UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-Q/A
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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: 0-26622
COMPUTER MANAGEMENT SCIENCES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2264633
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
8133 Baymeadows Way, Jacksonville, Florida 32256
(Address of principal executive offices) (zip code)
(904) 737-8955
(Registrant's telephone number, including area code)
N/A (Former name, former address and former fiscal year, if changed since last
report)
-----------------------------------
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 2, 1996 there were 8,254,618 shares of the Registrant's common
stock, $0.01 par value, outstanding.
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Index to Form 10-Q/A
For the Quarter Ended June 30, 1996
PART I - FINANCIAL INFORMATION Page
Item 1 Financial Statements
Consolidated Balance Sheets 3-4
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations 8-9
Liquidity and Capital Resources 9-10
PART II - OTHER INFORMATION 11
SIGNATURES 12
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Consolidated Balance Sheets
June 30, 1996 December 31, 1995
(unaudited) (restated)
Current assets:
Cash and cash equivalents $19,479,331 $30,068,844
Accounts receivable, net 8,762,740 5,602,778
Investments 1,836,506 --
Other receivables 422,888 80,903
Due from officers 296,750 21,750
Other current assets 40,330 46,539
Total current assets 30,838,545 35,820,814
Property and equipment:
Land 222,000 168,000
Buildings and improvements 1,638,656 1,516,356
Computers and software 1,406,104 1,044,050
Office furniture and equipment 858,618 811,400
Vehicles 199,235 169,883
Investment in leased property - 5,116
4,324,613 3,714,805
Less accumulated depreciation 1,314,559 1,126,707
Net property and equipment 3,010,054 2,588,098
Other assets:
Intangible assets, net of accumulated
amortization of $136,593 and $88,551 448,868 312,823
Land held for investment, at cost 428,465 428,465
Investments 7,973,982 646,536
Other 305,593 282,565
Total other assets 9,156,908 1,670,389
Total assets $43,005,507 $40,079,301
(continued)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Consolidated Balance Sheets (cont'd)
June 30, 1996 December 31, 1995
Liabilities and Shareholders' Equity (unaudited) (restated)
Current liabilities:
Notes payable $ 100 $ 232,396
Accounts payable 173,474 236,278
Accrued expenses 2,178,953 1,720,826
Unearned revenue 238,411 531,913
Income taxes payable 52,899 181,760
Deferred taxes payable 33,763 75,425
Total current liabilities 2,677,600 2,978,598
Long-term liabilities:
Notes payable -- 44,439
Deferred income taxes 140,468 57,666
Total long term liabilities 140,468 102,105
Shareholders' equity:
Common stock, $.01 par value;
20,000,000 shares authorized,
5,503,089 and 5,502,489 shares
issued and outstanding in 1996 and 1995 55,031 55,025
Common stock dividend distributable 27,515 -
Paid-in capital 29,797,252 29,337,744
Retained earnings 10,270,917 7,565,688
Unrealized gain on investments, net of
income tax 36,724 40,141
Total shareholders' equity 40,187,439 36,998,598
Total liabilities and shareholders'
equity $43,005,507 $40,079,301
(See accompanying notes to consolidated financial statements.)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Consolidated Statements of Operations
(Unaudited)
For the Three Month For the Six Month
Period Ended June 30, Period Ended June 30,
1996 1995 1996 1995
(restated) (restated)
Revenue $11,231,479 $7,715,523 $21,653,175 $15,292,755
Direct costs 6,877,813 4,744,221 13,290,011 9,526,156
Gross profit 4,353,666 2,971,302 8,363,164 5,766,599
Selling, general and
administrative expenses 2,211,236 1,854,697 4,274,073 3,569,005
Income from operations 2,142,430 1,116,605 4,089,091 2,197,594
Other income (expense):
Investment and other
income 398,538 26,741 781,849 66,579
Interest expense (2,269) (4,288) (4,842) (7,743)
396,269 22,453 777,007 58,836
Income before income
taxes 2,538,699 1,139,058 4,866,098 2,256,430
Provision for income taxes 959,000 418,432 1,779,000 804,349
Net income $1,579,699 $720,626 $3,087,098 $1,452,081
Net income per share $ .16 $ .12 $ .32 $ .24
Weighted average number of
common and common equivalent
shares outstanding 9,619,213 6,209,403 9,566,945 6,173,802
Pro Forma Information:
Net income as reported $1,579,699 $720,626 $3,087,098 $1,452,081
Pro Forma charge in lieu
of income taxes related
to the acquisition of an
S-Corporation accounted
for as a
pooling-of-interests 34,516 12,396 132,669 48,015
Pro Forma net income $1,545,183 $708,230 $2,954,429 $1,404,065
Pro Forma net income
per share $ .16 $ .11 $ .31 $ .23
(See accompanying notes to consolidated financial statements.)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For The Six Months Ended June 30,
1996 1995
(restated)
Cash flow from operating activities:
Net income $3,087,098 $1,452,081
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 256,373 154,257
Net gain on disposition of
property and equipment (600) (490)
Deferred income taxes 43,308 (22,318)
Change in assets and liabilities:
Increase in accounts and other
receivables (3,501,947) (713,995)
Decrease in refundable taxes - 23,726
Decrease (increase) in other current
assets 6,209 (46,164)
Increase in other assets (23,028) (13,689)
Increase in accounts payable and
accrued expense 395,323 210,307
(Decrease) in unearned revenue (293,502) (101,282)
(Decrease) increase in income taxes
payable (128,861) 101,196
Net cash (used in) provided by operating
activities (159,627) 1,043,629
Cash flow from investing activities:
Purchases of property and equipment (629,374) (202,857)
Proceeds from the sale of property
and equipment 600 490
Purchase of investments, net (9,169,537) (55,635)
Increase in intangible assets (185,000) (10,000)
Increase in due from officers (275,000) -
Net cash used in investing activities (10,258,311) (268,002)
Cash flow from financing activities:
Repayment of notes payable (276,735) (77,300)
Proceeds from issuance of common stock 105,160 651
Net cash (used in) provided by
financing activities (171,575) (76,649)
Net (decrease) increase in cash
and cash equivalents (10,589,513) 698,978
Cash and cash equivalents at beginning
of period 30,068,844 1,137,657
Cash and cash equivalents at end of
period $19,479,331 $1,836,635
(See accompanying notes to consolidated financial statements.)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Notes to Consolidated Financial Statements
(1) Organization and Basis of Presentation
Computer Management Sciences, Inc. (the Company), provides computer systems
and information technology consulting, project management, systems analysis
and design, and programming services to a broad range of industries and
software/hardware platforms. The Company's services are generally an
outside resource supplementing a client's internal information technology
(IT) capabilities, and include a broad range of technical services, such as
technology support services, IT solutions services and strategic IT
consulting.
The interim financial information included herein is unaudited. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC), although the
Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be
read in conjunction with the financial statements and related notes
contained in the Company's annual report on Form 10-K filed with the SEC on
March 29, 1996. Other than as indicated herein, there have been no
significant changes from the financial data published in that report. In
the opinion of management, such unaudited information reflects all
adjustments, consisting of normal recurring accruals and other adjustments
necessary for a fair presentation of the unaudited information.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
(2) Business Combination
On April 30, 1996, the Company issued 411,037 shares of its common stock in
exchange for all of the outstanding common stock of Summit Computer
Services, Inc. (SCS), a Charlotte, North Carolina based computer consulting
firm with concentrated expertise in client/server technology. This business
combination has been accounted for as a pooling-of-interests combination
and, accordingly, the consolidated financial statements for periods prior
to the combination have been restated to include the accounts and results
of operations of SCS. Prior to its acquisition by the Company, SCS had
elected S Corporation status for federal and state income tax purposes. As
an S Corporation, SCS's tax liability was the responsibility of its
stockholders. To reflect the earnings of SCS on an after tax basis, a pro
forma charge in lieu of income taxes has been included for the periods
preceding the termination of S Corporation status.
(3) Stock Split
On June 7, 1996, the Company's Board of Directors declared a 3-for-2 stock
split, effected in the form of a stock dividend, of the Company's common
stock. The common stock dividend was distributed on July 5, 1996 to holders
of record on June 21, 1996. Retroactive recognition has been given in the
calculation of earnings per share to the shares issued in the business
combination (note 2) and stock split.
(continued)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Notes to Consolidated Financial Statements (Cont'd)
(4) Subsequent Events
In July 1996, the Company purchased an approximate 50,000 square foot
facility in Atlanta, Georgia. The Company intends to utilize 15,000 square
feet of the building to house its Atlanta branch and Systems Outsourcing
Center (SOC), while the remaining 35,000 square feet will be leased. In
July 1996, the Company purchased an approximately 8,500 square foot
facility in Tallahassee, Florida in which the Company intends to house its
Tallahassee branch and SOC.
On July 31, 1996, the Company acquired substantially all of the assets of
Pathways Consulting, Inc. (Pathways), an Atlanta-based information
technology firm specializing in providing systems integration consulting
services to the public utilities industry. The purchase price of the
acquisition was $4,400,000 in cash of which $2,300,000 was paid at closing
and $2,100,000 is payable in equal installments over approximately a three
year period.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The information in the following table is presented as a percentage of net
sales for the period indicated:
Percentage of Total Revenue
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenue.......................100.0% 100.0% 100.0% 100.0%
Direct Costs.................. 61.2% 61.5% 61.4% 62.3%
Gross Profit...................38.8% 38.5% 38.6% 37.7%
Selling, general, and
administrative expenses.....19.7% 24.0% 19.7% 23.3%
Income from operations.........19.1% 14.5% 18.9% 14.4%
Other income, net...............3.5% 0.3% 3.6% 0.4%
Income before income taxes.....22.6% 14.8% 22.5% 14.8%
Provision for income taxes..... 8.5% 5.4% 8.2% 5.3%
Net income.....................14.1% 9.3% 14.3% 9.5%
Pro forma info:
Net income as reported 14.1% 9.3% 14.3% 9.5%
Charge in lieu of income
taxes 0.3% 0.1% 0.6% 0.3%
Pro forma net income 13.8% 9.2% 13.7% 9.2%
(continued)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Revenue:
Revenue for the second quarter ended June 30, 1996 was $11,231,479, a 45.6%
increase over revenue of $7,715,523 recorded in the second quarter of 1995.
Revenue for the current six-month period of $21,653,175 was a 41.6%
increase over the comparable 1995 period. The increase in revenue was
attributable to the strong performance of the Jacksonville based Business
Engineering Services Division (BESD), and the Greenville, Hartford and
Jacksonville Branches. The newly acquired Summit Computer Services, Inc.
also contributed to the growth in revenue with strong sales in both
consulting services and software sales.
Gross Profits:
1996 second quarter gross profit of $4,353,666 was a $1,382,364 improvement
over the second quarter of 1995. This increase was attributable to the
strong performance of the Strategic Consulting Group, a larger percentage
of fixed bid business, and increased revenue. For the six-month period,
gross profit of $8,363,164 was a 45.0% increase over results for the
comparable 1995 period.
SG & A Expenses:
Selling, general and administrative expenses totaled $2,211,236 for the
second quarter of 1996, an increase of $356,539 over the second quarter of
1995. Expressed as a percentage of revenue, however, SG&A expenses
decreased from 24.0% in the second quarter 1995 to 19.7% for the second
quarter 1996. For the current six-month period, SG&A expenses decreased as
a percentage of revenue to 19.7% from 23.3% for the comparable 1995
six-month period. The improved percentage for both periods resulted from
increased volume and cost containment of marketing and other fixed
expenses.
Net Income:
Net income improved $859,073 to $1,579,699 for the second quarter of 1996.
For the current six- month period, net income was $3,087,098, an increase
of $1,635,017. This improved performance for both the second quarter and
the six-month period was a result of increased revenue and cost containment
of SG&A expenses. For the second quarter of 1996, the effective tax rate
decreased to 37.8%. The decrease in the effective tax rate is primarily due
to the business combination with Summit Computer Services, Inc., an S
Corporation, on April 30, 1996, which was accounted for as a
pooling-of-interests.
Liquidity and Capital Resources
During the six months ended, June 30, 1996, cash decreased $10,589,513 and
working capital dropped $4,681,271. While a number of factors contributed
to the change, the main components were increases in investments and
accounts receivables, as discussed below.
As of December 31, 1995, $28,515,745 was invested in funds maturing within
ninety days and was classified as cash equivalents. The drop in interest
rates experienced during the first half of 1996 required the Company to
look for investments with maturities extending beyond 90 days to increase
its yield. By the end of the second quarter, $1,836,506 was invested in
trading securities and $7,973,982 was invested in various corporate and
governmental bonds with maturities exceeding one year. (continued)
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (cont'd)
Accounts receivable increased $3,159,962 during the first six months of
1996. The number days of sales outstanding increased 10 days since the end
of 1995 to 74 days of sales outstanding. Therefore, the bulk of the
increase in accounts receivable is a reflection of increase in sales volume
and increase in days of sales outstanding experienced during the period.
The amount of fixed bid business rose during the period by $1,866,095. Most
of this business requires payment after completion of particular phases of
a project or upon completion of the entire project. The amounts of revenue
earned in excess of billings increased approximately $790,000 since the end
of 1995.
During the six months, the Company spent a total of $629,374 for capital
expenditures, of which $348,953 was spent for computer equipment for the
SOCs and various branch locations. The amount of $175,000 was spent to
acquire a building to house the Tallahassee, Florida branch.
The Company maintains a $750,000 revolving credit facility with a
commercial bank, permitting advances equal to the lesser of $750,000 or 75%
of "qualified accounts" (defined as trade accounts receivables less than 90
days old which approximated $5,410,741 as of June 30, 1996). The credit
facility has been inactive during 1996. The Company assumed certain
mortgage obligations totaling $55,321 in connection with its December 28,
1995, merger with MIS Software Development, Inc., and $221,414 in notes
payable in connection with its April 30, 1996 merger with Summit Computer
Services, Inc. The mortgages and notes were paid off during the first half
of 1996.
The Company currently anticipates that its existing cash and operating cash
flow are sufficient to meet both the Company's short and long-term working
capital requirements and to fund its expansion through the establishment of
additional branch offices, SOC locations, and possible acquisitions.
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
Part II - Other Information
Item 1 - Legal Proceedings - None
Item 2 - Changes in Securities - None
Item 3 - Defaults Upon Senior Securities - None
Item 4 - Submission of Matter to a Vote of Security Holders -
An annual meeting of the shareholders of the Company was held on June 7,
1996, at which three Class I directors were nominated for election by
management. The result of the vote were as follows:
Votes Votes Votes Broker
For Against Withheld Abstentions Non-Votes
David C. Minardi 3,914,442 N/A 7,500 0 0
Larry A. Longhi 3,914,967 N/A 6,975 0 0
Harry C. Stonecipher 3,915,367 N/A 6,575 0 0
Item 5 - Other Information - None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 2.3 - Registrant filed an Agreement and Plan of Merger,
dated April 30, 1996, by and among Computer Management Sciences,
Inc., Summit Acquisition, Inc., Summit Computer Services, Inc.
("SCS"), and each of the shareholders of SCS on May 3, 1996, as an
exhibit to its current report on Form 8-K.
Exhibit 27 - Article 5 of Regulation S-X Financial Data Schedule
as of and for the six months ended June 30, 1996.
(b) Reports: On May 3, 1996, the Registrant filed a current report on
Form 8-K describing its acquisition of Summit Computer Services,
Inc.
<PAGE>
COMPUTER MANAGEMENT SCIENCES, INC.
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.
COMPUTER MANAGEMENT SCIENCES, INC.
(Registrant)
Date: October 23, 1996 /s/ANTHONY V. WEIGHT
Anthony V. Weight
Senior Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPUTER MANAGEMENT SCIENCES, INC. CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF OPERATIONS AS OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 19,479,331
<SECURITIES> 1,836,506
<RECEIVABLES> 8,762,740
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,838,545
<PP&E> 4,324,613
<DEPRECIATION> 1,314,559
<TOTAL-ASSETS> 43,005,507
<CURRENT-LIABILITIES> 2,677,600
<BONDS> 0
0
0
<COMMON> 55,031
<OTHER-SE> 40,132,408
<TOTAL-LIABILITY-AND-EQUITY> 43,005,507
<SALES> 21,653,175
<TOTAL-REVENUES> 21,653,175
<CGS> 13,290,011
<TOTAL-COSTS> 13,290,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,842
<INCOME-PRETAX> 4,866,098
<INCOME-TAX> 1,911,669
<INCOME-CONTINUING> 2,954,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,954,429
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
