<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 September 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 November 3, 1995, 3,459,061 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 SEPTEMBER 30, 1995
TABLE OF CONTENTS
- ---------------------------------------------------------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheets, September 30, 1995 and
December 31, 1994 ............................... 3
Condensed statements of operations for the three
months ended September 30, 1995 and 1994 ........ 4
Condensed statements of operations for the nine
months ended September 30, 1995 and 1994 ........ 5
Condensed statements of cash flows for the nine
months ended September 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 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
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
- ----------------------------------------------------------------
<TABLE><CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 2,947,977 $ 1,411,611
Temporary cash investments 3,473,045 3,484,282
Accounts receivable, less allowance
for doubtful accounts
(September 30, 1995, $210,139;
December 31, 1994, $251,982) 2,609,171 3,489,521
Other receivables 84,273 84,366
Inventories 305,900 215,655
Other current assets 790,528 515,819
----------- -----------
Total current assets 10,210,894 9,201,254
----------- -----------
Property and equipment 5,695,784 5,392,571
Less accumulated depreciation
and amortization 3,319,186 3,039,283
------------ -----------
Property and equipment - net 2,376,598 2,353,288
----------- -----------
Capitalized software costs - net 322,021 480,272
Purchased software - net 226,944 189,629
Other assets 99,943 126,054
----------- -----------
Total $13,236,400 $12,350,497
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 588,085 $ 644,545
Accrued commissions/royalties 143,348 166,543
Accrued income taxes - 588,685
Deferred revenues 5,462,978 4,514,684
Accrued employee expenses 850,550 975,919
Other current liabilities 198,248 241,091
----------- -----------
Total current liabilities 7,243,209 7,131,467
----------- -----------
Accrued rent expense 61,913 76,979
Deferred income taxes 384,000 398,000
Shareholders' equity:
Common stock, without par value
authorized, 8,000,000 shares;
issued - September 30, 1995,
3,459,061 shares; December 31,
1994, 3,419,040 shares 345,906 341,904
Additional paid in capital 1,304,997 897,690
Retained earnings 3,896,375 3,504,457
----------- -----------
Total shareholders' equity 5,547,278 4,744,051
----------- -----------
Total $13,236,400 $12,350,497
=========== ===========
</TABLE>
See notes to condensed financial statements.<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net revenue $5,766,128 $5,491,851
---------- ----------
Cost and expenses:
Cost of revenue 537,488 783,215
Customer support 1,292,178 1,019,401
Product development 1,247,164 1,055,492
Sales and marketing 1,462,365 1,367,846
General and administrative 887,776 791,093
---------- ----------
Total cost and expenses 5,426,971 5,017,047
---------- ----------
Income from operations 339,157 474,804
Other income 84,888 41,275
---------- ----------
Income before income taxes 424,045 516,079
Provision for income taxes 130,000 204,000
---------- ----------
Net income $ 294,045 $ 312,079
========== ==========
Earnings per share $ .08 $ .09
========== ==========
Weighted average common shares
outstanding 3,682,468 3,477,068
========== ==========
See notes to condensed financial statements.
</TABLE>
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Net revenue $17,630,909 $15,076,003
----------- -----------
Cost and expenses:
Cost of revenue 1,908,080 2,081,305
Customer support 3,693,811 2,893,757
Product development 3,776,898 2,875,885
Sales and marketing 4,389,605 3,973,126
General and administrative 2,867,803 2,492,725
----------- -----------
Total cost and expenses 16,636,197 14,316,798
----------- -----------
Income from operations 994,712 759,205
Other income 269,776 117,518
----------- -----------
Income before income taxes 1,264,488 876,723
Provision for income taxes 449,000 341,000
----------- -----------
Net income $ 815,488 $ 535,723
=========== ===========
Earnings per share $ .23 $ .15
=========== ===========
Weighted average common shares
outstanding 3,617,847 3,477,605
=========== ===========
See notes to condensed financial statements.
</TABLE>
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net cash provided by
operating activities $2,329,662 $3,165,056
---------- ----------
Cash flows from investing
activities:
Payments for property
and equipment (749,964) (1,038,274)
Capitalized software costs (58,021) (170,451)
Proceeds from temporary
cash investments 3,500,000
Purchase of temporary
cash investments (3,488,763) (974,734)
Other investing activities 15,713 4,236
---------- ----------
Net cash used in investing
activities (781,035) (2,179,223)
---------- ----------
Cash flows from financing
activities:
Proceeds from issuance of
common stock 421,520 126,785
Common stock reacquired (160,098) (140,000)
Dividends paid (273,683)
---------- ----------
Net cash used in
financing activities (12,261) (13,215)
---------- ----------
Net increase in cash
and cash equivalents 1,536,366 972,618
Cash and cash equivalents,
beginning of the year 1,411,611 2,336,471
---------- ----------
Cash and cash equivalents,
end of period $2,947,977 $3,309,089
========== ==========
Supplemental information:
Cash paid during the period for:
Income taxes $1,034,150 $ 301,266
Interest expense 129 2,554
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 nine month periods ended
September 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 September 30,
1995 and the results of its operations and its cash flows
for the three and nine month periods ended September 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 months ended September 30, 1994 and the nine
month periods ended September 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 5 percent to $5,766,000 in
the three months ended September 30, 1995 compared to $5,492,000
in the comparable period in 1994. The major component of net
revenue, software sales, decreased 1 percent to $3,071,000 in the
1995 period from $3,115,000 in the 1994 period. Construction
Gold software sales increased 28 percent in the three months
ended September 30, 1995 over the same period in 1994. However,
there was also a sharp decline in property management software
sales due to large national account software sales in the 1994
period which did not reoccur in the 1995 period. Software sales
represented 53 percent of net revenue in the three months ended
September 30, 1995 compared to 57 percent of net revenue in the
comparable period in 1994.
Service fees from maintenance, support and training, which
represented 45 and 42 percent of net revenue for the three months
ended September 30, 1995 and 1994, respectively, increased 14
percent to $2,618,000 in the 1995 period from $2,305,000 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. This increase was offset by a
decline in on-site training fees from national accounts which
have purchased the Company's property management software. 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 nine months ended September 30, 1995, net revenue
increased 17 percent to $17,631,000 from $15,076,000 for the nine
months ended September 30, 1994. Software sales increased 10
percent to $9,363,000 compared to $8,538,000 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
40 percent and estimating software sales increased 11 percent in
the nine months ended September 30, 1995 over the same period in
1994. Property management software sales in the first nine
months of 1995 dropped significantly compared to the same period
in 1994 due to a sharp decline in sales to national accounts in
the third quarter of 1995 as discussed above. Architect and
engineer software sales also declined in the 1995 period compared
to the 1994 period. Software sales represented 53 percent of
total revenue for the first nine months of 1995 compared to 57
percent for the same period in 1994.
Service fees, which represented 45 percent and 42 percent of net
revenue for the nine months ended September 30, 1995 and 1994,
respectively, increased 27 percent to $8,003,000 in the 1995
period from $6,289,000 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.
COST OF REVENUE. Cost of revenue decreased to 9 percent of net
revenue for the three months ended September 30, 1995 compared to
14 percent for the comparable period in 1994. For the nine
months ended September 30, 1995, cost of revenue decreased to 11
percent of net revenue from 14 percent for the same period in
1994. These decreases were due primarily to service fees
representing a greater percentage of net revenue in the 1995
periods, lower costs and royalties associated with software sales
and a refund for services rendered from a vendor which provided
software assembly and shipping services to the Company.
OPERATING EXPENSES. Operating expenses increased 15 percent to
$4,889,000 for the three months ended September 30, 1995 from
$4,234,000 for the same period in 1994. Operating expenses
increased 20 percent to $14,728,000 for the nine months ended
September 30, 1995 from $12,235,000 for the comparable period in
1994.
Customer support expenses increased 27 percent to $1,292,000 for
the three months ended September 30, 1995 from $1,019,000 for the
same period in 1994. Customer support expenses increased 28
percent to $3,694,000 for the nine months ended September 30,
1995 from $2,894,000 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 18 percent to $1,247,000
for the three months ended September 30, 1995 from $1,055,000 for
the same period in 1994. Product development expenses increased
31 percent to $3,777,000 for the nine months ended September 30,
1995 from $2,876,000 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.
Sales and marketing expenses increased 7 percent to $1,462,000 in
the three months ended September 30, 1995 from $1,368,000 for the
same period in 1994. Sales and marketing expenses increased 10
percent to $4,390,000 for the nine months ended September 30,
1995 from $3,973,000 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 remained constant at 25 percent in
the three months ended September 30, 1995 and 1994. As a percent
of net revenue, these expenses declined to 25 percent in the
first nine months of 1995 from 26 percent in the comparable 1994
period.
General and administrative expenses increased 12 percent to
$888,000 for the three months ended September 30,1995 from
$791,000 for the same period in 1994 and increased, as a
percentage of net revenue, to 15 percent in the three months
ended September 30, 1995 from 14 percent for the comparable
period in 1994. The increase in general and administrative
expenses was due primarily to an increase in personnel and
equipment costs.
General and administrative expenses increased 15 percent to
$2,868,000 for the nine months ended September 30, 1995 from
$2,493,000 for the same period in 1994. This was primarily due
to a $204,000 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 16 percent in
1995 from 17 percent in the first nine months of 1994.
OTHER INCOME. Other income increased to $85,000 for the three
months ended September 30, 1995 from $41,000 for the comparable
period in 1994. For the nine months ended September 30, 1995,
other income increased to $270,000 from $118,000 for the
comparable period in 1994. These increases were due to increased
interest income as a result of larger amounts of investable
funds.
PROVISION FOR INCOME TAXES. As a percent of income before income
taxes, the provision for income taxes was 31 percent for the
three months ended September 30, 1995 compared to 40 percent for
the comparable period in 1994. For the nine months ended
September 30, 1995 and 1994, these percentages were 36 percent
and 39 percent, respectively. The decrease in the year-to-date
tax percentage in 1995 was due primarily to a lower state tax
rate in 1995 and an increase in research tax credits. The
decrease in the tax percentage rate for the three months ended
September 30, 1995 was due primarily to the factors discussed
above and the effect of changing the year-to-date income tax
provision to the revised estimated income tax rate for 1995.
<PAGE>
Capital Resources and Liquidity
- -------------------------------
For the nine months ended September 30, 1995, net cash provided
by operations was $2,330,000 compared to $3,165,000 for the same
period in 1994. This decrease, despite the increase in net
income in 1995 over the same period in 1994, was primarily due to
the increase in income tax payments in 1995. Working capital
increased to $2,968,000 at September 30, 1995. Cash, cash
equivalents and temporary cash investments, which represented 49
percent of the Company's total assets at September 30, 1995,
increased $1,525,000 during the first nine months of 1995 due
principally to the increase in cash provided by operations. Net
accounts receivable at September 30, 1995 decreased $880,000
since December 31, 1994 reflecting a seasonal decline in sales in
September 1995 compared to December 1994 and the write-off of a
large receivable from a Canadian customer. Other current assets
increased $275,000 primarily due to an increase in prepaid
expenses.
Accrued income taxes decreased $589,000 during the first nine
months of 1995 as a result of the payment of federal income taxes
owed for 1994 and estimated income tax payments for 1995.
Deferred revenues increased $948,000 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
$125,000 during the first nine months of 1995 primarily due to
lower amounts owed for profit sharing bonuses.
The Company repurchased 27,000 shares of Common Stock during the
nine months ended September 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 nine months of 1995, the Company declared three
quarterly cash dividends amounting to $274,000. In October 1995,
the Company's Board of Directors declared another cash dividend
of $.03 per share.
As of September 30, 1995, the Company had expended $750,000 of
its 1995 capital expenditure budget of $1,200,000 for computer
and telecommunication equipment. The Company anticipates that it
will not spend all that it had budgeted in 1995 as some
expenditures will be delayed until 1996. 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 September 30, 1995, there were no outstanding
borrowings under the line of credit.
<PAGE>
PART II. Other Information
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
September 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: November 9, 1995 _____________________________
Thomas P. Cox, Senior Vice
President-Finance (Chief Financial
Officer)
<PAGE>
FORM 10-QSB
Exhibit Index
Exhibit Page
- ------- ----
(27) Financial Data Schedule 14
<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 SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,947,977
<SECURITIES> 3,473,045
<RECEIVABLES> 2,819,310
<ALLOWANCES> 210,139
<INVENTORY> 305,900
<CURRENT-ASSETS> 10,210,894
<PP&E> 5,695,784
<DEPRECIATION> 3,319,186
<TOTAL-ASSETS> 13,236,400
<CURRENT-LIABILITIES> 7,243,209
<BONDS> 0
<COMMON> 345,906
0
0
<OTHER-SE> 5,201,372
<TOTAL-LIABILITY-AND-EQUITY> 13,236,400
<SALES> 17,630,909
<TOTAL-REVENUES> 17,630,909
<CGS> 1,908,080
<TOTAL-COSTS> 16,636,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 1,264,488
<INCOME-TAX> 449,000
<INCOME-CONTINUING> 815,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 815,488
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
