<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 March 31, 1996.
[ ] 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 May 10, 1996, approximately 5,343,231 shares of common stock
of the registrant were outstanding after giving effect to a
three-for-two stock split declared by the registrant's Board of
Directors to shareholders of record on May 3, 1996.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [x]
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
- ---------------------------------------------------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheets, March 31, 1996 and
December 31, 1995 ............................... 3
Condensed statements of operations for the three
months ended March 31, 1996 and 1995 ............ 4
Condensed statements of cash flows for the three
months ended March 31, 1996 and 1995 ............ 5
Notes to condensed financial statements ....... ... 6
Item 2. Management's Discussion and Analysis or
Plan of Operation ............................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................. 11
SIGNATURES ................................................. 11
EXHIBIT INDEX .............................................. 12
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
TIMBERLINE SOFTWARE CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
- ----------------------------------------------------------------
<TABLE><CAPTION>
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,434,955 $ 3,856,533
Temporary cash investments 3,462,194 3,439,000
Accounts receivable, less allowance
for doubtful accounts
(March 31, 1996, $245,759;
December 31, 1995, $225,909) 2,722,777 3,185,737
Other receivables 91,046 81,025
Inventories 305,551 326,311
Other current assets 743,345 614,190
----------- -----------
Total current assets 11,759,868 11,502,796
----------- -----------
Property and equipment 6,010,839 5,738,256
Less accumulated depreciation
and amortization 3,564,320 3,374,494
------------ -----------
Property and equipment - net 2,446,519 2,363,762
----------- -----------
Capitalized software costs - net 449,988 245,669
Purchased software - net 154,483 176,151
Other assets 94,138 96,510
----------- -----------
Total $14,904,996 $14,384,888
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 705,444 $ 562,622
Accrued commissions/royalties 207,950 258,398
Accrued income taxes 92,414 79,427
Deferred revenues 5,861,960 5,337,973
Accrued employee expenses 684,198 1,148,231
Other current liabilities 238,904 222,585
----------- -----------
Total current liabilities 7,790,870 7,609,236
----------- -----------
Accrued rent expense 51,869 56,891
Deferred income taxes 387,000 358,000
Shareholders' equity:
Common stock, without par value
authorized, 8,000,000 shares;
issued 5,188,591 shares; 345,906 345,906
Additional paid in capital 1,304,997 1,304,997
Retained earnings 5,024,354 4,709,858
----------- -----------
Total shareholders' equity 6,675,257 6,360,761
----------- -----------
Total $14,904,996 $14,384,888
=========== ===========
</TABLE>
See notes to condensed financial statements.<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net revenue $6,678,197 $5,893,559
---------- ----------
Cost and expenses:
Cost of revenue 807,885 649,762
Customer support 1,485,556 1,196,017
Product development 1,126,423 1,248,773
Sales and marketing 1,682,297 1,417,914
General and administrative 932,256 1,086,326
---------- ----------
Total cost and expenses 6,034,417 5,598,792
---------- ----------
Income from operations 643,780 294,767
Other income 97,078 84,813
---------- ----------
Income before income taxes 740,858 379,580
Provision for income taxes 288,000 146,000
---------- ----------
Net income $ 452,858 $ 233,580
========== ==========
Earnings per share $ .08 $ .04
========== ==========
Weighted average common shares
outstanding 5,519,558 5,348,525
========== ==========
See notes to condensed financial statements.
/TABLE
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Net cash provided by
operating activities $1,227,185 $ 958,323
---------- ----------
Cash flows from investing
activities:
Payments for property
and equipment (239,828) (294,156)
Capitalized software costs (247,379) (8,686)
Proceeds from temporary
cash investments 1,000,000 1,500,000
Purchase of temporary
cash investments (1,023,194) (1,947,948)
Other investing activities -- 1,463
---------- ----------
Net cash used in investing
activities (510,401) (749,327)
---------- ----------
Cash flows from financing
activities:
Proceeds from issuance of
common stock -- 10,000
Common stock reacquired -- (159,750)
Dividends paid (138,362) (68,417)
---------- ----------
Net cash used in
financing activities (138,362) (218,167)
---------- ----------
Net increase (decrease) in cash
and cash equivalents 578,422 (9,171)
Cash and cash equivalents,
beginning of the year 3,856,533 1,411,611
---------- ----------
Cash and cash equivalents,
end of period $4,434,955 $1,402,440
========== ==========
Supplemental information:
Cash paid during the period for
income taxes $ 250,012 $ 497,327
========== ==========
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, 1995.
The balance sheet at December 31, 1995 has been condensed
from the audited balance sheet as of that date. The results
of operations for the three months ended March 31, 1996 and
1995 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 March 31, 1996
and the results of its operations and its cash flows for the
three month ended March 31, 1996 and 1995.
2. Accounting pronouncement
In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 requires expanded disclosures
of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument
awarded. Companies are permitted, however, to continue to
apply Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock issued to Employees," which recognizes
compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock-based compensation awards to
employees and will disclose the required pro forma effect on
net income and earnings per share in its financial
statements for the year ending December 31, 1996.
3. Subsequent event - stock split
On April 18, 1996, the Company's Board of Directors approved
a three-for-two stock split to shareholders of record on
May 3, 1996. All common shares and per share amounts in
these condensed financial statements 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 13 percent to $6,678,000 in
the three months ended March 31, 1996 compared to $5,894,000 in
the comparable period in 1995. The major component of net
revenue, software sales, increased 11 percent to $3,384,000 in
the 1996 period compared to $3,062,000 in the 1995 period. Gold
Extended Edition software sales increased 25 percent in the three
months ended March 31, 1996 over the same period in 1995.
Estimating software sales increased 32 percent in the three
months ended March 31, 1996 over the comparable period in 1995.
These increases were offset in part by a 47 percent decrease in
property management software sales primarily due to a software
sale to a large national account in March 1995 that did not
reoccur in the 1996 period. Software sales represented 51
percent of net revenue in the three months ended March 31, 1996
compared to 52 percent for the same period in 1995.
Service fees from maintenance, support and training, which
represented 47 and 46 percent of net revenue for the three months
ended March 31, 1996 and 1995, respectively, increased 15 percent
to $3,133,000 in the 1996 period from $2,729,000 for the
comparable period in 1995. The increase in service fees was due
to the increase in maintenance and support fees resulting from
the Company's larger user base. The Company continues to
anticipate that service fees will represent a significant
percentage of net revenue.
COST OF REVENUE. Cost of revenue, as a percentage of net
revenue, increased to 12 percent for the three months ended
March 31, 1996 from 11 percent for the comparable period in 1995.
The increase was primarily due to higher royalties expense and to
increased expenses related to training and consulting fees.
OPERATING EXPENSES. Operating expenses increased six percent to
$5,226,000 for the three months ended March 31, 1996 from
$4,949,000 for the comparable period in 1995. Customer support
expenses increased 24 percent to $1,486,000 for the three months
ended March 31, 1996 from $1,196,000 for the same period in 1995,
primarily due to additional personnel costs required to handle
the increased demand for support, consulting and training
services resulting from the increased sales of Gold Extended
Edition software. The Company anticipates 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 decreased 10 percent to $1,126,000
for the three months ended March 31, 1996 from $1,249,000 for the
comparable period in 1995. The decrease in expenses was
principally due to the capitalization of $247,000 of expenses
related to the development of new Windows-based software products
for the estimating and construction markets. The Company
anticipates releasing these new products in the summer of 1996.
Without the effect of the capitalization of product development
expenses, total product development expenses increased 10 percent
in the three months ended March 31, 1996 over the same period in
1995, primarily due to additional personnel required to maintain
the Company's existing software products and to develop and test
the new software products in the Windows environment. The
Company anticipates that eventually all of its products will
operate in the Windows environment and that additional personnel
will be required in 1996.
Sales and marketing expenses increased 19 percent to $1,682,000
in the three months ended March 31, 1996 from $1,418,000 for the
comparable period in 1995 primarily due to increases in marketing
personnel and trade show expenses. As a percentage of net
revenue, sales and marketing expenses increased to 25 percent for
the three months ended March 31, 1996 from 24 percent for the
same period in 1995.
General and administrative expenses decreased 14 percent to
$932,000 for the three months ended March 31, 1996 from
$1,086,000 for the comparable period in 1995 primarily due to a
$155,000 reduction in bad debt expense. General and
administrative expenses in the 1995 period included a large bad
debt expense for the write-off of a receivable from a Canadian
customer that went bankrupt in 1995. As a percentage of net
revenue, general and administrative expenses decreased to 14
percent for the three months ended March 31, 1996 from 18 percent
for the same period in 1995.
Capital Resources and Liquidity
- -------------------------------
During the three months ended March 31, 1996, net cash provided
by operations was $1,227,000 compared to $958,000 for the same
period in 1995. Working capital increased slightly since
December 31, 1995 to $3,969,000. Cash, cash equivalents and
temporary cash investments, which represented 53 percent of total
assets at March 31, 1996, increased $602,000 since December 31,
1995, principally due to the increase in cash and cash
equivalents provided by operations. Net accounts receivable at
March 31, 1996 decreased $463,000 since December 31, 1995, due
primarily to the seasonal decline in sales in the first quarter
of 1996 compared to the fourth quarter of 1995. Other current
assets increased $129,000 since December 31, 1995, primarily due
to an increase in prepaid insurance costs. Net capitalized
software costs increased $204,000 since December 31, 1995,
primarily due to the addition of $247,000 of capitalized software
development costs during the first three months of 1996 related
to the development of new Windows-based software products for the
estimating and construction markets. The Company anticipates
further capitalization of software development costs for the
remainder of 1996 as it develops Windows-based software products
for all of its product lines.
Accounts payable increased $143,000 since December 31, 1995
primarily due to accrued expenses for regional training classes
and a national users' conference. Deferred revenues increased
$524,000 in the same period primarily due to increased billings
for annual maintenance and support services and for training
classes. Revenue from annual maintenance and support service
billings are recognized monthly over the terms of the contracts
while revenue from training fees are recognized when the training
occurs. Accrued employee expenses decreased $464,000 during the
first three months of 1996 primarily as a result of the payment
of the Company's 1995 contribution to its 401(k) plan and
payments to employees for 1995 profit sharing bonuses.
In January 1996, the Company declared a regular cash dividend of
$138,000, representing $.0267 per share, after giving effect to
the subsequent three-for-two stock split to shareholders. See
Note 3 of Notes to Condensed Financial Statements. The Company
anticipates continuing to pay quarterly cash dividends.
As of March 31, 1996, the Company had expended $240,000 of its
1996 capital expenditure budget of $1,300,000. Subsequent
capital expenditures in 1996 are expected to be funded through
current cash balances and cash provided from operations.
The Company had a $1,000,000 working capital line of credit that
expired May 1, 1996. The Company decided not to renew its line
of credit at this time because its cash reserves are sufficient
to provide anticipated working capital needs.
Safe Harbor for Forward-Looking Statements
- ------------------------------------------
From time to time, the Company or its representatives have made
or may make forward-looking statements, orally or in writing,
including in this Report. Such forward-looking statements may be
included in, without limitation, press releases, oral statements
made with the approval of an authorized executive officer of the
Company or in various filings with the Securities and Exchange
Commission. The words or phrases "anticipates", "expects", "will
continue", "estimates", "projects", or similar expressions are
intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company's forward-looking statements are subject to certain
risks, trends, and uncertainties that could cause actual results
to vary materially from anticipated results, including, without
limitation, the following: delays in new product releases caused
by programming errors or "bugs" or failures by the Company's
outside vendors to perform as promised, changes in the software
operating systems for which the Company's products are written
and the risk factors listed from time to time in the Company's
Securities and Exchange Commission filings including, without
limitation, the Registration Statement on Form S-3 dated
May 4, 1994. <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
March 31, 1996.
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
Date May 14, 1996 _____________________________
Thomas P. Cox, Senior Vice
President-Finance (Chief Financial Officer)
FORM 10-QSB
Exhibit Index
Exhibit Page
- ------- ----
(27) Financial Data Schedule 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 MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,434,955
<SECURITIES> 3,462,194
<RECEIVABLES> 2,968,536
<ALLOWANCES> 245,759
<INVENTORY> 305,551
<CURRENT-ASSETS> 11,759,868
<PP&E> 6,010,839
<DEPRECIATION> 3,564,320
<TOTAL-ASSETS> 14,904,996
<CURRENT-LIABILITIES> 7,790,870
<BONDS> 0
<COMMON> 345,906
0
0
<OTHER-SE> 6,329,351
<TOTAL-LIABILITY-AND-EQUITY> 14,904,996
<SALES> 6,678,197 <F1>
<TOTAL-REVENUES> 6,678,197
<CGS> 807,885
<TOTAL-COSTS> 6,034,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 740,858
<INCOME-TAX> 288,000
<INCOME-CONTINUING> 452,858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 452,858
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<FN>
<F1> Amount includes revenue from services which is not
separately presented for interim reports
</FN>
</TABLE>
