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, 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 0-18090
CAERE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2250509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Cooper Court, Los Gatos, California, 95030
(Address of principal executive offices)
(408) 395-7000
(Registrant's telephone number, including area code)
----------------------------------------------------------------------
(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_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock.
Outstanding
Class June 30, 1997
Common Stock
$.001 par value 13,281,952
This is page 1 of 16 pages
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<TABLE>
CAERE CORPORATION
INDEX
PART I. Financial Information
<CAPTION>
Page
ITEM 1. Financial Statements
<S> <C> <C>
Condensed Consolidated Balance Sheets - June 30, 1997
and December 31, 1996 3
Condensed Consolidated Statements of Earnings -- Three Months
and Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
PART II. Other Information
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
CAERE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 6,021 $ 11,663
Short-term investments 39,090 32,627
Receivables 6,924 6,888
Inventories 2,365 2,779
Deferred income taxes 2,474 2,474
Other current assets 1,071 768
------ ------
Total current assets 57,945 57,199
Property and equipment, net 4,640 4,742
Other assets 1,369 1,213
------ ------
Total assets $ 63,954 $ 63,154
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other payables $ 5,329 $ 7,406
Preferred stock, $.001 par value: authorized 2,000,000
shares; none issued or outstanding - -
Common stock, $.001 par value: authorized 30,000,000
shares; issued and outstanding 13,281,952 and 12,630,584
shares 13 13
Additional paid-in capital 59,205 55,399
Retained earnings (accumulated deficit) (593) 336
------ ------
Total stockholders' equity 58,625 55,748
------ ------
Total liabilities and stockholders' equity $ 63,954 $ 63,154
====== ======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
<TABLE>
CAERE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 12,751 $ 13,989 $ 25,323 $ 27,545
Cost of revenues 3,353 4,457 7,069 8,772
------ ------ ------ ------
9,398 9,532 18,254 18,773
------ ------ ------ ------
Operating expenses:
Research and development 2,204 1,858 4,206 3,620
Selling, general and administrative 6,683 6,575 12,995 13,003
Merger related costs - - 2,935 90
------ ------ ------ ------
8,887 8,433 20,136 16,713
------ ------ ------ ------
Operating earnings (loss) 511 1,099 (1,882) 2,060
Interest income 613 745 1,175 1,393
------ ------ ------ ------
Earnings (loss) before income taxes 1,124 1,844 (707) 3,453
Income tax expense 112 369 222 678
------ ------ ------ ------
Net earnings (loss) $ 1,012 $ 1,475 $ (929) $ 2,775
====== ====== ====== ======
Net earnings (loss) per common and
common equivalent share $ 0.08 $ 0.11 $ (0.07) $ 0.20
====== ====== ====== ======
Shares used in per share calculation 13,320 13,820 12,983 13,658
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
<TABLE>
CAERE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (929) $ 2,775
Adjustments to reconcile net earnings (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,488 1,244
In-process research and development 2,935 -
Merger related costs - (860)
Amortization of capitalized software development costs 243 294
Changes in operating assets and liabilities:
Receivables, net (36) (837)
Income tax receivable - 1,109
Inventories 414 2
Other current assets (303) (175)
Accrued expenses and other payables (2,077) (164)
------ ------
Net cash provided by operating activities 1,735 3,388
------ ------
Cash flows from investing activities:
Short-term investments, net (6,463) (9,832)
Capital expenditures (1,184) (743)
Capitalized software development costs (558) (297)
Other assets 127 70
------ ------
Net cash used for investing activities (8,078) (10,802)
------ ------
Cash flows from financing activities -
proceeds from issuances of common stock 701 1,452
------ ------
Net change in cash and cash equivalents (5,642) (5,962)
Cash and cash equivalents, beginning of period 11,663 10,664
------ ------
Cash and cash equivalents, end of period $ 6,021 $ 4,702
====== ======
Supplemental disclosures:
Cash paid for income taxes $ 991 $ 46
====== ======
Common stock issued for business acquisition $ 3,105 $ -
====== ======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
CAERE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A) Basis of Presentation
The accompanying unaudited condensed consolidated balance sheets,
statements of earnings and statements of cash flows reflect all adjustments
(consisting of only normal recurring adjustments) which are, in the opinion of
management, necessary to fairly present the financial position of the Company as
of June 30, 1997, and the results of operations and cash flows for the periods
indicated.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions for Form 10-Q and
therefore certain information and footnote disclosure normally contained in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company filed audited financial
statements with the Securities and Exchange Commission which included all
information and footnotes necessary for a complete presentation of the Company's
financial position, results of operations and cash flows for the years ended
December 31, 1996, 1995 and 1994, in its report on Form 10-K for the year ended
December 31, 1996 ("the Form 10-K"). These condensed consolidated financial
statements should be read in conjunction with the financial statements contained
in the Company's Form 10-K dated March 25, 1997. The results of operations for
the interim periods ended June 30, 1997, are not necessarily indicative of the
results to be expected for the full year.
<TABLE>
<CAPTION>
B) Inventories June 30, 1997 December 31, 1996
------------ ------------- -----------------
(In thousands)
<S> <C> <C> <C> <C>
A summary of inventories follows:
Raw materials $ 1,483 $ 1,540
Work in process 204 348
Finished goods 678 891
--------- ---------
$ 2,365 $ 2,779
=== ===== =========
</TABLE>
C) Net Earnings Per Share
Net earnings per common and common equivalent share are computed using
the weighted average number of common and dilutive common equivalent shares
outstanding during the period. Common equivalent shares consist of options to
purchase common stock calculated using the treasury stock method. Fully diluted
earnings per share for all periods presented were not materially different from
primary earnings per share.
<PAGE>
D. Business Acquisition
On March 31, 1997, the Company acquired Formonix, Inc. ("Formonix"), a
software developer located in Colorado. The total value of the acquisition was
approximately $3,188,000. The Company issued 550,000 shares of common stock in
exchange for all of the capital stock of Formonix. Using the closing price of
the Company's stock on the closing date of acquisition, the valuation of the
shares issued was approximately $3,105,000. Acquisition costs associated with
the transaction totaled approximately $83,000 and consisted mainly of
professional fees. The business combination was accounted for under the purchase
method of accounting. Accordingly, the consolidated financial statements of the
Company do not include Formonix until after the date of acquisition.
Acquired technology was valued using a risk-adjusted cash flow model,
under which future expected cash flows were discounted taking into account risks
related to existing markets, the technology's life expectancy, future target
markets and potential changes thereto, and the competitive outlook for the
technology. The analysis resulted in an allocation of approximately $253,000 to
capitalized software development costs and the balance of approximately
$2,935,000 to in-process technology which had not yet reached technological
feasibility and had no alternative future use, and accordingly, was charged to
expense.
The following summarized, pro forma results of operations assumes the
acquisition took place at the beginning of the respective periods and excludes
the $2,935,000 charge for acquired in-process technology.
<TABLE>
<CAPTION>
Six months ended June 30, in thousands, except per share amounts 1997 1996
---- ----
<S> <C> <C>
Net revenues $25,323 $27,545
Net earnings $ 1,863 $ 2,853
Earnings per share $ .14 $ .20
</TABLE>
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company notes that, except for the historical information contained
herein, the matters discussed below are forward-looking statements subject to
risks and uncertainties that may cause the Company's actual results to differ
materially. Such risks and uncertainties include, but are not limited to,
various important competitive and technological factors such as rival customer
and pricing pressures; success of the "bundle and upgrade" business model to
include the Company's maintaining its relationships with scanner manufacturers
as well as customers opting to upgrade to newer or more fully featured products;
changes in customer order patterns, including the maintenance of relationships
with retail distributors and dealers; manufacturing considerations, including
the maintenance of margins in a declining-price environment as well as risk of
inventory obsolescence due to shifts in market demand and new product
introductions; and other risk factors listed from time to time in the Company's
reports filed with the Securities and Exchange Commission, including, but not
limited to, the report on Form 10-K for the year ended December 31, 1996
(Certain Trends and Risk Factors sections).
Results of Operations
The following chart summarizes net revenues, cost of revenues, and gross
margins for the Company's products categorized between hardware and software.
Software products consist of the OmniPage, WordScan, OmniForm, PageKeeper, and
Recognita lines of products. Hardware products consist of transaction processing
OCR and bar code products, and the M/Series line of production OCR products
<TABLE>
<CAPTION>
Business Line Analysis
------------- --------------- --------------- -------------- --------------- ---------------
Three Months Ending: June 30, 1997 June 30, 1996
Software Hardware Software Hardware
Products Products Combined Products Products Combined
<S> <C> <C> <C> <C> <C> <C>
Net revenues $11,351 $1,400 $12,751 $11,462 $2,527 $13,989
Cost of revenues 2,485 868 3,353 3,376 1,081 4,457
$8,866 $532 $9,398 $8,086 $1,446 $9,532
Gross margin % 78.1% 38.0% 73.7% 70.5% 57.2% 68.1%
------------- --------------- --------------- -------------- --------------- ---------------
------------- --------------- --------------- -------------- --------------- ---------------
Six Months Ending: June 30, 1997 June 30, 1996
Software Hardware Software Hardware
Products Products Combined Products Products Combined
Net revenues $22,216 $3,107 $25,323 $22,877 $4,668 $27,545
Cost of revenues 5,262 1,807 7,069 6,798 1,974 8,772
$16,954 $1,300 $18,254 $16,079 $2,694 $18,773
Gross margin % 76.3% 41.8% 72.1% 70.3% 57.7% 68.2%
------------- --------------- --------------- -------------- --------------- ---------------
</TABLE>
Net revenues for software products decreased 1% during the second quarter
of 1997 to $11,351,000 from $11,462,000 in the second quarter of 1996, due
primarily to a decrease in upgrade revenues of OmniPage Professional and
WordScan products. The primary reason for the decrease in upgrade unit sales was
the deferral of direct mail programs into the third quarter of 1997 when the
Company expects a new version of OmniPage Pro to begin shipping. This decrease
in software upgrade revenue was offset by a significant one-time payment of
royalties during the quarter, as well as an increase in revenues from sales of
OmniForm products. The one-time royalty payment was received as a result of the
fact that certain agreed upon changes in one of the Company's bundling programs
could not be implemented as quickly as the Company desired. For the six months
ended June 30, 1997, net revenues for software products decreased 3% to
$22,216,000 from $22,877,000 during the same period of 1996, due primarily to
the same reasons.
Net revenues for hardware products decreased 45% to $1,400,000 in the
second quarter of 1997 compared to $2,527,000 during the same period in 1996.
This decrease was primarily attributable to lower unit sales of transaction
processing OCR products between the two periods. Hardware product revenues in
the second quarter of 1996 included a large, one-time order for transaction
processing OCR products which exceeded $1 million. This fluctuation in revenues
is typical of quarterly shipment patterns in this line of the Company's
business. The balance of the decrease in hardware revenues is associated with a
transition of the M/Series line of production-level OCR products to
"software-only" solutions, as the computing power available on today's personal
computers continues to increase. For the six months ended June 30, 1997, net
revenues for hardware products decreased 33% to $3,107,000 from $4,668,000
during the same period of 1996, due primarily to the same factors.
International sales increased 10% to $3,744,000, or 29% of net revenues,
during the second quarter of 1997, compared to $3,408,000, or 24% of net
revenues, in the same period of 1996. The primary reason for this increase was
the operation of the Company's Hungarian subsidiary, Recognita Rt.
("Recognita"), acquired in December 1996. Also, to a lesser extent, the
availability of new foreign versions of certain software products contributed to
the increase in international sales as the "bundle and upgrade" strategy
continued to develop overseas. For the six months ended June 30, 1997,
international sales increased 13% to $8,683,000, or 34% of net revenues,
compared to $7,668,000, or 28% of net revenues, during the comparable period of
1996. This increase is primarily attributable to the same factors.
Gross Margins
Gross margins for software products improved from 70.5% in the second
quarter of 1996 to 78.1% in the second quarter of 1997, primarily due to the
shift of the manufacturing of bundled product to the Company's scanner
manufacturer partners. Beginning in the fourth quarter of 1996, the Company
began to change the bundling arrangement with certain of its partners. Prior to
the fourth quarter of 1996, the Company sold such bundled product to partners at
prices approximating cost. Since the fourth quarter of 1996, certain partners
have agreed to manufacture their product requirements on a much reduced royalty
basis. The effect of this change upon the Company's financial statements has
been to reduce net revenues and cost of revenues previously associated with such
bundled product by a similar amount, creating an improvement in overall gross
margins. The one-time royalty payment recorded in the second quarter of 1997
also contributed to the increase in gross margins for software products. For the
six months ended June 30, 1997, gross margins for software products improved to
76.3% from 70.3% in the first half of 1996. This improvements is primarily due
to the same factors.
Gross margins for hardware products decreased to 38.0% in the second
quarter of 1997 from 57.2% in the same period of 1996, due to lower unit sales
and revenues of both transaction processing OCR and bar code products, as well
as M/Series products. M/Series products typically carry higher gross margins
than other hardware products. Also contributing to the reduced margin on
hardware products was the fixed nature of a majority of the Company's hardware
manufacturing overhead. As hardware product revenues decline, the level of
manufacturing overhead does not decline in the same proportion. For the six
months ended June 30, 1997, gross margins for hardware products decreased to
41.8% from 57.7% in the first half of 1996 due primarily to the same factors.
The primary factor affecting gross margins in the future is likely to be
shifts in product mix between fully priced, non-upgrade software, bundled
software, upgrade products, and royalty revenues as well as overall shifts in
product mix between software and hardware products. The microcomputer software
market has been subject to rapid changes, including significant price
competition, which can be expected to continue. Future technology or market
changes may cause certain products to become obsolete rapidly, necessitating
increased inventory write-offs or reserves and a corresponding decrease in gross
margins.
Operating Expenses
Research and development (R&D) expenses increased 19% to $2,204,000 in the
second quarter of 1997 from $1,859,000 during the same period of 1996. The
increase in spending from 1996 to 1997 was primarily the result of development
expenses of the Company's recently acquired subsidiaries, Recognita in Hungary,
which was acquired in December 1996, and Formonix, Inc. ("Formonix") in
Colorado, which was acquired in March 1997. To a lesser extent, the increase in
R&D expenses was also attributable to increased staffing associated with the
Company's ongoing software development projects. As a percentage of revenue, R&D
expense increased to 17% of revenue in the second quarter of 1997 from 13%
during the same period in 1996. This increase is attributable to higher R&D
expense and lower net revenues between the comparable periods. For the six
months ended June 30, 1997, R&D expenses increased 16% to $4,206,000, or 17% of
net revenues, from $3,621,000, or 13% of net revenues, during the first half of
1996. This increase in spending was primarily the result of the same factors.
The Company is committed to providing continuing enhancements to current
products as well as developing new technologies for the future. This commitment
will result in the Company's continuing to invest heavily in R&D during 1997. In
accordance with Statement of Financial Accounting Standards No. 86, the Company
capitalized $150,000 of software development costs during the second quarter of
1997, compared to $132,000 in the same period of 1996. For the six months ended
June 30, 1997, capitalized software development costs totaled $305,000, compared
to $297,000 during the first half of 1996. In addition to this capitalization of
internal R&D expenses, in connection with the Company's acquisition of Formonix,
the Company capitalized approximately $253,000 of the acquisition cost during
the first quarter of 1997. The costs capitalized related to the portion of the
Formonix acquisition valuation which was allocated to existing products
acquired. Amortization of capitalized software development costs was $126,000 in
the second quarter of 1997, versus $132,000 for the comparable period in 1996.
On a year-to-date basis, amortization of capitalized software development costs
totaled $243,000 in the first half of 1997, versus $294,000 during the
comparable period in 1996.
Selling, general and administrative (S,G&A) expenses increased 2% in the
second quarter of 1997 to $6,683,000 from $6,574,000 during the same period of
1996. The increase in S,G&A spending was primarily related to increased service
and support expenses related to the Company's growing customer base resulting
from the high volume business being generated by the "bundle and upgrade" model.
To a lesser extent, the increase in S,G&A expenses was attributable to sales and
service costs of Recognita during 1997. As a percentage of net revenues, S,G&A
expense increased to 52% in the second quarter of 1997 from 47% during the same
period in 1996. This increase is attributable to higher S,G&A expense and lower
net revenues during the comparable periods. For the six months ended June 30,
1997, S,G&A spending remained consistent at $12,995,000 compared to $13,002,000
in the first half of 1996. This consistency resulted from increased service and
support costs being offset by savings related to the streamlining of management
and promotional costs between the OmniPage and OmniForm product line marketing
areas. As a percentage of revenue on a year-to-date basis, S,G&A expense
increased to 51% of revenue in the first half of 1997 from 47% during the same
period in 1996. This increase is attributable to lower net revenues during the
comparable periods. The Company expects that S,G&A expense may increase in
dollar terms in 1997, as efforts to expand sales and marketing activities
continue in the OCR, forms, and desktop document management areas.
During the first quarter of 1997, a $2,935,000 one-time charge for
in-process research and development was taken related to the Company's
acquisition of Formonix in March 1997. This charge related to the portion of the
Formonix acquisition valuation represented by the present value of estimated
cash flows expected to be generated by Formonix-related technology which, at the
acquisition date, had not yet reached the point of technological feasibility and
did not have an alternative future use.
Interest Income
Interest income decreased 18% in the second quarter of 1997 to $613,000
from $745,000 during the same period of 1996. For the six months ended June 30,
1997, interest income decreased 16% to $1,175,000 from $1,393,000 during the
first half of 1996. The decrease in interest income is attributable to a
reduction in total cash and short-term investment balances between the
comparable periods. The Company's one million share repurchase during the third
quarter of 1996, its acquisition of Recognita in December 1996, and its
acquisition of Formonix in March 1997 were the primary reasons for the decline
in total cash and short-term investment balances since the second quarter of
1996.
Income Taxes
The Company's effective income tax rate in 1997 is expected to be between
10% and 20%, which is less than statutory rates primarily due to the use of its
foreign sales corporation and increased utilization of net operating loss
carryforwards acquired in its 1994 merger with Calera Recognition Systems, Inc.
("Calera"). In the first half of 1996, the effective income tax rate was 20%,
due primarily to the use of the Company's foreign sales corporation and to
expected utilization of the Calera net operating loss carryforwards for the 1996
fiscal year.
Net Earnings and Earnings Per Share
Net earnings for the second quarter of 1997 were $1,012,000, compared to
$1,475,000 during the same period in 1996. Earnings per share were $.08 in the
second quarter of 1997, versus $.11 in the comparable period of 1996. For the
six months ended June 30, 1997, the net loss was $929,000, or $.07 per share,
compared to net earnings of $2,775,000, or $.20 per share, during the first half
of 1996. The reason for the loss in the first half of 1997 was the $2,935,000
one-time in-process research and development charge related to the Formonix
acquisition recorded during the first quarter. Excluding this one-time charge,
net earnings for the first half of 1997 would have been $2,006,000, or $.15 per
share, using primary dilutive shares outstanding of 13,124,000 under the
treasury stock method.
Certain Trends
The Company's future operating results may be affected by various uncertain
trends and factors which are beyond the Company's control. These include, but
are not limited to, adverse changes in general economic conditions, rising
costs, or the occasional unavailability of needed components. The industry is
characterized by rapid changes in the technologies affecting optical character
recognition, forms technology, and document management technology. The industry
has also become increasingly competitive, and, accordingly, the Company's
results may also be adversely affected by the actions of existing or future
competitors, including the development of new technologies, the introduction of
new products, and the reduction of prices by such competitors to gain or retain
market share.
During 1994, the Company began to bundle versions of its OmniPage and
WordScan software recognition products with scanners from various manufacturers.
The Company's objective in bundling its software products with scanners was to
expand the overall market for OCR software by providing a larger number of
scanner purchasers with experience in the advantages of optical character
recognition. The success of this model, compared to Caere's former model of
selling its software primarily through retail distribution, depends upon the
Company's maintaining or expanding its existing relationships with scanner
manufacturers and a significant proportion of customers who first receive OCR
software in a bundled product deciding to upgrade to a newer or more fully
featured version of the software. Such an upgrade is typically at a
substantially lower price than the retail price of the newer or fully featured
product.
Bundled products incorporating OmniPage and WordScan began shipping in
significant quantities in the fourth quarter of 1994. Because of the lower
per-unit revenue to the Company that results from the combined sale of a bundled
product plus an upgrade, compared to the retail sale of a fully featured version
of the software, the success of the "bundle and upgrade" program relies on
increasing unit sales of upgrades for its success. There can be no assurance
that Caere's transition to the "bundle and upgrade" business model will be
successful and provide sufficient increase in unit volume in the future to
offset reduced per-unit revenue. In addition, customers using the bundled
product may defer or forego purchase of the Company's more fully featured
versions of OmniPage and WordScan products if they find that the bundled
products satisfy their recognition needs.
A significant portion of the Company's net revenues is attributable to
sales through the distribution channel. The Company's future operating results
are dependent to a certain extent on its ability to maintain its existing
relationships with distributors.
The Company's future earnings and stock price could be subject to
significant volatility, particularly on a quarterly basis. The Company's
revenues and earnings are unpredictable due to the Company's shipment patterns.
As is common in the software industry, the Company's experience has been that a
disproportionately large percentage of shipments has occurred in the third month
of each fiscal quarter, and shipments tend to be concentrated in the latter half
of that month. Because the Company's backlog early in a quarter is not generally
large enough to assure that it will meet its revenue targets for any particular
quarter, quarterly results are difficult to predict until the end of the
quarter. A shortfall in shipments at the end of any particular quarter may cause
the results for that quarter to fall significantly short of anticipated levels.
Due to analysts' expectations of continued growth, any such shortfall in
earnings could have a very significant adverse effect on the trading price of
the Company's common stock in any given period.
As a result of the foregoing factors and other factors which may arise in
the future, the market price of the Company's common stock may be subject to
significant fluctuations over a short period of time. These fluctuations may be
due to factors specific to the Company, to changes in analysts' earnings
estimates, or to factors affecting the computer industry or the securities
markets in general.
Liquidity and Capital Resources
Caere's financial position remains strong at June 30, 1997. Working capital
increased 6% to $52,616,000 from $49,793,000 at December 31, 1996. The Company
has no long-term debt. The Company's cash and short-term investments totaled
$45,111,000 at June 30, 1997. The Company believes that current cash balances
and internally generated funds will be sufficient to meet its cash requirements
through 1997.
Caere generated cash for operating activities of $1,735,000 during the six
months ended June 30, 1997. Uses of cash included $6,463,000 to purchase
short-term investments in addition to a $1,184,000 investment in capital
equipment. During the first half of 1996, the Company generated cash from
operating activities of $3,388,000. Uses of cash during that period included
$9,832,000 to purchase short-term investments and $743,000 of expenditures for
capital equipment.
The Company offers credit terms to qualifying customers and also sells on
prepaid, credit card, and cash-on-delivery bases. With respect to credit sales,
the Company attempts to control its bad debt exposure through monitoring of
customers' creditworthiness and, where practicable, through participation in
credit associations that provide credit rating information about its customers.
The Company has also purchased credit insurance for certain key accounts to
reduce the potential for catastrophic losses.
<PAGE>
Item 4
Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Company was held on
May 13, 1997.
(b) Management's nominee to the Board of Directors of Class II Directors
(for a three-year term expiring at the Annual Meeting in the year 2000)
was elected by the following votes:
<TABLE>
<CAPTION>
For Withhold
<S> <C> <C>
Frederick W. Zuckerman (Class II) 11,129,233 124,818
</TABLE>
The following are persons whose term of office as Directors of the
Company continued after the meeting:
<TABLE>
<CAPTION>
<S> <C> <C>
Director Class Term Expires
Robert G. Teresi III 1998
Wayne E. Rosing III 1998
James K. Dutton I 1999
Robert J. Frankenberg I 1999
</TABLE>
(c) The other matters presented and the voting of stockholders with respecT
thereto are as follows:
<TABLE>
(i) Approval of the 1990 Employee Stock Purchase Plan, as amended,
to increase the number of shares which may be issued from
500,000 to 1,000,000, an increase of 500,000 shares.
<CAPTION>
<S> <C> <C> <C>
For: 9,094,736 Against: 1,905,694 Abstain: 45,591 No Vote: 208,030
(ii) Ratification of selection of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1997.
For: 11,150,870 Against: 75,295 Abstain: 27,886
</TABLE>
<PAGE>
Item 6
Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Net Earnings
(Loss) Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
period covered by this Report.
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.
CAERE CORPORATION
Date: August 7, 1997
/S/ Blanche M. Sutter
Blanche M. Sutter, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
<PAGE>
<TABLE>
EXHIBIT 11
CAERE CORPORATION
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS (LOSS) PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings (loss) $ 1,012,000 $ 1,475,000 $ (929,000) $ 2,775,000
== ========= ========= == ========= =========
Weighted average shares outstanding during
the period 13,280,285 13,434,976 12,982,694 13,417,216
Common equivalent shares using the treasury
stock method 39,990 385,145 - 240,889
----- ------ -------- ----- - --------
Common and common equivalent shares
outstanding for purposes of calculating net
earnings per share 13,320,275 13,820,121 12,982,694 13,658,105
========== ========== ========== ==========
Net earnings (loss) per common and common
equivalent share $ 0.08 $ 0.11 $ ( 0.07) $ 0.20
=========== =========== ============== ==============
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,021
<SECURITIES> 39,090
<RECEIVABLES> 6,924
<ALLOWANCES> 1,318
<INVENTORY> 2,365
<CURRENT-ASSETS> 57,945
<PP&E> 14,949
<DEPRECIATION> 10,309
<TOTAL-ASSETS> 63,954
<CURRENT-LIABILITIES> 5,329
<BONDS> 0
0
0
<COMMON> 59,218
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 63,954
<SALES> 25,323
<TOTAL-REVENUES> 25,323
<CGS> 7,069
<TOTAL-COSTS> 20,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,175
<INCOME-PRETAX> 707
<INCOME-TAX> 222
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 929
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
