<PAGE>
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 JUNE 30, 2000
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: 0-26507
SHOWCASE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1628214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4115 Highway 52 North, Suite 300
Rochester, Minnesota 55901-0144
(Address of principal executive offices) (Zip Code)
(507) 288-5922
(Registrants'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 Exchange Act during the past 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.
10,759,019 Common Shares as of August 2, 2000.
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Table of Contents
SHOWCASE CORPORATION AND SUBSIDIARIES
Report on Form 10-Q
for quarter ended
June 30, 2000
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statements of Operations for the three months ended
June 30, 2000 and 1999 2
Unaudited Consolidated Balance Sheets as of June 30, 2000 and March 31, 2000 3
Unaudited Consolidated Statements of Cash Flows for the three months ended
June 30, 2000 and 1999 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
SHOWCASE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------------------------
2000 1999
--------------------- ----------------------
<S> <C> <C>
Revenues:
License fees $ 5,508 $ 6,065
Maintenance and support fees 4,251 3,206
Professional service fees 1,653 1,234
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Total revenues 11,412 10,505
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Cost of revenues:
License fees 830 1,068
Maintenance and support fees 977 824
Professional service fees 1,531 1,032
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Total cost of revenues 3,338 2,924
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Gross margin 8,074 7,581
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Operating expenses:
Sales and marketing 6,161 5,275
Product development 1,584 1,163
General and administrative 1,249 941
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Total operating expenses 8,994 7,379
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Operating income (loss) (920) 202
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Other income (expense), net:
Interest expense (3) (7)
Interest and investment income 437 104
Other income (expense), net (5) 1
--------------------- ----------------------
Total other income (expense), net 429 98
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Net income (loss) before income taxes (491) 300
Income taxes 100 115
--------------------- ----------------------
Net income (loss) $ (591) $ 185
===================== ======================
Other comprehensive income (loss):
Foreign currency translation adjustment 69 34
Unrealized holding gain (loss) on securities (1) 32
--------------------- ----------------------
Comprehensive income (loss) $ (523) $ 251
===================== ======================
Net income (loss) per share:
Basic $(.06) $0.04
===================== ======================
Diluted $(.06) $0.02
===================== ======================
Weighted average shares outstanding used in
computing basic net income (loss) per share 10,572 4,542
Weighted average shares outstanding used in
computing diluted net income (loss) per share 10,572 8,371
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
SHOWCASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
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Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $17,234 $11,677
Marketable securities 12,788 18,387
Accounts receivable, net 9,097 8,848
Prepaid expenses and other current assets 1,720 1,731
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Total current assets 40,839 40,643
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Property and equipment, net 1,965 2,088
Goodwill, net of accumulated amortization 41 56
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Total assets $42,845 $42,787
===================== ====================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,866 $ 1,323
Accrued liabilities 4,070 4,333
Current portion of long-term debt 2 2
Current portion of obligations under capital leases 48 78
Deferred revenue 12,834 12,778
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Total current liabilities 18,820 18,514
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Deferred revenue, less current portion 842 914
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Total liabilities 19,662 19,428
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Commitments
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
10,749,759 and 10,522,113 shares issued and outstanding 107 105
Additional paid-in capital 31,760 31,443
Accumulated other comprehensive income:
Cumulative translation adjustment 192 123
Unrealized holding loss on securities (10) (9)
Deferred compensation (397) (426)
Accumulated deficit (8,469) (7,877)
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Total stockholders' equity 23,183 23,359
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Total liabilities and stockholders' equity $42,845 $42,787
===================== ====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
SHOWCASE CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (591) $ 185
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation and amortization 222 197
Provision for returns and doubtful accounts, net of returns
and write-offs -- (90)
Deferred compensation amortization 29 21
Loss on disposition of property and equipment 3 --
Changes in operating assets and liabilities, net of effect
of foreign exchange rate changes:
Accounts receivable (249) (189)
Prepaid expenses and other current assets 11 (169)
Accounts payable 543 (271)
Accrued liabilities (263) 217
Deferred revenue (16) (1,113)
Income taxes payable -- (295)
---------------- ----------------
Net cash used in operating activities (311) (1,507)
---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (22) (280)
Purchase of marketable securities (40,747) --
Proceeds from maturities and sale of marketable securities 46,346 --
Proceeds from sale of property and equipment 2 --
---------------- ----------------
Net cash provided by (used in) investing activities 5,579 (280)
---------------- ----------------
Cash flows from financing activities:
Proceeds from exercise of stock options 319 8
Payments on long-term debt -- --
Payments of capitalized lease obligations (30) (34)
---------------- ----------------
Net cash provided by (used in) financing activities 289 (26)
---------------- ----------------
Net increase (decrease) in cash 5,557 (1,813)
Cash and equivalents, beginning of period 11,677 8,900
---------------- ----------------
Cash and equivalents, end of period $ 17,234 $ 7,087
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the three months for interest $ 3 $ 7
================ ================
Cash paid during the three months for income taxes $ 51 $ 549
================ ================
Cash received during the three months for income tax refunds $ 221 $ --
================ ================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
SHOWCASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The unaudited interim consolidated financial statements include the
accounts of ShowCase Corporation and its wholly owned subsidiaries
(collectively, the "Company") and have been prepared by the Company in
accordance with generally accepted accounting principles, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included
in the financial statements have been omitted or condensed pursuant to such
rules and regulations. The information furnished reflects, in the opinion
of the management of the Company, all adjustments, consisting primarily of
recurring accruals, considered necessary for a fair presentation of the
financial position and the results of operations.
In June 2000, the SEC staff issued Staff Accounting Bulletin No. 101B,
which deferred the required implementation date of Staff Accounting
Bulletin No. 101 ("SAB 101"), as amended by SAB 101A. SAB 101, as amended,
summarizes certain views of the SEC staff in applying generally accepted
accounting principles to revenue recognition in financial statements.
Implementation of SAB 101 by the Company was previously required in the
quarter beginning April 1, 2000. Subject to SAB 101B, required
implementation of SAB101 has been deferred to the quarter beginning January
1, 2001. The Company does not expect the SAB101 to have a material impact
on its financial condition or results of operation.
(2) Net Income (Loss) per Share
Basic earnings (loss) per share represents net earnings (loss) divided by
the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per share represents net earnings (loss) divided by
the sum of the weighted average number of common shares outstanding plus
shares derived from other potentially dilutive securities. Potentially
dilutive securities include "in-the-money" fixed stock options and
warrants. The number of shares added for stock options and warrants is
determined by the treasury stock method, which assumes exercise of these
options and warrants and the use of any proceeds from such exercise to
repurchase a portion of these shares at the average market price for the
period. When the results of operations are a loss, other potentially
dilutive securities are not included in the calculation of loss per share.
For the three months ended June 30, 2000, basic loss per share is the same
as diluted loss per share because the effect of the inclusion of other
potentially dilutive securities in the calculation of diluted loss per
share was antidilutive. The number of option shares excluded from the
calculation of potentially dilutive securities because either the exercise
price exceeded the average market price or their inclusion in a calculation
of net loss per share would have been antidilutive was 1,173,343 for the
three months ended June 30, 2000.
(3) Related Party Transactions
In late June 2000, the Company licensed certain software to another
software company, an executive officer of which is also a member of the
board of directors of the Company. The company recognized $454,000 of
license revenue related to this transaction in the quarter ended June 30,
2000. The Company also licensed certain software from this software
company for which the Company paid $485,000 during the quarter ended June
30, 2000. The Company will amortize this amount over the one-year contract
period of the license.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All statements, trend analysis and other information contained in the
following discussion relative to markets for our products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend" and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks and uncertainties, including but not limited to those described
in Exhibit 99.1 to the Annual Report on Form 10-K for the fiscal year ended
March 31, 2000 on file with the Securities and Exchange Commission. Our actual
results of operations may differ materially from those contained in the forward-
looking statements. All forward-looking statements included in this report are
based on information available to us on the date of this report, and we assume
no obligation to update these forward-looking statements, or to update the
reasons why actual results could differ from those projected in these forward-
looking statements.
Overview
ShowCase develops, markets and supports a fully integrated, end-to-end,
business intelligence solution for IBM AS/400 customers. Our ShowCase STRATEGY
product suite and related services are designed to enable organizations to
rapidly implement business intelligence solutions that create increased value
from their operational and customer data. The sophisticated data warehousing
and management capabilities of our product suite provide our clients with highly
scalable and tightly integrated solutions. Our products enable enterprise-wide
distribution of information and allow end-user access and analysis through
familiar applications and Internet browsers.
Results of Operations For the Three Months Ended June 30, 2000 and 1999
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------
As a Percentage of Total Revenues: 2000 1999
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<S> <C> <C>
Revenues:
License fees 48.3% 57.7%
Maintenance and support 37.3 30.5
Professional service fees 14.5 11.7
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Total revenues 100.0 100.0
Cost of revenues:
License fees 7.3 10.2
Maintenance and support 8.6 7.8
Professional service fees 13.4 9.8
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Total cost of revenues 29.2 27.8
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Gross margin 70.8 72.2
Operating expenses:
Sales and marketing 54.0 50.2
Product development 13.9 11.1
General and administrative 10.9 9.0
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Total operating expenses 78.8 70.2
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Operating income (loss) (8.1) 1.9
Other income (expense), net 3.8 0.9
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Net income (loss) before income taxes (4.3) 2.9
Income taxes 0.9 1.1
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Net income (loss) (5.2)% 1.8%
=================== ====================
</TABLE>
<PAGE>
Revenues
Total revenues. Total revenues increased to $11.4 million for the three
months ended June 30, 2000 from $10.5 million for the three months ended June
30, 1999, representing an increase of 8.6%.
License fees. License fee revenues decreased to $5.5 million for the three
months ended June 30, 2000 from $6.1 million for the three months ended June 30,
1999, representing a decrease of 9.2%. License fee revenues as a percentage of
total revenues were 48.3% and 57.7% for the three months ended June 30, 2000 and
1999, respectively. The decrease in license fee revenues is largely
attributable to a decrease in the number of licenses sold, due primarily to the
impact of clients and prospects delaying or canceling purchase decisions due to
Year 2000.
Revenues from Essbase/400 licenses comprise a significant percentage of
total license fee revenues. License fees for this product were 37.5% and 43.6%
of license fee revenues for the three months ended June 30, 2000 and 1999,
respectively.
License fee revenues derived from our indirect distribution channels were
14.7% and 17.8% of license fee revenues for the three months ended June 30, 2000
and 1999, respectively.
Maintenance and support. Maintenance and support revenues increased to
$4.3 million for the three months ended June 30, 2000 from $3.2 million for the
three months ended June 30, 1999, representing and increase of 32.6%.
Maintenance and support revenues as a percentage of total revenues were 37.3%
and 30.5% for the three months ended June 30, 2000 and 1999, respectively. This
increase in maintenance and support revenues was largely a result of the renewal
of maintenance and support contracts as our installed base continued to grow, as
well as new maintenance and support contracts associated with new product
licenses.
Professional service fees. Professional service fee revenues increased to
$1.7 million for the three months ended June 30, 2000 from $1.2 million for the
three months ended June 30, 1999, representing an increase of 34.0%.
Professional service revenues as a percentage of total revenues were 14.5% and
11.7% for the three months ended June 30, 2000 and 1999, respectively. This
increase in professional service revenues was largely a result of the service
revenues associated with the sale of new product licenses and from the
completion of an IBM service engagement.
Revenues from clients outside North America represented 36.1% and 31.3% of
our total revenues for the three months ended June 30, 2000 and 1999,
respectively. A majority of this revenue was derived from European sales.
Costs of Revenues
Cost of license fees. Cost of license fees consists primarily of the costs
of product manuals, media, packaging, shipping and royalties paid to third
parties. Cost of license fees decreased to $830,000 for the three months ended
June 30, 2000 from $1.1 million for the three months ended June 30, 1999,
representing 15.1% and 17.6% of total license fees for such periods,
respectively. The decrease in cost of license fees was primarily attributable
to the decrease in the percentage of revenues from our Essbase/400 product, for
which we pay royalties.
Cost of maintenance and support. Cost of maintenance and support revenues
consists primarily of personnel costs associated with providing maintenance and
support services, particularly with respect to Essbase/400. Cost of maintenance
and support revenues increased to $1.0 million for the three months ended June
30, 2000 from $824,000 for the three months ended June 30, 1999, representing
23.0% and 25.7% of total maintenance and support revenues for such periods,
respectively. The increase in cost of maintenance and support is primarily due
to additional staffing and the increase in the payment of third-party
maintenance and support fees with respect to Essbase/400.
<PAGE>
Cost of professional service fees. Cost of professional service fees
consists primarily of the cost of providing training and consulting services.
Cost of professional service fees increased to $1.5 million for the three months
ended June 30, 2000 from $1.0 million for the three months ended June 30, 1999,
representing 92.6% and 83.6% of professional service fees for such periods,
respectively. The increase in cost of professional service fees was primarily
due to the expansion of professional services staff.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, bonuses, commissions and travel and promotional expenses.
Sales and marketing expenses increased to $6.2 million for the three months
ended June 30, 2000 from $5.3 million for the three months ended June 30, 1999,
representing 54.0% and 50.2% of total revenues for such periods, respectively.
This increase reflects the expansion of a direct field sales force and the
hiring of additional sales and marketing personnel and, to a lesser extent, an
increase in promotional activities.
Product development. Product development expenses consist primarily of
development personnel compensation and related costs associated with the
development of new products, the enhancement of existing products, quality
assurance and testing. Product development expenses increased to $1.6 million
for the three months ended June 30, 2000 from $1.2 million for the three months
ended June 30, 1999, representing 13.9% and 11.1% of total revenues for such
periods, respectively. This increase was due to expenses associated with the
development of new products and the hiring of additional personnel. Product
development costs are expensed as incurred.
General and administrative. General and administrative expenses consist
primarily of salaries of executive, financial, human resources and information
services personnel as well as outside professional fees. General and
administrative expenses increased to $1.2 million for the three months ended
June 30, 2000 from $941,000 for the three months ended June 30, 1999,
representing 10.9% and 9.0% of total revenues for such periods, respectively.
This increase in dollar amount was primarily due to increased staffing and
related expenses necessary to manage and support the expansion of operations.
Other Income
Other income consists primarily of earnings from investments and sales of
securities, net of any interest expense. Other income increased to $429,000 for
the three months ended June 30, 2000 from $98,000 for the three months ended
June 30, 1999. The increase in other income is primarily due to earnings on the
proceeds from the Company's initial public offering in fiscal 2000.
Provision for Income Taxes
Income taxes decreased to $100,000 for the three months ended June 30, 2000
from $115,000 for the three months ended June 30, 1999, primarily due to lower
foreign income taxes paid which could not be realized as tax credits in the
United States due to our consolidated losses from operations.
Liquidity and Capital Resources
To date, the Company has financed its business through cash provided by
operations, the sale of equity securities and bank borrowings. Operating
activities used cash of $311,000 for the three months ended June 30, 2000 and
$1.5 million for the three months ended June 30, 1999. This decrease in cash
used in operations was due primarily to the loss in the quarter ended June 30,
2000 offset by an increase in accounts payable.
<PAGE>
Investing activities provided cash of $5.6 million for the three months
ended June 30, 2000 and used cash of $280,000 for the three months ended June
30, 1999. The cash provided by financing activities for the three months ended
June 30, 2000 was related to the purchase and maturing of marketable securities.
The principal use of cash in investing activities was for capital expenditures
related to the acquisition of computer equipment and furniture required to
support the expansion of our operations.
Financing activities provided cash of $289,000 and used cash of $26,000 in
the three months ended June 30, 2000 and 1999, respectively. For the three
months ended June 30, 2000, cash provided by financing activities consisted
primarily of the receipt of proceeds from the exercise of stock options and the
purchase of stock under the employee stock purchase plan. For the three months
ended June 30, 1999, cash used by financing activities consisted primarily of
long-term debt repayment and payments under capitalized lease obligations.
Our sources of liquidity at June 30, 2000 consisted principally of cash and
marketable securities of $30.0 million. Cash equivalents are comprised
primarily of investment-grade commercial paper with varying terms of three
months or less. The Company intends to continue to review potential
acquisitions and business alliances that it believes would enhance its growth or
profitability. We believe that current cash, cash equivalents, and marketable
securities, and the funds generated from our operations, if any, will be
sufficient to fund operations for at least the next twelve months.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risks
There were no material changes in our market risk during the three months ended
June 30, 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
Our registration statement, filed on Form S-1 under the Securities Act
(File No. 333-77223), for the initial public offering of our common stock became
effective June 29, 1999. We have invested the net proceeds from the offering of
approximately $24.4 million in marketable securities pending the use of such
proceeds. We expect to use the net offering proceeds for general corporate
purposes, including the expansion of our direct sales force, product development
and working capital. A portion of the proceeds may also be used to acquire
businesses or technologies that are complementary to ours. There are no current
agreements with respect to any material acquisitions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: August 7, 2000 By: /s/ Craig W. Allen
------------------
Craig W. Allen
Chief Financial Officer
(Duly authorized officer and
principal financial and
accounting officer)
<PAGE>
EXHIBIT INDEX
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27.1 Financial Data Schedule
