FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
_X_ OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 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 September 12, 1995, was 2,985,523 shares.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
July 31, April 30,
1 9 9 5 1 9 9 5
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 96,032 $ 437,327
Receivables, net 8,246,021 9,320,446
Revenues earned in excess of billings and
retainages on long-term contracts 1,898,380 2,354,048
Inventories 652,574 732,321
Other current assets 517,627 409,978
----------- -----------
Total current assets 11,410,634 13,254,120
----------- -----------
NET PROPERTY AND EQUIPMENT 2,484,376 2,774,141
----------- -----------
OTHER ASSETS:
Long-term receivables, less current portion 1,419,525 1,345,821
Officers' receivable 429,560 429,965
Computer software development costs, net 1,077,460 1,090,651
Goodwill, net 1,408,620 1,454,828
Other, net 718,232 638,664
----------- -----------
Total other assets 5,053,397 4,959,929
----------- -----------
$18,948,407 $20,988,190
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 125,000 $ 180,000
Accounts payable 902,218 1,297,307
Billings in excess of revenues earned on
long-term contracts 1,369,921 1,459,054
Billings for future services 1,918,569 2,241,923
Accrued liabilities 1,828,430 1,658,421
----------- -----------
Total current liabilities 6,144,138 6,836,705
DEFERRED INCOME TAXES 368,000 368,000
LONG-TERM DEBT 4,245,000 4,784,000
SHAREHOLDERS' EQUITY 8,191,269 8,999,485
----------- -----------
$18,948,407 $20,988,190
=========== ===========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
July 31,
----------------------
1 9 9 5 1 9 9 4
<S> <C> <C>
NET REVENUES $5,719,632 $4,629,090
COST OF REVENUES 3,793,041 2,533,449
---------- ----------
Gross profit 1,926,591 2,095,641
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,291,525 1,886,764
---------- ----------
Income (loss) from operations (364,934) 208,877
OTHER EXPENSE, net 93,258 8,861
---------- ----------
Income (loss) before provision (credit) for
federal income taxes (458,192) 200,016
PROVISION (CREDIT) FOR FEDERAL INCOME TAXES (136,500) 83,000
---------- ----------
NET INCOME (LOSS) $ (321,692) $ 117,016
========== ==========
EARNINGS (LOSS) PER SHARE $ (.11) $ .04
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING <F*> 2,941,408 2,928,321
========== ==========
<FN>
<F*> The weighted average shares outstanding for the three months ended July 31,
1994, have been retroactively restated for the effect of the 5 percent stock
dividend that was declared on September 16, 1994, and was distributed on
November 18, 1994, to shareholders of record on October 14, 1994.
</FN>
See accompanying notes to consolidated condensed financial statements.
</TABLE>
-2-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
July 31,
--------------------------
1 9 9 5 1 9 9 4
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (321,692) $ 117,016
Adjustments to reconcile net income (loss) to net
cash and equivalents provided by operating
activities
Depreciation and amortization 429,050 358,099
Loss (gain) on disposition of property
and equipment 4,905 (25,896)
Decrease (increase) in assets:
Receivables, net 1,074,426 (414,411)
Revenues earned in excess of billings and
retainages 455,667 -
Inventories 97,199 (10,058)
Other current assets (107,649) 21,019
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (225,080) 421,829
Billings in excess of revenues earned (89,133) -
Billings for future services (323,354) (77,202)
---------- ----------
Net cash and equivalents provided by
operating activities 994,339 390,396
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment 2,324 -
Net additions to property and equipment (99,114) (158,471)
Investments in computer software (85,566) (193,176)
Decrease in long-term notes receivable (73,299) 45,218
Increase (decrease) in other assets 545 (29,490)
---------- ----------
Net cash and equivalents used for
investing activities (255,110) (335,919)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 13,476 55,852
Purchase of common stock for ESOP (500,000) -
Reduction of debt (594,000) (15,000)
---------- ----------
Net cash and equivalents provided
by (used for) financing activities (1,080,524) 40,852
---------- ----------
-3-
CASH AND EQUIVALENTS:
(Decrease) increase (341,295) 95,329
Balance at beginning of period 437,327 164,445
---------- ----------
Balance at end of period $ 96,032 $ 259,774
========== ==========
See accompanying notes to consolidated
condensed financial statements.
</TABLE>
-4-
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 July 31, 1995, and April 30,
1995, and (b) the results of its operations for
the three-months ended July 31, 1995 and 1994, and
(c) cash flows for the three-months ended July 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.
-5-
(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 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.
-6-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Net revenues of $5,719,632 for the three months ended July
31, 1995, have increased by 24% as compared to the
$4,629,090 of net revenues that were reported for the
comparable quarter in the prior fiscal 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 $2.2 million of the increase in revenues 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 state an local
governments in addition to the traditional products and
services offered by the Company. This increase has been
partially offset by a $200,000 decrease in hardware sales,
a $400,000 decrease in software sales and a $500,000
reduction in E911 service revenues during the current
quarter. The decreases in hardware and software sales are
due to a reduction in order volume caused in part by
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 July 31, 1995
has increased by 50% to $3,793,041 over the comparable
prior year amount of $2,533,449. This increase is
primarily due to the additional revenues noted above and a
reduction in the Company's gross profit margin from 45% in
the prior year to 34% for the current year. This margin
reduction is primarily due to the decrease in software
sales noted above. Long-term E911 service and the mass
real estate appraisal contracts typically have a much
lower margin than software sales. In addition, 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.
-7-
Selling, general and administrative expenses have
increased by 23% to $2,291,525 for the three months ended
July 31, 1995, compared to the $1,886,764 that was
incurred in the comparable quarter of the prior year.
This increase is primarily due to the additional personnel
and related expenses associated with the Sabre
acquisition. The Company is however continuing its
efforts to leverage or consolidate the fixed costs of its
operations which is reflected by the fact that selling,
general and administrative expenses for the current
quarter are approximately $138,000 or 6% lower than the
amount that was incurred in the previous quarter.
As a result of the factors noted above, the Company
reported an operating loss of $364,934 for the three
months ended July 31, 1995 as compared to operating income
of $208,877 in the prior year. Other expense, which is
primarily interest, has also increased from $8,861 to
$93,258 because of increased borrowings to fund the
acquisition of Sabre noted in this and previous reports.
The Company's provision (credit) for federal income taxes
fluctuates with the level of pretax income (loss). The
tax credit for the three months ended July 31, 1995,
reflects a 30% effective rate which is below the statutory
rate of 34% primarily because of nondeductible 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 $321,692 or $.11 per share for the
three months ended July 31, 1995, verses net income of
$117,016 or $.04 per share for the comparable quarter in
the prior year. Weighted average shares outstanding has
increased slightly from 2,928,321 to 2,941,408 between
years because additional shares of the Company's common
stock have been purchased through employee stock plans.
Financial Condition and Liquidity
Working capital of $5,266,496 at July 31, 1995, has
decreased significantly compared to the April 30, 1995
amount of $6,417,415. These levels reflect current ratios
of 1.86 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 $900,000 lower at July 31, 1995,
than it was at April 30, 1995.
-8-
Shareholders' equity at July 31, 1995, decreased by
$808,216 to $8,191,269 from the balance reported at April
30, 1995, primarily because of the $321,692 net loss and
the $500,000 leveraged ESOP transaction described
previously which has been recorded as an offset to equity.
As a result, book value per share has decreased to $2.78
as of July 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 $99,000 for the three months ended July 31,
1995, are lower than the comparable prior year amount of
$158,000. 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 July 31, 1995,
the Company owed $3,845,000 on its revolving credit
agreement. Despite these significant uses of cash, it is
anticipated that the new 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.
-9-
Part II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. No reports on Form 8-K were filed during the three
months ended July 31, 1995.
-10-
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: September 14, 1995 By s/Allen F. Peat
Allen F. Peat
Chairman, Chief Executive Officer
and Director (Principal Executive
Officer)
Date: September 14, 1995 By s/Paul R. Sylvester
Paul R. Sylvester
Vice President - Finance
(Principal Financial Officer and
Principal Accounting Officer)
-11-
EXHIBIT INDEX
Exhibit
Number Document
27 Financial Data Schedule
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER FISCAL 1996 FORM 10-Q AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 96,032
<SECURITIES> 0
<RECEIVABLES> 8,722,021
<ALLOWANCES> 476,000
<INVENTORY> 652,574
<CURRENT-ASSETS> 11,410,634
<PP&E> 5,180,936
<DEPRECIATION> 2,696,560
<TOTAL-ASSETS> 18,948,407
<CURRENT-LIABILITIES> 6,144,138
<BONDS> 0
<COMMON> 5,716,862
0
0
<OTHER-SE> 2,474,407
<TOTAL-LIABILITY-AND-EQUITY> 18,948,407
<SALES> 5,719,632
<TOTAL-REVENUES> 5,719,632
<CGS> 3,793,041
<TOTAL-COSTS> 3,793,041
<OTHER-EXPENSES> 2,269,961
<LOSS-PROVISION> 21,564
<INTEREST-EXPENSE> 110,957
<INCOME-PRETAX> (458,192)
<INCOME-TAX> (136,500)
<INCOME-CONTINUING> (321,692)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (321,692)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
