<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
-------------------
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-21980
----------------
CFI PROSERVICES, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0704365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 SW Sixth Avenue, Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-274-7280
----------------
The index to exhibits appears on page 19 of this document.
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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock without par value 4,919,198
(Class) (Outstanding at November 6, 1997)
- -------------------------------------------------------------------------------
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<PAGE>
CFI PROSERVICES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -September 30, 1997 and December 31, 1996 2
Consolidated Statements of Operations - Three Months Ended September
30, 1997 and 1996 and Nine Months Ended September 30, 1997 and 1996 3
Consolidated Statements of Cash Flows - Nine Months Ended September
30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
1
<PAGE>
CFI PROSERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 99 $ -
Accounts receivable, net of allowances of
$2,447 and $1,303 20,956 23,307
Inventory 171 156
Deferred tax asset 693 643
Prepaid expenses and other current assets 1,654 1,659
--------- ---------
Total Current Assets 23,573 25,765
Property and Equipment, net of accumulated
depreciation of $7,284 and $5,596 5,325 4,805
Software Development Costs, net of accumulated
amortization of $1,923 and $2,585 10,392 8,327
Purchased Software Costs, net of accumulated
amortization of $461 and $1,229 462 1,079
Other Intangibles, net of accumulated amortization
of $2,759 and $1,455 5,753 6,704
Other Assets, including deferred taxes 1,242 165
--------- ---------
Total Assets $ 46,747 $ 46,845
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Drafts payable $ - $ 425
Accounts payable 1,788 2,884
Accrued expenses 3,396 5,408
Deferred revenues 6,885 10,445
Customer deposits 1,458 869
Bank line of credit 4,718 1,627
Notes payable 291 1,269
Income taxes payable 702 46
--------- ---------
Total Current Liabilities 19,238 22,973
Long-Term Debt, less current portion 2,345 2,880
--------- ---------
Total Liabilities 21,583 25,853
Mandatory Redeemable Class A Preferred Stock 748 754
Shareholders' Equity:
Series preferred stock, 5,000,000 shares authorized,
none issued and outstanding - -
Common stock, no par value, 10,000,000
shares authorized and 4,918,108 and 4,824,973
shares issued and outstanding 18,819 17,745
Retained earnings 5,597 2,493
--------- ---------
Total Shareholders' Equity 24,416 20,238
--------- ---------
Total Liabilities and Shareholders' Equity $ 46,747 $ 46,845
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
CFI PROSERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE
Software license fees $ 9,770 $ 9,154 $ 28,055 $ 24,005
Service and Support 6,772 6,189 20,152 16,087
Other 1,352 919 3,568 2,577
-------- -------- --------- ---------
Total Revenue 17,894 16,262 51,775 42,669
COST OF REVENUE 6,986 5,616 18,626 14,411
-------- -------- --------- ---------
Gross Profit 10,908 10,646 33,149 28,258
OPERATING EXPENSES
Sales and marketing 3,993 3,337 11,243 9,526
Product development 3,151 2,783 9,092 7,841
General and administrative 2,306 1,532 6,095 4,034
Amortization of intangibles 315 330 944 752
Acquired in-process research and development - - - 8,030
-------- -------- --------- ---------
Total Operating Expenses 9,765 7,982 27,374 30,183
-------- -------- --------- ---------
Income (Loss) From Operations 1,143 2,664 5,775 (1,925)
NON-OPERATING INCOME (EXPENSE)
Interest expense (122) (45) (329) (91)
Interest income 33 39 135 237
Cancelled stock offering costs - - (487) -
Gain on sale of operating division 628 - 628 -
Other, net (10) (43) (51) (34)
-------- -------- --------- ---------
Total Non-operating Income (Expense) 529 (49) (104) 112
-------- -------- --------- ---------
INCOME (LOSS) BEFORE PROVISION FOR
(BENEFIT FROM) INCOME TAXES 1,672 2,615 5,671 (1,813)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 735 1,123 2,495 (163)
-------- -------- --------- ---------
NET INCOME (LOSS) 937 1,492 3,176 (1,650)
PREFERRED STOCK DIVIDEND 24 24 72 72
-------- -------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON $ 913 $ 1,468 $ 3,104 $ (1,722)
-------- -------- --------- ---------
-------- -------- --------- ---------
NET INCOME (LOSS) PER SHARE $ 0.18 $ 0.28 $ 0.61 $ (0.36)
-------- -------- --------- ---------
-------- -------- --------- ---------
SHARES USED IN PER SHARE CALCULATIONS 5,122 5,194 5,130 4,746
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
CFI PROSERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) applicable to common shareholders $ 3,104 $ (1,722)
Adjustments to reconcile net income (loss) applicable to common
shareholders to cash provided by operating activities:
Depreciation and amortization 5,295 3,358
Write-off of in-process research and development - 8,030
Gain on sale of property and equipment - (10)
Gain on sale of operating division (628) -
Deferred income taxes (50) (2,076)
Interest accreted (payments made) on mandatory
redeemable preferred stock, net (6) (5)
(Increase) decrease in assets, net of effects from
purchase of businesses:
Receivable, net 1,892 1,887
Income taxes receivable - 547
Inventories, net (15) 60
Prepaid expenses and other current assets 5 489
Increase (decrease) in liabilities, net of effects from
purchase of businesses:
Drafts payable (425) -
Accounts payable (1,096) (105)
Accrued expenses (2,359) 1,251
Deferred revenues (3,560) (2,955)
Customer deposits 589 (441)
Other current liabilities - (338)
Income Taxes Payable 1,080 -
-------- ---------
Net cash provided by operating activities 3,826 7,970
Cash flows from investing activities:
Expenditures for property and equipment (2,257) (2,084)
Software development costs capitalized (3,785) (3,685)
Expenditures for purchased software - (20)
Proceeds from sale of operating division 87 -
Proceeds from sale/maturity of investments - 2,826
Proceeds from sale of property and equipment - 19
Investment in Vendor Payment Systems, Inc. - (359)
Cash paid for acquisition of OnLine and COIN
Division, net of cash received - (2,295)
Cash paid for acquisition of Input Creations, Inc. - (2,107)
Cash paid for other acquisitions - (812)
Other assets - 353
-------- ---------
Net cash used in investing activities (5,955) (8,164)
Cash flows from financing activities:
Net proceeds from line of credit 3,091 1,627
Payments on notes payable (978) (6,910)
Payments on long-term debt (535) (323)
Proceeds from issuance of common stock 650 1,142
-------- ---------
Net cash provided by (used in) financing activities 2,228 (4,464)
-------- ---------
Increase (decrease) in cash and cash equivalents 99 (4,658)
Cash and cash equivalents:
Beginning of period - 4,844
-------- ---------
End of period $ 99 $ 186
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
CFI PROSERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS
OR AS OTHERWISE INDICATED)
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein for the three and nine month periods
ended September 30, 1997 and 1996 is unaudited; however, such information
reflects all adjustments consisting only of normal recurring adjustments which
are, in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods. The financial information as of December 31, 1996 is derived from the
audited financial statements contained in the Annual Report on Form 10-K as
filed by CFI ProServices, Inc. (the Company). The interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's 1996 Annual
Report on Form 10-K.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2: LINE OF CREDIT
Effective June 1, 1997, the Company negotiated to increase the amount of credit
available under its line of credit from $7.5 million to the lesser of $9.0
million or 50% of accounts receivable and to change the expiration date to May
1, 1998. Total borrowings under the line of credit at September 30, 1997 were
$4.7 million.
NOTE 3: SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
-------- --------
<S> <C> <C>
Cash paid during the period for income taxes $ 1,464 $ 1,367
Cash paid during the period for interest and
dividends 359 142
Tax benefit from exercise of nonqualified stock
options 424 152
Issuance of Common Stock in relation to
acquisition - 266
Issuance of notes payable and other long-term
liabilities in relation to acquisitions - 7,385
Note receivable received in connection with the
sale of remittance processing division 788 -
Increase in intangibles for accrued acquisition
related royalties 347 -
</TABLE>
5
<PAGE>
NOTE 4: ACQUISITIONS AND SALES
In April 1996, the Company acquired all of the capital stock of two software
companies and certain assets of four other software companies in four separate
transactions. The companies acquired were OnLine Financial Communication
Systems, Inc. ("OnLIne"), COIN Banking Systems, Inc. ("COIN"), Input Creations,
Inc. ("Input"), Pathways Software, Inc. and The Halcyon Group, Inc. All of
these acquisitions were accounted for as purchases. The combined purchase
prices totaled $13.8 million plus certain contingent royalties tied to future
revenue production or to software conversions. The $13.8 million included $5.2
million of cash, $7.6 million in notes payable and other long-term liabilities,
$266,000 of Common Stock and $0.7 million of other assumed liabilities. In
conjunction with these acquisitions, the Company recorded $4.1 million of
goodwill which is being amortized ratably over a seven year period and $8.0
million ($5.2 million net of tax benefits) of acquired in-process research and
development, all of which was expensed currently.
Unaudited proforma results of operations, including results of OnLine, COIN and
Input (the other companies are not considered significant either individually or
in the aggregate and are therefore, to the extent that they are not already
included in the actual results, not included in the unaudited proforma
information) for the nine month period ended September 30, 1996, assuming such
acquisitions occurred at the beginning of the period, are as follows:
Nine Months Ended
September 30, 1996
------------------
Total revenues $ 45,945
Net loss applicable to common stock (1,706)
Loss per share (0.36)
In September 1997, the Company sold substantially all of the assets of its
remittance processing division for cash and notes payable in quarterly
installments over four years with interest at 8.5% per annum. The gain on the
sale of approximately $0.6 million is included in non-operating income. On an
annual basis, the remittance processing revenues and expenses were both
approximately $1 million.
NOTE 5: EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement 128,
EARNINGS PER SHARE ("SFAS 128"), superseding Opinion 15. This statement
establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS 128, the Company will be required to present both basic net
income per share and diluted net income per share. Basic net income per share
is expected to be comparable to or slightly higher than the currently presented
primary net income per share, as the dilutive effect of stock options will not
be considered in computing basic net income per share. Diluted net income per
share is expected to be comparable to or slightly higher than the currently
presented primary net income per share, since the calculation of diluted net
income per share will use the average market price instead of the higher of the
average or ending market price for its calculations. The Company is required to
adopt SFAS 128 for periods ending after December 15, 1997.
6
<PAGE>
Pro forma effects of applying SFAS 128 are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1997 1996 1997 1996
------- ------- ------- --------
Primary EPS as reported $ 0.18 $ 0.28 $ 0.61 $ (0.36)
Effect of SFAS 128 0.01 0.02 0.02 0.00
------- ------- ------- --------
Basic EPS as restated $ 0.19 $ 0.30 $ 0.63 $ (0.36)
------- ------- ------- --------
------- ------- ------- --------
Fully diluted EPS as reported $ 0.18 $ 0.28 $ 0.61 $ (0.36)
Effect of SFAS 128 0.00 0.00 0.00 0.00
------- ------- ------- --------
Diluted EPS as restated $ 0.18 $ 0.28 $ 0.61 $ (0.36)
------- ------- ------- --------
------- ------- ------- --------
NOTE 6: RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO SHOULD BE READ IN
CONJUNCTION WITH THE FOLLOWING DISCUSSION. THIS DISCUSSION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE
CAUTIONARY STATEMENTS MADE IN THIS DISCUSSION SHOULD BE READ AS BEING APPLICABLE
TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS FILING.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE
DISCUSSED IN "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
FILING.
OVERVIEW
CFI is a leading provider of customer service software products and services to
financial institutions. The Company combines its technology, banking, and legal
expertise to deliver knowledge-based software solutions that enable institutions
to simplify key business processes such as sales and service, improve
productivity, strengthen customer relationships, and maintain compliance with
both internal business policies and external government regulations.
Approximately 5,000 financial institutions have licensed one or more of the
Company's products.
During 1993, substantially all of the Company's revenue was derived from the
Company's Laser Pro and Deposit Pro products. Today, the Company licenses more
than 20 products organized into five product groups: lending, retail delivery,
electronic delivery, marketing, and connectivity software. Due to its product
diversification efforts, the Company is now less reliant on the Laser Pro and
Deposit Pro products. Forty-three percent of the Company's revenue came from
these two products for the nine month period ended September 30, 1997, compared
to 50% for the same period in 1996.
7
<PAGE>
CFI generates recurring revenue from software maintenance agreements. For the
three month and nine month periods ended September 30, 1997, service and support
fees revenue accounted for approximately 38% and 39% of consolidated revenue,
respectively. Substantially all software customers subscribe to the Company's
service and support programs, which provide ongoing product enhancements and,
where applicable, updates to facilitate compliance with changing banking
regulations.
The Company's cost structure is relatively fixed and the cost of generating
revenue, in aggregate, does not vary significantly with changes in revenue. As a
result, the Company typically generates significantly greater profit margins
from incremental sales once fixed costs are covered. In addition, any failure to
achieve revenue targets in a particular period would adversely affect profit
margins for that period.
The Company believes that sales to larger banks will constitute a higher
percentage of total revenue in future periods. Transactions with these larger
banks are typically of greater scope, usually involve a greater sales effort
over a longer period of time, and require more customization and prolonged
acceptance testing. Accordingly, the predictability of revenue for any
particular period may be diminished to the extent the Company increases sales to
larger banks. In addition, this project oriented business tends to cause
growth in unbilled accounts receivable resulting from the use of percentage of
completion contracts and deferred payment terms and increased collection times
for billed accounts receivable. Both factors, in turn, result in higher days
sales outstanding (DSO's) in accounts receivable.
The Company's backlog as of September 30, 1997, was approximately $12.0 million,
as compared to approximately $9.2 million and $5.1 million at the end of the
third quarters of 1996 and 1995, respectively. CFI's backlog consists of firm
signed orders taken and not yet converted to revenue, but expected to convert to
revenue within the next twelve months. Orders constituting the Company's backlog
are subject to changes in delivery schedules or to cancellation at the option of
the purchaser without significant penalty. The stated backlog is not necessarily
indicative of the Company's revenue for any future period.
8
<PAGE>
ACQUISITIONS AND NEW BUSINESS VENTURES
The Company has expanded its market presence by acquiring products,
technologies and companies that complement the Company's product suite or
increase its market share. The Company has completed the following ten
acquisitions since June 1994.
<TABLE>
<CAPTION>
COMPANY DATE ACQUIRED PRINCIPAL PRODUCTS/MARKETS ACQUIRED
------- ------------- -----------------------------------
<S> <C> <C>
Assets of the Products Division June 1994 Access to customers in certain midwestern
of Professional Bank states for the Company's compliance
Systems, Inc. products
The Genesys Solutions September 1994 Call center software
Group, Inc.
Texas Southwest Technology April 1995 StarGate connectivity products and ACH
Group products
Culverin Corporation November 1995 Encore! Platform and teller branch
automation products and RPxpress!
remittance processing product
OnLine Financial April 1996 Over 1,000 branch automation customers
Communications employing DOS-based technology
Systems, Inc.
COIN Banking Systems, Inc. April 1996 Application Manager indirect lending product
Assets of Input Creations, Inc. April 1996 LOANscape mortgage lending product
Assets of Halcyon Group, Inc. April 1996 fisCAL loan decision support product and
TriScore
Assets of Pathways April 1996 LoansPlus neural net loan decision support
Software, Inc. and portfolio management product
Vendor Payment Systems, Inc. April 1996 Bill payment services company
</TABLE>
There can be no assurance that any of these or future acquisitions will have a
favorable impact on the performance of the Company. The Company believes that it
has achieved its objectives of growth and broadening its product offerings and
customer base through this acquisition program and intends to continue to pursue
acquisitions.
The aggregate purchase price for these ten acquisitions was $20.2 million and
380,967 shares of Common Stock, plus contingent royalties. In connection with
such acquisitions, the Company incurred non-cash charges primarily relating to
the write-off of acquired in-process research and development efforts totaling
$8.0 million in April 1996 and $4.5 million in November 1995. The terms of
certain of the acquisitions provide that, based on various factors including the
passage of time, certain product revenue or product development, the Company
will be required to pay contingent royalties, some of which obligations the
Company may satisfy through the issuance of shares of its Common Stock (see
"Cost of Revenue"). Because amortization of certain intangible assets arising
from the Company's acquisition activity is not deductible for federal income tax
purposes, certain amortization expense incurred by the Company has the effect of
increasing the Company's effective tax rate for financial reporting purposes.
9
<PAGE>
From time to time, the Company may also evaluate establishing new business
operations or making minority investments in new business ventures, including
joint ventures.
In March 1997, CFI announced the creation of Lori Mae (Loan Origination
Management and Exchange Corp.), a company that will securitize small business
loans originated by community banks. The Company expects to invest approximately
$1.5 million for up to 50% ownership in the venture. The Company will use the
equity method to account for this investment. Lori Mae leverages the strength of
the Company's Laser Pro Closing and Laser Pro fisCAL Online products, which are
the required software for financial institutions participating in this
securitization opportunity. The Company believes that this venture will not
only contribute commissions from the securitization transactions but, by giving
CFI's lending suite of products another competitive edge over the competition,
will serve to further strengthen and expand the Company's leadership in the
market for lending products. Still in its initial stages of execution at this
point, Lori Mae is not expected to materially affect CFI's financial results in
1997.
RESULTS OF OPERATIONS
The following table sets forth statements of income data of the Company
expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue
Software license fees . . . . . . . . . . . . . . . 54.6% 56.3% 54.2% 56.3%
Service and support . . . . . . . . . . . . . . . . 37.8 38.1 38.9 37.7
Other . . . . . . . . . . . . . . . . . . . . . . . 7.6 5.6 6.9 6.0
-------------------- --------------------
Total revenue . . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0 100.0
Gross profit. . . . . . . . . . . . . . . . . . . . . 61.0 65.5 64.0 66.2
Operating expenses
Sales and marketing . . . . . . . . . . . . . . . . 22.3 20.6 21.7 22.2
Product development . . . . . . . . . . . . . . . . 17.6 17.1 17.6 18.4
General and administrative. . . . . . . . . . . . . 12.9 9.4 11.8 9.5
Amortization of intangibles . . . . . . . . . . . . 1.8 2.0 1.8 1.8
Acquired in-process research and
development . . . . . . . . . . . . . . . . . . . - - - 18.8
-------------------- --------------------
Total operating expenses. . . . . . . . . . . . . . . 54.6 49.1 52.9 70.7
-------------------- --------------------
Income (loss) from operations . . . . . . . . . . . . 6.4 16.4 11.1 (4.5)
Non-operating income (expense). . . . . . . . . . . . 2.9 (0.3) (0.2) 0.3
-------------------- --------------------
Income (loss) before income taxes . . . . . . . . . . 9.3 16.1 10.9 (4.2)
Provision for (benefit from) income taxes . . . . . . 4.1 6.9 4.8 (0.4)
Preferred stock dividend. . . . . . . . . . . . . . 0.1 0.2 0.1 0.2
-------------------- --------------------
Net income (loss) applicable to
common shareholders . . . . . . . . . . . . . . . . 5.1% 9.0% 6.0% (4.0%)
-------------------- --------------------
-------------------- --------------------
</TABLE>
10
<PAGE>
The following table sets forth percentage changes, period over period, in the
statements of income data of the Company:
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 OVER 1997 OVER
SEPTEMBER 30, SEPTEMBER 30,
1996 1996
------------- --------------
Revenue
Software license fees. . . . . . . . 6.7% 16.9%
Service and support. . . . . . . . . 9.4 25.3
Other. . . . . . . . . . . . . . . . 47.1 38.5
------------- --------------
Total revenue. . . . . . . . . . . . . 10.0 21.3
Gross profit . . . . . . . . . . . . . 2.5 17.3
Operating expenses
Sales and marketing. . . . . . . . . 19.6 18.0
Product development. . . . . . . . . 13.2 15.9
General and administrative . . . . . 50.6 51.1
Amortization of intangibles. . . . . (4.6) 25.6
Acquired in-process research and
development. . . . . . . . . . . . -- (100.0)
------------- --------------
Total operating expenses . . . . . . . 22.3 (9.3)
------------- --------------
Income (loss) from operations. . . . . (57.1) 400.0
Non-operating income (expense) . . . . 1,205.9 (192.5)
------------- --------------
Income (loss) before income taxes. . . (36.1) 412.9
Provision for (benefit from) income
taxes. . . . . . . . . . . . . . . . (34.6) 1,631.8
------------- --------------
Net income (loss) applicable to
common shareholders. . . . . . . . . (37.8)% 280.3%
------------- --------------
------------- --------------
REVENUE
Total revenue increased 10% to $17.9 million and 21% to $51.8 million for the
three month and nine month periods ended September 30, 1997, respectively,
compared to $16.3 million and $42.7 million, respectively, for the comparable
periods in 1996.
Software License Fees. Software license fees include sales of software to
customers, fees for software customization, and fees related to implementing
software and systems at customer sites.
Software license fees increased 7% to $9.8 million and 17% to $28.1 million for
the three month and nine month periods ended September 30, 1997, respectively,
from $9.2 million and $24.0 million, respectively, for the comparable periods in
1996. Continued strength in Encore! Branch Automation and all areas of lending
products other than Laser Pro Mortgage, plus the improved performance for
Encore! Call Center led the
11
<PAGE>
gains in the third quarter, offsetting weakness in electronic delivery,
interfaces, remittance, and fair lending.
PERCENTAGE OF SOFTWARE LICENSE FEES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Lending Products . . . . . . . . . . 47.5% 45.2% 50.2% 42.9%
Retail Delivery Products . . . . . . 41.6 33.9 35.1 41.7
Electronic Delivery Products . . . . 3.6 8.2 6.9 7.6
Marketing Products . . . . . . . . . 4.0 6.9 4.2 3.7
Connectivity Products. . . . . . . . 3.3 5.8 3.6 4.1
----- ----- ----- -----
Total Software . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
----- ----- ----- -----
Lending products license revenue grew $0.5 million, or 12%, and $3.8 million, or
37%, for the three month and nine month periods ended September 30, 1997,
respectively, compared to the same periods of 1996. For the quarter, growth in
this product group was led by a 36% increase in Laser Pro Closing and a 30%
increase in Laser Pro Application Manager, which more than offset a
disappointing quarter for Laser Pro Mortgage. System and integration problems
encountered in the installation of the newly released client/server version of
the mortgage product at eight customers prevented any revenue recognition for
this product during the third quarter. The Company anticipates resolving most
of the mortgage product's problems in the fourth quarter of 1997. For the nine
months ended September 30, 1997, most products in the lending group have shown
gains, with 26% growth in Laser Pro revenue, 69% in Laser Pro Application
Manager and a more than doubling in Laser Pro fisCAL Online. Sales of Laser
Pro to large institutions for the quarter declined slightly to $1.2 million from
last year's third quarter, but are still more than 30% higher year to date over
the comparable period in 1996.
Retail delivery products increased $1.0 million, or 31%, for the three month
period ended September 30, 1997, compared to the same period a year ago, while
year to date license fees in this category reflected a slight decline of $0.2
million, or 2%, compared to the same period a year ago. Encore! Branch
Automation experienced a particularly outstanding quarter, posting a 119%
increase when compared to the third quarter of 1996. Increases in Deposit Pro
and Encore! Call Center revenues of 12% and 30%, respectively, for the quarter
ended September 30, 1997 helped offset a long anticipated 60% decline for OnLine
Branch Automation. License fee revenue for OnLine is expected to continue to
decline in future periods, as the Company no longer actively markets this older,
DOS based product. For the year to date period, a 61% increase in Encore! Branch
Automation revenue was offset by declines in Deposit Pro, Encore! Call Center,
and OnLine Branch Automation.
The year to date decline in Deposit Pro revenue results from a one-time jump in
revenues in the second quarter of 1996 when the Company released the Windows
12
<PAGE>
version of Deposit Pro. The 1997 results for Deposit Pro have been in line with
expectations and represent more normal levels of revenue for this product.
Call Center revenues increased in the third quarter over both the 1996 third
quarter and the 1997 second quarter because of accelerating activity on the
Company's Commerce Bank project. This project continues to be the only
significant call center order in the backlog. The Company expects Call Center
sales to increase once the Commerce installation can be used as a reference site
for potential customers, most likely towards the end of this year. Call Center
revenues for 1997 will be roughly $2 million below the Company's expectations.
For the quarter ended September 30, 1997, Encore! Personal Branch revenues
declined 53% from 1996's third quarter. Year-to-date, Encore! Personal Branch
license revenues were flat with the same period in 1996. The Company expects
Personal Branch license revenues for all of 1997 to be more than $4 million
short of its initial plans. The Company's home banking product has suffered from
the delayed introduction of the Internet-based WebPB product (now released), a
dependence solely on UNIX based servers that has put it at a price disadvantage
to Windows NT based products that compete in this market segment, and the lack
of a large installation to demonstrate to the market Encore! Personal Branch's
ability to handle large numbers of transactions. The Company is in the process
of developing a new version of Encore! Personal Branch that can operate in
either a Windows NT or UNIX environment, handle very large transaction volumes,
and be used by single institutions and in a service bureau environment. Early
versions of the product will be available in the front half of 1998. In
addition, the Company believes that its existing UNIX based product remains a
viable solution for certain types of customers. With re-energized sales of the
existing product and the availability of the new product, the Company expects
Encore! Personal Branch to regain its market momentum in 1998. As of September
30, 1997, Encore! Personal Branch has been licensed to more than 175 financial
institutions.
Marketing products license fee revenue fell $0.2 million to $0.4 million and
grew $0.3 million to $1.2 million for the three month and nine month periods
ended September 30, 1997, respectively, compared to the same periods of 1996.
Sales of Encore! Desktop, released in the second quarter of 1996, consistently
contributed about $0.4 million a quarter, while Pro Active sales continue to be
sluggish, down from 1996 levels both for the quarter and year to date.
Connectivity products recorded a 41% decline in third quarter license fee
revenue for the third quarter of 1997 as compared to the third quarter of 1996,
but year to date this license revenue is approximately equal to connectivity
revenues for the equivalent 1996 period. The decline in the current quarter is
attributable to non-StarGate middleware projects, with the Company increasingly
focusing on the technically superior and more cost effective StarGate solution
to interface its products to customer host systems.
SERVICE AND SUPPORT FEES. Service and support fees consist primarily of
recurring software support charges and revenue from training customers in the
use of the Company's products. Substantially all of the Company's software
customers subscribe to its support services, which require the payment of annual
or quarterly maintenance fees.
13
<PAGE>
Service and support fees increased $0.6 million, or 9%, and $4.1 million, or
25%, for the three month and nine month periods ended September 30, 1997,
respectively, over the comparable periods in 1996. These increases resulted
largely from the increase in the installed base of Company products,
including those installed bases acquired in the second quarter of 1996.
OTHER REVENUE. Other revenue includes Vendor Payment Systems ("VPS") processing
fees, sales of preprinted forms and supplies, and certain consulting revenue.
This revenue increased $0.4 million, or 47%, and $1.0 million, or 38%, for the
three month and nine month periods ended September 30, 1997, respectively, over
the comparable periods in 1996. The acquisition of VPS in April 1996, plus a
higher than expected third quarter for forms and hardware sales in conjunction
with the Company's software products, account for the increases in 1997 relative
to 1996. The Company does not expect this category of revenue to grow
significantly in the future.
COST OF REVENUE
Cost of revenue primarily consists of amortization of internally developed and
purchased software, royalty payments, compliance warranty insurance premiums,
software production costs, costs of product support, training and
implementation, costs of software customization, materials costs for forms and
supplies, and bill payment processing costs.
Cost of revenue increased $1.4 million, or 24%, to $7.0 million and $4.2
million, or 29%, to $18.6 million for the three month and nine month periods
ended September 30, 1997, respectively, over the comparable periods in 1996.
Primary factors leading to the quarterly increase were a $0.5 million increase
in amortization expense for developed software costs, plus $0.3 million and $0.2
million increases in support costs and royalty fees, respectively, both directly
related to the Company's higher revenue levels and installed user base. The
remaining increases came from higher software publication costs associated with
higher levels of software license sales and update costs to the existing user
base, plus increases in VPS bill payment volume. For the year to date period,
increases in expenses to support the larger user base (including that acquired
as part of the April 1996 acquisitions) accounted for $1.6 million of the $4.2
million increase, with amortization of developed software costs contributing
another $1.0 million increase and the VPS operation (acquired in April 1996 and
processing significantly higher volumes in 1997) adding another $0.6 million.
The remainder resulted from higher software publication costs and royalty
payments directly related to the Company's higher revenue levels.
As a result of recent acquisitions, costs associated with royalty payments will
increase in future periods. The Company is obligated to pay royalties ranging
from 3% to 18% of revenue related to certain products acquired in the various
acquisitions since June 1994. In addition, the Company is obligated to pay
MicroBilt Corporation a fixed amount per OnLine customer converted to the
Company's products. The royalty obligations generally extend three to five
years from the acquisition date.
14
<PAGE>
During the last twelve months, several software development projects reached
commercial feasibility. As a result, the Company began to amortize certain
product development costs, which had been capitalized in prior periods. In
addition, the Company recorded amortization as a result of software acquired in
connection with the 1996 acquisitions. In the third quarter of 1997 the Company
amortized $1.0 million of internally developed and purchased software
development costs. This represented an approximate doubling of this expense over
the third quarter of last year. Developed and purchased software amortization
for the first nine months of 1997 amounted to $2.3 million, compared to $1.3
million for the same period in 1996. The Company expects that the amount of
software amortization in 1997 will materially exceed the amount amortized in
1996, and that 1998 amortization will materially exceed 1997 amounts.
The Company capitalized $0.8 million and $3.8 million in software development
costs in the three month and nine month periods ended September 30, 1997,
respectively, compared to $1.8 million and $3.7 million for the same periods of
1996. Capitalized software development costs, net of accumulated amortization,
were $10.4 million as of September 30, 1997, up from $8.3 million as of December
31, 1996. The Company generally expects that software amortization will equal
or exceed software capitalization in future quarters.
The Company's gross margin declined to 61% from 66%, and to 64% from 66%, in the
three month and nine month periods ended September 30, 1997, respectively,
compared to the equivalent periods of 1996. This decline was primarily
attributable to increased software amortization expense in the current year,
increased royalty expenses, and the increasing number of major account sales
requiring more complex implementation and support services. The expected
continued increase in software amortization and royalty expense, and expected
continued investments in implementation capacity necessary to support the growth
of project oriented business may cause future gross margins to decline somewhat
from current levels.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses increased to $4.0 million, or
22% of revenues, and to $11.2 million, or 22% of revenues, for the three month
and nine month periods ended September 30, 1997, respectively, compared to $3.3
million, or 21% of revenues, and $9.5 million, or 22% of revenues, for the same
periods in 1996. The principal causes of the increases for both the quarter and
year to date include a 35% increase in telephone sales staffing, a 62% increase
in advertising costs incurred to develop a comprehensive promotional campaign to
include all of the Company's products, a 25% increase in travel necessary to
support the integration of all of the acquired products, and to general salary
increases required to align the entire sales force under one comprehensive
compensation program. In addition, the third quarter of 1997 included accrued
severance payments for a former officer of the Company.
PRODUCT DEVELOPMENT. Product development expenses include costs of enhancing
existing products and developing new products. Product development expenses,
before software capitalization, were $3.6 million, or 20% of revenue, and $11.4
million, or 22% of revenue, for the three month and nine month periods ended
September 30, 1997,
15
<PAGE>
respectively. These levels are down as a percentage of revenues from 24% and
25% for the equivalent periods of 1996. Development efforts related to the
forthcoming Laser Pro Closing Windows release and the new Windows-based Laser
Pro Application Manager aggressively continued in the third quarter of 1997,
but these are the last of the Company's large Windows conversion projects.
The extraordinary efforts necessary to convert the Company's products to
Windows caused gross product development expenses, as a percentage of
revenues, to be near 25% in 1995 and 1996. As those projects are completed,
the Company expects gross product development expenses, as a percentage of
revenues, to move closer to 20%.
Capitalization of internally developed software costs decreased $0.7 million to
$0.8 million and increased $0.1 million to $3.8 million for the three month and
nine month periods ended September 30, 1997, respectively, relative to the same
periods a year ago.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $2.3
million and $6.1 million for the three month and nine month periods ended
September 30, 1997, respectively, compared to $1.5 million and $4.0 million for
the same periods in 1996. General and administrative expenses as a percentage
of revenue increased to 13% and 12% for the three month and nine month periods
ended September 30, 1997, respectively, compared to 9% in 1996 for both the
comparable quarter and year to date periods. The relative growth over 1996 is
due in part to additional systems and infrastructure costs necessary to
accommodate growth since the April 1996 acquisitions, and in part due to the
Company's higher level of allowance for bad debts, which has been adjusted
upward in 1997 to cover a higher relative level of accounts receivable related
to more major account and project based revenue activity and to higher sales
volumes overall. Bad debt expense increased $0.5 million and $0.8 million for
the quarter and year to date, respectively, over the comparable 1996 periods.
Although the level of this expense category increased slightly in the third
quarter due to required increases in the bad debt allowance, the Company does
not expect general and administrative expenses to increase significantly as a
percentage of revenue in future quarters.
AMORTIZATION OF INTANGIBLES
Intangibles include acquisition payments assigned to goodwill, noncompetition
agreements, and customer lists. These costs are amortized over periods ranging
from five to seven years. The increase to $0.9 million for the nine month period
September 30, 1997, from $0.7 million for the comparable period of 1996 was due
to the April 1996 acquisitions of six companies.
NON-OPERATING INCOME (EXPENSE)
In February 1997, the Company's Board of Directors elected not to proceed with a
planned follow-on stock offering of the Company's common stock. The Company
took a $0.5 million non-operating charge in the first quarter as a result of the
cancellation. The Company's Board of Directors determined that the stock price
at which the Company would be required to offer the shares was too low and would
unfairly dilute the investment of existing shareholders.
16
<PAGE>
In September 1997 the Company completed the sale of its RPxpress! remittance
processing division to a remittance processing company. CFI acquired this
division along with the Encore! Branch Automation business in the November
1995 acquisition of Culverin Corporation. On an annual basis, the remittance
processing revenues and expenses were both approximately $1 million. The
Company received 10% of the sales price in cash with the remainder to be paid
in quarterly installments with interest at 8.5% per annum over four years.
In connection with the sale, the Company recorded a non-operating gain of
$0.6 million.
Other non-operating income, which consists primarily of interest income and
expense, was a net expense of $0.1 million and $0.2 million for the three
months and nine months ended September 30, 1997, respectively, compared to
net non-operating income of approximately zero and $0.1 million for the same
periods of 1996. The April 1996 acquisitions, for which the Company used a
significant amount of cash, caused a significant change in the Company's cash
position and resultant investment income.
PROVISION FOR INCOME TAXES
The effective tax rate for the three months and nine months ended September 30,
1997, was 44%, compared to the 43% rate experienced during the comparable
periods in 1996. This increase in the effective rate is primarily due to
increasing amounts of non-deductible royalty expense and goodwill amortization
levels resulting from the Company's various acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1997, was $4.3 million, increasing $0.9 million
during the third quarter and $1.6 million from December 31, 1996. Receivables
growth, net of deferred maintenance revenues outpaced working capital growth,
and as a result, borrowings on the bank line of credit increased to $4.7 million
at September 30, 1997, from $1.6 million at December 31, 1996. The significant
increase in large project oriented business accounts for most of the receivable
growth. Unbilled accounts receivable and milestone billings, which have
abnormally long collection cycles, both result from project oriented business.
Unbilled accounts receivable at September 30, 1997, were $4.9 million or 24% of
total accounts receivable compared with $3.3 million or 14% of total accounts
receivable at December 31, 1996. Days sales outstanding in accounts receivable,
including both billed and unbilled accounts receivable, increased to 104 days at
September 30, 1997, from 90 days at December 31, 1996 (excluding the distorting
impact of annual maintenance invoices). The bank line of credit was renewed
until May 1, 1998, and now carries a limit of the lesser of $9 million or 50% of
accounts receivable.
Operations provided $3.8 million in cash for the nine months ended September 30,
1997. Principal operating sources of cash during the nine months ended
September 30, 1997, included net income, excluding noncash items, of $8.8
million and a $1.9 million reduction in accounts receivable. The seasonal
pattern of the Company's maintenance billing cycles should have resulted in a
greater decline in accounts receivable. However,
17
<PAGE>
the impact of increasing project oriented business caused both unbilled
accounts receivable and days sales outstanding in accounts receivable
(adjusted for the distorting impact of annual maintenance invoices) to grow
disproportionately. The increasing frequency of the long term
milestone-based project business was also the source of the $0.6 million
provided by increased customer deposits during the period. The principal
operating uses of cash during the period included $2.4 million attributable
to a decline in accrued expenses due primarily to the payment during the
first quarter of bonus and commission amounts for 1996 performance. An
additional $3.6 million use of funds was from the decline in deferred
revenue, also a result of the annual maintenance billing pattern, and another
$1.5 million was used to reduce the Company's drafts payable balance to
approximately zero and reduce outstanding accounts payable.
Nearly two-thirds of the $6.0 million net cash used in investing activities for
the nine month period ended September 30, 1997, was due to the investment in
software development on new products to fuel future Company growth, such as the
Windows versions of Laser Pro Mortgage, Laser Pro Closing, and Laser Pro
Application Manager. Investments in Company infrastructure necessary to
accommodate the Company's continuing expansion, both in physical space and in
systems requirements, accounts for the balance of the cash used in investing
activities this year.
Cash provided by financing activities of $2.2 million during the nine month
period ended September 30, 1997, primarily resulted from $3.1 million provided
by net borrowings on the bank line of credit facility, partially offset by the
payment of approximately $1.5 million on acquisition related debt. In addition
$0.7 million of cash was provided by the exercise of stock options.
Future cash requirements could include, among other things, purchases of
companies, products or technologies, expenditures for internal software
development, capital expenditures necessary to the expansion of the business,
and installment payments on debt related to acquisitions. Available cash
resources include cash generated by the Company's operations and a revolving
line of credit of up to $9.0 million with the Company's principal bank, of which
$4.3 million was available at September 30, 1997.
From time to time, the Company receives contract claims from its customers. In
the second quarter of 1997, one of the Company's customers canceled a $0.8
million project with the Company and requested a partial refund of moneys paid
and cancellation of unpaid invoices. The Company believes that it has met all
of its contractual obligations to this customer and intends to enforce the terms
of the agreement.
The Company believes that funds expected to be generated from existing
operations and borrowings under its revolving line of credit will provide the
Company with sufficient funds to finance its current operations. However, any
significant new acquisitions or investments would require additional financing.
In the short term, such financing would most likely be in the form of
convertible debt; longer term, the Company may reconsider a stock offering. No
assurance can be given that additional financing will be available or, that, if
available, such financing will be obtainable on terms favorable to the Company
or its shareholders.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed as part of this report are listed below:
Exhibit Number and Description
- ------------------------------
10 Amendment No. 7 dated June 1, 1997, to business loan agreement dated
November 8, 1995, previously filed with the Company's Form 10-Q for the
quarter ended June 30, 1997, as filed with the Securities and Exchange
Commission on August 13, 1997, and is incorporated herein by reference.
11 Calculations of Net Income Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended September 30,
1997.
19
<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: November 7, 1997 CFI PROSERVICES, INC.
By: /s/ MATTHEW W. CHAPMAN
---------------------------------------
Matthew W. Chapman
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ FRED HALL
---------------------------------------
Fred Hall
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
20
<PAGE>
CFI PROSERVES, INC.
CALCULATIONS OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
---------------------- ----------------------
Primary Fully Diluted Primary Fully Diluted
------------------------------------------------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding
For The Period 4,936 4,936 4,846 4,846
Dilutive Common Stock Options Using The
Treasury Stock Method 186 192 348 348
----------------- ------------------
Total Shares Used For Per Share Calculations 5,122 5,128 5,194 5,194
Net Income (Loss) Applicable to Common Stock 913 913 1,468 1,468
----------------- ------------------
----------------- ------------------
Net Income (Loss) Per Common Share $ 0.18 $ 0.18 $ 0.28 $ 0.28
----------------- ------------------
----------------- ------------------
<CAPTION>
Nine Months Ended September 30,
1997 1996
----------------------- -----------------------
Primary Fully Diluted Primary Fully Diluted
----------------------- -----------------------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding
For The Period 4,895 4,895 4,746 4,746
Dilutive Common Stock Options Using The
Treasury Stock Method 235 235 - -
-------------------- ------------------
Total Shares Used For Per Share Calculations 5,130 5,130 4,746 4,746
Net Income (Loss) Applicable to Common Stock 3,104 3,104 (1,722) (1,722)
-------------------- ------------------
-------------------- ------------------
Net Income (Loss) Per Common Share $ 0.61 $ 0.61 $ (0.36) $ (0.36)
-------------------- ------------------
-------------------- ------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 99
<SECURITIES> 0
<RECEIVABLES> 23,403
<ALLOWANCES> 2,447
<INVENTORY> 171
<CURRENT-ASSETS> 23,573
<PP&E> 5,325
<DEPRECIATION> 7,284
<TOTAL-ASSETS> 46,747
<CURRENT-LIABILITIES> 19,238
<BONDS> 7,354
748
0
<COMMON> 18,819
<OTHER-SE> 5,597
<TOTAL-LIABILITY-AND-EQUITY> 24,416
<SALES> 2,631
<TOTAL-REVENUES> 51,775
<CGS> 1,763
<TOTAL-COSTS> 18,626
<OTHER-EXPENSES> 27,374
<LOSS-PROVISION> 1,356
<INTEREST-EXPENSE> (329)
<INCOME-PRETAX> 5,671
<INCOME-TAX> 2,495
<INCOME-CONTINUING> 3,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,104
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
