<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 1-8722
THE MACNEAL-SCHWENDLER CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2239450
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
815 Colorado Boulevard, Los Angeles, California 90041
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(Address of principal executive offices)
Registrant's telephone number (213) 258-9111
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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
----- -----
The number of shares outstanding of Registrant's Common Stock, par value $.01
per share, was 13,385,282 shares at June 6, 1995.
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets (Unaudited) - April 30, 1995
and January 31, 1995.........................................3
Consolidated Statements of Income (Unaudited)
Three Months Ended April 30, 1995 and 1994...................4
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended April 30, 1995 and 1994...................5
Notes to Consolidated Financial Statements
(Unaudited)..................................................6
Item 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition......................................8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.........................9
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
ASSETS 1995 1995
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $4,389,000 $6,944,000
Short-term investments 7,060,000 7,075,000
Trade accounts receivable, net 33,748,000 33,822,000
Other current assets 9,761,000 10,557,000
------------------ ------------------
Total current assets 54,958,000 58,398,000
Property and equipment, net 10,782,000 10,272,000
Capitalized software costs, net 27,250,000 26,694,000
Goodwill and other intangibles, net 19,111,000 19,451,000
Other assets 4,256,000 3,936,000
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$116,357,000 $118,751,000
------------------ ------------------
------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $1,583,000 $2,679,000
Note payable 2,500,000 0
Accrued liabilities 13,507,000 19,440,000
Merger related costs 4,684,000 5,817,000
Deferred income 13,026,000 12,913,000
Dividends payable 2,141,000 2,141,000
Income taxes payable 482,000 0
------------------ ------------------
Total current liabilities 37,923,000 42,990,000
Deferred income taxes 6,998,000 6,810,000
Convertible Subordinated Debentures 56,576,000 56,576,000
Commitments
Shareholders' equity:
Capital, common stock, $0.01 par value,
100,000,000 shares authorized;
13,394,000 and 13,380,000 issued
and outstanding at April 30,
1995 and January 31, 1995, respectively 29,368,000 29,366,000
Retained deficit (15,667,000) (16,580,000)
Accumulated translation adjustment 1,159,000 (411,000)
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Total shareholders' equity 14,860,000 12,375,000
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$116,357,000 $118,751,000
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------------------ ------------------
</TABLE>
See accompanying notes.
3
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30
-----------------------------------
1995 1994
--------------- ----------------
<S> <C> <C>
Revenue
Solver $18,917,000 $16,457,000
Modeling 9,536,000 2,293,000
Other 2,182,000 1,005,000
--------------- ----------------
Total revenue 30,635,000 19,755,000
Operating expenses:
Cost of revenue 4,088,000 1,297,000
Goodwill amortization 496,000 0
Research and development 5,672,000 4,945,000
Selling, general and administrative 14,729,000 9,636,000
--------------- ----------------
Total operating expense 24,985,000 15,878,000
Operating income 5,650,000 3,877,000
Other income 57,000 130,000
Interest expense (1,114,000) 0
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Income before income taxes 4,593,000 4,007,000
Provision for income taxes 1,539,000 1,302,000
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Net income $3,054,000 $2,705,000
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--------------- ----------------
Earnings per share $0.23 $0.20
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Weighted average number of
common shares outstanding 13,394,000 13,395,000
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--------------- ----------------
Cash dividends declared $0.16 $0.16
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</TABLE>
See accompanying notes.
4
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $3,054,000 $2,705,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,306,000 1,231,000
Amortization of capitalized software 2,058,000 913,000
Amortization of goodwill and other intangibles 574,000 0
Deferred income taxes 188,000 132,000
Loss (gain) on disposal of property and equipment (4,000) (23,000)
Increase (decrease) from changes in:
Accounts receivable, net 74,000 (3,462,000)
Other current assets 796,000 488,000
Accounts payable (1,096,000) (206,000)
Accrued liabilities (3,372,000) (1,344,000)
Merger related costs (1,133,000) (28,000)
Deferred income 113,000 750,000
Income taxes payable 482,000 928,000
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Net cash provided by operating activities 3,040,000 2,084,000
Cash flows from investing activities:
Acquisition of property and equipment (1,812,000) (1,204,000)
Disposition of property and equipment 0 0
Capitalized software costs (2,617,000) (1,313,000)
Decrease (increase) in short-term investments 15,000 (34,000)
Decrease (increase) in other assets (551,000) (60,000)
------------- -------------
Net cash used in investing activities (4,965,000) (2,611,000)
Cash flows from financing activities:
Proceeds from capital stock issued 2,000 36,000
Retirement of capital stock 0 0
Proceeds from short term borrowings 2,500,000 0
Interest paid on convertible subordinated debentures (2,561,000) 0
Cash dividends paid (2,141,000) (2,141,000)
Foreign currency translation adjustment 1,570,000 89,000
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Net cash used by financing activities (630,000) (2,016,000)
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Net increase (decrease) in cash and equivalents (2,555,000) (2,543,000)
Cash and cash equivalents at the beginning of the period 6,944,000 10,106,000
------------- -------------
Cash and cash equivalents at the end of the period $4,389,000 $7,563,000
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</TABLE>
See accompanying notes.
5
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated financial information is condensed from that
which would appear in the annual financial statements and should be read in
conjunction with the January 31, 1995 consolidated financial statements included
in The MacNeal-Schwendler Corporation's Annual Report on Form 10-K for the year
ended January 31, 1995.
Supplemental cash flow information for taxes paid during the three months
ended April 30, 1995 and 1994 were $55,000 and $177,000, respectively.
Additionally, the Company paid interest of $2,561,000 on its Convertible
Subordinated Debentures due 2004 during the three months ended April 30, 1995.
All interim financial data is unaudited but, in the opinion of management,
reflects all adjustments necessary for a fair presentation thereof. However, it
should be understood that accounting measurements at interim dates may be less
precise than at year end. Operating results for the three month period ended
April 30, 1995 are not necessarily indicative of the results that may be
expected for the year ended January 31, 1996.
Certain reclassifications have been made to the financial information for
the three months ended April 30, 1994 in order to conform to the April 30, 1995
presentation.
NOTE 2: CAPITALIZED SOFTWARE
The components of net capitalized software costs include:
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1995 1994
---- ----
<S> <C> <C>
Software costs capitalized $(2,617,000) $(1,313,000)
Amortization of capitalized software 2,058,000 913,000
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Net capitalized software costs $(559,000) $(400,000)
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</TABLE>
Amortization of capitalized software is included in Cost of Revenue.
6
<PAGE>
NOTE 3: ACCRUED LIABILITIES
The components of accrued liabilities are as follows:
<TABLE>
<CAPTION>
April 30, January 31,
1995 1995
---- ----
<S> <C> <C>
Compensation and related expenses $3,143,000 $3,375,000
Contribution to profit sharing plan 654,000 2,333,000
Commissions payable 2,314,000 2,500,000
Retirement benefits 1,389,000 1,338,000
Royalties payable 1,016,000 2,641,000
Debenture interest payable 571,000 1,967,000
Other 4,420,000 5,286,000
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$13,507,000 $19,440,000
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----------- -----------
</TABLE>
7
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED APRIL 30, 1995
The Company's revenue for the first quarter ended April 30, 1995 increased
55% to $30,635,000 compared to $19,755,000 in the same period last year. The
growth in revenue is a combination of three major factors: the addition of
MSC/PATRAN and MSC/MVISION as a result of the acquisition of PDA Engineering,
growth in MSC/NASTRAN, and the introduction of the Company's new PC based
solver, MSC/NASTRAN for Windows. Revenue from MSC/PATRAN and MSC/MVISION was
$7,866,000, MSC/NASTRAN revenue increased $1,432,000 compared to the first
quarter of the prior year, and MSC/NASTRAN for Windows generated revenue of
$634,000. North America revenue of $13,097,000 accounted for 43% of total first
quarter revenue and international revenue accounted for $17,538,000, or 57% of
total revenue.
Cost of revenue increased $2,791,000, or 315%, as a result of increased
amortization of capitalized software costs, increased royalty expenses
associated with MSC/PATRAN and MSC/MVISION, and production costs associated with
the preparation for releases of new versions of several of the Company's
products. Research and development costs increased $727,000, or 15%, due to
additional development staff added as a result of the acquisition of PDA.
Selling, general and administrative costs increased $5,093,000 due to increased
staff as a result of the PDA acquisition, especially in North America and
Europe, increased meeting, travel and relocation costs associated with
organizing the combined sales force following the PDA acquisition. As a result
of the foregoing, operating expenses for the first three months increased 57% to
$24,985,000.
The Company's resulting income from operations for the quarter ended April
30, 1995 was $5,650,000, representing a 46% increase over $3,877,000 during the
first quarter last year.
Nonoperating income and expense increased primarily due to interest expense
incurred during the current quarter related to the debentures issued in
connection with the acquisition of PDA.
Net income was $3,054,000 compared to $2,705,000 in the prior year.
Earnings per share for the three months ended April 30, 1995 were $0.23 compared
to $0.20 for the three months ended April 30, 1994.
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital base was $17.0 million as of April 30, 1995.
Cash flows from operations were $3.0 million during the first quarter of fiscal
1996, $1.0 million higher than the first quarter of fiscal 1995 primarily due to
increases in non-cash expenses, principally amortization of capitalized
software, goodwill, and other intangibles. Cash used by investing activities
increased by $2.4 million primarily due to increased investment in capital
equipment and capitalization of software costs. Cash flows from financing
activities improved by $1.4 million due to proceeds from borrowings against the
Company's bank line of credit, offset against the payment of interest on the
convertible subordinated debentures, and a favorable fluctuation in foreign
currency translation. The Company believes that its working capital and
internally generated funds and borrowings under its line of credit are
sufficient to meet its working capital and capital expenditure requirements over
the next twelve months.
A dividend payment of $0.16 per share is payable on June 7, 1995 to shareholders
of record on May 17, 1995.
8
<PAGE>
THE MACNEAL-SCHWENDLER CORPORATION
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 27 - Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MACNEAL-SCHWENDLER CORPORATION
----------------------------------
(Registrant)
Date: June 13, 1995
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/s/ Louis A. Greco
----------------------------------------------
Louis A. Greco, Chief Financial Officer
(Mr. Greco is the Principal Financial
and Accounting Officer and has been
duly authorized to sign on behalf of
the registrant.)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> APR-30-1995
<CASH> 4,389
<SECURITIES> 7,060
<RECEIVABLES> 36,476
<ALLOWANCES> (2,728)
<INVENTORY> 0
<CURRENT-ASSETS> 54,958
<PP&E> 26,360
<DEPRECIATION> (15,578)
<TOTAL-ASSETS> 116,357
<CURRENT-LIABILITIES> 37,923
<BONDS> 56,576
<COMMON> 29,368
0
0
<OTHER-SE> (14,508)
<TOTAL-LIABILITY-AND-EQUITY> 116,357
<SALES> 30,635
<TOTAL-REVENUES> 30,635
<CGS> 4,088
<TOTAL-COSTS> 24,985
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 1,114
<INCOME-PRETAX> 4,593
<INCOME-TAX> 1,539
<INCOME-CONTINUING> 3,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,054
<EPS-PRIMARY> .23
<EPS-DILUTED> .22
</TABLE>
