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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
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Commission File Number 0-25498
CONCENTRA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2827026
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 NORTH AVENUE
BURLINGTON, MA 01803-3301
(Address of principal executive offices)
(617) 229-4600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of August 12, 1996, there were issued and outstanding
5,348,855 shares of the Registrant's Common Stock.
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CONCENTRA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. Condensed Consolidated Financial Statements:
a) Condensed Consolidated Balance Sheets as of June 30,
1996 and March 31, 1996........................................ 3
b) Condensed Consolidated Statements of Operations for
the three months ended June 30, 1996 and 1995.................. 4
c) Condensed Consolidated Statements of Cash Flows for
the three months ended June 30, 1996 and 1995.................. 5
d) Notes to Condensed Consolidated Financial Statements........... 6
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.................................. 9
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONCENTRA CORPORATION
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
June 30, March 31,
-------- ---------
ASSETS 1996 1996
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,243 $ 9,121
Accounts receivable, net of allowance for doubtful accounts of $190 8,467 8,284
Other current assets 953 628
------- -------
17,663 18,033
Property and equipment, net 3,241 3,241
Capitalized software costs, net 1,548 1,268
Intangible assets, net 2,043 2,232
Other assets 335 335
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Total assets $24,830 $25,109
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,020 $ 1,173
Accrued expenses 1,582 2,177
Income tax payable 195 200
Deferred revenue 2,422 1,941
Current portion of capital lease obligations 361 363
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Total current liabilities 5,580 5,854
Capital lease obligations 728 798
Deferred revenue 130 150
Stockholders' equity:
Preferred stock - $.01 par value; 4,000,000 shares authorized, no
shares issued or outstanding - -
Common stock - $.00001 par value; 40,000,000 shares authorized,
5,346,582 and 5,333,651 shares issued and outstanding at June 30,
1996 and March 31, 1996 respectively - -
Additional paid-in capital 24,821 24,809
Accumulated deficit (6,102) (6,159)
Cumulative translation adjustment (327) (343)
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Total stockholders' equity 18,392 18,307
------- -------
Total liabilities and stockholders' equity $24,830 $25,109
======= =======
</TABLE>
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
------------------
1996 1995
<S> <C> <C>
Revenues:
Software licenses $2,839 $1,904
Services 2,277 2,472
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Total revenues 5,116 4,376
Operating expenses:
Cost of software licenses 429 188
Cost of services 662 510
Sales and marketing 2,846 2,458
Research and development 581 695
General and administrative 559 514
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Total operating expenses 5,077 4,365
Income from operations 39 11
Interest income 95 234
Interest expense (26) (2)
Other (expense) income (31) 143
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Income before income taxes 77 386
Provision for income taxes 20 77
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Net income $ 57 $ 309
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Net income per common and common equivalent share $ 0.01 $ 0.05
====== ======
Weighted average number of common and common equivalent
shares outstanding 5,600 5,813
====== ======
</TABLE>
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended June 30,
---------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 57 $ 309
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 481 260
Foreign exchange loss (gain) 31 (143)
Changes in operating assets and liabilities:
Accounts receivable (203) 1,191
Other assets (320) (392)
Accounts payable (153) (442)
Accrued expenses (615) (1,727)
Deferred revenue 456 (585)
Income taxes payable (5) 1
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Net cash used in operating activities (271) (1,528)
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Cash flows from investing activities:
Capitalized software costs (370) (125)
Purchase of property and equipment (182) (635)
Purchase of intangible assets (21) (330)
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Net cash used in investing activities (573) (1,090)
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Cash flows from financing activities:
Proceeds from exercise of stock options 12 42
Principal payments under capital lease obligations (72) (33)
------ -------
Net cash (used in) provided by financing activities (60) 9
------ -------
Effects of exchange rates on cash and cash equivalents 26 (47)
Net decrease in cash and cash equivalents (878) (2,656)
Cash and cash equivalents at beginning of year 9,121 17,010
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Cash and cash equivalents at end of period $8,243 $14,354
====== =======
Supplemental disclosure of cash flow information:
Interest paid $ 26 $ 2
Income taxes paid $ 25 $ 78
</TABLE>
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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CONCENTRA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
Concentra Corporation (the "Company") and its wholly-owned foreign subsidiaries.
All significant intercompany transactions and balances have been eliminated. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the consolidated financial
position, results of operations and cash flows of Concentra Corporation for the
period ended June 30, 1996. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that 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 period. Actual results could differ from those estimates and would
impact financial position, results of operations and cash flows.
Certain fiscal year 1996 balances have been reclassified to conform to
fiscal year 1997 presentation.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
OVERVIEW
Management's Discussion and Analysis of Financial Condition and Results of
Operations include certain forward-looking statements about the Company's
business and new products, revenues, expenditures and operating and capital
requirements. In addition, forward-looking statements may be included in various
other Company documents to be issued in the future and in various oral
statements by Company representatives to security analysts and investors from
time to time. Any such statements are subject to risks that could cause the
actual results or needs to vary materially. The Company discusses such risks in
detail in its Annual Report on Form 10-K for the year ended March 31, 1996.
RESULTS OF OPERATIONS
TOTAL REVENUES. Substantially all of the Company's revenues are derived from
the licensing of software products and the performance of related services. The
Company's total revenues increased 17% to $5.1 million for the three month
period ended June 30, 1996 from $4.4 million for the three month period ended
June 30, 1995. The increase resulted primarily from an increase in software
revenues.
SOFTWARE LICENSES. Software license fees increased 49% to $2.8 million for
the three month period ended June 30, 1996 from $1.9 million for the three month
period ended June 30, 1995 and increased as a percentage of revenues to 55% from
44%. Contributing to the increases were the increased adoption of the Company's
products by both new and existing customers and revenues from the new sales
force automation product, Selling Point.
SERVICES. Service fees decreased 8% to $2.3 million for the three month
period June 30, 1996 from $2.5 million for the three month period ended June 30,
1995, and decreased as a percentage of revenues to 45% from 56%. Service
revenues are derived from consulting, training and customer support services.
The decreases were primarily due to a decrease in the consulting services
provided in the three month period ended June 30, 1996.
COST OF SOFTWARE LICENSES. Cost of software licenses, consisting of the
amortization of capitalized software, license fees to third party suppliers and
software duplication and fulfillment costs, increased 128% to $0.4 million for
the three month period ended June 30, 1996 from $0.2 million for the three month
period ended June 30, 1995, and increased as a percentage of software revenues
to 15% from 10%. The increases were primarily due to increased software license
revenues, a greater mix of software licenses requiring the payment of third
party fees, and additional amortizations of intangible assets.
COST OF SERVICES. Cost of services, consisting primarily of personnel costs
for customer support, training and applications consulting, increased 30% to
$0.7 million for the three month period ended June 30, 1996 from $0.5 million
for the three month period ended June 30, 1995, and increased as a percentage of
service revenues to 29% from 21%. The increases were due primarily to the
contracting of additional personnel at higher rates to support consulting
services previously provided by personnel who were transferred to sales and
marketing.
SALES AND MARKETING. Sales and marketing expenses, which include
distribution, pre-sales support and marketing costs, increased 16% to $2.8
million for the three month period ended June 30, 1996 from $2.5 million for the
three month period ended June 30, 1995, and remained constant as a percentage of
revenues at 56%. The increases were primarily due to the transfer and addition
of sales and marketing employees and increased marketing and promotional
activities, all of which occurred in anticipation of increased selling
activities.
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RESEARCH AND DEVELOPMENT. Research and development expenses, consisting
primarily of employee salaries and benefits and development tools, decreased 16%
to $0.6 million for the three month period ended June 30, 1996 from $0.7 million
for the three month period ended June 30, 1995, and decreased as a percentage of
revenues to 11% from 16%. The decreases were primarily due to an increase in
capitalization of software development.
GENERAL AND ADMINISTRATIVE. General and administrative expenses, consisting
primarily of expenses associated with the finance, human resources and
administrative departments, increased 9% to $0.6 million for the three month
period ended June 30, 1996 from $0.5 million for the three month period ended
June 30, 1995, and decreased as a percentage of revenues to 11% from 12%. The
increase was primarily due to an increase in investor relations costs.
INTEREST INCOME. Interest income, consisting of interest from cash and cash
equivalents, was $95,000 for the three month period ended June 30, 1996 and was
$234,000 for the three month period ended June 30, 1995. This decrease was
attributable to lower cash balances during the current period.
INTEREST EXPENSE. Interest expense was $26,000 for the three month period
ended June 30, 1996 and was $2,000 for the three month period ended June 30,
1995. The increase was attributable to interest associated with the capital
leases initiated during the last nine months of fiscal 1996.
OTHER INCOME (EXPENSE). Other income (expense), consisting primarily of
foreign exchange gains (losses), for the three month period ended June 30, 1996
was an expense of $31,000 compared with other income of $143,000 for the three
month period June 30, 1995.
PROVISION FOR INCOME TAXES. The income tax provision for the three month
periods ended June 30, 1996 and 1995 was $20,000 and $77,000, respectively,
representing an effective tax rate of approximately 25% and 20%, respectively.
The effective tax rates are lower than the statutory rate principally due to the
utilization of net operating loss carryforwards and other temporary differences
that were not previously benefited.
LIQUIDITY AND CAPITAL RESOURCES
In February 1995, the Company raised $17.7 million (net of expenses) from
an initial public offering ("IPO") of its common stock. Prior to the IPO, the
Company funded its operations primarily through cash generated from operations,
loans and three private equity transactions.
As of June 30, 1996, the Company had cash and cash equivalents of $8.2
million. The Company also has a line of credit with a commercial lender. Under
this credit line, as amended, the Company has a $2.5 million unsecured working
capital line of credit. This line of credit bears interest at the bank's base
lending rate, and expires on June 30, 1997. The Company also has an equipment
line of credit of approximately $1.8 million, collateralized by the equipment,
bearing interest at the bank's base lending rate and expires on March 31, 1997.
As of June 30, 1996, the Company had borrowings under the equipment line of
credit of approximately $1.2 million.
During the three month period ended June 30, 1996, the Company had a net
profit of $0.1 million and used cash of $0.9 million. The decrease in cash and
cash equivalents was due primarily to $0.3 million used in cash from operations
and by $0.6 million used in investing activities. The Company's operating
activities included a decrease in accrued expenses of $0.6 million and an
increase in deferred revenue of $0.5 million. Investing activities included
capitalized software costs of $0.4 million and the purchase of property and
equipment for $0.2 million consisting primarily of computer equipment.
During fiscal 1996 the Company entered into a $5.0 million five year
applications consulting services contract with a significant customer of the
Company. The five year applications consulting services
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contract contains volume pricing discounts subject to adjustments for increased
costs. The Company has a minimum commitment of $2,500,000 of outside
applications services that will be used by the Company over a five year period.
The minimum commitment of $2,500,000 will be paid in five yearly payments
commencing December 31, 1996. These yearly payments are $250,000, $500,000,
$550,000, $600,000 and $600,000 for the five calendar years beginning December
31, 1996, respectively. Also, in connection with the Company's agreement to
license a software module, the Company paid $1.0 million in four quarterly
installments during fiscal 1996.
The Company believes that existing sources of liquidity and anticipated
funds from operations will satisfy the Company's working capital and capital
expenditure requirements through at least fiscal 1997.
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fiscal quarter
covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CONCENTRA CORPORATION
Date: August 13, 1996
By: /s/ Gerald M. Schimmoeller
-------------------------------
Gerald M. Schimmoeller
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1ST QTR 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,243
<SECURITIES> 0
<RECEIVABLES> 8,467
<ALLOWANCES> 190
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<CURRENT-ASSETS> 17,663
<PP&E> 3,241
<DEPRECIATION> 3,622
<TOTAL-ASSETS> 24,830
<CURRENT-LIABILITIES> 5,580
<BONDS> 0
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0
0
<OTHER-SE> 18,392
<TOTAL-LIABILITY-AND-EQUITY> 24,830
<SALES> 5,116
<TOTAL-REVENUES> 5,116
<CGS> 1,091
<TOTAL-COSTS> 1,091
<OTHER-EXPENSES> 3,986
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<EPS-PRIMARY> .01
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</TABLE>
