<PAGE> 1
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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 December 31, 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 0-18708
MICROGRAFX, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1952080
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1303 E. ARAPAHO ROAD, RICHARDSON, TEXAS 75081
(Address of principal executive offices) (Zip Code)
(972) 234-1769
(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 January 31, 1998, 10,594,702 shares of the Company's common stock
were outstanding.
================================================================================
<PAGE> 2
MICROGRAFX, INC.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
PART I. ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of 3
December 31, 1997 and June 30, 1997
Consolidated Statements of Operations for the three and 4
six months ended December 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the 5
six months ended December 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II.
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE> 3
MICROGRAFX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,608 $11,150
Short-term investments 3,563 3,615
Accounts receivable, less allowances of $4,874 and $ 4,131 11,579 9,610
Inventories 1,860 1,287
Other current assets 1,725 1,445
------- -------
Total current assets 28,335 27,107
Property and equipment, net 2,185 2,703
Capitalized software development costs
and acquired product rights, net 7,070 6,865
Other assets 2,703 2,437
------- -------
Total assets $40,293 $39,112
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $ 7,232 $ 7,227
Other accrued liabilities 7,609 6,943
------- -------
Total current liabilities 14,841 14,170
Noncurrent notes payable and other liabilities 1,408 1,414
Shareholders' equity 24,044 23,528
------- -------
Total liabilities and shareholders' equity $40,293 $39,112
======= =======
</TABLE>
See accompanying notes.
3
<PAGE> 4
MICROGRAFX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1997 1996 1997 1996
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 19,357 $ 16,113 $ 34,888 $ 32,703
Cost of revenues 5,508 5,339 10,214 9,941
-------- -------- -------- --------
Gross profit 13,849 10,774 24,674 22,762
Operating expenses:
Sales and marketing 9,868 8,783 17,890 16,732
General and administrative 1,558 2,483 3,068 4,435
Research and development 1,792 1,613 4,004 3,433
Restructuring charge -- 1,964 -- 1,964
-------- -------- -------- --------
Total operating expenses 13,218 14,843 24,962 26,564
-------- -------- -------- --------
Income (loss) from operations 631 (4,069) (288) (3,802)
Non operating expense (income) (228) 74 (305) (166)
-------- -------- -------- --------
Income (loss) before income taxes 859 (4,143) 17 (3,636)
Income taxes 301 (1,409) 6 (1,236)
-------- -------- -------- --------
Net income (loss) $ 558 $ (2,734) $ 11 $ (2,400)
======== ======== ======== ========
Basic and diluted income (loss) per share $ 0.05 $ (0.27) $ 0.00 $ (0.23)
======== ======== ======== ========
Shares used in computing income (loss) per share:
Basic 10,539 10,239 10,503 10,231
======== ======== ======== ========
Diluted 11,068 10,239 10,880 10,231
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
MICROGRAFX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
-----------------------------
1997 1996
------------ -------------
<S> <C> <C>
Net cash flows from operating activities $ 1,693 $ 1,533
Cash flows from investing activities:
Proceeds from maturities of short-term investments 1,008 3,909
Purchases of short-term investments (957) (4,453)
Capitalization of software development costs and
purchases of acquired product rights (3,043) (3,487)
Other (751) (979)
------- -------
Net cash used in investing activities (3,743) (5,010)
Net cash flows from financing activities:
Proceeds from employee stock plans 635 399
Effect of exchange rates on cash and cash equivalents (127) 347
------- -------
Net decrease in cash and cash equivalents (1,542) (2,731)
Cash and cash equivalents, beginning of period 11,150 13,790
------- -------
Cash and cash equivalents, end of period $ 9,608 $11,059
======= =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
MICROGRAFX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Micrografx, Inc.
and subsidiaries (the "Company") at December 31, 1997, and for the three and
six-month periods ended December 31, 1997 and 1996 are unaudited, but reflect
all adjustments which are of a normal recurring nature and, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The accompanying financial
statements and notes thereto should be read in conjunction with the Company's
audited financial statements for the year ended June 30, 1997, included in the
1997 Annual Report to Shareholders. The results of operations for the period
ended December 31, 1997 are not necessarily indicative of results to be expected
for the year ending June 30, 1998.
INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
------------------------ ---------------------
<S> <C> <C>
Raw materials $ 1,083 $ 822
Finished goods 777 465
------------------------ ---------------------
$ 1,860 $ 1,287
======================== =====================
</TABLE>
FOREIGN FORWARD EXCHANGE CONTRACTS
At December 31, 1997, the Company had one forward exchange contract outstanding
to sell 40 million yen for approximately $0.3 million expiring January 1998 and
one option contract outstanding to sell 100 million yen for approximately $0.8
million expiring May 1998. The difference between the carrying amount and the
current market settlement value of the contracts was not significant.
INCOME (LOSS) PER SHARE
Income (loss) per share for all periods presented is based on the weighted
average basic and dilutive equivalent shares outstanding using the treasury
stock method. Amounts are shown in thousands except for per share data.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------- ------------------------------
1997 1996 1997 1996
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 558 $ (2,734) $ 11 $ (2,400)
Denominator:
Denominator for basic earnings per 10,539 10,239 10,503 10,231
share - weighted average shares
Effect of dilutive employee stock options 529 -- 377 --
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 11,068 10,239 10,880 10,231
=========== =========== =========== ===========
Basic and diluted income per share $ 0.05 $ (0.27) $ 0.00 $ (0.23)
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
MICROGRAFX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Micrografx, Inc. ("Micrografx" or the "Company") develops and markets enterprise
graphics and personal creativity software. The Company sells and distributes its
products directly and through a network of distributors, value-added resellers,
and original equipment manufacturer customers.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items in the Company's Consolidated
Statements of Operations. Historical results and percentage relationships are
not necessarily indicative of operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------- --------------------------------
1997 1996 1997 1996
----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net revenues 100% 100% 100% 100%
Cost of revenues 28% 33% 29% 30%
--- --- --- ---
Gross profit 72% 67% 71% 70%
Operating expenses:
Sales and marketing 51% 55% 51% 51%
General and administrative 8% 15% 9% 14%
Research and development 9% 10% 12% 10%
Restructuring charge -- 12% -- 6%
--- --- --- ---
Total operating expenses 68% 92% 72% 81%
Income (loss) from operations 4% (25%) (1%) (11%)
Non operating (income) expense (1%) 1% (1%) --
Income (loss) before income taxes 5% (26%) -- (11%)
Income taxes 2% (9%) -- (4%)
Net income (loss) 3% (17%) -- (7%)
</TABLE>
7
<PAGE> 8
The following table sets forth net revenues by product category and the
percentage relationship to total net revenues. The Enterprise Graphics category
includes Micrografx FlowCharter(TM), Optima(TM), Micrografx Graphics Suite(TM),
Small Business Graphics and Print Studio(R), Micrografx Designer(TM), and
Designer Power Pack. The Web Graphics category includes Webtricity(TM), Simply
3D(TM), Picture Publisher(R), PhotoMagic(R), Instant 3D(TM), and Visual
Reality(R). The Personal Creativity category includes American Greetings(R)
CreataCard(R) Plus(TM), American Greetings(R) CreataCard(R) Gold(TM),
Crayola(TM)Art Studio(TM)2, and Hallmark Connections(TM) Card Studio(TM).
Revenues from Windows Draw(R) are categorized as either Enterprise Graphics or
Personal Creativity depending on the Company's assessment of the market or
channel into which the product is sold.
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
---------------------------------------------- ------------------------------------------
1997 % 1996 % 1997 % 1996 %
---------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Enterprise Graphics $ 10,195 52% $ 10,367 64% $ 18,323 53% $ 20,342 62%
Web Graphics 1,903 10% 905 6% 4,628 13% 2,252 7%
Personal Creativity 7,259 38% 4,841 30% 11,937 34% 10,109 31%
--------- -------- -------- -------- -------- ------ -------- ------
Total $ 19,357 100% $ 16,113 100% $ 34,888 100% $ 32,703 100%
========= ======== ======== ======== ======== ====== ======== ======
</TABLE>
For the three months ended December 31, 1997, revenues increased 20 percent
versus the same period of the prior year. If the exchange rates in effect during
the second quarter of fiscal 1997 had been in effect during the second quarter
of fiscal 1998, revenues would have been $1.1 million higher. This revenue
decrease resulted from the change in exchange rates of European currencies and
the Japanese yen versus the U.S. dollar. Since European manufacturing costs and
European and Japanese operating expenses are also incurred in those local
currencies, the impact of exchange rates on net income was reduced and net
income would have been $0.3 million higher. The Company expects unfavorable
exchange rate comparisons through the end of the current year, however the
amount of the impact is expected to decline.
The decline in Enterprise Graphics revenues resulted from the continuing decline
in legacy products such as Small Business Graphics and Print Studio and Designer
Power Pack as well as approximately $0.9 million of the aforementioned exchange
rate impact. These declines were mostly offset by increased revenues from
Graphics Suite resulting from the Company's increased focus on corporate
customers, revenues from the Optima product acquired June 30, 1997, and the
increased revenue from Windows Draw resulting from the international rollout of
version 6.0. During the quarter ended December 31, 1997, revenue from Graphics
Suite and the standalone versions of FlowCharter each represented more than 30%
of the Company's Enterprise Graphics revenues. One of the Company's primary
objectives is to focus on increasing Enterprise Graphics revenues. To meet this
objective, Micrografx has significantly increased the number of corporate sales
people over the past year. The rate of revenue growth in this category, though,
is difficult to predict with accuracy and may be uncertain due to the long sales
cycle in obtaining corporate customers, which typically ranges from 6 to 18
months. Additionally, the Company typically sells an initial license for a
certain introductory level of copies of the software to corporate customers
with the strategy that the customer will continue to increase usage and
purchase additional licenses over time, giving an annuity effect to
the license revenue. The Company has begun to see positive results from this
strategy, as several large corporations became customers during the most recent
quarter, but there is no assurance that this strategy will be successful.
The growth in the Company's Web Graphics revenues is reflective of the
increasing importance of the Internet. Revenues from Simply 3D in the second
quarter of fiscal 1998 far exceeded those of version 1.0 in the second quarter
of fiscal 1997. This resulted from the Company's emphasis on this software
category, increased functionality of the new version, which was released in
March 1997, and license agreements with original equipment manufacturers (OEMs)
whereby the OEMs bundle the Company's software with their graphics accelerator
boards. Also contributing to the increased revenue were sales of Webtricity,
which was introduced in February 1997, and an increase in sales of Picture
Publisher, partially offset by declines in legacy products. The Company expects
continued year-over-year growth in this
8
<PAGE> 9
category in the third quarter of fiscal 1998 resulting from the upcoming release
of updated versions of Simply 3D and Picture Publisher.
The increase in Personal Creativity revenues resulted from the increased
popularity of the Company's CreataCard and Windows Draw products. The Company
extended its market share leadership in the greeting card software category
during the holiday selling season. These gains were partially offset by the loss
of revenues related to the termination of the Company's right to distribute its
products licensed under the Crayola brand name, which expired in the third
quarter of fiscal 1997.Due to the high level of seasonality of Personal
Creativity revenues, the Company expects these revenues to decrease as a percent
of revenue through the end of the fiscal year.
Revenues by geographical region for the three and six months ended December 31,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
----------------------------------------------- --------------------------------------------
1997 % 1996 % 1997 % 1996 %
----------- --------- ----------- -------- -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Americas $ 9,708 50% $ 8,072 50% $18,128 52% $16,819 51%
Europe 7,230 37% 5,999 37% 12,142 35% 10,800 33%
Asia Pacific 2,419 13% 2,042 13% 4,618 13% 5,084 16%
------- ------- ------- ------- ------- ------- ------- -------
Total $19,357 100% $16,113 100% $34,888 100% $32,703 100%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The increase in Americas revenues corresponds with the increase in Personal
Creativity products, which are primarily only produced in English versions. The
European increase resulted from the focus of adding to the Corporate sales force
combined with the introduction of Windows Draw version 6.0. Despite the decline
in the regional economies, Asia Pacific revenues increased primarily as a result
of introducing Windows Draw version 6.0. The increases in Europe and Asia
Pacific would have been $1.1 million greater if the exchange rates in effect
during the second quarter of fiscal 1997 had been in effect during the second
quarter of fiscal 1998. The Company expects the Americas and Europe to continue
to increase in year-over-year comparisons, while the impact of the current
economic situation in Asia Pacific is uncertain.
Cost of revenues for the three months ended December 31, 1997 were $5.5 million,
or 28% of net revenues, compared to $5.3 million, or 33% of net revenues, for
the three months ended December 31, 1996. Included in these amounts is
amortization of capitalized software development costs and acquired product
rights of $1.7 million in each of the respective periods. The increase in cost
of revenues for the three months ended December 31, 1997 was attributable to the
increase in volume of shipments and increased external royalties. The decline in
cost of revenues as a percent of revenue resulted from a higher average selling
price and resultant margin in the CreataCard product line due to the addition of
a premium product, CreataCard Gold, as well as choosing lower cost components,
such as compact disks instead of diskettes, and other cost control measures. The
Company does not expect significant variability in cost of revenues as a percent
of revenue in the near term.
Sales and marketing expenses for the three months ended December 31, 1997 were
$9.9 million, or 51% of net revenues, compared to $8.8 million, or 55% of net
revenues for the same period in the previous year. The increase in sales and
marketing expense was attributable to increased advertising and promotional
expenses related to the strong holiday selling season and compensation expenses
for the increased corporate sales force. The Company expects that sales and
marketing expenses will continue to decline as a percent of revenue.
9
<PAGE> 10
General and administrative expenses for the three months ended December 31, 1997
were $1.6 million, or 8% of net revenues, compared to $2.5 million, or 15% of
net revenues, for the three months ended December 31, 1996. This decrease was
the result of the reductions in executive overhead, management layers, and
external legal expenses, in addition to cost control measures. The prior year
amount also includes non-recurring expenses related to the Company's chief
executive and senior management searches. The Company expects general and
administrative expenses to remain at approximately the current level for the
near term.
Net research and development expenses for the three months ended December 31,
1997 were $1.8 million, or 9% of net revenues, compared to $1.6 million, or 10%
of net revenues, for the quarter ended December 31, 1996. The increase in net
research and development expenses was due to an increase in the number of
development employees as well as ongoing development expenses resulting from the
acquisition of AdvanEdge Technologies, Inc. ("AdvanEdge") on June 30, 1997.
Gross research and development expenses, before capitalization, for the three
months ended December 31, 1997 were $2.9 million, or 15% of net revenues,
compared to $2.7 million, or 17% of net revenues for the quarter ended December
31, 1996. The Company expects research and development expenses to remain near
the current level as a percent of revenue.
During the three months ended December 31, 1997, the Company capitalized
approximately $1.1 million in software development costs and amortized
approximately $0.9 million in software development costs. This compares to
capitalization of $1.1 million and amortization of $1.1 million in the three
months ended December 31, 1996.
For the three months ended December 31, 1997, interest income of $0.1 million
declined compared to interest income of $0.2 million for the three months ended
December 31, 1996. This decrease was a result of the decline in the Company's
cash balance. Increased management of foreign currency exposures resulted in a
foreign currency gain of $0.1 million for the three months ended December 31,
1997 compared to a foreign currency loss of $0.3 million for the three months
ended December 31, 1996.
The Company's effective tax rate rose to 35% for the three months ended December
31, 1997 compared to 34% for the three months ended December 31, 1996. This
increase was primarily the result of higher tax rates in the Company's
international subsidiaries. The Company expects the effective tax rate to remain
at approximately 35% for the remainder of the fiscal year.
For the six months ended December 31, 1997, net revenues of $34.9 million
increased 7% compared with $32.7 million for the six months ended December 31,
1996. The Americas and Europe accounted for this increase due to the increased
popularity of the CreataCard and Windows Draw product lines. These gains were
partially offset by a decrease in Asia Pacific as a result of the decline of the
retail sector of the Japanese economy and the timing of the product life cycle.
If the exchange rates in effect during the first six months of fiscal 1997 had
been in effect during the first six months of fiscal 1998, revenues would have
been $2.1 million higher.
The loss from operations for the six months ended December 31, 1997 declined
compared to the same period of the prior year due to the restructuring charge in
fiscal 1997, increased revenue and margins, bringing sales and marketing
expenses in closer alignment with revenues, and scaling back general and
administrative expenses to a percent of revenue in line with industry averages,
partially offset by increasing research and development spending. If the
exchange rates in effect during the first six months of fiscal 1997 had been in
effect during the first six months of fiscal 1998, net income would have been
$0.5 million higher
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's principal sources of liquidity consisted of
cash and cash equivalents of $9.6 million and short-term investments of $3.6
million.
10
<PAGE> 11
For the six months ended December 31, 1997, cash used in investing activities
exceeded cash provided by operating and financing activities, resulting in a
decrease of $1.5 million in cash and cash equivalents. Cash flows from operating
activities generated $1.7 million in cash during the six months ended December
31, 1997. The cash provided by operating activities consisted primarily of
depreciation and amortization of $4.3 million, partially offset by an increase
in accounts receivable of $2.0 million and an increase in inventories of $0.6
million. Accounts receivable allowances increased primarily due to an increase
in accrued rebates and an increase in return allowances in line with the
seasonal increase in revenues.
Investing activities used $3.7 million in cash during the six months ended
December 31, 1997 primarily due to capitalized software development costs and
purchases of acquired product rights of $3.0 million as well as increases
resulting from the acquisition of WebKnight for $0.5 million and purchases of
fixed assets.
The Company believes that cash flow from operations as well as existing cash and
short-term investments will be sufficient to meet the Company's capital
requirements in the short term.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income" (SFAS
130), which is effective for fiscal years beginning after December 15, 1997.
SFAS 130 establishes standards for reporting and displaying comprehensive income
and its components in the financial statements. This standard does not, however,
require a specific format for the statement, but requires the Company to display
an amount representing total comprehensive income for the period in that
financial statement. The effect of SFAS 130 on the Company has not been
determined.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131), which is effective for fiscal
years beginning after December 15, 1997. SFAS 131 establishes standards for the
manner in which public business enterprises report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports
issued to stockholders. The effect of SFAS 131 on the Company has not been
determined.
YEAR 2000 COSTS
The Company has undertaken a preliminary evaluation of its mission critical
systems and believes that any costs that may arise to ensure functionality in
the year 2000 would not be material. Likewise, the Company has evaluated its own
products and has determined that all current products will function in the year
2000. Anyone may view a letter on this topic from Doug Richard, Micrografx
President and CEO, on the Internet at www.mgxsupport.com.
FORWARD-LOOKING STATEMENTS
The Company notes that, with the exception of historical information, the
matters discussed above are forward-looking statements that involve risks and
uncertainties. Additional information on the factors that could affect the
Company's financial results is included in the Company's 1997 Annual Report to
Shareholders and other filings with the Securities and Exchange Commission. The
Company's actual results may differ materially from the results discussed in
these forward-looking statements. Factors that could cause or contribute to such
differences include, without limitation, the length of time it takes new
Enterprise sales associates to become productive, changes in the market or
regional economies, foreign currency exchange rate variability, new products and
announcements from Micrografx as well as other companies, changes in technology,
and competition from larger, more established competitors.
11
<PAGE> 12
MICROGRAFX, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the resolution of
these legal proceedings and claims will not have a material effect on the
Company's consolidated financial position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on November 4, 1997, the
following persons were elected to the Board of Directors:
Affirmative Votes Votes Withheld
----------------- --------------
Russell E. Hogg 9,584,214 405,252
Eugene P. Beard 9,585,664 403,802
Robert Kamerschen 9,585,514 403,952
Seymour Merrin 9,584,566 404,900
Douglas Richard 9,582,720 406,746
The following proposals were also approved at the Company's Annual Meeting of
Shareholders
<TABLE>
<CAPTION>
Affirmative Negative Broker
Votes Votes Abstentions Non-votes
------- ----- ----------- ---------
<S> <C> <C> <C> <C>
Amendment of the Company's 1995 Incentive 2,725,512 2,111,599 81,373 5,193,965
and Nonstatutory Stock Option Plan to
increase the number of shares of stock
subject to options annually granted to
the Company's employees from 1,500,000 shares
to 2,600,000 shares.
Amendment to the Micrografx, Inc. Employee 3,423,512 1,397,664 97,308 5,193,965
Stock Purchase Plan in order to increase
the number of shares of stock authorized for
issuance under such plan from
800,000 to 1,300,000 shares.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Affirmative Negative Broker
Votes Votes Abstentions Non-votes
----- ----- ----------- ---------
<S> <C> <C> <C> <C>
Amendments to the Company's 1995 Director 4,154,436 609,190 86,858 5,261,965
Stock Option Plan (the "Plan") to (i)
increase the number of shares of Common Stock
authorized and reserved for issuance upon exercise
of options granted under the Plan from 300,000 shares
to 600,000 shares; (ii) increase the number of shares
subject to options annually granted under the Plan to
the Company's non-employee directors from 7,500 to
10,000 option shares; (iii) afford each non-employee
director the right to elect to receive stock options
under the Plan in lieu of cash directors' fees; and
(iv) provide for the immediate vesting of all
unexercisable options granted under the Plan upon the
occurrence of certain events resulting in a change of
control of the Company.
Appointment of Ernst & Young LLP as 9,927,350 34,258 27,858 122,983
independent public accountants for the
Company.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. The Financial Data Schedule required by Item 601(b)(27) of Regulation
S-K has been included with the electronic filing of this Form 10-Q.
(b) Reports on Form 8-K - none.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROGRAFX, INC.
Date: February 12, 1998 By /s/ Larry G. Morris
--------------------
Larry G. Morris
Chief Financial Officer
and Treasurer
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- ------------
27. The Financial Data Schedule required by Item 601(b)(27) of
Regulation S-K has been included with the electronic filing
of this Form 10-Q.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,608
<SECURITIES> 3,563
<RECEIVABLES> 16,453
<ALLOWANCES> 4,874
<INVENTORY> 1,860
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0
0
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</TABLE>
