<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ---------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to
________________
Commission File 0-015264
MANATRON, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1983228
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2970 SOUTH 9TH STREET
KALAMAZOO, MICHIGAN 49009
(Address of principal executive offices) (Zip Code)
(616) 375-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes __X__.
No _____.
The number of shares outstanding of registrant's common stock, no
par value, at December 13, 1996, was 2,868,112 shares.
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
OCTOBER 31, APRIL 30,
1996 1996
------------ ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 97,751 $ 352,074
Receivables, net 6,438,827 6,507,677
Revenues earned in excess of billings and
retainages on long-term contracts 2,886,742 2,466,205
Inventories 252,117 386,980
Other current assets 552,882 514,167
----------- -----------
Total current assets 10,228,319 10,227,103
----------- -----------
NET PROPERTY AND EQUIPMENT 1,775,097 1,995,004
----------- -----------
OTHER ASSETS:
Long-term receivables, less current portion 1,040,990 1,272,920
Officers' receivable 379,809 380,233
Computer software development costs, net 1,010,781 1,060,483
Goodwill, net 1,177,580 1,269,997
Other, net 288,411 377,447
----------- -----------
Total other assets 3,897,571 4,361,080
----------- -----------
$15,900,987 $16,583,187
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<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 804,460 1,048,484
Billings in excess of revenues earned on
long-term contracts 1,718,252 1,687,561
Billings for future services 2,581,565 2,721,567
Accrued liabilities 1,718,934 1,626,031
----------- -----------
Total current liabilities 6,923,211 7,183,643
----------- -----------
DEFERRED INCOME TAXES 175,000 175,000
LONG-TERM DEBT 3,415,000 3,500,000
OTHER LONG-TERM LIABILITIES 475,685 580,174
SHAREHOLDERS' EQUITY:
Common stock 5,431,337 5,444,497
Retained earnings (deficit) (19,559) 256,685
Deferred compensation (124,687) (131,812)
Unearned ESOP shares (375,000) (425,000)
----------- -----------
Total shareholders' equity 4,912,091 5,144,370
----------- -----------
Total liabilities and shareholders' equity $15,900,987 $16,583,187
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------------------------- ------------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $5,691,262 $ 5,595,034 $10,968,511 $11,314,666
COST OF REVENUES 3,524,097 3,711,858 6,705,876 7,504,899
---------- ----------- ----------- -----------
Gross profit 2,167,165 1,883,176 4,262,635 3,809,767
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,227,559 2,542,180 4,407,819 4,833,705
RESTRUCTURING CHARGE -- 1,598,004 -- 1,598,004
---------- ----------- ----------- -----------
Loss from operations (60,394) (2,257,008) (145,184) (2,621,942)
OTHER EXPENSE, net (66,548) (88,045) (131,059) (181,303)
---------- ----------- ----------- -----------
Loss before credit for
federal income taxes (126,942) (2,345,053) (276,243) (2,803,245)
CREDIT FOR FEDERAL INCOME
TAXES (Note 2) -- (63,500) -- (200,000)
---------- ----------- ----------- -----------
NET LOSS $ (126,942) $(2,281,553) $ (276,243) $(2,603,245)
========== =========== =========== ===========
LOSS PER SHARE $ (.04) $ (.76) $ (.10) $ (.88)
========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,866,044 2,986,694 2,864,700 2,966,658
========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
------------------------------
1996 1995
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(276,243) $(2,603,245)
Adjustments to reconcile net loss to net cash
and equivalents provided by operating
activities:
Depreciation and amortization 912,703 832,790
Deferred compensation expense 34,803 --
Loss (gain) on disposition of property
and equipment -- (7,800)
Decrease (increase) in assets:
Receivables, net 68,850 2,135,265
Revenues earned in excess of billings and
retainages (420,537) 120,597
Inventories 134,863 (11,471)
Other current assets (38,715) (637,670)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (151,121) 128,941
Billings in excess of revenues earned 30,691 53,408
Billings for future services (140,002) (382,934)
Restructuring charges -- 1,248,423
--------- -----------
Net cash and equivalents provided by
operating activities 155,292 876,304
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in long-term receivables 232,354 (134,006)
Proceeds from sale of property and equipment -- 28,303
Increase in other assets -- 195,016
Investments in computer software (202,233) (140,511)
Net additions to property and equipment (259,408) (200,325)
--------- -----------
Net cash and equivalents used for investing
activities (229,287) (251,523)
--------- -----------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 9,161 24,787
Purchase of common stock for ESOP -- (500,000)
Reduction of debt (85,000) (348,000)
Reduction of other long-term liabilities (104,489) --
--------- -----------
Net cash and equivalents used for
financing activities (180,328) (823,213)
--------- -----------
CASH AND EQUIVALENTS:
Decrease (254,323) (198,432)
Balance at beginning of period 352,074 437,327
--------- -----------
Balance at end of period $ 97,751 $ 238,895
========= ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these consolidated condensed financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1996, as filed with the Securities and
Exchange Commission on July 26, 1996. There have been no significant
changes in such information since the date of such Form 10-K.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of
only a normal and recurring nature, necessary to present fairly
(a) the financial position of the Registrant as of October 31, 1996,
and April 30, 1996, and (b) the results of its operations for the six-
months ended October 31, 1996 and 1995, and (c) cash flows for the
six-months ended October 31, 1996 and 1995.
(2) FEDERAL INCOME TAXES
During fiscal 1996, the Company recorded a valuation allowance against
a portion of its $1.2 million net operating loss carryforward due to
the uncertainty of its ultimate realization. The Company also has not
recorded a future tax benefit for the effect of the loss it incurred
during the six months ended October 31, 1996. These net operating
loss carryforwards are available to offset future taxable income
through the year 2012.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $5,691,262 for the three months ended October 31, 1996,
have increased by 2% in comparison to the $5,595,034 of net revenues that
were reported for the comparable period in the prior year. Year to date
net revenues of $10,968,511 are 3% lower than the $11,314,666 of net
revenues that were reported for the comparable six month period in the
prior year. These amounts include revenues from computer hardware and
software shipments, sales of computer forms and supplies, and various
related services such as mass real estate appraisal, software support,
training, hardware maintenance, digitizing property tax maps, and forms
processing and printing.
While software license fees and related service revenues have increased
slightly over the prior year, the year to date decrease in revenues can
primarily be attributed to two factors: delays in the completion of the
Company's new Windows-based appraisal, financial and payroll products and
the cyclical nature of the Company's market for appraisal services in
Indiana and Ohio. Significant progress has recently been made in both of
these areas as the new appraisal, financial and payroll software is now
being used by a number of customers. In addition, the Company has signed
long-term contracts for approximately $1.5 and $1.8 million of appraisal
services in New York during the first quarter and in Ohio subsequent to
October 31, 1996, respectively.
Cost of revenues for the three months ended October 31, 1996, decreased 5%
to $3,524,097 versus the comparable prior year amount of $3,711,858. Year
to date cost of revenues decreased by 11% from $7,504,899 in the prior year
to $6,705,876 for the six months ended October 31, 1996. These decreases
are primarily due to an improvement in the Company's gross profit margins
which can be attributed to a favorable change in the mix of revenues. The
prior year gross margins were approximately 34% for both the three and six
month periods while the current year margins have improved to 38% and 39%,
respectively. Sales of software generally yield a much higher margin than
sales of the Company's other products and services.
Selling, general and administrative expenses have decreased by 12% to
$2,227,559 for the three months ended October 31, 1996, compared to
$2,542,180 for the prior year quarter. Year to date selling, general and
administrative expenses have decreased 9% from $4,833,705 in the prior year
to $4,407,819 in the current year. This decrease is primarily due to the
Company's efforts to reduce costs without effecting the level of customer
service that has historically been provided.
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<PAGE>
As a result of the factors noted above, the Company reported operating
losses of $60,394 for the three months and $145,184 for the six months
ended October 31, 1996. This is a substantial improvement over the
comparable prior year operating losses of $2,257,008 for the three months
and $2,621,942 for the six months ended October 31, 1995, even after the
$1.6 million nonrecurring charge related to the retirement of Allen F.
Peat, who was the Company's former Chairman, Chief Executive Officer and
President, is excluded from the prior year amounts.
Interest expense which is included in other expense, has decreased from
$217,281 to $162,245 because the Company has reduced its average
outstanding indebtedness by approximately $1 million.
The Company's provision (credit) for federal income taxes generally
fluctuates with the level of pretax income (loss). In addition, the
effective tax rate is generally impacted because of non-deductible goodwill
amortization related to the Company's acquisitions of ATEK and Specialized
Data Systems. However, as previously discussed in Note 2, the Company has
elected not to record the tax effect of the losses for the three and six
month periods ended October 31, 1996.
As a result of the factors noted above, the Company reported net losses of
$126,942 or $.04 per share for the three months and $276,243 or $.10 per
share for the six months ended October 31, 1996, verses net losses of
$2,281,553 or $.76 per share and $2,603,245 or $.88 per share for the
comparable periods in the prior year. Weighted average shares outstanding
has decreased from 2,966,658 to 2,864,700 primarily because the Company
purchased approximately 150,000 shares of its common stock in March of 1996
from Allen F. Peat in connection with his retirement.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $3,305,108 at October 31, 1996, is up 9% compared to
April 30, 1996, amount of $3,043,460. These levels reflect current ratios
of 1.48 and 1.42, respectively.
Shareholders' equity at October 31, 1996, decreased by 5% to $4,912,091
from the $5,144,370 that was reported at April 30, 1996, primarily because
of the $276,243 net loss for the six month period. As a result, book value
per share has decreased to $1.71 as of October 31, 1996, from $1.80 at
April 30, 1996.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures, which were $259,408 for the six
months ended October 31, 1996, are slightly higher than the prior
year amount of $200,325. They relate primarily to the purchase of
additional or new computer hardware and software for the Company's
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<PAGE>
technical and support personnel. Net capital expenditures for future
periods are not anticipated to be significantly different from those
incurred in the current period.
Since the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
receivable to remain outstanding for approximately three to four months.
As of October 31, 1996, the Company owed $3,140,000 on its $5 million
revolving credit agreement and $375,000 on its ESOP loan. This is an
improvement over the prior year as the balances outstanding on these loan
agreements at October 31, 1995, were $4,116,000 and $475,000, respectively.
It is anticipated that the revolving line of credit, together with existing
cash balances, and cash generated from future operations will be sufficient
for the Company to meet its working capital requirements for at least the
next twelve months.
The Company cannot precisely determine the effect of inflation on its
business. The Company continues, however, to experience relatively stable
costs for its inventory as the computer hardware market is very
competitive. Inflationary price increases related to labor and overhead
will have a negative effect on the Company's cash flow and net income to
the extent that they cannot be offset through improved productivity and
price increases.
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<PAGE>
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) October 10, 1996 Annual Meeting of Shareholders
(b) Newly Elected Directors:
Randall L. Peat
Paul R. Sylvester
Stephen C. Waterbury
Directors whose term of office continued after the meeting:
Gene Bledsoe
Richard J. Holloman
Allen F. Peat
Douglas A. Peat
Jane M. Rix
Melvin J. Trumble
Harry C. Vorys
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following document is filed as an exhibit to this
report on Form 10-Q:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended
October 31, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: December 16, 1996 By /S/ PAUL R. SYLVESTER
Paul R. Sylvester
President, Chief Executive Officer
and Chief Financial Officer
(Principal) Executive, Financial
and Accounting Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SECOND QUARTER 1997 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 97,751
<SECURITIES> 0
<RECEIVABLES> 6,254,924
<ALLOWANCES> 747,686
<INVENTORY> 252,117
<CURRENT-ASSETS> 10,228,319
<PP&E> 5,479,325
<DEPRECIATION> 3,704,228
<TOTAL-ASSETS> 15,900,987
<CURRENT-LIABILITIES> 6,923,211
<BONDS> 0
<COMMON> 5,431,337
0
0
<OTHER-SE> (519,246)
<TOTAL-LIABILITY-AND-EQUITY> 15,900,987
<SALES> 10,968,511
<TOTAL-REVENUES> 10,968,511
<CGS> 6,705,876
<TOTAL-COSTS> 6,705,876
<OTHER-EXPENSES> 4,358,659
<LOSS-PROVISION> 49,160
<INTEREST-EXPENSE> 162,245
<INCOME-PRETAX> (276,243)
<INCOME-TAX> 0
<INCOME-CONTINUING> (276,243)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (276,243)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
