amounts of investable
funds.
PROVISION FOR INCOME TAXES. The provision for income taxes
increased to $173,000 for the three months ended June 30, 1995
from $110,000 for the same period in 1994. For the six months
ended June 30, 1995, the provision for income taxes increased to
$319,000 from $137,000 for the comparable period in 1994. These
increases were due to the increases in pre-tax income. As a
percent of income before income taxes, the provision for income
taxes was 38 percent for the three and six months ended June 30,
1995 and 1994.
<PAGE>
Capital Resources and Liquidity
- -------------------------------
For the six months ended June 30, 1995, net cash provided by
operations was $2,119,000 compared to $2,334,000 for the same
period in 1994. Working capital increased to $2,523,000 at June
30, 1995. Cash, cash equivalents and temporary cash investments,
which represented 50 percent of the Company's total assets at
June 30, 1995, increased $1,504,000 during the first six months
of 1995 due principally to the increase in cash provided by
operations. Net accounts receivable at June 30, 1995 decreased
$1,085,000, since December 31, 1994 reflecting a seasonal decline
in sales in June 1995 compared to December 1994 and the write-
off of a large receivable from a Canadian customer. Other
current assets increased $189,000 primarily due to an increase in
prepaid expenses.
Accounts payable increased $266,000 during the first six months
of 1995 primarily due to larger amounts owed to the vendor which
provides order assembly and shipping services to the Company.
Accrued income taxes decreased $589,000 during the first six
months of 1995 primarily as a result of the payment of federal
income taxes owed for 1994 and estimated income tax payments for
1995. Deferred revenues increased $817,000 in the same period
primarily due to increased billings for annual maintenance and
support services. Revenue from these billings is recognized
monthly over the term of the contracts. Accrued employee
expenses decreased $295,000 during the first six months of 1995
primarily due to lower amounts owed to the Company's 401(k) plan
and for profit sharing bonuses.
The Company repurchased 27,000 shares of common stock during the
six months ended June 30, 1995. As of that date, the Company's
Board of Directors had authorized management to repurchase up to
188,250 additional shares on the open market.
During the first six months of 1995, the Company declared two
quarterly cash dividends amounting to $171,000. In July 1995,
the Company's Board of Directors declared another cash dividend
of $.03 per share.
As of June 30, 1995, the Company had expended $473,000 of its
1995 capital expenditure budget of $1,200,000 for computer and
telecommunication equipment. Subsequent capital expenditures in
1995 are expected to be funded through current cash balances and
cash provided from operations. The Company has a $1,000,000
working capital line of credit that expires in May 1996. At June
30, 1995, there were no outstanding borrowings under the line of
credit.
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on April
25, 1995. Voting common shareholders took the following
actions at the meeting:
1. The shareholders voted to elect the following nominees
to the Company's Board of Directors:
Votes Votes Shares
For Withheld Not Voted
John Gorman 2,119,929 3,527 139,104
Leslie F. Clarke,II 2,119,929 3,527 139,104
James A. Meyer 2,119,929 3,527 139,104
Donald L. Tisdel 2,119,929 3,527 139,104
2. The shareholders voted to ratify management's selection
of auditors for 1995 by the affirmative vote of
2,117,354 shares, with 5,302 shares voting against the
proposal, and 139,904 shares not voted.
The foregoing results do not reflect the three-for-two stock
split to shareholders of record on May 5, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No Form 8-K was filed during the three months ended
June 30, 1995.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TIMBERLINE SOFTWARE CORPORATION
-------------------------------
(Registrant)
/s/ Thomas P. Cox
Dated: August 10, 1995 _____________________________
Thomas P. Cox, Senior Vice
President-Finance (Chief Financial
Officer)
FORM 10-QSB
Exhibit Index
Exhibit Page
- ------- ----
(27) Financial Data Schedule 14
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM TIMBERLINE SOFTWARE CORPORATION'S CONDENSED
FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY REPORT ON
FORM 10-QSB FOR THE PERIOD ENDING JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,457,919
<SECURITIES> 3,942,290
<RECEIVABLES> 2,632,322
<ALLOWANCES> 227,552
<INVENTORY> 207,981
<CURRENT-ASSETS> 9,837,380
<PP&E> 5,719,871
<DEPRECIATION> 3,334,159
<TOTAL-ASSETS> 12,922,365
<CURRENT-LIABILITIES> 7,314,348
<BONDS> 0
<COMMON> 342,636
0
0
<OTHER-SE> 4,788,446
<TOTAL-LIABILITY-AND-EQUITY> 12,922,365
<SALES> 11,864,781
<TOTAL-REVENUES> 11,864,781
<CGS> 1,370,592
<TOTAL-COSTS> 11,209,226
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 840,443
<INCOME-TAX> 319,000
<INCOME-CONTINUING> 521,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521,443
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
