SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 3, 1997
MARCAM CORPORATION
(Exact Name of Registrant as Specified in Charter)
MASSACHUSETTS 0-18674 04-2711580
- ---------------------------- ----------------------- --------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
95 WELLS AVENUE, NEWTON, MA 02159
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 965-0220
<PAGE>
Item 5. Other Events.
On April 28, 1997, the Board of Directors of Marcam Corporation authorized
management to proceed with the separation of Marcam Corporation into two
publicly traded corporations. Marcam Corporation intends to spin off in a
tax-free distribution the portion of its business relating to its PRISM, Protean
and Avantis product lines. In connection with the spin-off, Marcam Corporation
will transfer to a newly formed corporation, Marcam Solutions, Inc. ("Marcam
Solutions") substantially all of the business, assets and liabilities relating
to its PRISM, Protean and Avantis product lines and an aggregate of $39.0
million in cash. In the spin-off, all of the outstanding shares of common stock
of Marcam Solutions will be distributed by means of a distribution to
stockholders of Marcam Corporation. In connection with the spin-off, Marcam
Corporation will change its name to MAPICS, Inc. ("MAPICS") and will continue
the operations relating to the MAPICS product lines.
Although the common stock of Marcam Solutions will be distributed to Marcam
Corporation's stockholders, the distribution will be recorded as a disposal of
the business conducted by MAPICS, due to the relative significance of the
business conducted by Marcam Solutions. The combined financial statements and
notes thereto set forth in Exhibit 99.1 (the "Information") reflect only the
business related to the MAPICS product line and have been prepared using
Marcam Corporation's historical basis in the assets and liabilities and
historical results of operations related to the MAPICS product line.
This Form 8-K is being filed to update the disclosure of certain financial
information concerning MAPICS. The Information is incorporated
herein by this reference.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. None.
-----------------------------------------
(b) Pro Forma Financial Information. None.
-------------------------------
(c) Exhibits.
--------
Exhibit No. Description
- ----------- -----------
23.1 Consent of Coopers & Lybrand L.L.P.
99.1 The following financial statements, together with the Report of
Independent Accountants thereon:
Combined Balance Sheets as of September 30, 1995 and 1996
and March 31, 1997
Combined Statements of Operations for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1996 (unaudited) and 1997
Combined Statements of Divisional Equity for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1997
Combined Statements of Cash Flows for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1996 (unaudited) and 1997
Notes to Combined Financial Statements
<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 hereunto duly authorized.
MARCAM CORPORATION
Date: July 15, 1997 By: /s/ George A. Chamberlain, 3d
------------------------------
George A. Chamberlain, 3d
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of Coopers & Lybrand L.L.P.
99.1 The following financial statements, together with the Report of
Independent Accountant thereon:
Combined Balance Sheets as of September 30, 1995 and 1996
and March 31, 1997
Combined Statements of Operations for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1996 (unaudited) and 1997
Combined Statements of Divisional Equity for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1997
Combined Statements of Cash Flows for the years ended
September 30, 1994, 1995 and 1996 and for the six months
ended March 31, 1996 (unaudited) and 1997
Notes to Combined Financial Statements
Exhibit 23.1
------------
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Marcam Corporation on Form S-8 (Nos. 33-36346, 33-37794, 33-37619, 33-36499,
33-40557, 33-62992, 33-89732 and 333-02518), Form S-3 (Nos. 33-90670, 33-97374
and 333-26203) and Form S-4 (No. 333-29285) of our report dated June 3, 1997, on
our audits of the combined financial statements of MAPICS, Inc. as of September
30, 1995 and 1996 and March 31, 1997 and for each of the three years in the
period ended September 30, 1996 and for the six months ended March 31, 1997,
which report is included in this current report on Form 8-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 15, 1997
Exhibit 99.1
------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Marcam Corporation:
We have audited the accompanying combined balance sheets of MAPICS, Inc. as of
September 30, 1995 and 1996 and March 31, 1997 and the related combined
statements of operations, divisional equity, and cash flows for each of the
three years in the period ended September 30, 1996 and for the six months ended
March 31, 1997. These financial statements are the responsibility of MAPICS,
Inc.'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 combined financial position of MAPICS, Inc. as of
September 30, 1995 and 1996 and March 31, 1997, and the combined results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996 and for the six months ended March 31, 1997, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 3, 1997
1
<PAGE>
MAPICS, INC.
Combined Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
As of September 30, As of March 31,
--------------------- ----------------
1995 1996 1997
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ......................................................... $ 226 $ 378 $ 852
Accounts receivable, net of allowances of $1,626 in 1995,
$1,240 in 1996 and $1,466 in 1997 (Note 3) .................. 20,416 20,518 21,141
Prepaid expenses and other current assets ..................... 369 487 1,032
-------- -------- --------
Total current assets ....................................... 21,011 21,383 23,025
Property and equipment, net (Note 4) ........................... 1,755 2,992 2,813
Computer software costs, net (Note 5) ........................ 12,495 15,705 15,741
Other intangible assets, net (Notes 7 and 13) .................. 5,965 5,325 5,067
-------- -------- --------
Total assets ............................................. $41,226 $45,405 $46,646
======== ======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable ............................................. $ 3,659 $ 5,308 $ 4,412
Accrued expenses and other current liabilities (Note 6) ...... 10,673 11,457 11,415
Deferred revenue ............................................. 15,206 18,563 21,197
-------- -------- --------
Total current liabilities ................................. 29,538 35,328 37,024
Deferred income taxes (Note 8) ................................. 196 884 394
-------- -------- --------
Total liabilities .......................................... 29,734 36,212 37,418
Commitments and contingencies (Note 9) ........................ -- -- --
Divisional equity ............................................. 11,492 9,193 9,228
-------- -------- --------
Total liabilities and divisional equity .................. $41,226 $45,405 $46,646
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
2
<PAGE>
MAPICS, INC.
Combined Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
----------------------------------- --------------------------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
License .............................. $33,410 $42,745 $45,341 $20,501 $25,328
Services .............................. 19,373 26,553 32,261 15,343 18,837
-------- -------- ---------- -------- ----------
Total revenues ..................... 52,783 69,298 77,602 35,844 44,165
-------- -------- ---------- -------- ----------
Operating expenses:
Cost of license revenues ............ 3,280 5,689 6,913 3,026 4,129
Cost of services revenues ............ 5,428 7,567 9,499 4,573 5,301
Selling and marketing ............... 17,765 24,780 27,851 13,028 14,834
Product development .................. 6,692 7,432 6,398 3,122 4,969
General and administrative ............ 4,810 5,384 5,965 2,212 4,360
-------- -------- ---------- -------- ----------
Total operating expenses ............ 37,975 50,852 56,626 25,961 33,593
-------- -------- ---------- -------- ----------
Income before income tax expense ...... 14,808 18,446 20,976 9,883 10,572
Income tax expense ..................... 4,641 7,112 8,076 3,805 4,071
-------- -------- ---------- -------- ----------
Net income ........................... $10,167 $11,334 $12,900 $ 6,078 $6,501
======== ======== ========== ======== ==========
Pro forma net income per common
share (Note 2) (unaudited) ............ $0.72 $0.35
========== ==========
Pro forma weighted average number of
common and common equivalent
shares outstanding (Note 2)
(unaudited) ........................... 17,899 18,705
========== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
3
<PAGE>
MAPICS, INC.
Combined Statements of Divisional Equity
(In thousands)
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
--------------------------------------------- ------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Balance, beginning of period ............... $ 21,271 $ 17,091 $ 11,492 $ 9,193
Net income .............................. 10,167 11,334 12,900 6,501
Net transfers to Marcam Corporation ...... (14,347) (16,933) (15,199) (6,466)
---------- ---------- ---------- ---------
Balance, end of period ..................... $ 17,091 $ 11,492 $ 9,193 $ 9,228
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
4
<PAGE>
MAPICS, INC.
Combined Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
-------------------------------------- -------------------------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 10,167 $ 11,334 $ 12,900 $ 6,078 $ 6,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ....................................... 545 709 954 375 660
Amortization ....................................... 2,353 3,248 3,788 1,936 2,328
Provision for bad debts ........................... 6 939 399 73 611
Deferred income taxes .............................. 1,110 737 688 323 (490)
Changes in operating assets and liabilities, net
of effects of acquisition:
Accounts receivable .............................. (788) (5,302) (501) 4,447 (1,234)
Prepaid expenses and other assets .................. (418) 239 (118) (69) (266)
Accounts payable ................................. 576 383 1,071 (513) (896)
Accrued expenses and other current liabilities . 2,725 4,988 784 (2,999) (42)
Deferred revenue ................................. 4,143 5,466 3,357 2,982 2,634
--------- --------- --------- -------- --------
Net cash provided by operating activities ......... 20,419 22,741 23,322 12,633 9,806
--------- --------- --------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment .................. (979) (623) (1,613) (466) (481)
Additions to computer software costs ............... (4,795) (5,516) (6,358) (3,973) (2,385)
--------- --------- --------- -------- --------
Net cash used for investing activities ............ (5,774) (6,139) (7,971) (4,439) (2,866)
--------- --------- --------- -------- --------
Cash flows from financing activities:
Net transfers to Marcam Corporation .................. (14,347) (16,483) (15,199) (7,947) (6,466)
--------- --------- --------- -------- --------
Net cash used for financing activities ............ (14,347) (16,483) (15,199) (7,947) (6,466)
--------- --------- --------- -------- --------
Net increase in cash ................................. 298 119 152 247 474
Cash at beginning of period ........................... (191) 107 226 226 378
--------- --------- --------- -------- --------
Cash at end of period ................................. $ 107 $ 226 $ 378 $ 473 $ 852
========= ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
5
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements
(1) BASIS OF PRESENTATION
(a) The Distribution
On April 28, 1997, the Board of Directors of Marcam Corporation authorized
management to proceed with the separation of Marcam Corporation into two
publicly traded corporations. Marcam Corporation intends to spin off in a
tax-free distribution the portion of its business relating to its PRISM,
Protean and Avantis product lines. The separation into two independent,
publicly traded companies is designed to enable each to better focus on its
core markets, to better serve existing customers and to finance its business.
Marcam Corporation will change its name to MAPICS, Inc. ("MAPICS") and will
continue the operations relating to the MAPICS product lines.
In connection with the separation, Marcam Corporation will transfer to a
newly formed corporation, Marcam Solutions, Inc. ("Marcam Solutions"), the
business, assets and liabilities relating to its PRISM, Protean and Avantis
product lines and will commit to contribute certain amounts of cash to Marcam
Solutions, as represented by a note. The note will be paid with a portion of
the proceeds from a proposed offering of common stock of MAPICS or a debt
financing which would be consummated in lieu of or in combination with the
proposed public offering. All of the shares of common stock of Marcam Solutions
will be distributed (the "Distribution") by means of a distribution to
stockholders of Marcam Corporation. Subsequent to the Distribution, MAPICS will
be the legal entity that will continue to conduct the operations relating to
Marcam Corporation's MAPICS product lines. However, for accounting purposes,
due to the relative significance of the PRISM, Protean and Avantis product
lines, the Distribution will be recorded as a disposal of the MAPICS product
lines in the historical consolidated financial statements of Marcam Corporation
and in the future financial statements of Marcam Solutions.
The Distribution will be subject to final approval by the Board of
Directors of Marcam Corporation, approval by the stockholders of Marcam
Corporation, and the receipt of a favorable ruling from the Internal Revenue
Service that, except as provided therein, the Distribution will qualify as a
tax-free distribution under Section 355 of the Internal Revenue Code of 1986,
as amended (the "Code"), or, at the option of the Board of Directors of Marcam
Corporation, an opinion of special tax counsel and Marcam Corporation's
independent accountants to the effect that, except as provided therein, such
distribution should qualify as a tax-free distribution under Section 355 of the
Code.
These combined financial statements have been prepared using Marcam
Corporation's historical basis in the assets and liabilities and historical
results of operations related to the MAPICS product lines. These combined
financial statements generally reflect the financial position, results of
operations, and cash flows of MAPICS as if it were a separate entity for all
periods presented. Certain costs and expenses presented in these financial
statements have been allocated based on management's estimates of the cost of
services provided to MAPICS by Marcam Corporation. Management believes that
these allocations are reasonable. However, the financial information included
herein may not necessarily reflect the combined financial position, results of
operations, and cash flows of MAPICS in the future, or what they would have
been had MAPICS been a separate entity during the periods presented.
Prior to the Distribution, Marcam Corporation (to be renamed MAPICS)
intends to enter into various agreements with Marcam Solutions providing for
the separation of the product lines and governing various ongoing relationships
between the two companies, in accordance with the terms described in Note 15.
(b) Nature of the Business
MAPICS is a leading provider of enterprise resource planning (ERP)
software applications for mid-size manufacturing enterprises worldwide. MAPICS'
products provide an integrated and function-rich ERP solution with the breadth
and depth of applications to manage an entire manufacturing enterprise. The
MAPICS XA product line currently consists of 44 integrated application modules
in the areas of Engineering and Cost Management, Market and Demand Management,
Plant Operations and Logistics Management, Production Resource Planning,
Financial Management and Measurements and Cross Applications Solutions. MAPICS
also provides services to customers in the form of product support. The primary
geographic markets of MAPICS include North America, Europe, the Middle East,
Africa, Latin America and Asia Pacific.
6
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates by Management
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These estimates and assumptions 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 periods. The most significant
estimates included in these financial statements are the valuation of
capitalized software, intangible assets and accounts receivable and the
allocation of corporate expenses from Marcam Corporation. Actual results may
differ from estimates.
(b) Revenue Recognition
MAPICS recognizes revenues from the licensing of its software upon the
signing of license agreements, delivery of the software and determination that
collection of the related receivable is probable. Under the terms of the MAPICS
license agreements, the customer is responsible for installation and training.
At the time MAPICS recognizes revenues from the licensing of software, no
significant vendor obligations remain, and the costs of insignificant
obligations, if any, are accrued.
MAPICS recognizes services revenues from its periodic license fees ratably
over the terms of the license agreements. The periodic license fee, which is
typically payable annually in advance, entitles the customer to continue using
the software and to receive certain support services.
Generally, revenues from the licensing of products through third-party
representatives are included in revenues, and related commissions are included
in selling and marketing expenses. In certain situations, however, revenues
from affiliates are recorded as royalties in license revenues (See Note 14).
(c) Concentrations of Credit Risk
Financial instruments which potentially expose MAPICS to concentrations of
credit risk consist primarily of trade accounts receivable. MAPICS provides
credit, in the normal course of business, to various types and sizes of
manufacturers located throughout the world. As a result, concentration of
credit risk with respect to trade receivables is not significant.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method based upon the following estimated useful lives:
Furniture and fixtures ...... 4 years
Computer equipment ......... 4 years
Leasehold improvements ...... Shorter of lease term or useful life of asset
(e) Computer Software Costs
MAPICS charges all costs of establishing technological feasibility of
computer software products to product development expense as they are incurred.
Thereafter, computer software costs are capitalized and reported at the lower
of unamortized cost or net realizable value. Computer software costs include
in-house software development costs and the costs incurred to translate
software into various foreign languages. Amortization of computer software
costs commences upon general release of the product to customers and is
computed on a product-by-product basis using the greater of the amount
determined using (a) the ratio that current period gross revenues bear to the
total of current and anticipated future gross revenues or (b) the straight-line
method over the estimated economic life of the product (generally five years).
Amortization of capitalized software costs is charged to cost of license
revenues. Capitalized software is subject to rapid technological obsolescence
and, as a result, amortization periods could ultimately shorten to reflect
changes in technology in the future. In fiscal 1997, MAPICS changed the
estimated useful life of its 1997 and future translation expenditures from five
years to two years. This change in estimate decreased net income by
approximately $230,000 for the six months ended March 31, 1997.
7
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(f) Other Intangible Assets
Other intangible assets represent intangible assets that are being
amortized to cost of license revenues using the straight-line method over the
estimated lives of the intangibles. The installed customer base and affiliate
network is amortized over fifteen years; trade names, trademarks and goodwill
are amortized over ten years.
MAPICS evaluates the net realizable value of capitalized software costs
and other intangibles on a quarterly basis using undiscounted cash flows. Its
review of intangible assets includes an analysis of past operating results,
business plans and budgets related to recoverability of the specific assets.
(g) Foreign Currency Translation
The majority of foreign revenues of MAPICS are denominated in local
currencies. The functional currency for each of the MAPICS foreign operations
is generally its local currency. Assets and liabilities of foreign operations
are translated into U.S. dollars at period-end rates of exchange. Revenues and
expenses are translated into U.S. dollars at the average rates for the periods.
The resultant translation gains and losses are immaterial for all periods
presented. Foreign currency transaction gains and losses and the effects of
exchange rate changes on cash are immaterial for all periods presented.
(h) Income Taxes
Historically, the operations represented by MAPICS have been included in
the consolidated U.S. Federal and certain state and foreign income tax returns
filed by Marcam Corporation. Income tax expense has been calculated on a
separate-return basis. Income taxes paid on behalf of MAPICS are included in
divisional equity. After the Distribution, MAPICS will file separate income tax
returns.
Pursuant to the anticipated Tax Sharing Agreement between Marcam
Corporation and Marcam Solutions and after the Distribution, MAPICS will be
entitled to utilize certain tax attributes (principally federal, state and
foreign net operating loss carryforwards) of Marcam Corporation.
(i) Divisional Equity
Divisional equity includes accumulated retained earnings, net transfers to
Marcam Corporation and current period income.
(j) Unaudited pro forma net income per share
Unaudited pro forma net income per share gives effect to the Distribution.
The calculation of pro forma weighted average number of shares outstanding
includes (i) the weighted average number of common shares outstanding of Marcam
Corporation (11,384,000 shares and 11,459,000 shares, respectively, for the
year ended September 30, 1996 and for the six months ended March 31, 1997),
(ii) the weighted average number of common equivalent shares from the assumed
exercise of dilutive stock options, warrants and convertible preferred stock of
Marcam Corporation (2,801,000 shares and 3,532,000 shares, respectively, for
the year ended September 30, 1996 and for the six months ended March 31, 1997),
and (iii) the number of shares of common stock from the proposed offering of
MAPICS common stock whose proceeds are deemed to be used to pay the capital
contribution of $39,000,000 to Marcam Solutions, based on an assumed offering
price of $10.50 per share (3,714,000 shares for the year ended September 30,
1996 and for the six months ended March 31, 1997) (See Note 9). Pro forma fully
diluted net income per share does not differ materially from reported pro forma
primary net income per share.
(k) Allocated Costs
Expenses have been allocated based on a variety of methods depending on
the nature of the expense. Such allocation methods include proportional MAPICS
product revenue to total Marcam Corporation revenue, headcount equivalents and
management estimates. These amounts approximate management's estimates of
Marcam Corporation's corporate costs to support the MAPICS-related operations.
An allocation of corporate marketing expenses, corporate product development
expenses, and corporate administrative functions (including data services,
employee benefits, legal, insurance, accounting and other corporate overhead)
has been included in the selling and marketing, product development, and
general and administrative operating expenses in the combined statements of
operations.
8
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(l) Interim Period Financial Statements
The interim combined financial statements and related footnote information
for the six months ended March 31, 1996 are unaudited. In the opinion of
management, the interim combined financial statements contain all adjustments
of a normal recurring nature which are necessary to present fairly the interim
financial position of MAPICS and its interim results of operations and cash
flows. Results of operations and cash flows for the six months ended March 31,
1997 are not necessarily indicative of operating results for the entire year.
(m) New Accounting Pronouncements
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued which will
require MAPICS to elect either expense recognition under SFAS 123 or its
disclosure-only alternative for stock-based employee compensation. The expense
recognition provision encouraged by SFAS 123 would require fair-value based
financial accounting to recognize compensation expense for employee stock
compensation plans. MAPICS has determined that it will elect the
disclosure-only alternative. MAPICS will be required to disclose the pro forma
net income and pro forma net income per share in the notes to the financial
statements using the fair-value based method beginning in fiscal 1997 after the
Distribution, with comparable disclosures for fiscal 1996. MAPICS has not
determined the impact that these pro forma adjustments will have on its net
income or income per share.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), was issued which will require MAPICS to
present basic and diluted earnings per share (EPS). Basic EPS, which replaces
primary EPS, excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS under existing rules. SFAS 128 requires restatement of all prior
period earnings per share data presented. MAPICS will adopt SFAS 128 as of
October 1, 1998 and has not yet determined the impact of the adoption of this
standard.
(3) ALLOWANCE FOR DOUBTFUL ACCOUNTS
MAPICS provides reserves for customer receivable balances which are
considered potentially uncollectible. The allowance for doubtful accounts
amounted to $733,000, $1,626,000, $1,240,000 and $1,466,000 at September 30,
1994, 1995 and 1996 and March 31, 1997, respectively. The provision charged to
bad debt expense, which is included in general and administrative expenses, was
$6,000, $939,000 and $399,000 for fiscal 1994, 1995 and 1996, respectively, and
was $611,000 for the six months ended March 31, 1997. Write-offs against the
allowance were $458,000, $46,000 and $785,000 for fiscal 1994, 1995 and 1996,
respectively, and were $385,000 for the six months ended March 31, 1997.
9
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
------------- ---------
1995 1996 1997
<S> <C> <C> <C>
Furniture and fixtures ........................ $ 99 $ 106 $ 138
Computer equipment .............................. 3,101 5,285 5,710
Leasehold improvements ........................ 25 25 49
--------- --------- ---------
3,225 5,416 5,897
Accumulated depreciation and amortization ...... (1,470) (2,424) (3,084)
--------- --------- ---------
$ 1,755 $ 2,992 $ 2,813
========= ========= =========
</TABLE>
(5) COMPUTER SOFTWARE COSTS
Computer software costs capitalized during fiscal years 1994, 1995 and
1996 amounted to $4,795,000, $5,516,000 and $6,358,000, respectively, and
during the six months ended March 31, 1997, amounted to $2,385,000.
Amortization of computer software costs during those periods was approximately
$1,553,000, $2,448,000, $3,148,000, and $2,070,000, respectively. These
combined financial statements reflect a reduction of $1,050,000 in net
capitalized software costs at September 30, 1995 as a result of purchase
accounting adjustments described in Note 13 and reflect the reclassification of
$279,000 of capitalized software costs to other assets in the six months ended
March 31, 1997. Accumulated amortization at September 30, 1995, September 30,
1996 and March 31, 1997 totaled $2,754,000, $5,902,000 and $7,972,000,
respectively.
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following
(in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
------------- ---------
1995 1996 1997
<S> <C> <C> <C>
Accrued commissions and royalties ......... $ 5,949 $ 5,556 $ 7,077
Accrued payroll and related expenses ...... 274 1,642 1,632
Accrued sales and other taxes ............ 407 530 722
Other .................................... 4,043 3,729 1,984
-------- -------- --------
$10,673 $11,457 $11,415
======== ======== ========
</TABLE>
10
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(7) OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
------------- ---------
1995 1996 1997
<S> <C> <C> <C>
Installed customer base and affiliate network ...... $ 6,034 $ 6,034 $ 6,034
Trade names and trademarks ........................ 1,712 1,712 1,712
Goodwill .......................................... 286 286 286
--------- --------- ---------
8,032 8,032 8,032
Accumulated amortization ........................... (2,067) (2,707) (2,965)
--------- --------- ---------
$ 5,965 $ 5,325 $ 5,067
========= ========= =========
</TABLE>
(8) INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
------------------------- ---------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Federal:
Current ...... $2,742 $4,743 $5,547 $ 3,527
Deferred ...... 978 653 610 (434)
------- ------- ------- -------
Total ......... 3,720 5,396 6,157 3,093
------- ------- ------- -------
State:
Current ...... 736 1,398 1,415 745
Deferred ...... 131 84 78 (56)
------- ------- ------- -------
Total ......... 867 1,482 1,493 689
------- ------- ------- -------
Foreign:
Current ...... 54 234 426 289
Deferred ...... -- -- -- --
------- ------- ------- -------
Total ......... 54 234 426 289
------- ------- ------- -------
Total ......... $4,641 $7,112 $8,076 $ 4,071
======= ======= ======= =======
</TABLE>
11
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
The components of income from domestic and foreign operations before
provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
------------------------- ---------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Domestic ...... $14,760 $18,137 $20,766 $10,274
Foreign ...... 48 309 210 298
-------- -------- -------- --------
Total ......... $14,808 $18,446 $20,976 $10,572
======== ======== ======== ========
</TABLE>
The effective income tax rates of 31.3%, 38.6% and 38.5% for the years
ended September 30, 1994, 1995 and 1996, respectively, and 38.5% for the six
months ended March 31, 1997, differ from the expected income taxes for those
periods calculated by applying the federal statutory rate of 35.0% to income
before income taxes for the years ended September 30, 1994, 1995 and 1996 and
the six months ended March 31, 1997 as follows (in thousands):
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
------------------------ ---------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Expected tax .............................. $ 5,183 $ 6,456 $ 7,342 $ 3,701
Benefit of net operating losses ............ (169) -- -- --
State taxes, net ........................... 610 992 998 429
Research and experimentation credits ...... (737) (423) (413) (159)
Other .................................... (246) 87 149 100
------- ------- ------- -------
$ 4,641 $ 7,112 $ 8,076 $ 4,071
======= ======= ======= =======
</TABLE>
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the net deferred income tax liability at September 30, 1995 and 1996 and March
31, 1997 relate to the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
------------- ---------
1995 1996 1997
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue ..................... $ 334 $ 411 $ 451
Allowance for doubtful accounts ...... 469 229 450
Intangible assets ..................... 71 -- --
Other ................................. 41 267 718
--------- --------- ---------
Total deferred tax assets ............ 915 907 1,619
--------- --------- ---------
Deferred tax liabilities:
Capitalized software .................. (1,044) (1,034) (867)
Intangible assets ..................... -- (737) (1,143)
Other ................................. (67) (20) (3)
--------- --------- ---------
Total deferred tax liabilities ...... (1,111) (1,791) (2,013)
--------- --------- ---------
Net deferred tax liabilities ......... $ (196) $ (884) $ (394)
========= ========= =========
</TABLE>
12
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred
tax assets will not be realized. As a result of its evaluation, management has
recorded no valuation allowance.
Pursuant to the anticipated Tax Sharing Agreement between Marcam
Corporation and Marcam Solutions and upon the effectiveness of the
Distribution, MAPICS will become entitled to utilize certain tax attributes of
Marcam Corporation. As of September 30, 1996, those attributes include net
operating loss carryforwards of approximately $42 million, foreign tax credit
carryforwards of approximately $4 million and research and experimentation
credit carryforwards of approximately $3 million. Such carryforwards expire
between 1997 and 2012. The utilization of net operating loss carryforwards will
be limited on an annual basis due to changes in ownership of Marcam
Corporation. Management does not believe that this limitation will have a
significant impact on the amount of taxes to be paid in the future.
(9) COMMITMENTS AND CONTINGENCIES
Lease Commitments
MAPICS leases certain equipment and office space under noncancelable
agreements and leases which expire at various dates through 2001. Future
minimum lease payments under noncancelable operating leases at September 30,
1996 were as follows (in thousands):
Year ending September 30:
1997 ........................... $1,161
1998 ........................... 584
1999 ........................... 166
2000 ........................... 11
2001 ........................... 5
-------
Total minimum lease payments ...... $1,927
=======
Total rental expense charged to operations was $926,000, $1,033,000 and
$1,133,000 for fiscal years 1994, 1995 and 1996, respectively, and $533,000 for
the six months ended March 31, 1997.
Capitalization of Marcam Solutions/Marcam Corporation Debt (Unaudited)
Prior to the Distribution, MAPICS intends to contribute to Marcam
Solutions a promissory note, the maximum amount of which may be $39.0 million.
In addition, at the time of the Distribution, MAPICS will assume the $25.0
million 9.82% subordinated notes due 2001 issued by Marcam Corporation. Both of
these liabilities are currently expected to be repaid, in whole or in part,
with proceeds from a proposed offering of common stock of MAPICS. If the
offering is unsuccessful or delayed, MAPICS will be required to seek
alternative sources to finance these expected obligations.
Litigation
MAPICS is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the financial
position or results of operations of MAPICS.
MAPICS will be indemnified for future claims arising from Marcam
Corporation's PRISM, Protean and Avantis product lines and related activities
in accordance with the agreements to be entered into with Marcam Solutions as
described in Note 15.
13
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(10) EMPLOYEE STOCK OPTION PLANS
Under Marcam Corporation's stock plans, certain employees and officers
have been granted incentive stock options and non-qualified stock options. At
September 30, 1996, options for the purchase of 2,109,000 shares of Marcam
Corporation common stock were outstanding, of which options for 623,000 shares
were exercisable, with option prices ranging from $1.00 to $29.25 per share. Of
those options, MAPICS employees held 213,000, of which 96,000 shares were
exercisable, with option prices ranging from $1.50 to $22.50 per share. At
March 31, 1997, options for the purchase of approximately 2,664,000 shares of
Marcam Corporation common stock were outstanding, of which options for 874,000
shares were exercisable, with option prices ranging from $1.00 to $29.25 per
share. Of those options, MAPICS employees held approximately 357,000, of which
124,000 shares were exercisable, with option prices ranging from $1.50 to
$22.50 per share.
Promptly following the Distribution, outstanding awards under the Marcam
Corporation stock plans held by Marcam Corporation employees will be adjusted
so as to represent two separately exercisable options--one to purchase common
stock of MAPICS and one to purchase common stock of Marcam Solutions. Each of
the two options will have the same ratio of the exercise price per option to
the market value per share, the same vesting provisions, option periods and
other terms and conditions and, in aggregate, the same difference between
market value and exercise price as reflected in the original Marcam Corporation
option.
(11) EMPLOYEE BENEFIT PLAN
Certain employees of MAPICS in the United States are eligible to
participate in Marcam Corporation's sponsored profit sharing retirement plan
established under the provisions of Internal Revenue Code Section 401(k). The
expenses of MAPICS related to this plan which are included in the statements of
operations amounted to $0, $77,000 and $110,000 for the fiscal years ended
September 30, 1994, 1995, and 1996, respectively, and $85,000 for the six-month
period ended March 31, 1997.
(12) MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
MAPICS had no customers which accounted for 10% or more of total revenues
in fiscal years 1995 and 1996 or in the six months ended March 31, 1996 and
1997. In fiscal 1994, International Business Machines Corporation accounted for
12% of total revenues (See Note 14.)
MAPICS markets its products worldwide. Revenues are grouped into three
main geographic segments: U.S., Europe and All Other. Financial data by
geographic area is as follows (in thousands):
14
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
<TABLE>
<CAPTION>
U.S. Europe All Other Elimination Total
---- ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Fiscal year 1994
- ----------------
Net sales to unaffiliated customers ...... $41,210 $ 5,273 $6,300 $ -- $52,783
Transfers between geographic areas ...... 965 -- -- (965) --
-------- -------- ------- -------- --------
Total revenues ........................... 42,175 5,273 6,300 (965) 52,783
-------- -------- ------- -------- --------
Net income .............................. 5,356 1,375 1,608 1,828 10,167
Identifiable assets ..................... 32,041 3,489 862 -- 36,392
Fiscal year 1995
- ----------------
Net sales to unaffiliated customers ...... $50,934 $10,419 $7,945 $ -- $69,298
Transfers between geographic areas ...... 1,538 -- -- (1,538) --
-------- -------- ------- -------- --------
Total revenues ........................... 52,472 10,419 7,945 (1,538) 69,298
-------- -------- ------- -------- --------
Net income (loss) ........................ 9,669 458 2,623 (1,416) 11,334
Identifiable assets ..................... 34,765 4,841 1,620 -- 41,226
Fiscal year 1996
- ----------------
Net sales to unaffiliated customers ...... $56,546 $14,311 $6,745 $ -- $77,602
Transfers between geographic areas ......... 1,816 -- -- (1,816) --
-------- -------- ------- -------- --------
Total revenues ........................... 58,362 14,311 6,745 (1,816) 77,602
-------- -------- ------- -------- --------
Net income (loss) ........................ 10,058 2,197 938 (293) 12,900
Identifiable assets ........................ 37,876 4,789 2,740 -- 45,405
Six months ended March 31,1997
- ------------------------------
Net sales to unaffiliated customers ...... $32,450 $ 9,447 $2,268 $ -- $44,165
Transfers between geographic areas ...... 1,114 -- -- (1,114) --
-------- -------- ------- -------- --------
Total revenues ........................... 33,564 9,447 2,268 (1,114) 44,165
-------- -------- ------- -------- --------
Net income (loss) ........................ 5,641 702 255 (97) 6,501
Identifiable assets ..................... 37,459 5,156 4,031 -- 46,646
</TABLE>
(13) RELATIONSHIP WITH MARCAM CORPORATION
An allocation of corporate marketing expenses, corporate product
development expenses, and corporate administrative functions (including data
services, employee benefits, legal, insurance, accounting and other corporate
overhead) has been included in the selling and marketing, product development,
and general and administrative operating expenses in the combined statements of
operations and is presented in the following table. Certain general and
administrative and selling and marketing expenses, which were specifically
identified by product line in fiscal 1995 and 1996, were not directly
identified by product line or function in fiscal 1994. Management has estimated
those fiscal 1994 expenses attributable to the MAPICS-related business, and has
presented those expenses as corporate allocations in the following table.
The amounts allocated to MAPICS in each of the periods presented are as
follows (in thousands):
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
------------------------- ---------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Selling and marketing ............ $5,219 $ 223 $ 213 $ 102 $134
Product development ............ 207 221 239 117 --
General and administrative ...... 2,794 2,030 2,412 1,204 1,415
</TABLE>
15
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
Net transfers to Marcam Corporation, included in divisional equity,
includes net cash transfers to Marcam Corporation, amounts due to Marcam
Corporation for services and other charges, and income taxes paid on behalf of
MAPICS by Marcam Corporation. No interest has been charged to MAPICS related to
these transactions or to any debt held by Marcam Corporation. The weighted
average balance due to (from) Marcam Corporation was $16,901,000, $1,261,000,
$(14,806,000) and $(25,638,000) for the years ended September 30, 1994, 1995
and 1996 and for the six months ended March 31, 1997, respectively. The
activity in the net transfers to Marcam Corporation account, included in
divisional equity, is summarized below.
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
------------------------- ---------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Marcam Corporation services and other charges ...... $ 8,220 $ 2,474 $ 2,864 $ 1,549
Domestic and foreign income taxes .................. 4,641 7,112 8,076 4,071
Non-cash purchase accounting adjustments ............ -- (450) -- --
Cash transfers, net ................................. (27,208) (26,069) (26,139) (12,086)
--------- --------- --------- ----------
Net transfers to Marcam Corporation ............... $ (14,347) $(16,933) $ (15,199) $ (6,466)
========= ========= ========= ==========
</TABLE>
On February 26, 1993, Marcam Corporation acquired the exclusive worldwide
marketing rights to the MAPICS product line for 25 years. Marcam Corporation
also acquired the option to purchase the MAPICS product line and certain
related intellectual property rights. As part of the acquisition of the
marketing rights, Marcam Corporation expensed $5,568,000 of in-process research
and development costs and recorded $10,699,000 of intangible assets acquired.
These amounts have been reflected in the combined financial statements of
MAPICS.
On September 29, 1995, Marcam Corporation acquired all of the outstanding
stock of the company which owned the MAPICS product line. As part of the
acquisition, certain non-cash balance sheet adjustments were recorded by Marcam
Corporation which have been reflected in the combined financial statements of
MAPICS. The adjustments consist of the following (in thousands):
Reduction of net computer software costs $ 1,050
Reduction of payables ..................... (1,500)
---------
Net adjustment ........................... $ (450)
=========
(14) RELATED PARTY TRANSACTIONS
MAPICS has a number of marketing and product development relationships
with International Business Machines Corporation ("IBM"). IBM has purchased
licenses for MAPICS products for internal use, as well as for marketing
purposes. MAPICS has purchased certain services, equipment and software
licenses from IBM.
Under various agreements with MAPICS and its representatives, IBM markets
MAPICS products in cooperation with MAPICS and its subsidiaries or
representatives in several countries. In each case, MAPICS or its
representative pays IBM a fee for marketing MAPICS products when a sale is made
with IBM's assistance. The fee is calculated as a percentage of the license
fees received by MAPICS and varies based on the agreement's specific
territories. MAPICS paid IBM aggregate fees of $1,453,000, $198,000 and $0 in
fiscal years 1994, 1995 and 1996, respectively, and $0 in the six-month period
ended March 31, 1997.
MAPICS recorded royalties from IBM of approximately $5,675,000, $2,614,000
and $604,000 in fiscal years 1994, 1995 and 1996, respectively, and $265,000,
in the six-month period ended March 31, 1997 relating to sales of MAPICS
products.
MAPICS also licenses products and provides services to IBM in the ordinary
course of business. During fiscal years 1994, 1995 and 1996, MAPICS recognized
an aggregate of approximately $700,000, $185,000 and $409,000,
16
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
respectively, and during the six-month period ended March 31, 1997 recognized
$236,000 from licensing products and providing services to IBM. IBM also sells
products and provides services, including distribution and translation
services, to MAPICS in the ordinary course of business.
Total revenues that were derived from transactions with IBM were
$6,375,000, $2,799,000 and $1,013,000 for fiscal 1994, 1995 and 1996,
respectively, and $501,000 for the six-month period ended March 31, 1997.
(15) SUBSEQUENT EVENTS (Unaudited)
Agreements with Marcam Solutions
Distribution Agreement. Prior to the completion of the Distribution,
Marcam Corporation (to be renamed MAPICS) and Marcam Solutions will enter into
a Distribution Agreement. Pursuant to the Distribution Agreement, subject to
limited exceptions, the two companies are required to indemnify each other and
each other's directors, officers, employees, agents and representatives for
liabilities under federal or state securities laws that are a result of the
offering and the Distribution. The Distribution Agreement also provides that
each party thereto will indemnify the other party thereto and its directors,
officers, employees, agents and representatives for liabilities that may be
incurred by the indemnified party relating to, resulting from or arising out of
(i) the business, operations or assets conducted or owned or formerly conducted
or owned by the indemnifying party and its subsidiaries, or (ii) the failure by
the indemnifying party to comply with any other agreements executed in
connection with the Distribution or the offering. In addition, the Distribution
Agreement provides that each will indemnify the other party and its directors,
officers, employees, agents and representatives for any liabilities resulting
from or arising out of certain acts, failures to act or the provision of
incorrect factual information by the indemnifying party in connection with the
IRS private letter ruling request that cause the Distribution to be taxable to
the indemnified party or its stockholders. The ancillary agreements to be
executed in connection with the Distribution include a General Services
Agreement and a Tax Sharing Agreement. With respect to matters governed by the
General Services Agreement, the relationship between MAPICS and Marcam
Solutions is intended to continue in a manner generally consistent with past
practices. Management believes that the expected charges in accordance with
these agreements are fair and reasonable.
General Services Agreement. The General Services Agreement will provide
that Marcam Solutions and MAPICS will provide to each other from time to time,
upon request, certain routine and ordinary corporate services, including
financial, accounting, administrative, tax, and legal services. For these
services, the party providing such services will be reimbursed for its costs,
including the pro rata costs of its employees performing such services and
allocable overhead, on a per diem basis.
Tax Sharing Agreement. Prior to completion of the Distribution, Marcam
Corporation (to be renamed MAPICS) and Marcam Solutions intend to enter into a
Tax Sharing Agreement that defines the parties rights and obligations with
respect to certain tax liabilities and refunds of taxes relating to Marcam
Corporation's business for periods ending on or prior to the date of the
Distribution. In general, pursuant to the Tax Sharing Agreement, Marcam
Solutions shall be responsible for certain state, local and foreign taxes for
periods ending on or before the date of the Distribution (and shall be entitled
to refunds with respect to such taxes), and MAPICS shall be responsible for all
other taxes for such periods (and shall be entitled to refunds with respect to
such taxes). In addition, under the Tax Sharing Agreement, MAPICS shall be
liable for any taxes arising out of the Distribution. The Tax Sharing Agreement
further provides for cooperation with respect to certain tax matters, the
exchange of information and the retention of records.
Line of Credit
In connection with the Distribution, MAPICS will assume Marcam
Corporation's $20,000,000 revolving credit facility and be obligated to repay
any indebtedness outstanding under this credit facility. Borrowing availability
under this facility is limited to 80% of qualifying accounts receivable, and
borrowings bear interest at a designated prime rate plus 1% per annum. This
credit facility will expire on August 31, 1997 and, after the Distribution,
will be collateralized by liens on substantially all of MAPICS' assets.
Additionally, this credit facility will contain
17
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
covenants which, among other things, impose certain limitations or prohibitions
on MAPICS with respect to additional indebtedness, liens and capital leases;
the payment of dividends on, and the redemption or repurchase of, capital stock
of MAPICS; investments and acquisitions; the merger or consolidation of MAPICS
with any person or entity and the disposition of any of the property or assets
of MAPICS.
(16) SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
The following quarterly information is unaudited and, in the opinion of
management, includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the operating results for each
quarter.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
1995:
Revenues .............................. $17,213 $15,358 $15,303 $21,424 $69,298
Income before income tax expense ...... 5,744 4,040 3,502 5,160 18,446
Net income ........................... 3,529 2,482 2,152 3,171 11,334
1996:
Revenues .............................. $18,623 $17,221 $18,128 $23,630 $77,602
Income before income tax expense ...... 5,037 4,846 4,594 6,499 20,976
Net income ........................... 3,098 2,980 2,826 3,996 12,900
1997:
Revenues .............................. $23,379 $20,786
Income before income tax expense ...... 5,793 4,779
Net income ........................... 3,563 2,938
</TABLE>
18
