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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-12311
COMPUTER LANGUAGE RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1297386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2395 Midway Road, Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
(214) 250-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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 _____
Outstanding at
Class of Common Stock April 30, 1996
$0.01 par value 14,192,279 shares
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COMPUTER LANGUAGE RESEARCH, INC.
FORM 10-Q
March 31, 1996
TABLE OF CONTENTS
ITEM PAGE
---- ----
PART I. FINANCIAL INFORMATION
1 FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets .................................. 1-2
Consolidated Statements of Income ............................ 3
Consolidated Statements of Cash Flows ........................ 4
Notes to Consolidated Financial Statements ................... 5-7
2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .......................... 8-13
PART II. OTHER INFORMATION
4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......... 14
6 EXHIBITS AND REPORTS ON FORM 8-K ............................. 14
i
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPUTER LANGUAGE RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
March 31 December 31
------------------ -----------
1996 1995 1995
-------- -------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ............. $ 13,631 $ 15,517 $ 13,641
Short-term investments ................ -- 10,774 --
Accounts receivable, less allowance for
for doubtful accounts of $844 at
March 31, 1996, $706 at March 31, 1995,
and $608 at December 31, 1995 ........ 23,569 16,459 26,615
Current deferred taxes ................ 2,110 2,013 2,093
Other current assets .................. 1,606 1,713 1,584
Net current assets of discontinued
operations ........................... -- 1,060 --
-------- -------- --------
Total current assets ................ 40,916 47,536 43,933
-------- -------- --------
PROPERTY AND EQUIPMENT, AT COST:
Land .................................. 2,584 3,077 2,584
Buildings and improvements ............ 16,781 16,785 16,787
Data processing equipment ............. 33,294 31,036 32,010
Furniture, fixtures, and equipment .... 8,742 8,285 8,608
-------- -------- --------
61,401 59,183 59,989
Less accumulated depreciation ......... 40,804 38,132 39,527
-------- -------- --------
Net property and equipment .......... 20,597 21,051 20,462
-------- -------- --------
OTHER NONCURRENT ASSETS:
Software, net of accumulated amortiza-
tion of $22,134 at March 31, 1996,
$18,825 at March 31, 1995, and
$21,874 at December 31, 1995 ......... 23,817 13,371 20,087
Intangibles and other assets, net of
accumulated amortization of $6,297 at
March 31, 1996, $4,185 at March 31,
1995, and $5,219 at December 31, 1995 19,098 5,884 14,578
Net noncurrent assets of
discontinued operations .............. -- 935 --
-------- -------- --------
Total other noncurrent assets ....... 42,915 20,190 34,665
-------- -------- --------
Total assets ....................... $104,428 $ 88,777 $ 99,060
======== ======== ========
See accompanying Notes to Consolidated Financial Statements (unaudited).
1
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COMPUTER LANGUAGE RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
March 31 December 31
------------------ -----------
1996 1995 1995
-------- -------- -----------
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt ..... $ 750 $ -- $ 750
Accounts payable ...................... 2,415 1,387 1,549
Accrued compensation, payroll taxes,
and benefits ......................... 6,945 5,518 8,634
Deferred revenue ...................... 12,340 7,018 10,296
Accrued support ....................... 1,985 1,862 2,133
Income taxes payable .................. 261 2,900 29
Other current liabilities ............. 6,888 2,111 4,708
-------- -------- --------
Total current liabilities ........... 31,584 20,796 28,099
-------- -------- --------
NONCURRENT LIABILITIES:
Long-term debt ........................ 750 -- 937
Other liabilities ..................... 5,216 726 3,270
Deferred income taxes and other
liabilities .......................... 1,450 3,913 1,205
-------- -------- --------
Total noncurrent liabilities ........ 7,416 4,639 5,412
-------- -------- --------
COMMITMENTS AND CONTINGENCIES .......... -- -- --
SHAREHOLDERS' EQUITY:
Preferred stock, $1 per share par value,
10,000 shares authorized; none
outstanding .......................... -- -- --
Common stock, $0.01 per share par value,
40,000 shares authorized; 15,002 shares
issued at March 31, 1996, 14,779 shares
issued at March 31, 1995, and 14,942
shares issued at December 31, 1995 ... 150 148 149
Capital in excess of par value ........ 33,794 32,229 33,271
Retained earnings ..................... 36,750 36,231 37,395
Treasury stock at cost, 810 shares .... (5,266) (5,266) (5,266)
-------- -------- --------
Total shareholders' equity .......... 65,428 63,342 65,549
-------- -------- --------
Total liabilities and shareholders'
equity ............................ $104,428 $ 88,777 $ 99,060
======== ======== ========
See accompanying Notes to Consolidated Financial Statements (unaudited).
2
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COMPUTER LANGUAGE RESEARCH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31
------------------
1996 1995
-------- --------
Revenues .............................................. $ 35,847 $ 32,233
-------- --------
Costs and expenses:
Cost of revenues ..................................... 18,695 14,979
Selling, general, and administrative ................. 12,587 8,405
Charge for purchased research and development ........ 3,498 --
-------- --------
Total costs and expenses ........................... 34,780 23,384
-------- --------
Operating income ...................................... 1,067 8,849
Interest income ....................................... 165 266
Interest expense ...................................... 24 8
Loss on disposals of property and equipment ........... (19) (12)
-------- --------
Income before income taxes ............................ 1,189 9,095
Provision for income taxes ............................ 416 2,910
-------- --------
Income from continuing operations ..................... 773 6,185
Income from discontinued operations ................... -- 91
-------- --------
Net income ............................................ $ 773 $ 6,276
======== ========
Earnings per share from continuing operations ......... $ 0.05 $ 0.44
Earnings per share from discontinued operations ....... -- --
======== ========
Earnings per share .................................... $ 0.05 $ 0.44
======== ========
Dividends per share ................................... $ 0.10 $ 0.10
======== ========
Weighted average number of common and common
equivalent shares outstanding ........................ 14,608 14,392
======== ========
See accompanying Notes to Consolidated Financial Statements (unaudited).
3
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COMPUTER LANGUAGE RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31
------------------
1996 1995
-------- --------
OPERATING ACTIVITIES:
Income from continuing operations .................... $ 773 $ 6,185
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization ...................... 4,427 2,879
Charge for purchased research and development ...... 3,498 --
Loss on disposals of property and equipment ........ 19 12
Changes in assets and liabilities, net of effect
of acquisitions ................................... 3,726 4,910
-------- --------
Net cash provided by operating activities ........ 12,443 13,986
-------- --------
INVESTING ACTIVITIES:
Capital expenditures ................................. (1,499) (1,342)
Additions to software ................................ (1,898) (1,401)
Cash paid for acquisitions ........................... (7,979) (689)
Purchases of short-term investments .................. -- (113)
Disposals of property and equipment .................. 4 77
-------- --------
Net cash used in investing activities ............ (11,372) (3,468)
-------- --------
FINANCING ACTIVITIES:
Payments on long-term debt ........................... (187) --
Proceeds from exercise of common stock options ....... 524 144
Payment of dividends ................................. (1,418) (1,397)
-------- --------
Net cash used in financing activities ............ (1,081) (1,253)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. (10) 9,265
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...... 13,641 6,252
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............ $ 13,631 $ 15,517
======== ========
See accompanying Notes to Consolidated Financial Statements (unaudited).
4
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COMPUTER LANGUAGE RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission for interim financial information. Accordingly, they do not
include all of the information and footnote disclosure required by
generally accepted accounting principles for complete financial statements.
During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in the Annual
Report on Form 10-K when reviewing interim financial results.
In the opinion of management, the accompanying financial statements include
all material adjustments necessary (consisting only of normal recurring
accruals) for a fair presentation of the Company's consolidated financial
position and results of operations. The results of operations for the
three-month period ended March 31, 1996, are not necessarily indicative of
the results to be expected for the full year. Certain prior period amounts
have been reclassified to be consistent with the presentation in the
current period statements.
2. ACQUISITIONS
Since December 31, 1995, the Company has completed six acquisitions at a
total cost of approximately $13.2 million, which consisted of $8.0 million
in cash and accruals of $5.2 million for miscellaneous payables, and
noncompetes and employment bonuses agreed upon by certain owners and key
employees of the acquired businesses.
Based on appraised value, a portion of the combined purchase price was
allocated to purchased research and development ("R&D") which had not
reached technological feasibility and had no alternative future use. The
allocation resulted in a $3.5 million charge to the Company's operations in
the first quarter of 1996. The remainder of the combined purchase price
was allocated $1.6 million to accounts receivable and other assets based on
estimated fair value, and to software and intangibles, $3.6 million and
$4.5 million, respectively, with portions based on appraised value and the
balance based on estimated fair value.
All acquisitions were financed from the Company's cash flow and have been
accounted for using the purchase method of accounting. The results of
their operations have been included in the Company's Consolidated Financial
Statements since their respective acquisition dates.
The following acquisitions were made for the Company's Fast-Tax business:
5
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COMPUTER LANGUAGE RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1996
(Unaudited)
On January 5, 1996, the Company acquired substantially all of the assets of
E. F. Haskell & Associates, Inc., a privately held Arizona corporation
marketing practice management and write-up software to the accounting
industry.
On March 19, 1996, the Company acquired substantially all of the assets of
Axtell, Inc., a privately held Arizona based corporation that provides
Windows(REGISTERED)-based client/server fixed asset management software
and services to corporations.
The following acquisitions were completed by the Company's wholly-owned
subsidiary, Rent Roll, Inc. ("Rent Roll"):
On January 4, 1996, Rent Roll acquired the capital stock of Credit
Interfaces, Inc., a privately held California corporation, which provides
applicant screening and other information services to the apartment housing
market.
On January 22, 1996, Rent Roll acquired substantially all of the assets of
Project Data Systems, Inc., a California business which supplies software
and services for the compliance, tracking, and reporting requirements of
the affordable housing market.
On March 18, 1996, Rent Roll acquired substantially all of the assets of
Renter Index, Inc., a privately held Dallas based corporation which
provides applicant screening and other information services to the
apartment housing market in Texas.
As of March 29, 1996, Rent Roll acquired substantially all of the assets of
Crystal Solutions, LLC, a South Carolina limited liability company, which
sells residential property management software and services to the
multifamily housing market.
The following unaudited pro forma summary presents the consolidated results
of operations for the three months ended March 31, 1996, and 1995, as if
the above acquisitions had occurred as of the beginning of each period
presented, after giving effect to certain adjustments which include
amortization of assets acquired, decreased interest income due to
acquisition costs, and the related income tax effects. The results of both
quarters include the $3.5 million charge for purchased R&D. In order to
provide meaningful pro formas, the results include not only those
acquisitions made during the first quarter of 1996, but also include
comparative financial information for the Sequel McGladrey, Rent Roll,
Inc., and TMS business acquisitions made in April, June, and December 1995,
respectively. These pro forma results have been prepared for comparative
purposes only and are not necessarily indicative of what the actual results
of operations would have been had the acquisitions been made as of those
dates, nor does it purport to represent future operations of the Company.
6
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COMPUTER LANGUAGE RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
March 31, 1996
(Unaudited)
(In thousands, except per share amounts) 1996 1995
---------------------------------------- -------- --------
Revenue $ 36,848 $ 37,421
Net Income $ 350 $ 870
Earnings per share $ 0.02 $ 0.06
3. DISCONTINUED OPERATIONS
In June 1995, the Company sold substantially all of the assets of its
wholly-owned subsidiary, Electronic Form Systems Incorporated ("EFS"). As
consideration for the sale, the Company received cash of $3.8 million and
shares of the buyer's common stock valued at $6.0 million, which were
subsequently sold on the open market with an immaterial gain. The sale
resulted in a gain of $4.7 million, net of taxes. Prior period financial
statements have been restated to reflect the discontinuation of the EFS
segment.
4. INCOME TAXES
Income tax expense for the three months ended March 31, 1996, is
approximately 35.0% of income before taxes compared to 32.0% in 1995. The
lower tax rate in 1995 is due to the Research and Experimentation Credit
regulation in effect in 1995. The Company determined that some of its
research activities qualified as Research and Experimentation under these
regulations.
5. DIVIDENDS
On March 25, 1996, the Company paid a $1.4 million dividend at the rate of
$0.10 per share to shareholders of record on March 8, 1996. There were
14.2 million shares issued and outstanding on March 8, 1996.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated Statements of Operations expressed as a percentage of revenues.
Percentage of
Total Revenues
------------------
Three Months Ended
March 31
------------------
1996 1995
------ ------
Revenues .............................................. 100.0 % 100.0 %
------ ------
Costs and expenses:
Cost of revenues ...................................... 52.1 46.5
Selling, general, and administrative .................. 35.1 26.1
Charge for purchased research and development ......... 9.8 --
------ ------
Total costs and expenses ............................ 97.0 72.6
------ ------
Operating income ....................................... 3.0 27.4
Interest income ........................................ 0.5 0.8
Interest expense ....................................... 0.1 --
Loss on disposals of property and equipment ............ (0.1) --
------ ------
Income before income taxes ............................. 3.3 28.2
Provision for income taxes ............................. 1.1 9.0
------ ------
Income from continuing operations ...................... 2.2 19.2
Income from discontinued operations .................... -- 0.3
------ ------
Net income ............................................. 2.2 % 19.5 %
====== ======
COMPANY ACTIVITIES
Since December 31, 1995, the Company, together with its wholly-owned subsidiary,
Rent Roll, Inc., have completed six acquisitions at a total cost of
approximately $13.2 million. All of the acquisitions were financed from the
Company's cash flow. Four of the acquisitions will enhance Rent Roll's existing
apartment housing software and services. The remainder were acquired for the
accounting tax business. For additional details see Note 2 in the Notes to
Consolidated Financial Statements.
These acquisitions, as well as acquisitions made in 1994 and 1995, have a
significant impact on the comparability of financial results. These effects
tend to adversely distort reported performance and may span more than one year
before more normalized operating results become evident. The more important of
the effects are as follows:
o Charge for in-process research and development ("R&D") costs.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
o Amortization of purchase price related to the acquired business.
o Deferral of revenue. This is particularly acute where a significant
component of revenues from an acquired business is reported ratably (e.g.,
annual maintenance contracts). It generally takes a full year following
acquisition for there to be a full year of revenue to offset a full year of
operating expenses.
o Lost revenue and additional expense incurred during the adjustment period
in which the new business is being assimilated.
REVENUES AND EXPENSES: FIRST QUARTER OF 1996 COMPARED TO FIRST QUARTER OF 1995
Total revenues for the first quarter ended March 31, 1996, increased by $3.6
million or 11.2% to $35.8 million from $32.2 million for the same period in
1995.
Cost of revenues was $18.7 million or 52.1% of revenues in the first quarter of
1996 compared to $15.0 million or 46.5% of revenues in 1995. Selling, general,
and administrative expenses were $12.6 million or 35.1% of revenues for the
first quarter of 1996 compared to $8.4 million or 26.1% of revenues in 1995.
The higher costs and expenses in 1996 are attributable to acquisitions made in
the last twelve months.
FAST-TAX BUSINESS
Revenues from the tax business increased $1.1 million (3.6%) from $31.7 million
in the first quarter of 1995 to $32.8 million for the same period in 1996.
Operating expenses in the tax business increased $4.0 million (18.4%) from $21.7
million in the first quarter of 1995 to $25.6 million in the first quarter of
1996. The increase was primarily due to the acquisition of TMS in the fourth
quarter of 1995 and to the amortization of capitalized acquisition costs.
In the first quarter of 1996, total software development costs were $8.2 million
in the tax business, of which the Company capitalized $1.7 million.
Amortization of capitalized software development costs was $0.7 million for the
quarter, resulting in net software development costs for the tax business of
$7.2 million compared to $6.8 million for the same period in 1995. Increased
development costs are attributable to Windows client/server development and
expenses incurred to maintain products marketed by acquired companies.
RENT ROLL BUSINESS
Revenues from the apartment housing business increased $2.4 million from $0.6
million in the first quarter of 1995 to $3.0 million for the same period in
1996. Increased revenue was attributable to acquisitions and internal growth.
The 1995 annual revenue base for all companies included in the apartment housing
business, had they been owned throughout 1995, would have approximated $15.0
million. The Company expanded the number of apartment sites that utilize its
core property management software by over 600 sites through internal growth in
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
the first quarter of 1996. Revenue from the apartment housing market is
expected to be seasonal with a higher percentage of overall revenue generated in
the second and third quarter of the year due to greater applicant screening
needs during the heavy summer moving months. Therefore, the Company does not
believe that revenue generated in the first quarter is representative of the
full year and expects full year revenue from the apartment housing business to
exceed $20 million in 1996 (see the Safe Harbor statement below).
Operating expenses in the apartment housing business increased $7.2 million from
$0.6 million in the first quarter of 1995 to $7.8 million in the first quarter
of 1996. The increase in additional operating costs attributable to
acquisitions and increased spending to expand the sales force and product
development activities was $2.8 million. The remaining $4.4 million increase
related to (i) the amortization of capitalized acquisition costs, and (ii) the
write-off of in-process R&D (see Note 2 in the Notes to Consolidated Financial
Statements).
Total software development costs were $0.5 million in the apartment housing
business in the first quarter of 1996 compared to $0.2 million for the same
period in 1995. The Company is currently expensing all software development
costs in the apartment housing business since this business is newer and
technological feasibility is less certain than development undertaken in the
more mature tax business. Increased development costs are attributable to
Windows client/server development and expenses incurred to maintain products
marketed by acquired companies.
CORPORATE OVERHEAD
In the first quarter of 1996, there was $1.4 million of unallocated corporate
overhead expense compared to $1.1 million for the same period of 1995.
PROVISION FOR TAXES
Estimated income tax expense for the first three months of 1996 increased to
35.0% of income before taxes from 32.0% in 1995. The lower tax rate in 1995 is
due to the Research and Experimentation Credit regulation in effect in 1995.
The Company determined that some of its research activities qualified as
Research and Experimentation under these regulations. This benefit is expected
to be substantially lower, or non-existent, in 1996 depending upon when, and if,
Congress extends the research tax credit.
DISCONTINUED OPERATIONS
On June 23, 1995, the Company sold substantially all of the assets of its
wholly-owned subsidiary, Electronic Form Systems Incorporated, reported
previously as the electronic form systems business segment. The first quarter
of 1995 has been restated to reflect discontinued operations.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
NET RESULTS
The impact on the Company of all the changes described above was to decrease
first quarter net income by $5.5 million or 87.7% to $0.8 million or $0.05 per
share in 1996 from $6.3 million or $0.44 per share in 1995.
The decrease in 1996 first quarter net income is attributable to:
(1) amortization and other charges related to acquisitions of $3.7 million, net
or tax, ($0.26 per share) in 1996 compared to $0.5 million ($0.03 per share)
for the same period in 1995, (ii) a significant increase in operating expenses
related to the newly acquired businesses without the benefit of comparable
offsetting revenue, due to generally accepted accounting principles which do not
allow establishment of deferred revenue at the date of acquisition, and (iii) no
research tax credits in the first quarter of 1996 compared to $0.3 million
($0.02 per share) in 1995, due to congressional failure, to date, to extend the
Research and Experimental Credit regulations in effect in 1995.
A significant portion of revenue generated from the TMS business, subsequent to
its acquisition, was deferred under the Company's revenue recognition policies.
During the first quarter of 1996 TMS deferred revenue increased $2.2 million to
$5.5 million from the $3.3 million deferred at December 31, 1995. These
deferrals will benefit future periods.
The Company has completed nine acquisitions during the twelve months ended
March 31, 1996. While expenses are currently growing faster than revenues,
which is necessary to achieve a smooth assimilation of these acquisitions, the
Company anticipates higher earnings from continuing operations, excluding
amortization and other acquisition related charges, in both the second quarter
and for the year (see the Safe Harbor statement below), as compared to the same
periods in 1995. However, such earnings are expected to improve at a slower
rate than the rate of increase in revenue in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The first three months of 1996 saw a net decrease in cash and cash equivalents
of approximately $10,000, compared with a net increase of $9.3 million for the
same period of 1995. The decrease was primarily due to the increase in cash
paid for acquisitions of $7.3 million, combined with a $1.5 million decrease in
net cash provided by operating activities.
The decrease in net cash provided from operating activities is primarily due to
net working capital fluctuations in the ordinary course of business. Net cash
used by investing activities increased $7.9 million, primarily due to the $7.3
million increase in cash paid for acquisitions combined with a $0.6 million
increase in capital expenditures and software additions. The decrease in cash
used by financing activities was immaterial.
The Company made investments in property and equipment of $1.5 million in the
first three months of 1996 compared to $1.3 million for the same period in 1995.
The Company anticipates that investments in property and equipment will be
approximately $7.0 million for the year ended December 31, 1996.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
On December 21, 1995, the Company entered into a $20.0 million revolving
credit/term facility which will expire in December 1997 and replaced the
existing $12.0 million line of credit commitment. At March 31, 1996, there were
no borrowings outstanding under the facility and the entire $20.0 million was
available to the Company. The availability of this line of credit, together
with funds generated from operations, is expected to be sufficient for liquidity
requirements and capital needs of the Company.
Long-term debt, including the current portion, increased to approximately $1.5
million at March 31, 1996, compared to none at March 31, 1995. The increase is
due to the addition of the unsecured promissory note executed in connection with
a software acquisition completed in April 1995.
On March 25, 1996, the Company paid a $1.4 million dividend at the rate of $0.10
per share to shareholders of record on March 8, 1996. At its April 30, 1996,
meeting, the Board of Directors declared a dividend for the second quarter of
1996 at a rate of $0.10 per share. The dividend is payable May 30, 1996, to
shareholders of record on May 15, 1996.
SAFE HARBOR
The Company's 1996 outlook and all other statements other than historical facts
are forward-looking statements and are subject to risks and uncertainties which
may cause actual future results or events to vary materially. A description of
some of the risks and uncertainties that could occur, is provided in the
Company's annual report on Form 10-K - Item 7.
IMPACT OF ACQUISITION RELATED AMORTIZATION AND CHARGES
The Company has made numerous acquisitions since 1991, and the portion of the
purchase prices that was allocated to intangibles is being amortized over
periods of 1-9 years. As discussed above, these acquisitions have a significant
impact on the comparability of financial results. Amortization in the first
quarter of 1996 was $1.2 million for Fast-Tax business and $1.0 million for Rent
Roll business, and the charge for purchased R&D related to the Rent Roll
business was $3.5 million, totaling $5.7 million for the Company. In the first
quarter of 1995, the amortization was $0.5 million for Fast-Tax business and
$0.1 million for Rent Roll business totaling $0.6 million, a net increase of
$5.1 million.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Concluded)
Amortization and other acquisition related charges for 1995, and for each of
the next five years and thereafter (based on existing acquisitions), are as
follows (in thousands):
Amortization R&D Write-off
-------------------- --------------------
Year Fast-Tax Rent Roll Fast-Tax Rent Roll Total
---- -------- --------- -------- --------- --------
1995 $ 4,717 $ 897 $ 5,600 $ -- $ 11,214
1996 4,702 4,376 -- 3,498 12,576
1997 4,539 2,508 -- -- 7,047
1998 4,154 2,178 -- -- 6,332
1999 3,834 1,524 -- -- 5,358
2000 2,320 680 -- -- 3,000
Thereafter 341 69 -- -- 410
-------- -------- -------- -------- --------
Total $ 24,607 $ 12,232 $ 5,600 $ 3,498 $ 45,937
======== ======== ======== ======== ========
13
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on April 30, 1996,
for the purpose of electing a board of directors. Proxies for the meeting were
solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's solicitations. All of
management's nominees for directors as listed in the proxy statement were
elected.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none.
(b) During the quarter ended March 31, 1996, the Company filed a Form 8-K/A
dated December 2, 1995, with the Securities and Exchange Commission to
report the acquisition of the corporate tax compliance software business of
Price Waterhouse LLP.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUTER LANGUAGE RESEARCH, INC.
DATE: May 6, 1996 By M. Brian Healy
--------------------------------------------
M. Brian Healy
Group Vice President, Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS PRESENTED IN THE 1ST QUARTER 1996 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
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