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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 July 31, 1996
[ ] 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, 1996, was 2,864,994 shares.
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
JULY 31, APRIL 30,
1996 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 298,134 $ 352,074
Receivables, net 6,297,858 6,507,677
Revenues earned in excess of billings and
retainages on long-term contracts 2,685,192 2,466,205
Inventories 289,984 386,980
Other current assets 532,567 514,167
Total current assets 10,103,735 10,227,103
NET PROPERTY AND EQUIPMENT 1,880,488 1,995,004
OTHER ASSETS:
Long-term receivables, less current portion 1,159,725 1,272,920
Officers' receivable 379,959 380,233
Computer software development costs, net 1,043,634 1,060,483
Goodwill, net 1,223,788 1,269,997
Other, net 332,190 377,447
Total other assets 4,139,296 4,361,080
$16,123,519 $16,583,187
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 834,465 1,048,484
Billings in excess of revenues earned on
long-term contracts 1,751,799 1,687,561
Billings for future services 2,683,328 2,721,567
Accrued liabilities 1,702,721 1,626,031
Total current liabilities 7,072,313 7,183,643
DEFERRED INCOME TAXES 175,000 175,000
LONG-TERM DEBT 3,330,000 3,500,000
OTHER LONG-TERM LIABILITIES 529,089 580,174
SHAREHOLDERS' EQUITY:
Common stock 5,437,986 5,444,497
Retained earnings 107,384 256,685
Deferred compensation (128,250) (131,812)
Unearned ESOP Shares (400,003) (425,000)
Total shareholders' equity 5,017,117 5,144,370
Total liabilities and shareholders' equity $16,123,519 $16,583,187
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED
JULY 31,
1996 1995
<S> <C> <C>
NET REVENUES $5,277,249 $5,719,632
COST OF REVENUES 3,181,779 3,793,041
Gross profit 2,095,470 1,926,591
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,180,260 2,291,525
Loss from operations (84,790) (364,934)
OTHER EXPENSE, net (64,511) (93,258)
Loss before credit for federal income taxes (149,301) (458,192)
CREDIT FOR FEDERAL INCOME TAXES (Note 2) -- (136,500)
NET LOSS $ (149,301) $ (321,692)
LOSS PER SHARE $ (.05) $ (.11)
WEIGHTED AVERAGE SHARES OUTSTANDING 2,863,355 2,941,408
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
JULY 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(149,301) $ (321,692)
Adjustments to reconcile net loss to net cash
and equivalents provided by operating
activities:
Depreciation and amortization 455,077 429,050
Deferred compensation expense 17,846 --
Loss on disposition of property
and equipment -- 4,905
Decrease (increase) in assets:
Receivables, net 209,819 1,074,426
Revenues earned in excess of billings and
retainages (218,987) 455,667
Inventories 96,996 97,199
Other current assets (18,400) (107,649)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (137,329) (225,080)
Billings in excess of revenues earned 64,238 (89,133)
Billings for future services (38,239) (323,354)
Other long-term liabilities (51,085) --
Net cash and equivalents provided by
operating activities 230,635 994,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in long-term notes receivable 113,469 (73,299)
Proceeds from sale of property and equipment -- 2,324
Decrease in other assets -- 545
Investments in computer software (108,249) (85,566)
Net additions to property and equipment (123,997) (99,114)
Net cash and equivalents used for investing
activities (118,777) (255,110)
-4-
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 4,202 13,476
Purchase of common stock for ESOP -- (500,000)
Reduction of debt (170,000) (594,000)
Net cash and equivalents used for
financing activities (165,798) (1,080,524)
CASH AND EQUIVALENTS:
Decrease (53,940) (341,295)
Balance at beginning of period 352,074 437,327
Balance at end of period $ 298,134 $ 96,032
</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, 1996, as filed with the Securities and
Exchange Commission on July 26, 1996. 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, 1996, and
April 30, 1996, and (b) the results of its operations for the three-
months ended July 31, 1996 and 1995, and (c) cash flows for the
three-months ended July 31, 1996 and 1995.
(2) FEDERAL INCOME TAXES
During 1996, the Company recorded a valuation allowance against a
portion of its $1.2 million net operating loss carryforward due to the
uncertainty of its ultimate realization. As a result, the Company also
has not recorded a future tax benefit for the effect of the loss
it incurred during the three months ended July 31, 1996. These net
operating loss carryforwards are available to offset future taxable
income through the year 2012.
-6-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $5,277,249 for the three months ended July 31, 1996, have
decreased by 8% in comparison to the $5,719,632 of net revenues that were
reported for the comparable period in 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.
Software sales increased 32% as compared to the prior year quarter
primarily because a significant contract for the Company's GAVEL and MIRRS
software and related services was signed in the first quarter of fiscal
1997. While a few of the modules were installed during the first quarter,
the majority of the work related to this contract and the related revenue
will occur during the balance of this year. This increase was offset by a
25% decrease in revenues from appraisal services because established
markets such as Ohio and Indiana are at the low end of their appraisal
cycles which have reduced opportunities for new work. The Appraisal
Division is anticipating an upswing in its Ohio sales cycle during
the balance of this fiscal year and has taken steps to sign work in
other areas to offset the impact of its cyclical market as evidenced by
its award of two contracts for approximately $1.5 million in New York
during the first quarter of fiscal 1997.
As a result of the decrease in net revenues, cost of revenues for the
three months ended July 31, 1996, also decreased 16% to $3,181,779
compared to prior year amount of $3,793,041. Part of this decrease is
due to an improvement in the Company's gross profit margin from 34%
in the first quarter of fiscal 1996 to 40% for the first quarter of
fiscal 1997. The margin improvement can primarily be attributed to the
completion of a few mass real estate appraisal contracts that were problem
jobs in the prior year and the increase in higher margin software sales as
noted above.
Selling, general and administrative expenses have decreased by 5% to
$2,180,260 for the three months ended July 31, 1996, compared to $2,291,525
that was reported for the same period in prior year. This decrease is
primarily due to the Company's efforts to reduce costs until its new Open
Window Series of products can be released.
As a result of the factors noted above, the Company reported an operating
loss of $84,790 for the three months ended July 31, 1996, compared to
$364,934 for the first quarter of fiscal 1996. In addition, interest
expense, which is included in other expense, has decreased from $110,957
to $80,995 as a result of the Company's current focus on reducing debt.
-7-
The Company's provision (credit) for federal income taxes generally
fluctuates with the level of pretax income (loss). In addition, the
effective tax rate is generally impacted because of non-deductible
goodwill amortization related to the Company's acquisitions of ATEK
Information Services and Specialized Data Systems. However, the Company
has not recorded the tax effect of its $149,301 loss for the three months
ended July 31, 1996, since the Company has recorded a valuation allowance
against its net operating loss carryforward as described in Note 2.
As a result of the factors noted above, the Company reported a net loss of
$149,301 or $.05 per share for the three months ended July 31, 1996,
compared to a net loss of $321,692 or $.11 per share for the prior year.
Weighted average shares outstanding has decreased from 2,941,408 to
2,863,355 primarily because the Company obtained approximately 150,000
shares of its common stock in March of 1996 as part of the severance
agreement with Allen F. Peat.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $3,031,422 at July 31, 1996, is comparable to the
April 30, 1996, amount of $3,043,460. These levels reflect current ratios
of 1.43 and 1.42, respectively.
Shareholders' equity at July 31, 1996, decreased by $127,253 to $5,017,117
from the balance reported at April 30, 1996, primarily because of the
$149,301 net loss. As a result, book value per share has decreased to
$1.75 as of July 31, 1996, from $1.80 at April 30, 1996.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures which were approximately $124,000
for the three months ended July 31, 1996, are slightly higher than the
prior year amount of $99,000. 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.
As 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.
As of July 31, 1996, the Company owed $3,030,000 on its $5 million
revolving credit agreement and $400,000 on its ESOP loan. 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.
-8-
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.
PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following document is filed as an exhibit to this
report on Form 10-Q.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended
July 31, 1996.
-9-
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 13, 1996 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
President, Chief Executive
Officer and Chief Financial
Officer (Principal) Executive,
Financial and Accounting
Officer
-10-
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
27 Financial Data Schedule
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FIRST QUARTER 1997 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 298,134
<SECURITIES> 0
<RECEIVABLES> 6,000,035
<ALLOWANCES> 724,000
<INVENTORY> 289,984
<CURRENT-ASSETS> 10,103,735
<PP&E> 5,372,195
<DEPRECIATION> 3,491,707
<TOTAL-ASSETS> 16,123,519
<CURRENT-LIABILITIES> 7,072,313
<BONDS> 0
<COMMON> 5,437,986
0
0
<OTHER-SE> (420,869)
<TOTAL-LIABILITY-AND-EQUITY> 16,123,519
<SALES> 5,277,249
<TOTAL-REVENUES> 5,277,249
<CGS> 3,181,779
<TOTAL-COSTS> 3,181,779
<OTHER-EXPENSES> 2,155,100
<LOSS-PROVISION> 25,160
<INTEREST-EXPENSE> 80,995
<INCOME-PRETAX> (14,301)
<INCOME-TAX> 0
<INCOME-CONTINUING> (149,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149,301)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
