TIMBERLINE SOFTWARE CORPORATION - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

	[ x ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003
	[ ]	TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number 0-16376

TIMBERLINE SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)

Oregon
(State or other jurisdiction of incorporation or organization)

93-0748489
(I.R.S. Employer Identification No.)

15195 N.W. Greenbrier Parkway, Beaverton, Oregon 97006-5701
(Address of principal executive offices) (Zip code)

(503) 690-6775
(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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No[x]

At August 11, 2003, 11,861,733 shares of common stock of the registrant were outstanding.

TIMBERLINE SOFTWARE CORPORATION
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

	Condensed consolidated balance sheets, June 30, 2003, and December 31, 2002 (Unaudited)	3

	Condensed consolidated statements of operations for the three months ended June 30, 2003 and 2002 (Unaudited)	4

	Condensed consolidated statements of operations for the six months ended June 30, 2003 and 2002 (Unaudited)	5

	Condensed consolidated statements of cash flows for the six months ended June 30, 2003 and 2002 (Unaudited)	6

	Notes to condensed consolidated financial statements (Unaudited)	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3. Quantitative and Qualitative Disclosures About Market Risk		21

Item 4. Controls and Procedures		21

PART II. OTHER INFORMATION

Item 5. Submission of Matters to a Vote of Security Holders		22

Item 6. Exhibits and Reports on Form 8-K		22

SIGNATURES		23

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

TIMBERLINE SOFTWARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2003 AND DECEMBER 31, 2002 (Unaudited)

(Amounts in thousands)

June 30, December 31,

2003 2002

ASSETS

Current assets:

Cash and cash equivalents $ 9,497 $ 8,301

Temporary investments 3,417 2,038

Accounts receivable, less allowance for doubtful

        accounts (June 30, 2003, $112; December 31,

          2002, $117) 6,389 6,336

Inventories 169 194

Other current assets 1,818 2,004

          Total current assets 21,290 18,873

Property and equipment 35,466 34,825

          Less accumulated depreciation and amortization 14,881 13,623

          Property and equipment - net 20,585 21,202

Capitalized software costs - net 9,785 10,759

Purchased software costs - net 1,510 1,784

Other assets 634 685

          Total $ 53,804 $ 53,303

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 1,202 $ 1,169

Deferred revenues 19,164 18,388

Accrued employee expenses 1,256 1,036

Income taxes payable 656 882

Current portion of long-term debt 375 375

Other current liabilities 2,029 1,705

          Total current liabilities 24,682 23,555

Accrued rent expense 582 508

Deferred income taxes 3,164 3,621

Long-term debt 375 375

Commitments

Shareholders' equity:

Common stock, without par value 355 353

          authorized, 20,000 shares; issued - June 30, 2003,

          11,830 shares; December 31, 2002, 11,778 shares

Additional paid in capital 5,972 5,786

Accumulated other comprehensive income 41 27

Retained earnings 18,633 19,078

          Total shareholders' equity 25,001 25,244

          Total $ 53,804 $ 53,303

See notes to condensed consolidated financial statements.

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TIMBERLINE SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)

(Amounts in thousands, except per share data)

Three Months Ended June 30,

   2003

   2002

Net revenue:

          Software license fees $ 5,898 $ 4,271

          Service fees 10,434 9,642

          Other 159 196

          Net revenue 16,491 14,109

Cost and expenses:

          Cost of revenue 2,185 2,042

          Client services 3,699 3,365

          Product development 3,996 3,853

          Sales and marketing 3,602 3,509

          General and administrative 2,112 1,903

          Total cost and expenses 15,594 14,672

Operating income (loss) 897 (563)

Other income 50 91

Income (loss) before income taxes 947 (472)

Income tax provision (benefit) 321 (155)

Net income (loss) $ 626 $ (317)

Earnings (loss) per share:

          Basic $ 0.05 $ (0.03)

          Diluted 0.05 (0.03)

See notes to condensed consolidated financial statements.

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TIMBERLINE SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)

(Amounts in thousands, except per share data)

Six Months Ended June 30,

2003

2002

Net revenue:

Software license fees $ 10,657 $ 9,099

Service fees 20,726 18,609

Other 657 744

Net revenue 32,040 28,452

Cost and expenses:

Cost of revenue 4,654 3,787

Client services 7,249 6,655

Product development

TIMBERLINE SOFTWARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002 (Unaudited)
(Amounts in thousands)

		June 30,		December 31,
		2003		2002
ASSETS
Current assets:
Cash and cash equivalents	$	9,497	$	8,301
Temporary investments		3,417		2,038
Accounts receivable, less allowance for doubtful
accounts (June 30, 2003, $112; December 31,
2002, $117)		6,389		6,336
Inventories		169		194
Other current assets		1,818		2,004
Total current assets		21,290		18,873

Property and equipment		35,466		34,825
Less accumulated depreciation and amortization		14,881		13,623
Property and equipment - net		20,585		21,202

Capitalized software costs - net		9,785		10,759
Purchased software costs - net		1,510		1,784
Other assets		634		685
Total	$	53,804	$	53,303

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,202	$	1,169
Deferred revenues		19,164		18,388
Accrued employee expenses		1,256		1,036
Income taxes payable		656		882
Current portion of long-term debt		375		375
Other current liabilities		2,029		1,705
Total current liabilities		24,682		23,555

Accrued rent expense		582		508
Deferred income taxes		3,164		3,621
Long-term debt		375		375
Commitments
Shareholders' equity:
Common stock, without par value		355		353
authorized, 20,000 shares; issued - June 30, 2003,
11,830 shares; December 31, 2002, 11,778 shares
Additional paid in capital		5,972		5,786
Accumulated other comprehensive income		41		27
Retained earnings		18,633		19,078
Total shareholders' equity		25,001		25,244
Total	$	53,804	$	53,303

See notes to condensed consolidated financial statements.

TIMBERLINE SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
(Amounts in thousands, except per share data)

		Three Months Ended June 30,

		2003		2002

Net revenue:
Software license fees	$	5,898	$	4,271
Service fees		10,434		9,642
Other		159		196
Net revenue		16,491		14,109
Cost and expenses:
Cost of revenue		2,185		2,042
Client services		3,699		3,365
Product development		3,996		3,853
Sales and marketing		3,602		3,509
General and administrative		2,112		1,903
Total cost and expenses		15,594		14,672
Operating income (loss)		897		(563)
Other income		50		91
Income (loss) before income taxes		947		(472)
Income tax provision (benefit)		321		(155)
Net income (loss)	$	626	$	(317)

Earnings (loss) per share:
Basic	$	0.05	$	(0.03)
Diluted		0.05		(0.03)

See notes to condensed consolidated financial statements.

TIMBERLINE SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
(Amounts in thousands, except per share data)

		Six Months Ended June 30,

		2003		2002

Net revenue:
Software license fees	$	10,657	$	9,099
Service fees		20,726		18,609
Other		657		744
Net revenue		32,040		28,452
Cost and expenses:
Cost of revenue		4,654		3,787
Client services		7,249		6,655
Product development