<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- -----------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
OCTOBER 31, 1997 0-15264
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 12, 1997, was 2,809,194 shares.
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<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
OCTOBER 31, APRIL 30,
1997 1997
ASSETS ------------- ------------
------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 235,754 $ 457,691
Receivables, net 5,227,289 5,918,358
Revenues earned in excess of billings and
retainages on long-term contracts 3,272,566 2,772,705
Inventories 90,030 275,142
Other current assets 573,601 650,431
------------- ------------
Total current assets 9,399,240 10,074,327
------------- ------------
NET PROPERTY AND EQUIPMENT 1,333,026 1,463,577
------------- ------------
OTHER ASSETS:
Long-term receivables, less current portion 401,992 638,024
Officers' receivable 350,148 354,013
Computer software development costs, net 1,020,397 1,021,664
Goodwill, net 992,749 1,085,165
Other, net 153,832 217,498
------------- ------------
Total other assets 2,919,118 3,316,364
------------- ------------
$ 13,651,384 $ 14,854,268
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 603,538 1,181,660
Billings in excess of revenues earned on
long-term contracts 1,491,425 1,749,100
Billings for future services 2,683,286 3,227,865
Accrued liabilities 2,400,354 2,240,842
------------- ------------
Total current liabilities 7,278,603 8,499,467
------------- ------------
DEFERRED INCOME TAXES 43,000 43,000
------------- ------------
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<PAGE>
LONG-TERM DEBT 1,267,000 1,110,000
------------- ------------
OTHER LONG-TERM LIABILITIES 270,891 376,134
------------- ------------
SHAREHOLDERS' EQUITY:
Common stock 5,258,422 5,418,203
Retained deficit (81,095) (149,974)
Deferred compensation (110,437) (117,562)
Unearned ESOP shares (275,000) (325,000)
------------- ------------
Total shareholders' equity 4,791,890 4,825,667
------------- ------------
Total liabilities and shareholders' equity $ 13,651,384 $ 14,854,268
============= ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<PAGE>
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 5,917,284 $ 5,691,262 $ 11,881,269 $ 10,968,511
COST OF REVENUES 4,029,377 3,524,097 7,851,927 6,705,876
------------ ------------ ------------ ------------
Gross profit 1,887,907 2,167,165 4,029,342 4,262,635
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,813,905 2,227,559 3,898,865 4,407,819
------------ ------------ ------------ ------------
Income (loss) from
operations 74,002 (60,394) 130,477 (145,184)
OTHER EXPENSE, net (25,714) (66,548) (61,598) (131,059)
------------ ------------ ------------ ------------
Income (loss) before
provision for federal
income taxes 48,288 (126,942) 68,879 (276,243)
PROVISION FOR FEDERAL
INCOME TAXES (Note 2) -- -- -- --
NET INCOME (LOSS) $ 48,288 $ (126,942) $ 68,879 $ (276,243)
============ ============ ============ ============
INCOME (LOSS) PER SHARE $ .02 $ (.04) $ .02 $ (.10)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,808,245 2,866,044 2,829,848 2,864,700
============ ============ ============ ============
</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,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 68,879 $ (276,243)
Adjustments to reconcile net income (loss) to net cash
and equivalents provided by (used for) operating
activities:
Depreciation and amortization 758,632 912,703
Deferred compensation expense 37,481 34,803
Decrease (increase) in assets:
Receivables, net 691,069 68,850
Revenues earned in excess of billings and
retainages (499,861) (420,537)
Inventories 185,112 134,863
Other current assets 76,830 (38,715)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (418,610) (151,121)
Billings in excess of revenues earned (257,675) 30,691
Billings for future services (544,579) (140,002)
Other long-term liabilities (105,243) (104,489)
---------- ----------
Net Cash and equivalents provided by
(used for) operating activities (7,965) 50,803
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in long-term receivables 239,897 232,354
Decrease (increase) in other assets 829 --
Investments in computer software (226,509) (202,233)
Net additions to property and equipment (245,052) (259,408)
---------- ----------
Net cash and equivalents used for investing
activities (230,835) (229,287)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repurchase) of common stock (190,137) 9,161
Purchase of common stock for ESOP 50,000 --
Borrowings (repayments) under line of credit 157,000 (85,000)
---------- ----------
Net cash and equivalents provided by
(used for) financing activities 16,863 (75,839)
---------- ----------
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<PAGE>
CASH AND EQUIVALENTS:
Increase (decrease) (221,937) (254,323)
Balance at beginning of period 457,691 352,074
---------- ----------
Balance at end of period $ 235,754 $ 97,751
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
MANATRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have
been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations,
although the Registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these consolidated condensed financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for
the year ended April 30, 1997, as filed with the Securities and
Exchange Commission on July 29, 1997. 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, 1997,
and April 30, 1997, (b) the results of its operations for the six
months ended October 31, 1997 and 1996 and (c) cash flows for the six
months ended October 31, 1997 and 1996.
(2) FEDERAL INCOME TAXES
During 1997 and 1996, the Company recorded valuation allowances
totaling $912,000 against certain of its future tax benefits,
including its tax loss carryforward due to the uncertainty of their
ultimate realization. In addition, as of April 30, 1997, the Company
had tax net operating loss carryforwards available of approximately
$995,000. As a result, the Company has not recorded a provision for
federal income taxes for the three or the six months ended October 31,
1997, because a portion of these loss carryforwards will be utilized.
These net operating loss carryforwards are available to offset future
taxable income generated through the year 2011.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $5,917,284 for the three months ended October 31, 1997,
have increased by 4% in comparison to the $5,691,262 of net revenues that
were reported for the three months ended October 31, 1996. Net revenues of
$11,881,269 for the six months ended October 31, 1997, are 8% higher than
the $10,968,511 of net revenues that were reported for the six months ended
October 31, 1996. 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 and forms processing and printing.
The increase in net revenues primarily can be attributed to the cyclical
nature of the Company's appraisal business. Recent contracts have
increased the Company's backlog for appraisal services to over $12,000,000,
which is approximately $1 million lower than the backlog was at the end of
the last quarter. Revenues from hardware, software and related services
have remained relatively flat and the Company currently expects such
revenues to remain so until additional progress is made with respect to the
Company's efforts focused on enhancing, reengineering, and deploying new
software products such as property tax, appraisal, financial and MIRRS.
Cost of revenues for the three months ended October 31, 1997, increased 14%
to $4,029,377 in comparison to the $3,524,097 that was reported for the three
months ended October 31, 1996. Cost of revenues also increased by 17% from
$6,705,876 for the six months ended October 31, 1996, to $7,851,927 for the
six months ended October 31, 1997. These increases are due to the increases
in net revenues noted above. In addition, margins have decreased from
approximately 39% to 34% because a higher percentage of the Company's
revenues are from appraisal services which typically generate a lower margin
than software sales and services. The Company is also experiencing increased
costs due to annual salary adjustments and other costs associated with
attracting and retaining good employees. Finally, the six month results
include a reclassification of approximately $200,000 from first quarter
selling, general and administrative expenses to cost of revenues.
Selling, general and administrative expenses have decreased by 19% to
$1,813,905 for the three months ended October 31, 1997, compared to
$2,227,559 for the three months ended October 31, 1996. Selling, general
and administrative expenses have decreased 12% from $4,407,819 for the six
months ended October 31, 1996, as compared to $3,898,865, for the six
months ended October 31, 1997. These decreases are primarily the result of
cost containment efforts.
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<PAGE>
As a result of the factors noted above, the Company reported operating
income of $74,002 for the three months and $130,477 for the six months
ended October 31, 1997. This is a substantial improvement over the
operating losses of $60,394 for the three months and $145,184 for the six
months ended October 31, 1996. In addition, interest expense, which is
included in other expense, has decreased from $162,245 for the six months
ended October 31, 1996 to $86,866 for the six months ended October 31,
1997, because the Company has reduced its average outstanding indebtedness
by approximately $1,000,000.
The Company's provision for federal income taxes generally fluctuates with
the level of pretax income. In addition, the effective tax rate generally
is impacted because of non-deductible goodwill amortization related to the
Company's acquisitions. However, as described in Note 2, the Company has not
recorded a provision for federal income taxes for the three and six month
periods ended October 31, 1997, because a portion of its net operating loss
carryforwards available have been utilized to offset such provision.
As a result of the factors noted above, the Company reported net income of
$48,288 or $.02 per share for the three months and $68,879 or $.02 per
share for the six months ended October 31, 1997, as compared to 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. Weighted average shares
outstanding has decreased from 2,864,700 to 2,829,848 primarily because the
Company repurchased 95,200 shares of its common stock during June, July and
August of the current fiscal year, offset by issuances of about 30,000 shares
through employee stock plans.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $2,120,637 at October 31, 1997, has increased 35%
compared to the April 30, 1997, amount of $1,574,860. These working
capital levels reflect current ratios of 1.29 and 1.19, respectively. The
increase in working capital primarily is due to a reduction in current
liabilities as a result of payments made or services performed during the
first half of the current fiscal year.
Shareholders' equity at October 31, 1997, decreased by $33,777 to
$4,791,890 from the balance reported at April 30, 1997, primarily because
the Company repurchased 95,200 shares of its common stock for $201,028.
This amount was offset by $68,879 of net income, $37,481 of deferred
compensation expense and $60,891 of purchases by employee stock plans for
the six month period. Book value per share increased slightly to $1.71 as
of October 31, 1997, from $1.68 at April 30, 1997.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures, which were $245,052 for the six
months ended October 31, 1997, are slightly lower than the prior year
amount of $259,408. The increase in capital expenditures primarily is due
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<PAGE>
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 currently 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, 1997, the Company owed $1,092,000 on its $5,000,000
revolving credit agreement and $275,000 on its ESOP loan. It currently 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
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
competitive. Inflationary price increases related to labor and overhead
will have a negative effect on the Company's cash flow and net income to
the extent that they cannot be offset through improved productivity and
price increases.
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of shareholders of Manatron, Inc. was held on
October 9, 1997. The purpose of the meeting was to elect directors and
transact any other business that properly came before the meeting.
The name of each director elected (along with the number of votes cast
for or authority withheld) is as follows:
<TABLE>
<CAPTION>
VOTES CAST
AUTHORITY
ELECTED DIRECTORS FOR WITHHELD/AGAINST
- ----------------- --- ----------------
<S> <C> <C>
Richard J. Holloman 1,934,592 14,179
Douglas A. Peat 1,931,071 17,700
Melvin J. Trumble 1,933,793 14,978
</TABLE>
The following persons continue to serve as directors: Gene Bledsoe,
Allen F. Peat, Randall L. Peat, Jane M. Rix, Paul R. Sylvester, Harry C.
Vorys and Stephen C. Waterbury.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS. The following documents are filed as exhibits to this
report on Form 10-Q:
3.1 Restated Articles of Incorporation. Previously filed as
an exhibit to the Company's Form 10-K Annual Report for
the fiscal year ended April 30, 1995, and incorporated
herein by reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended
April 30, 1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1
above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement.
Previously filed an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1996,
and incorporated herein by reference.
4.5 Second Amendment to Revolving Credit Agreement.
Previously filed an exhibit to the Company's Form 10-K
Annual Report for the fiscal year ended April 30, 1996,
and incorporated herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron,
Inc. and Registrar and Transfer Company. Previously
filed as an exhibit to the Company's Form 8-A filed on
June 11, 1997, and incorporated herein by reference.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the three months ended
October 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: December 15, 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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<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
3.1 Restated Articles of Incorporation. Previously filed as an
exhibit to the Company's Form 10-K Annual Report for the
fiscal year ended April 30, 1995, and incorporated herein by
reference.
3.2 Bylaws. Previously filed as an exhibit to the Company's
Form 10-K Annual Report for the fiscal year ended April 30,
1995, and incorporated herein by reference.
4.1 Restated Articles of Incorporation. See Exhibit 3.1 above.
4.2 Bylaws. See Exhibit 3.2 above.
4.3 Revolving Credit Loan Agreement. Previously filed as an
exhibit to the Company's Form 8-K Current Report dated
November 11, 1994, and incorporated herein by reference.
4.4 First Amendment to Revolving Credit Agreement. Previously
filed an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.5 Second Amendment to Revolving Credit Agreement. Previously
filed an exhibit to the Company's Form 10-K Annual Report
for the fiscal year ended April 30, 1996, and incorporated
herein by reference.
4.6 Rights Agreement dated June 2, 1997 between Manatron, Inc.
and Registrar and Transfer Company. Previously filed as an
exhibit to the Company's Form 8-A filed on June 11, 1997,
and incorporated herein by reference.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SECOND QUARTER 1998 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-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 235,754
<SECURITIES> 0
<RECEIVABLES> 5,010,420
<ALLOWANCES> 770,000
<INVENTORY> 90,030
<CURRENT-ASSETS> 9,399,240
<PP&E> 5,676,222
<DEPRECIATION> 4,343,196
<TOTAL-ASSETS> 13,651,384
<CURRENT-LIABILITIES> 7,278,603
<BONDS> 0
<COMMON> 5,258,422
0
0
<OTHER-SE> (466,532)
<TOTAL-LIABILITY-AND-EQUITY> 13,651,384
<SALES> 11,881,269
<TOTAL-REVENUES> 11,881,269
<CGS> 7,851,927
<TOTAL-COSTS> 7,851,927
<OTHER-EXPENSES> 3,855,523
<LOSS-PROVISION> 43,342
<INTEREST-EXPENSE> 86,866
<INCOME-PRETAX> 68,879
<INCOME-TAX> 0
<INCOME-CONTINUING> 68,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,879
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
