SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO FORM 10-Q
___ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
_X_ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 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 0-015264
MANATRON, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1983228
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2970 SOUTH 9TH STREET
KALAMAZOO, MICHIGAN 49009
(Address of principal executive offices) (Zip Code)
(616) 375-5300
(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 _____.
The number of shares outstanding of registrant's common stock, no
par value, at December 14, 1995, was 2,988,996 shares.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 238,895 $ 437,327
Receivables, net 7,185,181 9,320,446
Revenues earned in excess of billings
and retainages on long-term contracts 2,233,451 2,354,048
Inventories 752,097 732,321
Refundable income taxes 566,832 -
Other current assets 480,816 409,978
Total current assets 11,457,272 13,254,120
NET PROPERTY AND EQUIPMENT 2,329,292 2,774,141
OTHER ASSETS:
Long-term receivables, less current portion 1,488,452 1,345,821
Officers' receivable 421,340 429,965
Computer software development costs, net 1,065,674 1,090,651
Goodwill, net 1,362,412 1,454,828
Other, net 503,876 638,664
Total other assets 4,841,754 4,959,929
$18,628,318 $20,988,190
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 125,000 $ 180,000
Accounts payable 878,454 1,297,307
Billings in excess of revenues earned on
long-term contracts 1,512,462 1,459,054
Billings for future services 1,858,989 2,241,923
Accrued liabilities 2,206,215 1,658,421
Restructuring reserve (Note 4) 1,014,377 -
Total current liabilities 7,595,497 6,836,705
DEFERRED INCOME TAXES 368,000 368,000
LONG-TERM DEBT 4,491,000 4,784,000
OTHER LONG-TERM LIABILITIES (Note 4) 665,099 -
SHAREHOLDERS' EQUITY:
Common stock 5,867,111 5,703,386
Retained earnings 692,854 3,296,099
Deferred compensation (620,190) -
Other (431,053) -
Total shareholders' equity 5,508,722 8,999,485
$18,628,318 $20,988,190
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET REVENUES $ 5,595,034 $ 5,524,307 $11,314,666 $10,153,397
COST OF REVENUES 3,711,858 3,313,635 7,504,899 5,847,084
Gross profit 1,883,176 2,210,672 3,809,767 4,306,313
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,542,180 1,899,236 4,833,705 3,786,000
RESTRUCTURING CHARGE (Note 4) 1,598,004 - 1,598,004 -
Income (loss) from operations (2,257,008) 311,436 (2,621,942) 520,313
OTHER EXPENSE, net (88,045) (35,238) (181,303) (44,099)
Income (loss) before provision
(credit) for federal income taxes (2,345,053) 276,198 (2,803,245) 476,214
PROVISION (CREDIT) FOR FEDERAL INCOME
TAXES (Note 5) (63,500) 112,000 (200,000) 195,000
NET INCOME (LOSS) $(2,281,553) $ 164,198 $(2,603,245) $ 281,214
EARNINGS (LOSS) PER SHARE $ (.76) $ .06 $ (.88) $ .10
WEIGHTED AVERAGE SHARES OUTSTANDING 2,986,694 2,932,423 2,966,658 2,930,501
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,603,245) $ 281,214
Adjustments to reconcile net income (loss) to net
cash and equivalents provided by operating
activities
Depreciation and amortization 832,790 751,885
Gain on disposition of property
and equipment (7,800) -
Decrease (increase) in assets:
Receivables, net 2,135,265 (107,290)
Revenues earned in excess of billings and
retainages 120,597 -
Refundable income taxes (Note 5) (566,832) -
Inventories (11,471) 357,431
Other current assets (70,838) 60,977
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 128,941 359,717
Billings in excess of revenues earned 53,408 -
Billings for future services (382,934) (26,810)
Restructuring charges 1,248,423 -
Net cash and equivalents provided by
operating activities 876,304 1,677,124
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment 28,303 -
Net additions to property and equipment (200,325) (535,450)
Investments in computer software (140,511) (411,459)
Decrease in long-term notes receivable (134,006) -
Increase (decrease) in other assets 195,016 -
Net cash and equivalents used for investing
activities (251,523) (946,909)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 24,787 64,495
Purchase of common stock for ESOP (500,000) -
Reduction of debt (348,000) (600,000)
Net cash and equivalents provided
by (used for) financing activities (823,213) (534,505)
-4-
CASH AND EQUIVALENTS:
(Decrease) increase (198,432) 195,710
Balance at beginning of period 437,327 164,445
Balance at end of period $ 238,895 $ 360,155
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-5-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures
are adequate to make the information presented not misleading. It
is suggested that these consolidated condensed financial statements
be read in conjunction with the consolidated financial statements
and notes thereto included in the Registrant's Annual Report on Form
10-K for the year ended April 30, 1995, as filed with the Securities
and Exchange Commission on July 28, 1995. There have been no
significant changes in such information since the date of such Form
10-K.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting
of only a normal and recurring nature, necessary to present fairly
(a) the financial position of the Registrant as of October 31, 1995,
and April 30, 1995, and (b) the results of its operations for the
six-months ended October 31, 1995 and 1994, and (c) cash flows for
the six-months ended October 31, 1995 and 1994.
(2) ACQUISITION OF SABRE SYSTEMS
On July 28, 1995, the Company reached a final resolution of the
closing net asset statement related to its purchase of Sabre
Systems. As a result, the purchase price was reduced from
$4,000,000 to $3,900,000.
(3) EMPLOYEE STOCK OWNERSHIP PLAN
On June 29, 1995, the Company established a leveraged Employee Stock
Ownership Plan (the "ESOP") covering substantially all of its
employees. The ESOP purchased 142,858 common shares from the
Company's chairman, president and chief executive officer for $3.50
per share. The ESOP borrowed $500,000 from a bank to finance the
stock purchase. The Company has guaranteed the ESOP's loan and is
obligated to make contributions sufficient to enable the ESOP to
repay the loan, including interest. The loan is repayable in
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MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(3) EMPLOYEE STOCK OWNERSHIP PLAN (Continued)
quarterly installments of $25,000, beginning September 30, 1995,
plus interest at the bank's prime rate. This obligation has been
recorded as a liability and a like amount, considered deferred
compensation, has been recorded as a reduction of shareholders'
equity in the accompanying consolidated condensed financial
statements.
As of October 31, 1995, 7,142 common shares have been released for
allocation to ESOP participants. As a result, the fair market value
of these shares has been recorded as compensation expense in the
accompanying consolidated condensed financial statements.
(4) SEVERANCE AGREEMENT
The Company and Allen F. Peat entered into an agreement, effective as
of October 17, 1995, setting forth the terms pursuant to which Mr.
Peat retired as Chairman, President and Chief Executive Officer. The
agreement terminated Mr. Peat's five-year employment agreement and
provided for severance compensation, deferred compensation and other
payments totalling approximately $1.3 million to be paid through
December of 1999.
The present value of these payments plus legal and professional costs
associated with the restructuring of the Company has been expensed
in the accompanying consolidated condensed statements of operations.
In addition, the Company assumed and agreed to pay on March 15, 1996
the third and final installment of approximately $750,000 owed by
Mr. Peat to Ronald D. Stoynoff pursuant to a stock purchase
agreement between the two parties. In exchange for assuming the
obligation, the Company will be receiving from Mr. Peat
approximately 150,000 shares of Manatron common stock. The Company
and Mr. Stoynoff are currently discussing alternative approaches for
funding this obligation.
The remaining obligations under this agreement as of October 31, 1995
have been appropriately classified as current or long-term
liabilities in the accompanying consolidated condensed financial
statements. The fair market value of the stock to be received is
approximately $430,000 and is recorded in shareholders' equity in
the accompanying consolidated condensed financial statements. The
$320,000 difference between the stock value and the total assumed
obligation of $750,000 is considered compensation expense and,
accordingly, is included in the restructuring charge.
-7-
(5) FEDERAL INCOME TAXES
As a result of the $2,803,245 pretax loss for the six months ended
October 31, 1995, the Company has generated a net operating loss
carryforward of approximately $2 million that is available to offset
taxable income in future periods. This future tax benefit is not
reflected in the accompanying consolidated condensed financial
statements because the Company has elected to record a valuation
allowance equal to the net operating loss carryforward.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS
Net revenues of $5,595,034 for the three months ended October 31, 1995 have
remained fairly flat in comparison to the $5,524,307 of net revenues that
were reported for the comparable quarter in the prior year. Year to date
net revenues of $11,314,666 for the six month period ended October 31,
1995, are 11% higher than the $10,153,397 of net revenues that were
reported in the first half of the prior year. These amounts include
revenues from computer hardware and software shipments, revenues from sales
of computer forms and supplies, and revenues from various related services
such as mass real estate appraisal, digitizing maps, hardware maintenance,
software support, training, laser printing and internal data processing.
Approximately $4.3 million of the net revenues for the six months ended
October 31, 1995, can be attributed to the contribution from the Sabre
business that was acquired on November 11, 1994. Sabre provides mass real
estate appraisal services for local governments in addition to the
traditional products and services offered by the Company. This increase in
net revenue has been mostly offset by a $1.1 million decrease in hardware
sales, a $1 million decrease in software sales and a $900,000 reduction in
E911 service revenues. The decreases in hardware and software sales are due
to a reduction in order volume caused in part by increased competition,
market pressures on existing products and delays related to the
introduction of the Company's new fourth generation products. The reduction
in E911 service revenues was anticipated as the Company has completed most
of these long-term projects and has not pursued any new ones.
Cost of revenues for the three months ended October 31, 1995, increased 12%
to $3,711,858 over the comparable prior year amount of $3,313,635. Year to
date cost of revenues have increased by 28% to $7,504,899 over the
comparable prior year amount of $5,847,084. The increase in cost of
revenues is due to the increase in revenues noted above and a reduction in
the Company's gross profit margin from 42% in the prior year to 34% for the
current year. This margin reduction is primarily due to the decrease in
software sales noted above as well as the impact from the mass real estate
-8-
appraisal contracts, which typically have a much lower margin than software
sales. Additionally, the current year margins on the appraisal contracts
have been negatively impacted by higher than anticipated integration costs,
a couple of problem jobs that were a part of the acquisition and the fact
that Sabre is in the flat part of its sales cycle.
Selling, general and administrative expenses have increased by 34% to
$2,542,180 for the three months ended October 31, 1995, compared to the
$1,899,236 that was incurred in the comparable quarter of the prior year.
In addition, year to date selling, general and administrative expenses are
up 28% to $4,833,705 from $3,786,000 for the first half of the prior year.
These increases are primarily due to the additional personnel and related
expenses associated with the Sabre acquisition since the prior year periods
do not reflect any of these costs.
In addition to its normal operating expenses, the Company recorded a
nonrecurring management restructuring charge of $1.6 million during the
three months ended October 31, 1995. This expense is related to the
retirement of Allen F. Peat as Chairman, Chief Executive Officer and
President as previously described in Note 4 of this report.
As a result of the factors noted above, the Company reported operating
losses of $2,257,008 for the three months and $2,621,942 for the six months
ended October 31, 1995, verses operating income of $311,436 and $520,313
for the comparable periods in the prior year. In addition, interest expense
which is included in other expense, has increased from $83,000 to $217,000
because of increased borrowings to fund the acquisition of Sabre.
The Company's provision (credit) for federal income taxes generally
fluctuates with the level of pretax income (loss). The tax credits for the
three and six month periods ended October 31, 1995, do not reflect the tax
effect of the entire loss since the Company has not recorded a future tax
benefit related to its net operating loss carryforward of approximately $2
million. As a result, the Company's effective tax rate is substantially
lower than the statutory rate of 34%. In addition, the effective tax rate
has been adjusted for non-deductible goodwill amortization related to the
Company's acquisitions of ATEK and Specialized Data Systems, Inc.
As a result of the factors noted above, the Company reported a net loss of
$2,281,553 or $.76 per share for the three months ended October 31, 1995,
verses net income of $164,198 or $.06 per share for the comparable quarter
in the prior year. In addition, the Company is reporting a net loss for the
six months ended October 31, 1995, of $2,603,245 or $.88 per share verses
net income of $281,214 or $.10 per share for the prior year half. Weighted
average shares outstanding for both periods presented has increased
slightly over the prior year because additional shares of the Company's
common stock have been purchased or granted through employee stock plans.
-9-
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $3,861,775 at October 31, 1995, has decreased
significantly compared to the April 30, 1995, amount of $6,417,415. These
levels reflect current ratios of 1.51 and 1.94, respectively. The decrease
is primarily due to the reduction in revenues noted above which has
resulted in lower receivables. In addition, the cash generated from the
collection of receivables has been used to reduce the Company's long-term
revolving credit line which is approximately $700,000 lower at October 31,
1995, than it was at April 30, 1995.
Shareholders' equity at October 31, 1995, decreased by $3,490,763 to
$5,508,722 from the balance reported at April 30, 1995, primarily because
of the $2,603,245 net loss. In addition, the leveraged ESOP transaction and
a portion of the severance transaction described previously have been
recorded as an offset to equity. As a result, book value per share has
decreased to $1.84 as of October 31, 1995, from $3.06 at April 30, 1995.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures which were approximately $200,000 for
the six months ended October 31, 1995, are lower than the prior year amount
of approximately $535,000 due to the fact that a $200,000 building was
purchased in the prior year. They relate primarily to the purchase of
additional or new computer hardware and software for the Company's
technical and support personnel. Net capital expenditures for future
periods are not anticipated to be significantly different from those
incurred in the current period.
Since the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
receivable to remain outstanding for approximately three to four months. In
addition, the Company's cash and investment balances have decreased by
approximately $2 million and over $5 million of borrowings were made under
the Company's revolving credit agreement during the past two years to fund
working capital and the purchase price of the acquisitions. As of October
31, 1995, the Company owed $4,116,000 on its revolving credit agreement.
Despite these significant uses of cash, it is anticipated that the
revolving line of credit, together with existing cash balances, and cash
generated from future operations will be sufficient for the Company to meet
its working capital requirements for at least the next twelve months.
The Company cannot precisely determine the effect of inflation on its
business. The Company continues, however, to experience relatively stable
costs for its inventory as the computer hardware market is very
competitive. Inflationary price increases related to labor and overhead
will have a negative effect on the Company's cash flow and net income to
the extent that they cannot be offset through improved productivity and
price increases.
-10-
Part II. - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A. October 12, 1995 Annual Meeting of Shareholders
B. Newly elected Directors:
Gene Bledsoe
Allen F. Peat
Jane M. Rix
Melvin J. Trumble
Harry C. Vorys
Directors whose term of office continued after the Meeting:
Richard J. Holloman
Douglas A. Peat
Randall L. Peat
Paul R. Sylvester
Stephen C. Waterbury
C. The shareholders approved the 1995 Long-Term Incentive Plan, a copy
of which was included with the Company's 1995 proxy statement that
was mailed on or about September 20, 1995.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
(27) Financial Data Schedule
B. On November 13, 1995, the Registrant filed a Form 8-K current
report pursuant to the Securities and Exchange Act of 1934. The
report was filed in conjunction with Mr. Allen F. Peat's retirement
as President, Chief Executive Officer and Chairman of the Company
which became effective October 17, 1995. The Form 8-K current
report included a copy of the agreement setting forth the terms
pursuant to which Mr. Peat retired.
-11-
SIGNATURES
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.
Date: December 20, 1995 By /S/ RANDALL L. PEAT
Randall L. Peat
Chairman and Director (Principal
Executive Officer)
Date: December 20, 1995 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
Vice President - Finance
(Principal Financial Officer and
Principal Accounting Officer)
-12-
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SECOND QUARTER 1996 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 238,895
<SECURITIES> 0
<RECEIVABLES> 7,689,981
<ALLOWANCES> 504,800
<INVENTORY> 752,097
<CURRENT-ASSETS> 11,457,272
<PP&E> 5,246,579
<DEPRECIATION> 2,917,287
<TOTAL-ASSETS> 18,628,318
<CURRENT-LIABILITIES> 7,595,497
<BONDS> 0
<COMMON> 5,867,111
0
0
<OTHER-SE> (358,389)
<TOTAL-LIABILITY-AND-EQUITY> 18,628,318
<SALES> 11,314,666
<TOTAL-REVENUES> 11,314,666
<CGS> 7,504,899
<TOTAL-COSTS> 7,504,899
<OTHER-EXPENSES> 6,363,137
<LOSS-PROVISION> 68,572
<INTEREST-EXPENSE> 217,281
<INCOME-PRETAX> (2,803,245)
<INCOME-TAX> (200,000)
<INCOME-CONTINUING> (2,603,245)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,603,245)
<EPS-PRIMARY> (.88)
<EPS-DILUTED> (.88)
</TABLE>
