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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 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 Number: 0-015264
MANATRON, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-1983228
(State of Incorporation) (I.R.S. Employer Identification No.)
2970 SOUTH 9TH STREET
KALAMAZOO, MICHIGAN 49009
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (616) 375-5300
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
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 ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by nonaffiliates of the
registrant based on the last sale price on July 24, 1996, was approximately
$1,880,091.
As of July 24, 1996, 2,864,994 shares of the registrant's Common Stock,
no par value, were outstanding.
Portions of the definitive proxy statement for the registrant's annual
shareholders' meeting to be held October 10, 1996, are incorporated by
reference into Part III of this report.
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PART I
ITEM 1. BUSINESS.
GENERAL
Manatron, Inc. ("Manatron" or the "Company") was originally
organized in 1969 as a partnership and was later incorporated in Michigan
in 1972. Manatron initially provided in-house data processing services for
local governmental units located in Michigan. Subsequently, the Company
expanded its business into Indiana in 1972, into Illinois in 1975, and into
Missouri in 1981. In 1982, Manatron's business was extended further to
include advanced microcomputer-based "turn-key" data processing systems for
governments. These "turn-key" data processing systems used both general
purpose computer hardware produced by leading manufacturers and
proprietary software developed or purchased by the Company.
In 1990, Manatron acquired PC-based tax and vehicle registration
software developed for use in Georgia from Charter Micro Applications,
Inc., of Savannah, Georgia. Enhanced versions of this software are still
being used by about 15 counties in Georgia. In March of 1992, Manatron
acquired by merger all of the outstanding stock of Specialized Data
Systems, Inc. ("SDS"), a then 10-year old computer software company located
in Greenville, North Carolina. SDS had installed its PC-based software
(primarily fund accounting, payroll, property tax billing, and utility
billing) in about 300 cities and 50 counties in the Southeastern United
States. Today, the Company is still serving this large base of customers
with enhanced versions of SDS software and with software products that
Manatron and Sabre Systems and Service ("Sabre") have developed.
In July of 1993, Manatron acquired all of the outstanding stock of
ATEK Information Services, Inc. ("ATEK"), a then 25-year old computer software
company located in Canton, Ohio and Indianapolis, Indiana. Like Manatron,
ATEK served local governments with a similar suite of products and services;
however, ATEK's software primarily operated on Digital Equipment Corporation
("DEC") VAX or Alpha computers. ATEK, which had been Manatron's largest
competitor in Indiana and Ohio during the prior 10 years, installed software
in approximately 50 counties in Indiana and 20 counties in Ohio to perform
various functions such as financial accounting, property tax billing, child
support accounting, and court accounting. Today, 80 out of 92 counties in
Indiana and 73 out of 88 counties in Ohio are utilizing enhanced versions
of ATEK software in addition to the software products that Manatron and
Sabre have developed.
In December of 1993, Manatron acquired substantially all of
the assets of City Computer Solutions, Inc. ("CCS"), a small computer
software company located in Birmingham, Alabama. CCS had marketed its
software and services to approximately 100 cities and a few counties
in Alabama and other surrounding Southern states. CCS's software
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primarily operated on BTOS and UNIX based computers. These customers
are potential upgrade targets for new Manatron products and services.
In May of 1994, Manatron acquired substantially all of the
assets of Horizon Systems and Software, Inc. of Farmington Hills,
Michigan ("Horizon"), a small computer software company which focused
on the judicial information system services business. At the time of
acquisition, Horizon had 18 customer sites in Eastern Michigan and Indiana.
In November of 1994, Manatron acquired substantially all of
the assets of the Ohio-based Real Estate Services Division from Moore
Business Forms, Inc., known as Sabre, which had been another major
competitor. At that time, Sabre was the second largest provider of mass
appraisal services to local governments in the country with a strong
presence in Indiana and Ohio, one of Manatron's major market areas. Sabre
also has a presence in Connecticut, Massachusetts, New Hampshire, New York,
Pennsylvania, Rhode Island, and more recently, South Carolina and Virginia.
In addition, Sabre has developed property tax and appraisal software which
the Company is currently marketing to the same customer base along with
property mapping services, hardware, and support services. Sabre's
software primarily functions on DEC VAX or Alpha hardware, although recent
developmental efforts have been focused on providing appraisal systems
which function in a PC environment.
In February of 1995, Manatron acquired substantially all of the
assets of MSL Business Computers, Inc. of Harrisburg, Illinois ("MSL"), a
small software company with approximately 10 county installations. MSL's
software, which primarily consisted of fund accounting, payroll, taxes,
and appraisal, operated on IBM System 36 and AS/400 computers. In addition
to expanding the Company's presence in Southern Illinois, this acquisition
has provided Manatron with three additional technically skilled employees
for the Illinois region and the opportunity to sell Manatron and Sabre
software to this new base of customers.
As a result of all of these acquisitions, the Company is now
focusing its efforts on upgrading its large customer base and
consolidating the common software products into single Open Window
Series products that utilize the Microsoft Windows operating system and
other modern development tools. Currently, the Company serves over 1,700
customers in more than 30 states with concentration in the Midwest,
Northeastern, and Southeastern regions of the United States.
PRODUCTS
The Company designs, markets, installs, and maintains advanced
computer-based "turn-key" data processing systems primarily for city,
county, and township governmental units. Manatron's data processing
systems employ general purpose computer hardware produced by leading
manufacturers in connection with proprietary software developed or
-3-
purchased by the Company. The Company specializes in keeping its
application software in compliance with the varying requirements of
state statutes. A significant feature of the Company's software is
that the applications are tied together, thus eliminating duplication
of functions. For example, assessed values computed in either the
land information system or the appraisal system are electronically
updated in the property tax system.
The Company's software systems provide simplified data entry
through the display of information on monitors and prompting messages. The
security features of the software systems permit selected user access and
generate user reports on demand.
The following is a general description of the features and
functionality of the Company's major software product groups that it has
developed or acquired. Additional capabilities will be provided as the
products are enhanced. In connection with these enhancements, the Company
is focused on combining similar products within each group that were
originally developed by the companies that Manatron acquired.
PROPERTY TAX BILLING, COLLECTION, AND APPRAISAL WITH MAPPING AND IMAGING
The Company has developed a unique approach to property tax
billing, collection, and appraisal, which allows government officials to
update property tax values and follow up with assessment rolls, tax rolls,
tax bills, and tax distribution in conformance with applicable state laws.
The Company works closely with state, county, and local officials to assure
compliance with legislative changes at various levels. Manatron's computer
assisted mass appraisal product ("CAMA") values property using various
valuation methods, including market, cost, and income. CAMA also
incorporates sketch, video imaging, and pen-based computers for field
appraisers. The product has advanced features which allow it to be used in
many states, thereby reducing the need for multiple appraisal products.
This software, which can be integrated with imaging, facilitates the
storage of photographs. In addition, the software permits reading of bar
codes on property tax bills. Finally, when integrated with the Company's
land information systems the software allows for a visual inventory of
land and improvements that are taxed by the governmental unit.
FINANCIAL MANAGEMENT
The Company has developed a comprehensive fund accounting system
consisting of subsystems such as general ledger, accounts payable, accounts
receivable, cost allocation, receipt processing, purchase order, cash
information management, payroll, human resources, inventory control, fixed
assets, equipment and vehicle maintenance, and report writer. The system,
which meets established national accounting standards, offers double or
single entry and features a flexible user defined account number structure
and chart of accounts.
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UTILITY BILLING
The Company has developed utility billing software which
encompasses an integrated system from engineering through meter
reading, billing, and accounting. The system accommodates water,
sewer, gas, electric, garbage collection, and other related services.
Utility billing also allows for an unlimited number of services per
customer and can accommodate complicated electric rate tables. This
software also supports hand-held reading devices, peak-to-peak billing,
budget billing, and demand meters. The system can be used by small
rural districts which tend to bill few services, as well as larger
municipal customers that bill many types of services.
JUDICIAL INFORMATION
The Company has developed judicial information systems which
are available for all levels of government and consist of the following
modules: (i) Case Management; (ii) Court Accounting; (iii) Prosecution
Management; (iv) Probation Tracking; (v) Jury Management; (vi) Child
Support; and (vii) Voter Registration. In addition, the Company has
integrated bar coding into this extensive suite of software to assist in
capturing data, easing production processes, and reducing errors. The Case
Management module encompasses civil, criminal, traffic fine, and court
docket functions. The Court Accounting module tracks all fines, court
costs, and bonds in addition to providing necessary reports to a
governmental unit. The Prosecution Tracking module is a management
recordkeeping and financial module for prosecutors in trial courts. The
Probation Tracking module is a case tracking, recordkeeping, and financial
system for probation departments. The Jury Management module facilitates
the selection of jurors as well as payments to jurors for jury duty. The
Child Support module provides for a complete financial accounting of
divorce, paternity, and alimony cases, including Title IV-D reporting.
The Voter Registration module oversees the legal recordkeeping
requirements, jury selection, and maintenance of an unlimited voting
history and can be integrated with imaging which facilitates the storage of
signatures. Each module can be used alone or can be interfaced with the
other modules to produce a complete and thorough court management system.
MANATRON INDEXING, RECORDING, AND RETRIEVAL (MIRRS)
Manatron's indexing, recording, and retrieval system is a software
solution developed for recording information from numerous types of
documents, including deeds, mortgages, UCC financing statements, liens,
vital records, and soldiers' discharges. The software allows immediate
access to all database information and includes integrated microfilming and
imaging, automatic receipting, index printing, and statistical reports. In
addition, the software offers remote access which allows applicable
documents to be faxed from the database to abstractors and title companies.
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LAND INFORMATION
The Company's land information system allows governmental
agencies to create and maintain their own electronic maps, which replace
time consuming manual maps. Overlay maps can be plotted in a matter of
minutes incorporating, for example, property ownership, zoning, and land
use, either individually or collectively. Data from a variety of
sources, including aerial photographs, census files, and detailed soil
surveys, is utilized with information from existing manual maps which
are computerized by a digitizer. In addition, textual and graphic data
can be displayed and analyzed. The textual data may be resident on the
host or remote computers with connections being made through interactive
record level or file transfer. Although the Company has historically
developed and maintained its own land information system, it now has
an agreement with Environmental Systems Research Institute to market
their land information systems known as ARC View and ARC/INFO GIS.
Many of the software packages described above can be used in
conjunction with software enhancement options, such as the use of a laser
pen to decipher bar coding for efficient storage and retrieval of
information. In addition, laser printing and microfilm services have
been added through alliances with other companies, although Manatron has
recently begun providing these services from its Illinois office.
Laser printing and microfilm services reduce the amount of paper
needed to store documents and, accordingly, save storage space. Laser
printing produces copies that look like originals because data is
electronically printed from magnetic computer tape onto paper which
results in improved print quality, and offers the option of multiple
fonts and graphics. Microfilm, produced from computer-generated
magnetic tape in either microfiche or roll film, uses approximately 98%
less storage space than paper. Manatron's customers are able to keep
historical data in a user's department, which permits retrieval and
printing, often within seconds of command.
Most of the above described Manatron systems were
originally written in COBOL and installed at customer sites using the
BTOS/CTOS operating system and network desktop microcomputers
manufactured by Unisys Corporation ("Unisys"). Most of the ATEK and
Sabre systems were originally written in BASIC, DIBOL, and ADMINS
utilizing the VMS operating system and VAX minicomputers manufactured
by DEC. Sabre also has a number of installations utilizing its FoxPro
PC CAMA product. The SDS systems were written in CLIPPER and function
on IBM compatible personal computers.
With the Company's movement toward open architecture
capabilities, many of the above described systems are now installed
at customer sites using the MS-DOS and MicroSoft Windows operating
systems in a stand alone or client source Novell network hardware
-6-
environment using a variety of personal computers manufactured by DEC,
IBM, Unisys, or Concentric Systems. In addition, a number of the
Company's larger software installations are now functioning in a
UNIX environment in which the IBM RS6000 Series, DEC Alpha Series,
and Unisys U6000 Series computers are utilized.
SERVICES
In connection with the installation of its "turn-key" systems,
the Company provides ongoing hardware integration and maintenance,
software support, training, and other customer services through regional
offices described under the caption "Properties" below. The Company has
established a regional office in each state where it has a significant
nucleus of customers to respond to the needs of its customers. Each
regional office includes customer service personnel who are able to
assist with the installation of the Company's "turn-key" systems and
provide technical support on site before and after installation. In
addition, Company personnel respond on a daily basis to customer
telephone inquiries regarding the use of Manatron systems. A number
of regional offices are also staffed with employees who are trained to
identify and respond to customers' hardware and other technical problems.
With the acquisition of Sabre, Manatron now provides mass real
estate services to local governments. The real estate services are a
natural product extension for the Company, as many Manatron "turn-key"
systems customers also periodically contract for mass appraisal services.
Sabre is one of the two largest vendors of mass appraisal services in the
United States. A typical mass appraisal engagement is performed under a
fixed-price contract over an 18- to 24-month time frame. Using the
advanced technology of its appraisal software products, Sabre has developed
a highly flexible methodology for appraisal delivery, which enables Sabre
to service jurisdictions of any size and accommodate the specific requirements
of an individual client. Through physical inspection, computer analysis,
and sound judgment of professional appraisers, Sabre assesses a value to
each parcel of property in a jurisdiction. Sabre supports these values on
behalf of the jurisdiction through the hearings process and finalizes the
tax rolls to enable the jurisdiction to create tax bills.
The Company also provides services for governments at its
Illinois, Michigan, and Ohio facilities, such as keypunching, creation of
digital maps, and preparation and/or printing of property tax bills.
MARKETING AND SALES
The Company primarily markets its products through its regional
offices in Alabama, Georgia, Illinois, Indiana, Michigan, Missouri, North
Carolina, Ohio, and Rhode Island. Manatron plans the opening of each new
office based on a review of marketing opportunities and financial analysis
within a particular region. The Company also markets its products through
nonexclusive dealer arrangements.
-7-
The Company's sales and marketing personnel approach various
governments with Manatron-specific solutions to their data processing and
property valuation needs and also respond to governments' proposal
requests. The Company's customer service personnel also assist with
product demonstrations in connection with these sales efforts.
Manatron's marketing efforts involve, among other things,
developing and distributing product brochures and a bimonthly
newsletter, direct mailings, telemarketing, attending conventions
and conferences, forming user groups for the purpose of determining
customer needs and expectations, conducting seminars for the purpose of
demonstrating products and services, and advertising in trade journals.
The Company is also a value-added reseller for a number of
leading hardware manufacturers such as DEC, IBM, and Unisys. In turn,
the sales forces of these manufacturers often work closely with the
Company's sales and marketing personnel in an effort to promote sales
of the Company's services and products in conjunction with sales of
the hardware.
CUSTOMER BASE
The Company's customers are primarily city, township, and county
governments. The Company's management believes that the potential domestic
market for the Company's systems and services is very large, consisting of
over 40,000 city, township, and county government units in the United
States. It has been the Company's experience that the sale of one Manatron
"turn-key" system frequently leads to follow-up sales or service with the
same customer. In addition, the sales of mapping and mass appraisal
services to a customer often lead to the sale of a "turn-key" system.
COMPETITION
Competition for the Company's data processing systems, related
services, and mass appraisal services is intense. The Company competes
primarily on the basis of name recognition, financial stability, range of
products, and reputation for providing good customer service.
The Company's major competitors for data processing systems
and related services are generally small local software and service firms,
which often are able to offer less expensive solutions or to develop
long-term relationships with key governmental officials. Generally,
these smaller firms can sell hardware and services at reduced amounts
because of their small amount of overhead. The Company also competes
with national software developers such as Business Records and Systems
and Computer Technologies which have greater financial, technical, and
human resources than the Company. These established software companies
may offer competitive products and the manufacturers of the computer
hardware distributed by the Company may begin to expand the marketing
of their applications software to compete with the Company.
-8-
Manatron could be adversely affected if a large computer manufacturer
associates itself solely with a third-party software supplier and targets
the local government data processing market.
Furthermore, applications software also is periodically
developed by or for public agencies for use by governments. If the
funding and distribution of governmentally developed or funded software
becomes more widespread, such products could compete with the Company's
products.
Competition in mass appraisal services comes from a number of
small local firms and one large firm, Cole Layer and Trumble of Dayton,
Ohio, a division of Day & Zimmerman, Inc. As the largest seller of mass
appraisal services in the United States, Cole Layer and Trumble has greater
resources than the Company. Small local firms often can offer less
expensive mass appraisal services and products than the Company or can
develop long-term relationships with key governmental officials.
Although state and local governments have traditionally lagged
behind both the federal government and the private sector in computer
automation, the application of microcomputer and personal computer
technology to local governmental units recently has been subject to rapid
development and change. The ability of the Company to develop new
applications software programs utilizing modern technology is critical
to its ability to compete successfully. Manatron constantly reviews
and updates its software programs so that they meet the needs of its
customers and can be utilized on newer models of personal computers,
minicomputers, and UNIX computers. Management believes that its
systems and services are competitive with the systems and services
presently offered by competitors of the Company.
The most significant barriers to entry into the Company's market
are time, expense, expertise, and personnel needed to develop software. As
software development and the sale of mass appraisal services are not highly
capital intensive, barriers to entry into these industries are
comparatively low. In addition, since software products have a relatively
low manufacturing cost, increased price competition may be expected in the
future.
RESEARCH AND DEVELOPMENT
Manatron's success depends on the Company's ability to respond
quickly to changing technology, market demands, and the needs of its
customers. Manatron emphasizes research and development and commits
substantial resources to support and further its role as a leader in the
markets it serves. The Company's research and development expenditures
relate primarily to computer software development costs. Systems
programming and support expenses were approximately $2.0 million, $1.7
million and $1.5 million for the fiscal years ended April 30, 1996, 1995,
and 1994, respectively. Certain of these expenses are capitalized in
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accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed" as described in the Notes to Consolidated Financial
Statements contained in this Form 10-K.
During fiscal 1996, the Company continued to focus on the
creation of its Open Windows Series financial and payroll products which
are expected to be completed this year. In addition to functioning in a
windows environment, these products are expected to have additional
features and functionality which originated from customer input. More
importantly, as these products are introduced to its customers, the
Company will strive to reduce some of the redundancies which currently
occur because its products have often been supporting multiple
financial and payroll systems previously developed and sold by the
different companies Manatron has acquired.
The Company has also emphasized development of its PC CAMA
product during this past year, particularly with respect to making the
product functional in new market territories, such as Virginia and New
Hampshire. In addition, the Company gave significant attention to its
Indiana appraisal product. The Company's efforts improved the
functionality of the product which was introduced in the prior year as
a result of new Indiana state legislation.
Manatron also continued to develop the integration of image
processing into its various software applications and focused on
completing its new utility billing system that will be released to
Southeastern United States customers during the next fiscal year. The
Company also devoted time recently to modify its Michigan tax system
as a result of legislative changes in the manner of calculating
property taxes in Michigan.
In the past fiscal year, the Company worked to improve
performance, add reports, offer more flexibility in terms of hardware or
database selection, and stabilize its new MIRRS windows product. Finally,
developmental efforts were focused in Ohio to allow customers to
transition their existing software from VAX VMS to Alpha Open VMS thereby
enabling them to take advantage of DEC's new RISC 64 bit architecture.
SUPPLIERS
The Company generally maintains a minimum of three alternate
suppliers. All computers, peripherals, disks, printers, plotters,
digitizers, operating system software, office automation software, and
other equipment required by the Company are presently available from at
least three sources. Hardware is purchased on original equipment
manufacturer or distributor terms at discounts from retail. The Company
has not experienced any significant supply problems.
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PATENTS AND TRADEMARKS
The Company currently does not have patent protection for its
products or services. While Manatron in the future may apply for a patent
or patents to protect its rights to certain software and related products,
no assurance can be given that such patents would be granted. The Company
is treating certain proprietary materials as trade secrets, and employs and
will continue to employ procedures, techniques, and contractual arrangements
to help protect such confidential matters.
Management may seek to obtain copyright registration of its
software programs. However, these copyrights, if applied for and granted,
would provide only limited practical protection against duplication of the
media embodying the programs and related user manuals. The Company has
registered certain of its trade names, has a trade name registration
currently pending, and may apply for registration of additional trade
names and trademarks at appropriate times in the future. No assurance
can be given that the applications for such registration will be granted.
The Company incorporates programming on software disks to make
unauthorized duplication of the software more difficult.
EMPLOYEES
As of July 1, 1996, the Company had 258 full-time employees
and 39 duration employees. For assistance on specific mass appraisal
projects, the Company will hire duration employees, whose employment
generally lasts for the duration of a project. Duration employees
generally do not receive the same benefits as regular full-time employees.
The Company's employees are not represented by a labor union.
No work stoppages have been experienced and management presently
considers its relations with employees to be positive.
An approximate breakdown of the Company's employees is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Executive 5%
Administrative 13%
Development 10%
Sale and Marketing 9%
Service and Support 27%
Appraisal 36%
Total 100%
</TABLE>
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ITEM 2. PROPERTIES.
The principal executive and administration offices are
located in a building owned by Manatron in Kalamazoo, Michigan which
consists of approximately 12,300 square feet. The Company also rents
office and/or warehouse space in Alabama, Georgia, Illinois, Indiana,
Michigan, Missouri, New York, North Carolina, Ohio, Pennsylvania,
Rhode Island, and South Carolina, totaling approximately 60,000
square feet. Rental payments for the Company's leased office and
warehouse space for the fiscal year ended April 30, 1996, amounted to
approximately $750,000.
The Company currently leases its Greenville, North Carolina,
office from Richard J. Holloman, a Director of the Company. See "Certain
Relationships and Related Transactions."
Management considers all of its offices to be well maintained, in
good operating condition, and suitable and adequate for their intended
purposes.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings other
than routine litigation incidental to its business. In the opinion of
management, the outcome of any litigation currently pending will not
materially affect the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive officers of the Company are elected by the Board of
Directors at its organizational meeting following the annual meeting of
shareholders and serve until their successors are elected and qualified.
The following information includes the name and age of the only
executive officer of the Company who is not a director as of the date of
this Annual Report on Form 10-K, the officer's present position with the
Company, and the business experience of the officer during the past five
years.
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Larry L. Terhune (age 39) joined the Company in 1992 and was
promoted to Vice President-Software Development in 1993. In 1995, Mr.
Terhune was also appointed Southeastern Regional Vice President of the
Company. Mr. Terhune is responsible for systems design, development,
documentation, and implementation of certain product groups. In addition,
he oversees sales and customer service in the states of North Carolina,
South Carolina, Georgia, and Virginia. Prior to 1992, Mr. Terhune was
employed by Unisys Corporation as a software and systems manager.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
Manatron's Common Stock is traded over-the-counter and is
regularly quoted on The NASDAQ Stock Market under the symbol "MANA."
The following table shows the range of high and low last sales
price quotations reported by The NASDAQ Stock Market for the years ended
April 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
QUARTER LOW HIGH LOW HIGH
<S> <C> <C> <C> <C> <C>
May - July $ 2 7/8 $ 3 5/8 $ 3 3/4 $ 4 1/2
August - October 2 5/8 3 1/2 3 1/4 4 1/4
November - January 1 1/2 3 1/16 3 3 5/8
February - April 1 5/8 2 1/8 2 15/16 3 5/8
</TABLE>
The Company historically has not paid cash dividends. The
Company declared a 5% stock dividend on September 16, 1994, September 9,
1993, and July 9, 1992, to shareholders of record on October 14, 1994,
October 15, 1993, and August 28, 1992, respectively.
As of July 24, 1996, the Company's Common Stock was held by
approximately 1,500 shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of the
Company for the periods indicated and has been derived from consolidated
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financial statements of the Company. The data should be read in connection
with the consolidated financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Conditions and Results
of Operations" included in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FIVE-YEAR OPERATING AND
FINANCIAL SUMMARY
YEARS ENDED APRIL 30,
1996<F1> 1995 1994 1993<F2> 1992
<S> <C> <C> <C> <C> <C>
Operating Results:
Net Revenues $23,946,243 $24,768,515 $18,203,653 $11,962,959 $10,083,930
Gross Profit 8,427,625 9,564,453 8,634,917 5,613,196 5,227,172
Income (Loss) from
Operations (2,870,606) 1,010,162 548,331 150,398 578,591
Other Income (Expense),
Net (368,808) (245,755) 10,554 119,880 176,596
Net Income (Loss) (3,039,414) 437,407 334,175 343,278 507,187
Earnings (Loss) Per
Share<F3> (1.03) .15 .12 .13 .20
At Year-end:
Cash and Investments 352,074 437,327 164,445 2,211,981 2,274,560
Total Assets 16,583,187 20,988,190 14,644,452 11,931,280 11,865,589
Long-Term Debt 3,500,000 4,784,000 130,000 -- --
Book Value Per Share<F3> 1.80 3.06 2.91 2.78 2.67
<FN>
______________________________________________________________________________
<F1> The 1996 amounts include a one-time $1,598,000 management
restructuring charge primarily related to the retirement of
Allen F. Peat, the Company's former Chairman, President, and Chief
Executive Officer, as further discussed in the accompanying Notes to
Consolidated Financial Statements.
<F2> The 1993 amounts include a one-time $186,000 gain, or $.07 per share,
related to the Company's adoption of SFAS 109 which was reflected as a
cumulative effect of change in accounting principle in the Company's
consolidated financial statements.
-14-
<F3> All applicable per-share amounts have been retroactively restated for
the effect of the 5% stock dividends that were declared on September
16, 1994, September 9, 1993, and July 9, 1992, for shareholders of record
on October 14, 1994, October 15, 1993, and August 28, 1992, respectively.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following section provides a narrative discussion about
Manatron's financial condition and results of operations. The comments
that follow should be read in conjunction with the Company's consolidated
financial statements and related notes thereto presented in this Annual
Report on Form 10-K.
RESULTS OF OPERATIONS: FISCAL YEAR 1996 COMPARED TO 1995
Net revenues of $23,946,243 for the year ended April 30, 1996,
have decreased by 3% as compared to net revenues of $24,768,515 that
were reported for 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, mapping, hardware maintenance, software
support, training, laser printing, and internal data processing.
Approximately $4.3 million of incremental net revenues for the
year ended April 30, 1996, can be attributed to the contribution from the
Sabre business. As Sabre was not acquired until November 11, 1994, the
first and second quarters of fiscal 1995 do not reflect revenue from that
organization. Sabre provides mass real estate appraisal services for
state and local governments in addition to the traditional products
and services offered by the Company.
Sabre's contribution of additional net revenues largely has been
offset by a $1.5 million decrease in hardware sales, $1.6 million decrease
in software sales, and $1.4 million 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 products. The Company anticipated a reduction in E911 service revenues
because most of these long-term projects are complete and the Company has
not pursued any new projects.
Despite the decrease in net revenues, cost of revenues for the
year ended April 30, 1996, increased 2% to $15,518,618 over the prior
-15-
year amount of $15,204,062. This increase is due to a reduction in the
Company's gross profit margin from 39% in the prior year to 35% for the
current year.
The margin reduction is primarily due to the decrease in
software sales noted above as well as the impact from mass real
estate 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 few problem jobs that were a part of the
Sabre acquisition, and the fact that Sabre was in the flat part of its
sales cycle. Sabre signed a contract for approximately $1.2 million in
January 1996 in South Carolina and two contracts for approximately
$1.5 million in the first quarter of fiscal 1997 in New York for
appraisal and software services and is expecting an upswing in its
sales cycle during the next fiscal year.
Selling, general, and administrative expenses have increased by
13% to $9,700,227 for the year ended April 30, 1996, compared to $8,554,291
that was reported for fiscal 1995. These increases are primarily due to the
additional personnel and related expenses associated with the Sabre
acquisition.
In addition to its normal operating expenses, the Company
recorded a nonrecurring management restructuring expense of $1.6 million
during the three months ended October 31, 1995. This expense was related
to the retirement of Allen F. Peat as Chairman, Chief Executive Officer,
and President as more fully described in Note 11 of the accompanying
consolidated financial statements.
As a result of the factors noted above, the Company reported an
operating loss of $2,870,606 for the year ended April 30, 1996, versus
operating income of $1,010,162 for the prior year. Other expense, which
is primarily interest, increased from $245,755 in fiscal 1995 to $368,808
in fiscal 1996 due to borrowings required in connection with the Sabre
acquisition.
The Company's provision (credit) for federal income taxes
generally fluctuates with the level of pretax income (loss). The tax
credit for the year ended April 30, 1996, does not reflect the tax effect
of the entire loss for the year ended April 30, 1996, because the Company
recorded a valuation allowance against certain of its future tax benefits
and its net operating loss carryforward. See Note 7 of the accompanying
consolidated financial statements for details. In addition, the effective
tax rate is impacted because of nondeductible goodwill amortization related
to the Company's acquisitions of ATEK and SDS.
-16-
As a result of the factors noted above, the Company reported a
net loss of $3,039,414, or $1.03 per share, for the year ended April 30,
1996, versus net income of $437,407, or $.15 per share, for the prior
year. Weighted average shares outstanding for both years have not
changed significantly.
RESULTS OF OPERATIONS: FISCAL YEAR 1995 COMPARED TO 1994
Net revenues of $24,768,515 for the year ended April 30, 1995,
increased by 36% as compared to the $18,203,653 of net revenues reported
for the fiscal year 1994. Approximately $4.4 million of the increase in
revenues resulted from the contribution of Sabre, which the Company
acquired on November 11, 1994. Revenues in the Southeast also increased
by approximately $2 million over fiscal 1994 because significant work was
completed on a number of long-term E911 systems and service contracts that
were signed in fiscal 1994. Finally, since the acquisition of ATEK was
not completed until July 28, 1993, fiscal 1995 revenues resulting from
ATEK were approximately $1.5 million higher than the comparable amounts
for fiscal 1994. These increases were partially offset by decreases in
hardware and hardware maintenance revenues due to price reductions and
extended warranties that were offered by a number of hardware
manufacturers.
Cost of revenues for fiscal 1995 increased by 59% to $15,204,062
over the comparable prior year amount of $9,568,736. This increase
primarily was due to the upward movement in revenues noted above and a
reduction in the Company's gross profit margin from 47% in fiscal 1994 to
39% in fiscal 1995. This margin reduction resulted from a change in the
revenue mix in connection with the Sabre acquisition. In addition, the
long-term E911 services contracts and service revenues typically
have a much lower margin than software sales. As previously noted, margins
on the mass appraisal revenues were negatively impacted by higher-than-
anticipated integration costs, a few problem jobs that were inherited in
connection with the acquisition, and the fact that Sabre was in the flat
part of its sales cycle.
Despite the 36% increase in revenues and the additional personnel
obtained in connection with its acquisitions, the Company's selling, general,
and administrative expenses only increased by 6% to $8,554,291 for the year
ended April 30, 1995, compared to $8,086,586 for the prior year. The
additional personnel and related expenses associated with the ATEK and Sabre
acquisitions were offset by the Company's continuing efforts to leverage or
consolidate the fixed costs of its operations.
As a result of the factors noted above, the Company reported
operating income of more than $1,000,000 for the first time since 1987.
Operating income increased by 84% to $1,010,162 for the year ended
-17-
April 30, 1995, over the prior year amount of $548,331. However, the
Company reported $245,755 of net interest expense for fiscal year 1995
versus net interest income of $10,544 in fiscal year 1994 because of
increased borrowings to fund the acquisitions of ATEK, CCS, and Sabre.
In addition, interest rates were 3% higher in fiscal 1995 than in
fiscal 1994.
The Company's provision for federal income taxes fluctuates with
the level of pretax income. The tax provision for the year ended April 30,
1995, reflected a 43% effective rate which was in excess of the statutory
rate of 34% primarily because of nondeductible goodwill amortization
related to the Company's acquisitions of ATEK and SDS. No goodwill was
recorded in connection with the Sabre acquisition since the purchase price
was less than the book value of the net assets which were acquired.
As a result of the factors noted above, the Company reported net
income of $437,407, or $.15 per share, for the year ended April 30, 1995,
which was a 31% increase over the prior year net income of $334,175, or $.12
per share. Weighted average shares outstanding for both years were
restated to reflect the 5% stock dividend that was declared on
September 16, 1994, and did not change significantly between periods.
-18-
QUARTERLY RESULTS
The following table sets forth selected unaudited quarterly
financial data for the eight quarters ended April 30, 1996:
<TABLE>
<CAPTION>
QUARTER ENDED
FISCAL 1996 FISCAL 1995
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 30, APRIL 30,
1995 1995 1996 1996 1994 1994 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $5,719,632 $5,595,034 $6,637,705 $5,993,872 $4,629,090 $5,524,307 $7,196,532 $7,418,586
Gross Profit 1,926,591 1,883,176 2,387,192 2,230,666 2,095,641 2,210,672 2,702,197 2,555,943
Operating Income (364,934) (2,257,008)<F1> (145,828) (102,836) 208,877 311,436 363,635 126,211
(Loss)
Other Expense, Net (93,258) (88,045) (104,020) (83,485) (8,861) (35,238) (87,502) (114,154)
Net Income (Loss) (321,692) (2,281,553)<F1> (249,848) (186,321) 117,016 164,198 169,136 (12,943)
Earnings (Loss) (.11) (.76) (.08) (.06) .04 .06 .06 .00
Per Share<F*>
<FN>
_________________
<F*> All applicable per-share amounts have been retroactively restated
for the effect of the 5% stock dividend that was declared on September
16, 1994, to shareholders of record on October 14, 1994.
<F1> This amount includes a one-time management restructuring charge
of approximately $1,598,000 primarily related to the retirement
of Allen F. Peat, the Company's former Chairman, President, and
Chief Executive Officer, as further discussed in the accompanying
Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-19-
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $3,043,460 at April 30, 1996, has
decreased significantly compared to $6,417,415 at April 30, 1995.
These levels reflect current ratios of 1.42 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 was
approximately $1.7 million lower at April 30, 1996, than at April 30,
1995.
Shareholders' equity at April 30, 1996, decreased by $3,855,115
to $5,144,370 from the balance reported at April 30, 1995, primarily
because of the $3,039,414 net loss. In addition, the leveraged ESOP
transaction and the purchase of stock in connection with Allen Peat's
retirement as more fully described in Notes 10 and 11 to the accompanying
consolidated financial statements have reduced shareholders' equity. As
a result, book value per share has decreased to $1.80 as of April 30,
1996, 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 $369,000
for the year ended April 30, 1996, are lower than the comparable prior year
amount of $536,000. These expenditures relate primarily to the purchase of
additional or new computer hardware and software for the Company's technical
and support personnel. The reduction is primarily due to the current
emphasis on reducing debt. 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 and over $5.0
million of borrowings have been used to fund working capital and various
acquisitions. As of April 30, 1996, the Company owed $3,175,000 on
its revolving credit agreement and $425,000 on the ESOP loan. In
addition, as previously noted, on March 15, 1996, the Company borrowed
approximately $750,000 under its credit agreement to pay Ronald
Stoynoff's obligation that was assumed from Allen Peat. Despite these
significant uses of cash, it is anticipated that the $5.0 million revolving
credit agreement, 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 12 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
-20-
competitive. The Company anticipates that inflationary price increases
related to labor and overhead will have a negative effect on cash flow
and net income to the extent that the increases cannot be offset through
improved productivity and price increases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item is set forth in Appendix A of this
Annual Report on Form 10-K and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding directors of the Company contained
under the captions "Board of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the definitive Proxy Statement of
the Company for its annual meeting of shareholders to be held October
10, 1996, is incorporated by reference. The information regarding
executive officers is provided in the Supplemental Item following
Item 4 in Part I of the Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the captions "Compensation of
Directors," "Executive Compensation," and "Compensation Committee Interlocks
and Insider Participation" in the definitive Proxy Statement of the Company
for its annual meeting of shareholders to be held October 10, 1996, is
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Voting Securities,"
"Ownership of Common Stock," and "Securities Ownership of Management" in the
definitive Proxy Statement of the Company for its annual meeting of
shareholders to be held October 10, 1996, is incorporated by reference.
-21-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and
Related Transactions" in the definitive Proxy Statement of the Company for
its annual meeting of shareholders to be held October 10, 1996, is
incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
ITEM 14(a)(1). LIST OF FINANCIAL STATEMENTS. The following report,
consolidated financial statements of the Company, and notes thereto are
filed as a part of this report:
- Report of Arthur Andersen LLP, Independent Public Accountants,
dated July 12, 1996
- Consolidated Balance Sheets as of April 30, 1996 and April 30,
1995
- Consolidated Statements of Operations for the years ended April
30, 1996, 1995, and 1994
- Consolidated Statements of Shareholders' Equity for the years
ended April 30, 1996, 1995, and 1994
- Consolidated Statements of Cash Flows for the years ended April
30, 1996, 1995, and 1994
- Notes to Consolidated Financial Statements
ITEM 14(a)(2). FINANCIAL STATEMENT SCHEDULES. Not applicable.
ITEM 14(a)(3). LIST OF EXHIBITS. The following exhibits are filed as a
part of this report:
EXHIBIT
NUMBER
3.1 Restated Articles of Incorporation. This exhibit is
incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended April
30, 1995.
-22-
3.2 Bylaws. This exhibit is incorporated by reference to
the Registrant's Form 10-K Annual Report for the
fiscal year ended April 30, 1995.
4.1 Revolving Credit Loan Agreement. This exhibit is
incorporated by reference to the Registrant's Form 8-K
Current Report dated November 11, 1994.
4.2 First Amendment to Revolving Credit Agreement.
4.3 Second Amendment to Revolving Credit Agreement.
9 Buy and Sell and Voting Trust Agreement Concerning
Stock of Manatron, Inc. This exhibit is incorporated
by reference to the Registrant's Form 10-K Annual
Report for the fiscal year ended April 30, 1995.
10.1 Manatron, Inc. 1986 Incentive Stock Option Plan.*
This exhibit is incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal
year ended April 30, 1995.
10.2 Manatron, Inc. 1989 Stock Option Plan.* This exhibit
is incorporated by reference to the Registrant's Form
10-K Annual Report for the fiscal year ended April
30, 1995.
10.3 Manatron, Inc. 1995 Long-Term Incentive Plan.* This
exhibit is incorporated by reference to the
Registrant's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 12, 1995.
10.4 Buy and Sell and Voting Trust Agreement Concerning
Stock of Manatron, Inc.* See Exhibit 9 above.
10.5 Executive Employment Agreement with Randall L. Peat.*
This exhibit is incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal
year ended April 30, 1995.
10.6 Form of Stock Purchase Warrant with Brent R. Nicklas,
as amended.* This exhibit is incorporated by
reference to the Registrant's Form 10-K Annual Report
for the fiscal year ended April 30, 1995.
10.7 Manatron, Inc. Employee Stock Ownership and Salary
Deferral Plan. This exhibit is incorporated by
reference to the Registrant's Form 10-K Annual Report
for the fiscal year ended April 30, 1995.
-23-
10.8 Manatron, Inc. Employee Stock Purchase Plan. This
exhibit is incorporated by reference to the
Registrant's Form 10-K Annual Report for the fiscal
year ended April 30, 1993.
10.9 ATEK Information Services, Inc. Stock Purchase
Agreement. This exhibit is incorporated by reference
to the Registrant's Form 8-K Current Report dated
July 28, 1993.
10.10 Stock Purchase Agreement between Ronald D. Stoynoff
and Allen F. Peat dated March 15, 1994. This exhibit
is incorporated by reference to the Registrant's
Form 8-K Current Report dated March 15, 1994.
10.11 Agreement between Manatron, Inc. and Ronald D.
Stoynoff effective as of April 1, 1994. This exhibit
is incorporated by reference to the Registrant's
Form 8-K Current Report dated March 15, 1994.
10.12 Asset Purchase Agreement between Manatron, Inc. and
Moore Business Forms, Inc. dated November 11, 1994.
This exhibit is incorporated by reference to the
Registrant's Form 8-K Current Report dated November
11, 1994.
10.13 Manatron, Inc. 1994 Long-Term Incentive Plan. This
exhibit is incorporated by reference to the
Registrant's Definitive Proxy Statement for its
Annual Meeting of Shareholders held October 6, 1994.
10.14 Agreement between Manatron, Inc. and Allen F. Peat
dated October 17, 1995.* This exhibit is incorporated
by reference to the Registrant's Form 8-K Current
Report dated November 13, 1995.
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
_______________________
*Management contract or compensatory plan or arrangement.
-24-
The Company will furnish a copy of any exhibit listed above to
any shareholder of the Company without charge upon request to Jane M. Rix,
2970 South 9th Street, Kalamazoo, Michigan 49009.
ITEM 14(b) REPORTS ON FORM 8-K.
No current reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MANATRON, INC.
Dated: July 26, 1996 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
President, Chief Executive Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
/S/ PAUL R. SYLVESTER Date: July 26, 1996
Paul R. Sylvester
President, Chief Executive Officer,
and Chief Financial Officer
(Principal executive, financial, and
accounting officer)
-25-
/S/ RANDALL L. PEAT* Date: July 26, 1996
Randall L. Peat, Vice President
and Director
/S/ MELVIN J. TRUMBLE* Date: July 26, 1996
Melvin J. Trumble, Senior Vice
President and Director
/S/ RICHARD J. HOLLOMAN* Date: July 26, 1996
Richard J. Holloman, Director
/S/ DOUGLAS A. PEAT* Date: July 26, 1996
Douglas A. Peat, Vice President -
Marketing and Director
/S/ JANE M. RIX* Date: July 26, 1996
Jane M. Rix, Secretary and
Director
/S/ STEPHEN C. WATERBURY* Date: July 26, 1996
Stephen C. Waterbury, Director
/S/ HARRY C. VORYS* Date: July 26, 1996
Harry C. Vorys, Director
/S/ GENE BLEDSOE* Date: July 26, 1996
Gene Bledsoe, Director
/S/ ALLEN F. PEAT* Date: July 26, 1996
Allen F. Peat, Director
*By /S/ PAUL R. SYLVESTER Date: July 26, 1996
Paul R. Sylvester
Attorney-in-Fact
-26-
APPENDIX A
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Manatron, Inc.:
We have audited the accompanying consolidated balance sheets of MANATRON,
INC. (a Michigan corporation) and Subsidiaries as of April 30, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
April 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Manatron, Inc. and
Subsidiaries as of April 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1996, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
July 12, 1996
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30,
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 352,074 $ 437,327
Accounts receivable, less allowances of
$700,000 in 1996 and $469,000 in 1995 5,538,249 8,416,807
Revenues earned in excess of billings and
retainages on long-term contracts 2,466,205 2,354,048
Current portions of notes receivable:
Installment notes receivable 714,576 615,637
Net investment in sales type leases 254,852 288,002
Inventories 386,980 732,321
Other current assets 514,167 409,978
Total current assets 10,227,103 13,254,120
NET PROPERTY AND EQUIPMENT 1,995,004 2,774,141
OTHER ASSETS:
Notes receivable, less current portions:
Installment notes receivable 870,920 973,821
Net investment in sales type leases 402,000 372,000
Officers' receivable 380,233 429,965
Computer software development costs,
net of less accumulated amortization 1,060,483 1,090,651
Goodwill, net of accumulated amortization 1,269,997 1,454,828
Other, net 377,447 638,664
4,361,080 4,959,929
$16,583,187 $20,988,190
</TABLE>
-2-
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 180,000
Accounts payable 1,048,484 1,297,307
Billings in excess of revenues earned
on long-term contracts 1,687,561 1,459,054
Billings for future services 2,721,567 2,857,392
Restructuring reserve 218,294 -
Accrued liabilities:
Payroll and employee benefits 963,435 672,349
Accrued commissions 227,270 327,668
Other 217,032 42,935
Total current liabilities 7,183,643 6,836,705
DEFERRED INCOME TAXES 175,000 368,000
LONG-TERM DEBT, less current portion 3,500,000 4,784,000
OTHER LONG-TERM LIABILITIES 580,174 -
CONTINGENCY (NOTE 11)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value,
2,000,000 shares authorized, none
issued
Common stock, no par value, 7,500,000
shares authorized, 2,862,522 and
2,938,939 shares issued and outstanding
at April 30, 1996 and 1995,
respectively 5,444,497 5,703,386
Retained earnings 256,685 3,296,099
Deferred compensation (131,812) -
Unearned ESOP shares (425,000) -
Total shareholders' equity 5,144,370 8,999,485
$16,583,187 $20,988,190
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
-3-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET REVENUES $23,946,243 $24,768,515 $18,203,653
COST OF REVENUES 15,518,625 15,204,062 9,568,736
Gross Profit 8,427,625 9,564,453 8,634,917
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 9,700,227 8,554,291 8,086,586
RESTRUCTURING CHARGE 1,598,004 - -
Income (loss) from operations (2,870,606) 1,010,162 548,331
OTHER INCOME (EXPENSE):
Interest Expense (429,116) (316,399) (77,730)
Other 60,308 70,644 88,274
(368,808) (245,755) 10,544
Income (loss) before pro-
vision (credit) for
federal income taxes (3,239,414) 764,407 558,875
PROVISION (CREDIT) FOR FEDERAL
INCOME TAXES (200,000) 327,000 224,700
NET INCOME (LOSS) $(3,039,414) $ 437,407 $ 334,175
EARNINGS (LOSS) PER SHARE $ (1.03) $ .15 $ .12
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
-4-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
<CAPTION>
TOTAL
COMMON RETAINED DEFERRED UNEARNED SHAREHOLDERS'
STOCK EARNINGS COMPENSATION ESOP SHARES EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT APRIL 30, 1993 $4,055,177 $3,656,133 $ - $ - $7,711,310
Net income - 334,175 - - 334,175
Issuance of 41,450 shares under
employee stock plans 145,465 - - - 145,465
Issuance of 129,776 shares in
connection with a stock
dividend 616,436 (616,436) - - -
Issuance of 88,244 shares in
connection with certain
acquisitions 293,415 - - - 293,415
BALANCE AT APRIL 30, 1994 5,110,493 3,373,872 - - 8,484,365
Net income - 437,407 - - 437,407
Issuance of 9,119 shares
under employee stock plans 27,384 - - - 27,384
Issuance of 139,597 shares
in connection with a stock
dividend 515,180 (515,180) - - -
Issuance of 11,842 shares in
connection with an acquisition 50,329 - - - 50,329
BALANCE AT APRIL 30, 1995 5,703,386 3,296,099 - - 8,999,485
Net loss - (3,039,414) - - (3,039,414)
Establishment of Employee Stock
Ownership Plan - - - (500,000) (500,000)
Issuance of 57,664 shares
under employee stock plans 175,874 - (142,500) - 33,374
Issuance of 15,849 shares for
payment of services 25,755 - - - 25,755
Purchase of 149,930 shares in
connection with the
restructuring charge (Note 11) (431,053) - - - (431,053)
Compensation expense (29,465) - 10,688 75,000 56,223
BALANCE AT APRIL 30, 1996 $5,444,497 $ 256,685 $(131,812) $ 425,000 $5,144,370
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-5-
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income $(3,039,414) $ 437,407 $ 334,175
Adjustments to reconcile net (loss) income
to net cash and equivalents
provided by (used for) operating
activities:
Depreciation and amortization 2,010,348 1,687,381 1,242,755
Deferred income taxes (227,000) 686,235 165,700
Change in assets and liabilities, net of
effects from acquisitions (Note 2):
Decrease (increase) in:
Accounts and notes receivable 2,812,769 (1,211,321) (2,480,405)
Revenues in excess of billings
and retainages (112,157) 1,230,943 -
Inventories 345,341 351,233 287,578
Other current assets (70,189) 119,755 61,464
Increase (decrease) in:
Accounts payable and accrued
liabilities 115,962 504,935 (2,880,865)
Billings in excess of revenues
earned 228,507 (527,040) -
Billings for future services (135,825) (149,288) 117,625
Restructuring reserves 798,468 - -
Net cash and equivalents provided
by (used for) operating activities 2,726,810 3,130,240 (3,151,973)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property and equipment (368,953) (536,263) (313,454)
Investments in computer software (439,655) (584,171) (381,107)
Proceeds from sales of property and
equipment 32,848 39,176 48,743
Net cash (paid) received for acquisitions 100,000 (4,000,000) 868,560
Decrease in temporary investments - - 684,943
(Decrease) Increase in other assets 129,086 (632,484) (280,970)
-6-
Net cash and equivalents (used
for) provided by investing
activities (546,674) (5,713,742) 626,715
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of long-term debt (1,364,000) - (170,000)
Proceeds from issuance of long-term debt - 4,834,000 -
Proceeds from issuance of common stock 29,664 27,384 145,465
Purchase of common stock in restructuring (431,053) - -
Purchase of common stock for ESOP (500,000) - -
Net (repayment) of proceeds from
short-term borrowings - (2,005,000) 1,187,200
Net cash and equivalents (used for)
provided by financing activities (2,265,389) 2,856,384 1,162,665
CASH AND EQUIVALENTS:
Increase (Decrease) (85,253) 272,882 (1,362,593)
Balance at beginning of year 437,327 164,445 1,527,038
Balance at end of year $ 352,074 $ 437,327 $ 164,445
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
-7-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Manatron, Inc. and its Subsidiaries (the "Company" or "Manatron")
design, market, install and maintain advanced computer-based "turn-
key" data processing systems primarily for state and local
governments, using general purpose computer hardware produced by
leading manufacturers and proprietary software developed or
purchased by Manatron. The Company also provides mass real estate
appraisal and mapping services for state and local governments.
The Company's business is primarily concentrated in the Midwest,
the Northeast and the Southeast regions of the United States.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Manatron, Inc. and its wholly-owned subsidiaries, ATEK
Information Services, Inc. ("ATEK") and Specialized Data Systems,
Inc. ("SDS"). In addition, the accompanying consolidated financial
statements include the accounts of Sabre Systems and Service
("Sabre") which is a division of the Company. All significant
intercompany accounts and transactions have been eliminated. As
more fully explained in Note 2, ATEK was acquired in July of 1993
and Sabre was acquired in November of 1994. Accordingly, the
accompanying consolidated financial statements only reflect the
results of these subsidiary operations since their respective
acquisition dates.
REVENUE RECOGNITION
Revenue from in-house data processing, maintenance contracts and
software support services is normally billed in advance on a
monthly, quarterly or annual basis. These billings are recognized
as revenue on a straight-line basis over the periods covered by the
agreements. At the end of a reporting period, the balance of
billings not yet recognized as revenue are reflected as "Billings
for Future Services" in the Company's consolidated balance sheets.
Costs related to these services are expensed as incurred.
Revenue and costs related to sales of computer hardware and
supplies are recognized when title passes, which is normally the
shipping or installation date. Revenue from software licensing
fees is recognized when the license agreements are consummated,
-8-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
which is also normally the shipping or installation date. The
Company's contracts typically do not contain a right of return. As
of April 30, 1996 and 1995, the reserve for returns was not
significant.
Revenue and costs related to leases of computer hardware are
recognized in accordance with Statement of Financial Accounting
Standards No. 13, "Accounting for Leases" (see Note 3).
In addition, as a result of the acquisition of Sabre, the Company
now provides mass real estate appraisal and property mapping
services to state and local governments. Revenue and costs under
these long term contracts, which typically range from one to three
years, are recognized on a percentage of completion basis. Losses
on these contracts, if any, are recognized when they become known.
As of April 30, 1996 and 1995, the reserve for contract losses was
not significant.
CASH AND EQUIVALENTS
Cash and equivalents consist of money market funds and short-term
time deposits.
INVENTORIES
The Company values its inventories at the lower of cost or market.
Cost is determined using the first-in, first-out method. The
Company's inventories consist of the following at April 30:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Computer hardware and repair parts $141,418 $455,008
Data processing supplies and
purchased software products 245,562 277,313
$386,980 $732,321
</TABLE>
PROPERTY AND EQUIPMENT, AT COST
Net property and equipment consists of the following at April 30,:
-9-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Land $ 25,650 $ 25,650
Building and improvements 449,547 440,672
Furniture and fixtures 595,788 606,509
Rental equipment 398,720 438,115
Office equipment and software 3,468,679 3,375,642
Vehicles 342,936 381,422
5,281,320 5,268,010
Less- Accumulated depreciation (3,286,316) (2,493,869)
$ 1,995,004 $ 2,774,141
</TABLE>
Depreciation of property and equipment is computed over the
estimated useful lives of the related assets using primarily the
straight-line method for financial reporting and accelerated
methods for tax purposes.
The estimated useful lives of the assets used to compute
depreciation expense are as follows:
<TABLE>
<CAPTION>
ASSET DESCRIPTION YEARS
<S> <C> <C>
Building and improvements 5-25
Furniture and fixtures 4-7
Rental equipment 3
Office equipment and software 4-7
Vehicles 3-5
</TABLE>
During 1996 and 1995, approximately $98,000 and $305,000 of
inventory was reclassified as property and equipment to better
reflect its use by Company personnel.
Maintenance and repair costs which do not add to the economic
useful lives of the related assets are expensed as incurred. Such
amounts expensed were approximately $176,000, $123,000 and
$68,000 in fiscal 1996, 1995 and 1994, respectively.
-10-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
OFFICER RECEIVABLES
At April 30, 1996 and 1995, the Company had $380,233 and $429,965
in receivables from certain of its officers. These receivables are
non-interest bearing and generally are required to be repaid within
five years of their issuance.
SOFTWARE DEVELOPMENT COSTS
The Company capitalized approximately $435,000, $584,000 and
$381,000 of computer software development costs during fiscal 1996,
1995 and 1994, respectively.
Amortization of software development costs is computed using the
straight-line method over the estimated economic lives of the
products which approximate five years. Accumulated amortization
was approximately $2,395,000 and $1,930,000 as of April 30, 1996
and 1995, respectively. Amortization expense was approximately
$465,000, $364,000 and $280,000 in 1996, 1995 and 1994,
respectively, and is included in cost of revenues in the
accompanying consolidated statements of operations.
Research and development costs incurred to establish technological
feasibility were insignificant for fiscal 1995, 1994 and 1993,
respectively, and have been expensed. Substantially all of the
Company's research and development costs relate to computer
software development.
NONCOMPETE AGREEMENTS
In connection with certain acquisitions, the Company has short-term
noncompete agreements with the former principal owners totaling
approximately $620,000 as of April 30, 1996 and 1995, respectively.
These amounts are included in other assets in the accompanying
consolidated balance sheets and are being amortized over the terms
of the agreements using the straight line method. Accumulated
amortization was approximately $543,000 and $411,000 as of April
30, 1996 and 1995, respectively.
-11-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
ADVERTISING AND PROMOTIONAL MATERIALS
All advertising and promotional costs are expensed as incurred and
amounted to approximately $49,000, $49,000 and $50,000 in fiscal
1996, 1995 and 1994, respectively.
EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average
number of shares outstanding during the year. The weighted average
number of shares outstanding are 2,961,139, 2,933,341 and 2,854,577
for fiscal 1996, 1995 and 1994, respectively. The 1994 amount has
been restated for the effect of a 5% stock dividend that was
declared on September 16, 1994 for shareholders of record on
October 14, 1994.
LONG-TERM ASSETS
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 "Accounting for the Impairment of Long-lived
Assets and Long-lived Assets to be Disposed of" (SFAS No. 121).
The Company is required to adopt the provisions of SFAS No. 121
no later than its fiscal year 1997. Based on information currently
available, the Company does not expect the impact of adopting this
statement to have a material effect on its financial condition or
results of operations.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year statements
to conform to the current year presentation.
-12-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(2) ACQUISITION OF SUBSIDIARIES
Effective July 28, 1993, the Company acquired all of the
outstanding stock of ATEK in exchange for 50,000 shares of
restricted Manatron common stock and $542,000 in cash and notes
payable. This transaction, and ATEK's plan of reorganization were
approved by the United States Bankruptcy court for the Northern
District of Ohio on July 27, 1993. Subsequent to July 28, 1993,
Manatron advanced approximately $1.7 million to ATEK in connection
with its plan of reorganization, which enabled ATEK to pay in full
all allowed claims, and as a result, emerge from bankruptcy. ATEK,
based in Ohio and Indiana, is also engaged in the same line of
business as Manatron.
In addition, effective November 11, 1994, the Company acquired
substantially all of the assets of Sabre in exchange for $4 million
in cash (subject to adjustment based on the resolution of a closing
net asset statement) together with the assumption of certain
liabilities and obligations of the acquired company. Of the $4
million paid at the closing date, $3.4 million was paid to the
previous owner, and $600,000 was placed in escrow. On July 28,
1995, the Company reached a final resolution of the Closing Net
Asset Statement which resulted in the purchase price being reduced
to $3.9 million. Sabre is based in Ohio and provides real estate
mass appraisal and property mapping services, as well as sales of
computer hardware and software to local governments.
The acquisitions of ATEK and Sabre were accounted for as purchases.
Accordingly, the purchase prices were allocated to the net assets
acquired based upon their fair market values. The Sabre
acquisition price was less than the book value of the net assets
acquired, therefore, no goodwill was recorded. The entire excess
of the ATEK purchase price has been classified as goodwill in the
accompanying consolidated balance sheets. Total goodwill, which is
approximately $1,848,000, is being amortized over a ten year
period using the straight line method. Accumulated amortization
was approximately $578,000 and $393,000 as of April 30, 1996 and
1995, respectively.
Pro forma unaudited operating results of the Company, assuming the
acquisition of Sabre had been made as of May 1, 1994, are summarized
below:
-13-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(2) ACQUISITION OF SUBSIDIARIES, continued
<TABLE>
<CAPTION>
1995
<S> <C> <C>
Net revenues $30,543,000
Net income (loss) $ 627,000
Earnings (loss) per share $ .21
</TABLE>
These pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as additional
depreciation expense as a result of a step up in the basis of fixed
assets, amortization of acquisition costs and increased interest
expense on the acquisition debt. They do not purport to be
indicative of the results of operations which actually would have
resulted had the combination been in effect on May 1, 1994, or of
future results of operations of the consolidated entities.
(3) SALES TYPE LEASES AND OPERATING LEASES
Certain of the Company's leases meet the criteria of sales type
leases as defined by Statement of Financial Accounting Standards
No. 13, "Accounting for Leases." The difference between the normal
selling price of the equipment and the cost is recognized as profit
at the inception of the lease. The sum of the aggregate rental
payments to be received plus the unguaranteed residual value, if
any, minus the selling price of the equipment at the inception of a
lease is amortized to income over the respective lease terms using
the effective interest method. Residual values are generally not
significant given that the computer hardware market is subject to
rapid technological change. Such amortized amounts are included in
the accompanying consolidated statements of operations under the
caption "Net Revenues".
The following are components of the net investment in sales type
leases as reflected in the accompanying consolidated balance sheets
at April 30,:
-14-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(3) SALES TYPE LEASES AND OPERATING LEASES, continued
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Future minimum rentals receivable $751,257 $ 772,749
Less- Unamortized unearned income (94,405) $(112,747)
Net investment in sales type leases $656,852 $ 660,002
</TABLE>
Substantially all future minimum rentals receivable on sales type
leases are due in the next three fiscal years.
The Company also leases computer equipment to customers under
operating lease agreements with various terms through fiscal
2001. The accumulated depreciation on rental equipment was
$262,000 and $231,000 at April 30, 1996 and 1995, respectively.
Future minimum lease payments to be received under noncancelable
operating leases at April 30, 1996, are approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C> <C>
1997 280,000
1998 159,000
1999 96,000
2000 51,000
2001 8,000
</TABLE>
(4) INSTALLMENT NOTES RECEIVABLE
The Company also offers its hardware and software solutions for
sale on an installment basis and as a result has notes receivable
totaling $1,585,496 and $1,589,458 at April 30, 1996 and 1995,
respectively. The notes have various payment terms, generally bear
interest at rates approximating prime and have various maturity
dates through January of 1999.
-15-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(5) LONG-TERM DEBT
In connection with its acquisition of Sabre, the Company
obtained a $9.2 million long-term revolving line of credit
with a bank (secured by substantially all the assets of the
Company), which matures on December 1, 1999. This line was
subsequently reduced to $5 million. Borrowings under
this Long-Term Credit Agreement at April 30, 1996 and 1995
were $3,175,000 and $4,784,000, respectively. Interest is
payable monthly at the bank's prime rate which was 8.25% at
April 30, 1996.
Additionally, the Company is required to, among other things,
collect specified levels of past due receivables, generate
minimum levels of cash flow from operations, maintain a certain
level of tangible net worth, a minimum debt-to-equity ratio,
and minimum working capital. The Company was in compliance with
these provisions of the debt agreement, with the exception of
the working capital requirement, for which it has obtained a
waiver.
Cash paid for interest approximated the amounts shown as interest
expense in the accompanying consolidated statements of operations.
(6) RENTAL COMMITMENTS
The Company leases the majority of its office and warehouse space
under agreements with various terms through fiscal 2001. Total
rent expense reflected in the accompanying consolidated statements
of operations was approximately $750,000, $575,000 and $367,000 for
fiscal 1996, 1995 and 1994, respectively.
Future minimum rental payments under noncancelable operating leases
at April 30, 1996, are approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C> <C>
1997 498,000
1998 353,000
1999 285,000
2000 191,000
2001 119,000
</TABLE>
-16-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(7) FEDERAL INCOME TAXES
The Company is complying with the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of
events that have been included in the consolidated financial
statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
The provision (credit) for federal income taxes consists of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C> <C>
Currently payable (refundable) $ 27,000 $(359,200) $ 59,000
Deferred provision (credit) (227,000) 686,200 165,700
$(200,000) $ 327,000 $224,700
</TABLE>
The Company's effective tax rate was 6%, 43% and 40% in fiscal
1996, 1995 and 1994, respectively. A reconciliation of the amounts
computed by applying the statutory federal income tax rate of 34%
to pretax income and the provision (credit) for federal income taxes
as reflected in the accompanying consolidated statements of operations
is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C> <C>
Computed tax expense (credit)
using the 34% statutory rate $(1,101,000) $260,000 $190,000
Operating losses with no
current tax benefit 824,000 - -
Tax-exempt interest income (18,000) (22,000) (17,000)
Non-deductible goodwill
amortization 63,000 63,000 52,000
Non-deductible meals and
entertainment 34,000 25,000 9,000
Other (2,000) 1,000 (9,300)
$ (200,000) $327,000 $224,700
</TABLE>
-17-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(7) FEDERAL INCOME TAXES, continued
The tax effect and type of significant temporary differences which
gave rise to the future tax benefits and deferred income taxes as
of April 30, 1996 and 1995, are approximately as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Deferred tax assets:
Valuation reserves not currently
deductible $ 531,000 $ 373,000
Net Operating Loss Carryforward 424,000 -
Accrued liabilities not currently
deductible 308,000 150,000
Restructuring Reserves not
currently deductible 255,000 -
Other 96,000 36,000
1,614,000 559,000
Valuation Allowance (824,000) -
790,000 559,000
Deferred tax liabilities:
Software development costs expensed
for tax purposes (304,000) (284,000)
Property and equipment depreciation
and basis differences (56,000) (73,000)
Lease accounting method differences (273,000) (272,000)
(633,000) (629,000)
Net deferred tax (liability) asset $ 157,000 $ (70,000)
</TABLE>
During 1996, the Company recorded a valuation allowance against
certain of its future tax benefits, including a portion of the
current year net operating loss carryforward, due to the
uncertainty of their ultimate realization.
As of April 30, 1996, the Company had tax net operating loss
carryforwards of approximately $1,247,000. These net operating
loss carryforwards are available to offset future taxable income
through the following fiscal years: $725,000 in 2010 and
$522,000 in 2011.
-18-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(7) FEDERAL INCOME TAXES, continued
Cash expended or (received) for federal income taxes totaled
approximately $(178,000), $(207,000) and $320,000 during fiscal
1996, 1995 and 1994, respectively.
(8) EMPLOYEE STOCK PLANS
The Manatron, Inc. Employee Stock Purchase Plan (the "Plan")
provides for eligible employees to authorize the Company to
withhold up to 10% of their base compensation for the purchase of
shares of Manatron common stock. Approximately 8% of the
Company's employees participate in the Plan. As of April 30, 1996,
43,869 shares of common stock are available for purchase. The
purchase price for each share is equal to 85% of the market value
on the day of the purchase. Shares are purchased on the last day
of each calendar quarter. No more than 5,000 shares may be
purchased in any one quarter. In addition, the market value of
shares purchased by a participant cannot exceed $25,000 in any one
year. No amounts are charged to operations related to the Plan.
Since the inception of the Plan in 1987, and through April 30,
1996, a total of 74,220 shares have been purchased by
participants at prices ranging from $1.27 to $6.27 per share.
The Manatron, Inc. Restricted Stock Plan of 1987 (the "Restricted
Plan") is intended to assist the Company in attracting, rewarding
and retaining well-qualified directors, executive personnel and
other key employees by offering them additional incentives. The
Restricted Plan provides for a committee appointed by the Board of
Directors to grant up to 50,000 shares of common stock subject to
certain restrictions. As of April 30, 1996, 41,300 shares remain
available for issuance under the Restricted Plan.
The Company has four stock option plans: the Manatron, Inc. 1986
Incentive Stock Option Plan, the Manatron, Inc. 1989 Stock Option
Plan, the Manatron, Inc. 1994 Long-Term Incentive Plan and the
Manatron, Inc. 1995 Long-Term Incentive Plan ("Option Plans").
Under these Option Plans, 1,025,000 shares of common stock were
reserved for issuance. The Option Plans provide for a committee
appointed by the Board to grant to directors, officers and other
key employees up to 100,000 shares of common stock subject to
certain restrictions and up to 925,000 options to purchase shares
of the Company's common stock at a price which is at least equal to
the fair market value of such shares on the date of grant. For
employees of the Company owning stock with more than ten percent of
-19-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(8) EMPLOYEE STOCK PLANS, continued
the voting rights, the exercise price of the options must be at
least 110 percent of the fair market value of the shares on the
date of grant. The aggregate fair market value of options granted
to any employee in any calendar year cannot exceed $100,000.
Options granted under the Option Plans are generally exercisable
within limits specified at the time of grant and expire five to ten
years from the date of grant. No charges to operations are
recorded with respect to the authorization, grant or exercise of
these options. As of April 30, 1996, 60,000 shares of restricted
common stock may be issued and 226,363 stock options may be granted
under these Option Plans.
A summary of stock option activity including the retroactive effect
of the stock dividends is as follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
<S> <C> <C> <C>
Outstanding at April 30, 1993 150,995
Granted 95,150 $3.63-$5.13
Expired (11,027) $2.06-$3.75
Exercised (40,199) $2.06-$3.75
Outstanding at April 30, 1994 194,919
Granted 158,626 $3.13-$4.26
Expired (4,463) $2.88-$4.00
Exercised (1,050) $3.00
Outstanding at April 30, 1995 348,032
Granted 408,500 $1.63-$2.88
Expired (162,118) $2.88-$5.25
Exercised (9,258) $2.50-$2.88
Outstanding at April 30, 1996 585,156
Exercisable at April 30, 1996 306,156
</TABLE>
During fiscal 1996, 40,000 shares of Restricted Stock were granted
over a period of ten years at a market price of $3.50. The
related amount is reflected as deferred compensation in the
accompanying consolidated financial statements and is being
amortized over the related restriction period. No restricted
shares were granted in fiscal 1995 or fiscal 1994.
-20-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(9) STOCK WARRANTS
As of April 30, 1996, the Company has outstanding 23,000 and 75,000
warrants for the purchase of its common stock which expire on
September 25, 1996 and April 30, 1998, respectively. These
warrants were issued to a previous member of the Board of Directors
for consulting services performed in 1986, and to a public
relations firm retained during 1995. The warrants are immediately
exercisable at prices ranging from $2.88 to $3.50 per share, with
the exception that 50,000 of the warrants may be forfeited if
certain stipulated conditions are not met by April 30, 1997.
(10) EMPLOYEE BENEFIT PLANS
The Company has an Employee Stock Ownership, profit sharing and
401(k) plan covering substantially all of its employees. The
Company's contribution to the profit sharing plan is subject to
the discretion of the Board of Directors. No contributions were
approved for the years ended April 30, 1996, 1995 and 1994, due
to the reduced profitability levels of the Company.
The 401(k) plan allows eligible employees to have up to 15% of
their pay withheld on a pretax basis, subject to certain IRS
limitations. This money is deposited into a trust in which the
employee has a number of investment alternatives. The Company
provides a matching contribution equal to 25% of employee
contributions not to exceed 1.25% of an employee's gross pay.
Company matching contributions charged to expense for the years
ended April 30, 1996, 1995 and 1994, were approximately
$83,000, $60,000 and $37,000, respectively.
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 Allen F.
Peat, the Company's former 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 plus interest at the
bank's prime rate. As of April 30, 1996, three quarterly
-21-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(10) EMPLOYEE BENEFIT PLANS, continued
installments have been made. The $425,000 balance is reflected as
a liability and a like amount, considered deferred compensation,
has been recorded as a reduction of shareholders' equity in the
accompanying consolidated balance sheets.
As of April 30, 1996, 21,426 common shares have been committed to
be released for allocation to ESOP participants. Allocations occur
on December 31 of each year. As a result, the fair market value of
these shares at the time they were committed for release, which
aggregates approximately $46,000, has been recorded as compensation
expense in the accompanying consolidated condensed statements of
operations. The difference between this amount and the original
cost of these shares, which is approximately $29,000, has been
charged against common stock. The fair value of the unearned ESOP
shares as of April 30, 1996 approximated $200,000.
The Company is self-insured for all employee's medical expenses
incurred to a level of $30,000 per individual or family per year.
Employees' medical expenses incurred beyond the $30,000 level are
insured under a stop-loss coverage insurance plan. The Company
does not provide health care or other post-employment benefits to
retired employees.
(11) 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 totaling 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, which
approximates $1.3 million, is included in the $1.6 million
restructuring charge that is reflected in the accompanying
consolidated condensed statements of operations. In addition,
the Company assumed and paid 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
-22-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(11) SEVERANCE AGREEMENT, continued
the two parties. In exchange for assuming this obligation, the
Company received approximately 150,000 shares of Manatron common
stock from Mr. Peat.
The remaining obligations under this agreement as of April 30,
1996, have been appropriately classified as current or long-term
liabilities in the accompanying consolidated condensed financial
statements. The fair market value of the stock received was
approximately $431,000 and has been recorded as a reduction to
common stock in the accompanying consolidated balance sheets. The
$319,000 difference between the fair market value of the stock and
the total assumed obligation of $750,000 was considered
compensation expense and, accordingly, is included in the
$1.6 million restructuring charge.
(12) RELATED PARTY TRANSACTIONS
During the three months ended July 31, 1993, prior to its
acquisition of ATEK (see Note 2), the Company entered into a
software license agreement with ATEK with respect to the use of
Manatron's appraisal software and related documentation for the
ATEK customers in the State of Indiana. The license fee of
$395,000 paid by ATEK to Manatron, which is included in net
revenues in the accompanying consolidated statements of income, had
a $240,000 favorable impact upon the Company's net income for the
three month period ended July 31, 1993. However, there was no
impact on net income for the year ended April 30, 1994, as the
$395,000 license fee has been expensed in connection with ATEK's
sales of this software to its customers. This pre-acquisition
contract was for an amount and at terms comparable to those used in
transacting business with other parties.
In September 1995, the Company purchased the portion of the
corporate office building it had previously leased from Allen F.
Peat. The purchase price of $200,000 was paid in cash and was
based on an independent appraisal.
-23-
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments included
in current assets and current liabilities approximate their fair
value due to their short-term nature. The fair value of the notes
receivable is estimated by discounting expected future cash flows
using current interest rates at which similar loans would be made
to customers with similar credit ratings and remaining maturities.
As of April 30, 1996 and April 30, 1995, the fair value of the
notes receivable approximated the carrying value. The Company's
long-term debt reprices frequently at the then-prevailing market
interest rates. As of April 30, 1996 and April 30, 1995, the
carrying value approximated the fair value of the Company's
long-term debt.
-24-
EXHIBIT INDEX
NUMBER ITEM
4.2 First Amendment to Revolving Credit
Agreement.
4.3 Second Amendment to Revolving Credit
Agreement.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
EXHIBIT 4.2
FIRST AMENDMENT
TO REVOLVING CREDIT LOAN AGREEMENT
(SECURED)
THIS FIRST AMENDMENT to Revolving Credit Loan Agreement (Secured) is
entered into this 27th day of July, 1995 among MANATRON, INC. (the
"Borrower"), ATEK INFORMATION SERVICES, INC., SPECIALIZED DATA SYSTEMS,
INC. (the foregoing two corporations are hereinafter referred to as the
"Subsidiaries") and COMERICA BANK (the "Bank").
BACKGROUND
The Bank, the Borrower and the Subsidiaries have entered into a
Revolving Credit Loan Agreement (Secured) dated November 11, 1994 (the
"Agreement"). The Borrower and the Subsidiaries are in default of certain
covenants set forth in the Agreement. The Borrower and the Subsidiaries
have requested that the Bank waive the defaults under such covenants and
amend such covenants in accordance with the terms of this Agreement. The
Bank is willing to waive such defaults and amend such covenants as
described herein in consideration of the agreements of the Borrower and the
Subsidiaries set forth below.
TERMS AND CONDITIONS
THEREFORE, in consideration of the facts set forth above and the terms
and conditions contained below, the parties hereby agree as follows:
1. AMENDMENTS TO SECTIONS 6.7, 6.11, 6.13 AND 7.6. Sections 6.7,
6.11, 6.13 and 7.6 of the Agreement are hereby amended in their entirety to
read as follows:
6.7 MAINTAIN WORKING CAPITAL. On a consolidated basis, maintain
Working Capital for the Borrower of not less than the amounts specified
during the periods specified below:
(a) $6,200,000 from April 30, 1995 until April 29, 1996,
(b) $6,400,000 from April 30, 1996 until April 29, 1997,
(c) $6,600,000 from April 30, 1997 until April 29, 1998,
(d) $6,800,000 from April 30, 1998 until April 29, 1999,
and
(f) $7,000,000 from April 30, 1999 and at all times
thereafter.
6.11 TITLE INSURANCE; SURVEY. On or before December 31, 1995, the
Borrower shall furnish to the Bank, in form and content satisfactory to the
Bank, (i) a policy in the amount of $200,000 insuring the Bank's Continuing
Collateral Mortgage as a first lien under a standard ALTA title insurance
policy, subject only to the Permitted Liens, with such endorsements as the
Bank may require, (ii) a survey of the Real Property made within thirty
(30) days of the title insurance policy showing the improvements situated
therein to be within all lot lines and set-back lines, showing all
easements (identified by recording information), showing no encroachments
and showing such other information as the Bank may request, said survey to
be certified to the Bank, the title company and such other persons as the
Bank may request in such form and content as the Bank may request; and
(iii) any additional mortgages or other documentation requested by the Bank
to grant to the Bank a perfected first mortgage lien in the Real Property.
6.13 LEGEND ON CHATTEL PAPER. On or before September 30, 1995, the
Borrower and each of the Subsidiaries shall add the following legend to the
first page of each installment purchase agreement, lease agreement and
other Chattel Paper in which the Borrower or any of the Subsidiaries is the
seller, lender or lessor and shall, in the future, add the following legend
to each such document at the time of execution of such document: "This
instrument and all rights to receive the payments due hereunder are subject
to a security interest in favor of Comerica Bank."
7.6 GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any
other Person, whether by agreement to purchase the indebtedness of any
other Person, agreement for the furnishing of funds to any other Person
through the furnishing of goods, supplies or services, by way of stock
purchase, capital contribution, advance or loan, for the purpose of paying
or discharging (or causing the payment or discharge of) the indebtedness of
any other Person, or otherwise, except for (a) the endorsement of
negotiable instruments by the Borrower in the ordinary course of business
for deposit or collection, (b) the Borrower's guarantee of approximately
$1,400,000 owed by Allen F. Peat to Ronald Stoynoff on the date of this
Agreement, and (c) the Borrower's guarantee of all indebtedness owed to the
Bank by the Trustee of the Manatron, Inc. Employee Stock Ownership and
Salary Deferral Plan Trust.
2. NO OTHER AMENDMENTS. Except as specifically amended in section 1
above, all of the terms and conditions of the Agreement and all other
documents referred to in the Agreement shall remain in full force and
effect.
3. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Subsidiaries reiterate and affirm the representations and warranties made
in section 5 of the Agreement, effective as of the date of this Amendment.
The Borrower and the Subsidiaries further represent and warrant to the Bank
that, upon execution of this Amendment by all parties, no Event of Default
(as defined in the Agreement) has occurred which has not been cured by the
Borrower and the Subsidiaries or waived in writing by the Bank and no event
has occurred, which with notice and/or the passage of time, could become an
Event of Default and which has not been cured by the Borrower and the
Subsidiaries or waived in writing by the Bank.
-2-
4. WAIVER OF DEFAULTS. The Bank hereby waives any failure of the
Borrower to fulfill the requirements of sections 6.7, 6.11, 6.13 and 7.6 of
the Agreement prior to the date of this Amendment. The foregoing waiver
will not constitute a waiver of: (i) any other "Event of Default" under the
Agreement; or (ii) any failure of the Borrower to comply, after the date
hereof, with the provisions of sections 6.7, 6.11, 6.13 and 7.6 of the
Agreement, as amended.
5. MISCELLANEOUS. This Amendment shall be governed by and construed
in accordance with the laws of the State of Michigan. This Amendment:
constitutes the entire agreement among the parties relating to the
amendment of the Agreement; supersedes all prior agreements, commitments
and understandings among the parties relating to amendment of the
Agreement; and cannot be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment on the date first set forth above.
MANATRON, INC.
By: /S/ ALLEN F. PEAT
Allen F. Peat
Its: President
By: /S/ PAUL R. SYLVESTER
Paul R. Sylvester
Its: Chief Financial Officer and Treasurer
ATEK INFORMATION SERVICES, INC.
By: /S/ ALLEN F. PEAT
Allen F. Peat
Its: Chairman of the Board
SPECIALIZED DATA SYSTEMS, INC.
By: /S/ ALLEN F. PEAT
Allen F. Peat
Its: Chairman of the Board
-3-
COMERICA BANK
By: /S/ JULIE A. PAUSCH
Julie A. Pausch
Its: Vice President
-4-
EXHIBIT 4.3
SECOND AMENDMENT
TO REVOLVING CREDIT LOAN AGREEMENT
(SECURED)
THIS SECOND AMENDMENT to Revolving Credit Loan Agreement (Secured) is
entered into this 18th day of March, 1996 among MANATRON, INC. (the
"Borrower"), ATEK INFORMATION SERVICES, INC., SPECIALIZED DATA SYSTEMS,
INC. (the foregoing two corporations are hereinafter referred to as the
"Subsidiaries") and COMERICA BANK (the "Bank").
BACKGROUND
The Bank, the Borrower and the Subsidiaries have entered into a
Revolving Credit Loan Agreement (Secured) dated November 11, 1994, as
amended by a First Amendment to Revolving Credit Loan Agreement (Secured)
dated July 27, 1995 (the "Agreement"). The Borrower and the Subsidiaries
are in default of certain covenants set forth in the Agreement. The
Borrower and the Subsidiaries have requested that the Bank waive the
defaults under such covenants and amend such covenants in accordance with
the terms of this Agreement. The Bank is willing to waive such defaults
and amend such covenants as described herein in consideration of the
agreements of the Borrower and the Subsidiaries set forth below.
TERMS AND CONDITIONS
THEREFORE, in consideration of the facts set forth above and the terms
and conditions contained below, the parties hereby agree as follows:
1. AMENDMENTS TO DEFINED TERMS. Section 1.1 of the Agreement is
hereby amended by adding the terms "Net Cash POA" and "120-Day Accounts" as
set forth below and by amending the definition of "Commitment Amount" in
its entirety to read as set forth below:
"COMMITMENT AMOUNT" shall mean $5,000,000.
"NET CASH POA" shall mean "Net Cash & Equivalents Provided by
Operating Activities" of the Borrower calculated in the manner set forth in
the Manatron, Inc. & Subsidiaries Consolidated Statements of Cash Flows
dated February 6, 1996 provided by the Borrower to the Bank.
"120-DAY ACCOUNTS" shall mean the accounts receivable of the Borrower
which, as of February 1, 1996, had been outstanding for 120 or more days.
2. EXHIBIT A TO AGREEMENT. Exhibit A to the Agreement is hereby
amended in its entirety to read as set forth in Exhibit A attached hereto.
3. AMENDMENTS TO SECTIONS 2.3, 6.5, 6.6 AND 6.7. Sections 2.3, 6.5,
6.6 and 6.7 of the Agreement are hereby amended in their entirety to read
as follows:
2.3 REVOLVING CREDIT NOTE. The Revolving Loans shall be
evidenced by the Revolving Credit Note, executed by the Borrower, dated
March 18, 1996, payable to the Bank on the Termination Date (unless sooner
accelerated pursuant to the terms of this Agreement), and in the principal
amount of the Commitment Amount. The date and amount of each Revolving
Loan made by the Bank and of each repayment of principal thereon received
by the Bank shall be recorded by the Bank in its records. The aggregate
unpaid principal amount so recorded by the Bank shall constitute the best
evidence of the principal amount owing and unpaid on the Revolving Credit
Note, absent fraud or obvious error, PROVIDED, HOWEVER, that the failure by
the Bank so to record any such amount or any error in so recording any such
amount shall not limit or otherwise affect the obligations of the Borrower
under this Agreement or the Revolving Credit Note to repay the principal
amount of all the Revolving Loans together with all interest accrued or
accruing thereon.
6.5 MAINTAIN TANGIBLE NET WORTH. On a consolidated basis, maintain a
Tangible Net Worth for the Borrower of not less than the amounts specified
during the periods specified below:
(a) $1,981,000 on January 31, 1996,
(b) $1,617,000 from February 1, 1996 until April 30, 1996,
(c) $1,377,000 from May 1, 1996 until July 31, 1996,
(d) $1,211,000 from August 1, 1996 until October 31, 1996,
(e) $1,178,000 from November 1, 1996 until January 31, 1997, and
(f) $1,214,000 from February 1, 1997 and at all times
thereafter.
6.6 MAINTAIN DEBT RATIO. On a consolidated basis, maintain the ratio
of the Borrower's Debt to Tangible Net Worth at not more than the ratios
specified during the periods specified below:
(a) 6.46 to 1.00 on January 31, 1996,
(b) 8.04 to 1.00 from February 1, 1996 until April 30, 1996,
(c) 9.05 to 1.00 from May 1, 1996 until July 31, 1996,
(d) 9.99 to 1.00 from August 1, 1996 until October 31, 1996,
(e) 9.82 to 1.00 from November 1, 1996 until January 31, 1997,
and
(f) 9.05 to 1.00 from February 1, 1997 and at all times
thereafter.
6.7 MAINTAIN WORKING CAPITAL. On a consolidated basis, maintain
Working Capital for the Borrower of not less than the amounts specified
during the periods specified below:
-2-
(a) $3,347,000 on January 31, 1996,
(b) $3,700,000 from February 1, 1996 until April 30, 1996,
(c) $3,190,000 from May 1, 1996 until July 31, 1996,
(d) $2,930,000 from August 1, 1996 until October 31, 1996,
(e) $2,360,000 from November 1, 1996 until January 31, 1997, and
(f) $2,350,000 from February 1, 1997 and at all times
thereafter.
4. NEW SECTIONS 6.1.9, 6.14 AND 6.15. The Agreement is hereby
amended by adding the following language as sections 6.1.9, 6.14 and 6.15
thereof:
6.1.9 MONTHLY FINANCIAL STATEMENTS. Furnish to the Bank not
later than forty-five (45) days after the close of each month of each
fiscal year of the Borrower, beginning with the month ending February 29,
1996, internally prepared financial statements as of the end of each such
period, in such detail as the Bank may reasonably require, and the accuracy
of the statements shall be certified by the chief executive or financial
officer of the Borrower.
6.14 GENERATE NET CASH POA. Generate Net Cash POA of not less
than the amounts specified during the periods specified below:
(a) $115,000 for the quarter ended April 30, 1996,
(b) $605,000 for the quarter ended July 31, 1996,
(c) $465,000 for the quarter ended October 31, 1996,
(d) $570,000 for the quarter ended January 31, 1997,
(e) $640,000 for the quarter ended April 30, 1997.
6.15 COLLECTION OF 120-DAY ACCOUNTS. Collect not less than the
amounts described below of the Borrower's 120-Day Accounts on or before the
dates described below AND apply all such collections to payment of the
outstanding principal balance of the Revolving Credit Note:
<TABLE>
<CAPTION>
AGGREGATE AMOUNT
DATE TO BE COLLECTED
<S> <C> <C>
July 31, 1996 $240,000
October 31, 1996 480,000
January 31, 1997 720,000
April 30, 1997 960,000
</TABLE>
5. NO OTHER AMENDMENTS. Except as specifically amended in sections
1, 2, 3 and 4 above, all of the terms and conditions of the Agreement and
all other documents referred to in the Agreement shall remain in full force
and effect.
-3-
6. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Subsidiaries reiterate and affirm the representations and warranties made
in section 5 of the Agreement, effective as of the date of this Amendment.
The Borrower and the Subsidiaries further represent and warrant to the Bank
that, upon execution of this Amendment by all parties, no Event of Default
(as defined in the Agreement) has occurred which has not been cured by the
Borrower and the Subsidiaries or waived in writing by the Bank and no event
has occurred, which with notice and/or the passage of time, could become an
Event of Default and which has not been cured by the Borrower and the
Subsidiaries or waived in writing by the Bank.
7. WAIVER OF DEFAULTS. The Bank hereby waives any failure of the
Borrower to fulfill the requirements of sections 6.5, 6.6 and 6.7 of the
Agreement prior to the date of this Amendment. The foregoing waiver will
not constitute a waiver of: (i) any other "Event of Default" under the
Agreement; or (ii) any failure of the Borrower to comply, after the date
hereof, with the provisions of sections 6.5, 6.6 and 6.7 of the Agreement,
as amended herein.
8. MISCELLANEOUS. This Amendment shall be governed by and construed
in accordance with the laws of the State of Michigan. This Amendment:
constitutes the entire agreement among the parties relating to the
amendment of the Agreement; supersedes all prior agreements, commitments
and understandings among the parties relating to amendment of the
Agreement; and cannot be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment on the date first set forth above.
MANATRON, INC.
By: /S/ PAUL R. SYLVESTER
Its: President
By: /S/ PAUL R. SYLVESTER
Paul R. Sylvester
Its: Chief Financial Officer and Treasurer
ATEK INFORMATION SERVICES, INC.
By: /S/ PAUL R. SYLVESTER
Its: PRESIDENT
-4-
SPECIALIZED DATA SYSTEMS, INC.
By: /S/ PAUL R. SYLVESTER
Its: PRESIDENT
COMERICA BANK
By: /S/ JULIE A. PAUSCH
Julie A. Pausch
Its: Vice President
-5-
REVOLVING CREDIT NOTE
$5,000,000 Kalamazoo, Michigan
March 18, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
COMERICA BANK (the "Bank") at Kalamazoo, Michigan, on December 1, 1999, the
principal sum or so much of the principal sum of Five Million Dollars
($5,000,000) as may from time to time have been advanced and be outstanding
under that certain Revolving Credit Loan Agreement dated November 11, 1994,
as amended, between the undersigned and the Bank (the "Agreement") plus all
accrued but unpaid interest thereon.
The unpaid principal amount of this Note shall bear interest at the
rate provided in Section 2.4 of the Agreement, which Agreement, as it may
be amended from time to time, is by this reference incorporated herein and
made a part hereof. Interest shall be payable to the extent accrued on the
first day of each consecutive calendar month, beginning April 1, 1996,
until maturity (whether by acceleration or otherwise) and, thereafter, on
demand at a rate equal to three percent (3%) per annum plus the rate
otherwise prevailing hereunder, but in no event to exceed the Legal Rate
(as defined in the Agreement).
This Note is a Master Note under which sums may or must be repaid from
time to time and under which new advances are to be made by the Bank
pursuant to the terms and conditions of the Agreement, and the books and
records of the Bank shall constitute the best evidence of the amount of the
indebtedness at any time owing hereunder.
This Note is secured by the Collateral described in the Agreement, to
which reference is made for, among other things, the conditions under which
this Note may or must be paid in whole or in part prior to its due date or
its due date accelerated. The Bank is hereby granted a security interest
in all property of the undersigned at any time in the possession of the
Bank or any Affiliate (as defined in the Agreement) of the Bank (or as to
which the Bank or any Affiliate of the Bank at any time controls possession
by documents or otherwise) and in all balances of deposit or other accounts
(including without limit an account evidenced by a certificate of deposit)
of the undersigned from time to time with the Bank or any Affiliate of the
Bank.
If an Event of Default (as defined in the Agreement) occurs and is not
cured within the time, if any, provided for by the Agreement, the Bank may
exercise any one or more of the rights and remedies granted by the
Agreement or any document contemplated thereby or given to a secured party
under applicable law, including without limit the right to accelerate this
Note and any other Indebtedness (as defined in the Agreement), and may set
off against the principal of and interest on this Note or against any other
Indebtedness (i) any amount owing by the Bank to the undersigned, (ii) any
property of the undersigned at any time in the possession of the Bank or
any Affiliate of the Bank and (iii) any amount in any deposit or other
account (including without limit an account evidenced by a certificate of
deposit) of the undersigned with the Bank or any Affiliate of the Bank.
The undersigned and all accommodation parties, guarantors and
indorsers (i) waive presentment, demand, protest and notice of dishonor,
(ii) agree that no extension or indulgence to the undersigned or release or
non-enforcement of any security, whether with or without notice, shall
affect the obligations of any accommodation party, guarantor or indorser,
and (iii) agree to reimburse the holder of this note for any and all costs
and expenses incurred in collecting or attempting to collect any and all
principal and interest under this Note (including, but not limited to,
court costs and reasonable attorney fees, whether in-house or outside
counsel is used and whether such costs and expenses are incurred in formal
or informal collection actions, federal bankruptcy proceedings, appellate
proceedings, probate proceedings, or otherwise). This Note shall be
governed by and construed in accordance with the laws of the State of
Michigan.
This Note is, in part or whole, a renewal of the unpaid balance of a
$9,200,000 Revolving Credit Note dated November 11, 1994.
MANATRON, INC.
By: /S/ PAUL R. SYLVESTER
Its: President
-2-
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF MANATRON, INC.
<CAPTION>
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
ATEK Information Services, Inc. Indiana
Specialized Data Systems, Inc. North Carolina
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File Numbers 33-15777, 33-33966, 33-61286, 33-90490,
and 333-7519.
Grand Rapids, Michigan /S/ ARTHUR ANDERSEN LLP
July 23, 1996 Arthur Andersen LLP
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ RANDALL L. PEAT
Randall L. Peat
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ STEPHEN C. WATERBURY
Stephen C. Waterbury
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 23, 1996 /S/ GENE BLEDSOE
Gene Bledsoe
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ JANE M. RIX
Jane M. Rix
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ ALLEN F. PEAT
Allen F. Peat
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ HARRY C. VORYS
Harry C. Vorys
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ DOUGLAS A. PEAT
Douglas A. Peat
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ RICHARD J. HOLLOMAN
Richard J. Holloman
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Manatron, Inc., does hereby appoint PAUL R.
SYLVESTER his or her attorney to execute in his or her name, place and
stead an Annual Report of Manatron, Inc. on Form 10-K for its fiscal year
ended April 30, 1996, and any and all amendments thereto, and to file it
with the Securities and Exchange Commission.
DATE SIGNATURE
JULY 18, 1996 /S/ MELVIN J. TRUMBLE
Melvin J. Trumble
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FISCAL YEAR 1996 FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<INCOME-TAX> (200,000)
<INCOME-CONTINUING> (3,039,414)
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