<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
JULY 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 September 12, 1997, was 2,806,819 shares.
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
MANATRON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
JULY 31, APRIL 30,
1997 1997
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 629,817 $ 457,691
Receivables, net 5,439,978 5,918,358
Revenues earned in excess of billings and
retainages on long-term contracts 3,061,090 2,772,705
Inventories 127,206 275,142
Other current assets 603,964 650,431
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Total current assets 9,862,055 10,074,327
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NET PROPERTY AND EQUIPMENT 1,372,906 1,463,577
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OTHER ASSETS:
Long-term receivables, less current portion 534,613 638,024
Officers' receivable 353,426 354,013
Computer software development costs, net 1,006,028 1,021,664
Goodwill, net 1,038,957 1,085,165
Other, net 182,668 217,498
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Total other assets 3,115,692 3,316,364
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$14,350,653 $14,854,268
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 738,309 1,181,660
Billings in excess of revenues earned on
long-term contracts 1,500,094 1,749,100
Billings for future services 3,015,348 3,227,865
Accrued liabilities 2,193,332 2,240,842
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Total current liabilities 7,547,083 8,499,467
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DEFERRED INCOME TAXES 43,000 43,000
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LONG-TERM DEBT 1,712,000 1,110,000
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OTHER LONG-TERM LIABILITIES 320,053 376,134
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SHAREHOLDERS' EQUITY:
Common stock 5,271,899 5,418,203
Retained deficit (129,382) (149,974)
Deferred compensation (114,000) (117,562)
Unearned ESOP shares (300,000) (325,000)
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Total shareholders' equity 4,728,517 4,825,667
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Total liabilities and shareholders' equity $14,350,653 $14,854,268
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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
JULY 31,
----------------------------
1997 1996
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<S> <C> <C>
NET REVENUES $5,963,985 $5,277,249
COST OF REVENUES 3,594,425 3,181,779
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Gross profit 2,369,560 2,095,470
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,313,085 2,180,260
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Income (loss) from operations 56,475 (84,790)
OTHER EXPENSE, net 35,884 64,511
---------- ----------
Income (loss) before provision for
federal income taxes 20,591 (149,301)
PROVISION FOR FEDERAL INCOME
TAXES (Note 2) -- --
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NET INCOME (LOSS) $ 20,591 $ (149,301)
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INCOME (LOSS) PER SHARE $ .01 $ (.05)
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WEIGHTED AVERAGE SHARES OUTSTANDING 2,851,450 2,863,355
========== ==========
</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>
THREE MONTHS ENDED
JULY 31,
---------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 20,591 $(149,301)
Adjustments to reconcile net income (loss) to net cash
and equivalents (used for) provided by operating
activities:
Depreciation and amortization 371,353 455,077
Deferred compensation expense 19,633 17,846
Decrease (increase) in assets:
Receivables, net 478,380 209,819
Revenues earned in excess of billings and
retainages (288,385) (218,987)
Inventories 147,936 96,996
Other current assets 46,467 (18,400)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (490,861) (137,329)
Billings in excess of revenues earned (249,006) 64,238
Billings for future services (212,517) (38,239)
Other long-term liabilities (56,081) (51,085)
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Net cash and equivalents (used for) provided
by operating activities (212,490) 230,635
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term receivables 103,998 113,469
Decrease in other assets 3,411 --
Investments in computer software (96,418) (108,249)
Net additions to property and equipment (91,001) (123,997)
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Net cash and equivalents used for investing
activities (80,010) (118,777)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repurchase) of common stock (187,374) 4,202
Purchase of common stock for ESOP 50,000 --
Borrowings (repayments) under line of credit 602,000 (170,000)
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Net cash and equivalents provided by (used
for) financing activities 464,626 (165,798)
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CASH AND EQUIVALENTS:
Increase (decrease) 172,126 (53,940)
Balance at beginning of period 457,691 352,074
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Balance at end of period $ 629,817 $ 298,134
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
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, 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 July 31, 1997, and
April 30, 1997, and (b) the results of its operations for the three-
months ended July 31, 1997 and 1996, and (c) cash flows for the
three-months ended July 31, 1997 and 1996.
(2) FEDERAL INCOME TAXES
During 1997 and 1996, the Company recorded a valuation allowance
against certain of its future tax benefits 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 income taxes for the three months ended July 31, 1997,
because a portion of these loss carryforwards will be utilized. These
net operating loss carryforwards are available to offset future taxable
income through the year 2011.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net revenues of $5,963,985 for the three months ended July 31, 1997, have
increased by 13% in comparison to the $5,277,249 of net revenues that were
reported for the comparable period in the prior fiscal 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, 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 $13 million,
which is the highest the backlog has been since Sabre Systems and Service
was acquired in November of 1994. Revenues from hardware, software and
related services have remained relatively flat and will probably remain so
until development efforts focused on enhancing and reengineering current
legacy software products such as property tax, appraisal, financial and
MIRRS are further along.
As a result of the increase in net revenues, cost of revenues for the
three months ended July 31, 1997, also increased 13% to $3,594,425 versus
the comparable prior year amount of $3,181,779. Margins for both periods
have remained comparable at 40%.
Selling, general and administrative expenses have increased by 6% to
$2,313,085 for the three months ended July 31, 1997, compared to $2,180,260
for the same period in the prior fiscal year. This increase primarily is
due to annual salary adjustments and other costs associated with attracting
and retaining good employees.
As a result of the factors noted above, the Company reported operating
income of $56,475 for the three months ended July 31, 1997, versus an
operating loss of $84,790 for the three months ended July 31, 1996. In
addition, interest expense, which is included in other expense, has
decreased from $80,995 to $42,258 because the Company has reduced its
average outstanding indebtedness by over $1.5 million.
The Company's provision for federal income taxes generally fluctuates
with the level of pretax income. In addition, the effective tax rate is
generally impacted because of non-deductible goodwill amortization related
to the Company's acquisitions of ATEK Information Services and Specialized
Data Systems. However, as described in Note 2, the Company has not
recorded a provision for federal income taxes for the three months ended
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<PAGE>
July 31, 1997, as a portion of its net operating loss carryforwards
available have been utilized to offset it.
As a result of the factors noted above, the Company reported net income of
$20,591 or $.01 per share for the three months ended July 31, 1997, versus
a net loss of $149,301 or $.05 per share for the comparable period in the
prior fiscal year. Weighted average shares outstanding has decreased from
2,863,355 to 2,851,450 primarily because the Company announced its intention
to and began to buy back up to 100,000 shares of its common stock during the
first quarter of this current fiscal year.
FINANCIAL CONDITION AND LIQUIDITY
Working capital of $2,314,972 at July 31, 1997, has increased by 47%
compared to the April 30, 1997, amount of $1,574,860. These levels
reflect current ratios of 1.31 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
quarter of the current fiscal year.
Shareholders' equity at July 31, 1997, decreased by $97,150 to $4,728,517
from the balance reported at April 30, 1997, primarily because the Company
repurchased 92,000 shares of its common stock for approximately $194,000
during the first quarter. This amount was offset by net income for the
quarter of $20,591, deferred compensation expense of $19,633 and purchases
by employee stock plans. Book value per share has remained unchanged at
$1.68 as of July 31, 1997.
The nature of the Company's business is not property or equipment
intensive. Net capital expenditures, which were approximately $91,000
for the three months ended July 31, 1997, are slightly lower than the
$124,000 of capital expenditures reported for the comparable period in
the prior fiscal year. The net capital expenditures 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 currently are not anticipated to be significantly different
from those incurred in the current period.
As the Company's revenues are generated from contracts with local
governmental entities, it is not uncommon for certain of its accounts
receivable to remain outstanding for approximately three to four months.
As of July 31, 1997, the Company owed $1,512,000 on its $5 million
revolving credit agreement and $300,000 on its ESOP loan. It is
anticipated that the revolving line of credit, together with existing cash
balances, and cash generated from future operations will be sufficient for
the Company to meet its working capital requirements for at least the next
12 months.
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<PAGE>
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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PART II. - OTHER INFORMATION
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 as 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 as 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) The Company filed a Form 8-K Current Report on June 10, 1997
relating to the distribution of a Series A Preferred Stock
Purchase Right for each outstanding share of common stock of the
Company, pursuant to a Rights Agreement between Manatron, Inc.
and Registrar and Transfer Company dated June 2, 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: September 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 as 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 as 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.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FIRST QUARTER 1998 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 629,817
<SECURITIES> 0
<RECEIVABLES> 5,131,962
<ALLOWANCES> 753,000
<INVENTORY> 127,206
<CURRENT-ASSETS> 9,862,055
<PP&E> 5,540,638
<DEPRECIATION> 4,167,732
<TOTAL-ASSETS> 14,350,653
<CURRENT-LIABILITIES> 7,542,083
<BONDS> 0
<COMMON> 5,271,899
0
0
<OTHER-SE> (543,382)
<TOTAL-LIABILITY-AND-EQUITY> 14,350,653
<SALES> 5,963,985
<TOTAL-REVENUES> 5,963,985
<CGS> 3,594,425
<TOTAL-COSTS> 3,594,425
<OTHER-EXPENSES> 2,291,977
<LOSS-PROVISION> 21,108
<INTEREST-EXPENSE> 42,258
<INCOME-PRETAX> 20,591
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,591
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
