<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
[ ] 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 the registrant's common
stock, no par value, at March 14, 1997, was 2,871,394 shares.
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
JANUARY 31, APRIL 30,
1997 1996
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ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 139,399 $ 352,074
Receivables, net 6,889,382 6,507,677
Revenues earned in excess of billings and
retainages on long-term contracts 2,739,189 2,466,205
Inventories 156,050 386,980
Other current assets 559,474 514,167
----------- -----------
Total current assets 10,483,494 10,227,103
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NET PROPERTY AND EQUIPMENT 1,624,334 1,995,004
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OTHER ASSETS:
Long-term receivables, less current portion 798,881 1,272,920
Officers' receivable 379,516 380,233
Computer software development costs, net 1,016,479 1,060,483
Goodwill, net 1,131,372 1,269,997
Other, net 241,770 377,447
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Total other assets 3,568,018 4,361,080
----------- -----------
$15,675,846 $16,583,187
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LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 855,164 1,048,484
Billings in excess of revenues earned on
long-term contracts 1,692,102 1,687,561
Billings for future services 3,250,493 2,721,567
Accrued liabilities 1,530,698 1,626,031
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Total current liabilities 7,428,457 7,183,643
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DEFERRED INCOME TAXES 175,000 175,000
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LONG-TERM DEBT 2,815,000 3,500,000
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OTHER LONG-TERM LIABILITIES 423,135 580,174
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SHAREHOLDERS' EQUITY:
Common stock 5,421,252 5,444,497
Retained earnings (deficit) (115,873) 256,685
Deferred compensation (121,125) (131,812)
Unearned ESOP shares (350,000) (425,000)
----------- -----------
Total shareholders' equity 4,834,254 5,144,370
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Total liabilities and shareholders' equity $15,675,846 $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 NINE MONTHS ENDED
JANUARY 31, OCTOBER 31,
---------------------------- ------------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $5,498,981 $6,637,705 $16,467,492 $17,952,371
COST OF REVENUES 3,349,968 4,250,513 10,055,844 11,755,412
---------- ---------- ----------- -----------
Gross profit 2,149,013 2,387,192 6,411,648 6,196,959
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,174,158 2,533,020 6,581,977 7,366,725
RESTRUCTURING CHARGE -- -- -- 1,598,004
---------- ---------- ----------- -----------
Loss from operations (25,145) (145,828) (170,329) (2,767,770)
OTHER EXPENSE, net (71,170) (104,020) (202,229) (285,323)
---------- ---------- ----------- -----------
Loss before credit for
federal income taxes (96,315) (249,848) (372,558) (3,053,093)
CREDIT FOR FEDERAL INCOME
TAXES (Note 2) -- -- 0 (200,000)
---------- ---------- ----------- -----------
NET LOSS $ (96,315) $ (249,848) $ (372,558) $(2,853,093)
========== ========== =========== ===========
LOSS PER SHARE $ (.03) $ (.08) $ (.13) $ (.96)
========== ========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,869,218 2,990,318 2,866,206 2,974,544
========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
-------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (372,558) $(2,853,093)
Adjustments to reconcile net loss to net cash
and equivalents provided by operating
activities:
Depreciation and amortization 1,384,840 1,512,630
Deferred compensation expense 49,079 --
Loss (gain) on disposition of property
and equipment 111,074
Decrease (increase) in assets:
Receivables, net (381,705) 2,519,546
Revenues earned in excess of billings and
retainages (272,984) (155,263)
Inventories 230,930 154,313
Other current assets (45,307) (619,329)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (288,653) 494,841
Billings in excess of revenues earned 4,541 151,153
Billings for future services 528,926 (527,070)
Restructuring charges -- 1,176,508
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Net cash and equivalents provided by
operating activities 837,109 1,965,310
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in long-term receivables 474,756 (195,224)
Proceeds from sale of property and equipment -- 30,324
Increase in other assets -- 1,273
Investments in computer software (341,348) (265,608)
Net additions to property and equipment (354,516) (284,788)
---------- -----------
Net cash and equivalents used for investing
activities (221,108) (714,023)
---------- -----------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 13,363 18,060
Purchase of common stock for ESOP -- (500,000)
Reduction of debt (685,000) (919,000)
Reduction of other long-term liabilities (157,039) --
---------- -----------
Net cash and equivalents used for
financing activities (828,676) (1,400,940)
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CASH AND EQUIVALENTS:
Decrease (212,675) (149,653)
Balance at beginning of period 352,074 437,327
---------- -----------
Balance at end of period $ 139,399 $ 287,674
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</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 January 31, 1997,
and April 30, 1996, and (b) the results of its operations for the nine
months ended January 31, 1997 and 1996, and (c) cash flows for the
nine months ended January 31, 1997 and 1996.
(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 nine months ended January 31, 1997. 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 $5,498,981 for the three months ended January 31, 1997,
have decreased by 17% in comparison to the $6,637,705 of net revenues that
were reported for the comparable period in the prior year. Year to date
net revenues of $16,467,492 are 8% lower than the $17,952,371 of net
revenues that were reported for the comparable nine-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. The Company has recently started to release its new
appraisal, financial and payroll software to a number of customers for
their review and testing. In addition, the Company has signed over
$3 million of appraisal service contracts during the third quarter,
which has caused the backlog for these services to increase significantly
over the prior year. While a small amount of appraisal revenue has been
recognized on these new contracts, the majority of the revenue will be
recognized in the next twelve to eighteen months as the services are
provided.
Cost of revenues for the three months ended January 31, 1997, decreased 21%
to $3,349,968 versus the comparable prior year amount of $4,250,513. Year
to date cost of revenues decreased by 14% from $11,755,412 in the prior
year to $10,055,844 for the nine months ended January 31, 1997. These
decreases are primarily due to the decrease in revenues noted above and an
improvement in the Company's gross profit margins. The margin improvement
can be attributed to a favorable change in the mix of revenues. The prior
year gross margins were approximately 36% and 35% for the three- and nine-
month periods while the current year margins have improved to 39% for both
periods. 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 14% to
$2,174,158 for the three months ended January 31, 1997, compared to
$2,533,020 for the prior year quarter. Year to date selling, general and
administrative expenses have decreased 11% from $7,366,725 in the prior
year to $6,581,977 in the current year. This decrease is primarily due to
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the Company's efforts to reduce costs without effecting the level of
customer service that has historically been provided.
As a result of the factors noted above, the Company reported operating
losses of $25,145 for the three months and $170,329 for the nine months
ended January 31, 1997. This is a substantial improvement over the
comparable prior year operating losses of $145,828 for the three months and
$2,767,770 for the nine months ended January 31, 1996, 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 nine month amount.
Interest expense which is included in other expense, has decreased from
$334,825 to $251,502 because the Company has reduced its average
outstanding indebtedness by approximately $1.2 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 nine
month periods ended January 31, 1997.
As a result of the factors noted above, the Company reported net losses of
$96,315 or $.03 per share for the three months and $372,558 or $.13 per
share for the nine months ended January 31, 1997. This represents a
significant improvement over the net losses of $249,848 or $.08 per share
and $2,853,093 or $.96 per share that were reported for the comparable
periods in the prior year. Weighted average shares outstanding has
decreased from 2,974,544 to 2,866,206 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 $3,055,037 at January 31, 1997, is comparable to the
April 30, 1996, amount of $3,043,460. These levels reflect current ratios
of 1.41 and 1.42, respectively.
Shareholders' equity at January 31, 1997, decreased by 6% to $4,834,254
from the $5,144,370 that was reported at April 30, 1996, primarily because
of the $372,558 net loss for the nine-month period. As a result, book
value per share has decreased to $1.68 as of January 31, 1997, 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 $354,516 for the nine
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<PAGE>
months ended January 31, 1997, are slightly higher than the prior year
amount of $284,788. They relate primarily to the purchase of additional or
new computer hardware and software for the Company's technical and support
personnel. Net capital expenditures for future periods are not anticipated
to be significantly different from those incurred in the current period.
Since the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
receivable to remain outstanding for approximately three to four months.
As of January 31, 1997, the Company owed $2,565,000 on its $5 million
revolving credit agreement and $350,000 on its ESOP loan. This reflects a
significant improvement over the prior year, as the balances outstanding at
January 31, 1996, were $3,595,000 and $450,000, 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 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
January 31, 1997.
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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: March 17, 1997 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
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE THIRD QUARTER 1997 FOREM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 139,399
<SECURITIES> 0
<RECEIVABLES> 6,768,189
<ALLOWANCES> 770,000
<INVENTORY> 156,050
<CURRENT-ASSETS> 10,483,494
<PP&E> 5,496,280
<DEPRECIATION> 3,871,946
<TOTAL-ASSETS> 15,675,846
<CURRENT-LIABILITIES> 7,428,457
<BONDS> 0
<COMMON> 5,421,252
0
0
<OTHER-SE> (586,998)
<TOTAL-LIABILITY-AND-EQUITY> 15,675,846
<SALES> 16,467,492
<TOTAL-REVENUES> 16,467,492
<CGS> 10,055,844
<TOTAL-COSTS> 10,055,844
<OTHER-EXPENSES> 6,507,638
<LOSS-PROVISION> 74,339
<INTEREST-EXPENSE> 251,502
<INCOME-PRETAX> (372,558)
<INCOME-TAX> 0
<INCOME-CONTINUING> (372,558)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (372,558)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
