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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 NO. 000-22688
MACROMEDIA, INC.
(A DELAWARE CORPORATION)
I.R.S. EMPLOYER IDENTIFICATION NO. 94-3155026
600 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94103
(415) 252-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: $0.001 par value Common Stock;
52,259,353 number of shares outstanding on July 31, 2000.
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<CAPTION>
MACROMEDIA, INC. AND SUBSIDIARIES
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets June 30, 2000 and March 31, 2000........................ 3
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2000 and 1999................................................... 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 2000 and 1999................................................... 5
Notes to Condensed Consolidated Financial Statements.......................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................... 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................. 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.......................................................................... 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................................................. 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................................................ 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................ 17
ITEM 5. OTHER INFORMATION.......................................................................... 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................................... 17
SIGNATURES......................................................................................... 20
</TABLE>
2
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<TABLE>
<CAPTION>
MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
June 30, March 31,
ASSETS 2000 2000
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 129,184 $ 115,084
Short-term investments.............................................. 82,831 71,952
Accounts receivable, net............................................ 36,772 41,883
Inventory, net...................................................... 1,515 1,349
Prepaid expenses and other current assets........................... 13,962 12,944
Deferred tax assets, short-term..................................... 8,206 7,812
------------- -------------
Total current assets............................................ 272,470 251,024
Land and building, net................................................ 18,805 18,982
Other fixed assets, net............................................... 53,701 41,871
Related party loans................................................... 11,463 9,944
Non-current restricted cash........................................... 4,475 --
Other long-term assets................................................ 22,253 17,538
------------- -------------
Total assets.................................................... $ 383,167 $ 339,359
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 3,079 $ 4,988
Accrued liabilities................................................. 33,534 34,735
Accrued compensation, fringe benefits and payroll taxes............. 23,813 19,107
Unearned revenue.................................................... 9,941 10,044
------------- -------------
Total current liabilities....................................... 70,367 68,874
Other liabilities..................................................... 377 321
------------- -------------
Total liabilities............................................... 70,744 69,195
------------- -------------
Minority interest..................................................... 17,352 15,888
------------- -------------
Stockholders' equity:
Common stock, par value $0.001 per share; 80,000 shares authorized; 60,619 and
50,674 shares issued and outstanding
as of June 30, and March 31, 2000, respectively.................. 60 51
Treasury stock at cost; 1,818 shares as of
June 30, and March 31, 2000....................................... (33,649) (33,649)
Additional paid-in capital.......................................... 365,531 335,497
Notes receivable from stockholders.................................. (1,914) --
Deferred compensation............................................... (22,808) (23,465)
Accumulated other comprehensive income.............................. 395 393
Accumulated deficit................................................. (12,544) (24,551)
------------- -------------
Total stockholders' equity...................................... 295,071 254,276
------------- -------------
Total liabilities and stockholders' equity...................... $ 383,167 $ 339,359
============= =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three months ended June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues................................................ $ 94,764 $ 51,232
Cost of revenues........................................ 10,111 5,754
----------- -----------
Gross margin............................................ 84,653 45,478
Operating expenses:
Sales and marketing ................................ 38,886 23,276
Research and development ........................... 24,915 12,990
General and administrative ......................... 8,901 5,810
Acquisition related ................................ 1,674 --
Non-cash compensation................................ 1,923 248
Amortization of intangibles.......................... 316 257
----------- -----------
Total operating expenses........................... 76,615 42,581
----------- -----------
Operating income................................... 8,038 2,897
Other income (expense):
Interest and investment income, net.................. 3,192 1,185
Foreign exchange gain................................ 954 54
Other................................................ (513) 112
------------ -----------
Total other income................................. 3,633 1,351
Minority interest....................................... 3,922 --
----------- -----------
Income before income taxes......................... 15,593 4,248
Provision for income taxes.............................. 3,586 2,521
----------- -----------
Net income......................................... 12,007 1,727
Accretion on mandatorily redeemable convertible
preferred stock................................... -- (164)
----------- ------------
Net income applicable to common stockholders...... $ 12,007 $ 1,563
=========== ===========
Net income applicable to common stockholders per share:
Basic.............................................. $ 0.24 $ 0.04
Diluted ........................................... $ 0.21 $ 0.03
Shares used in calculating net income applicable to
common stockholders per share:
Basic.............................................. 49,462 42,150
Diluted ........................................... 56,638 50,233
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
MACROMEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three months ended June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $ 12,007 $ 1,727
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.................................... 5,672 3,629
Deferred income taxes............................................ (394) --
Tax benefit from employee stock plans............................ 3,538 --
Minority interest................................................ (3,922) --
Non cash compensation............................................ 160 --
Deferred compensation amortization............................... 1,763 490
Change in operating assets and liabilities:
Accounts receivable, net...................................... 5,111 (1,739)
Inventory, net................................................ (166) (152)
Prepaid expenses and other current assets..................... (1,018) 1,157
Other assets.................................................. (2,520) 13
Accounts payable.............................................. (1,909) (1,221)
Accrued liabilities........................................... 3,505 3,113
Unearned revenue.............................................. (103) 414
Other long-term liabilities................................... 56 (38)
------------ ------------
Net cash provided by operating activities.................... 21,780 7,393
Cash flows from investing activities:
Capital expenditures................................................ (17,007) (8,250)
Purchase of short-term investments.................................. (31,339) (12,389)
Maturities and sales of short-term investments...................... 20,462 13,537
Loans receivable.................................................... (1,519) 1,433
Purchase of investments............................................. (2,513) --
Purchase restricted cash............................................ (4,475) --
------------ ------------
Net cash used in investing activities........................ (36,391) (5,669)
Cash flows from financing activities:
Proceeds from issuance of mandatorily redeemable convertible preferred
stock............................................................... -- 15,440
Proceeds from issuance of subsidiary preferred stock................ 4,732 --
Proceeds from issuance of common stock.............................. 23,979 6,201
Borrowings on capital lease......................................... -- 453
Payments on capital lease........................................... -- (135)
Acquisition of treasury stock....................................... -- (8,204)
----------- ------------
Net cash provided by financing activities.................... 28,711 13,755
Increase in cash and cash equivalents................................. 14,100 15,479
Inclusion of Andromedia's net cash activity for the excluded
three months ended March 31, 1999.................................... -- (3,826)
----------- ------------
Total................................................................. 14,100 11,653
Cash and cash equivalents, beginning of period........................ 115,084 29,459
----------- ------------
Cash and cash equivalents, end of period.............................. $ 129,184 $ 41,112
=========== ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
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MACROMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. NATURE OF OPERATIONS
Macromedia's Software business develops software that creates Web site
layout, graphics and rich media content for Internet users and develops
solutions for analyzing Web traffic and personalizing Web sites. Additionally,
the Company's consumer business, shockwave.com, Inc. ("shockwave.com"), designs,
develops and markets aggregated content to provide and expand online
entertainment on the Web. Macromedia sells its products through a network of
distributors, value-added resellers ("VAR"s) and its own sales force and Web
site, and to original equipment manufacturers ("OEM"s) in North America, Europe,
Asia Pacific and Latin America. In addition, Macromedia derives revenues from
advertising on its Web sites, and from software maintenance and technology
licensing agreements. shockwave.com derives revenues from advertising and
sponsorship on its Web sites. Macromedia, Inc. and its subsidiaries are
hereinafter collectively referred to as the "Company" or Macromedia.
2. BASIS OF PREPARATION
The condensed consolidated financial statements as of and for the quarter
ended June 30, 2000 and 1999 are unaudited and reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the Company's financial
position and operating results for the interim periods.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's annual report on Form 10-K for
the fiscal year ended March 31, 2000.
The results of operations for the three months ended June 30, 2000 are not
necessarily indicative of the results for the fiscal year ending March 31, 2001
or any other future periods.
3. INVESTMENTS
During the three months ended June 30, 2000, the Company made strategic
preferred stock investments in several companies, including Yo.com, Moonfruit
Ltd., and ePod Corp. These investments are included in the other long-term
assets component of the condensed consolidated balance sheets. The cost method
is used to record these investments, as the Company holds less than 20% of the
voting rights of each of these investees and does not have the ability to
significantly influence the investees. The Company determines the fair value of
the investment based on current market price, or if the investment is not
publicly traded, considers among other factors, pricing of current financing
rounds. As of June 30, 2000, the investment costs approximated their fair
values.
4. EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") 128, EARNINGS PER SHARE. Under the
provisions of SFAS 128, basic net income per share is computed by dividing the
net income available to common stockholders for the period by the weighted
average number of common shares outstanding during the period. Diluted net
income per share is computed by dividing the net income applicable to common
stockholders for the period by the weighted average number of common and
potentially dilutive securities outstanding during the period, to the extent
such potentially dilutive securities are dilutive. Potentially dilutive
securities are composed of incremental common shares issuable upon the exercise
of stock options and warrants and upon conversion of Series A, B, C, and D
convertible preferred stock.
6
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<TABLE>
<CAPTION>
MACROMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
The following table sets forth the reconciliations of the numerator and
denominator used in the computation of basic and diluted net income per share
(in thousands, except per share data):
Three months ended
June 30,
------------------------
2000 1999
---------- -----------
<S> <C> <C>
BASIC NET INCOME PER SHARE COMPUTATION
Numerator:
Net income.................................. $ 12,007 $ 1,727
Accretion of Series C, D and E mandatorily
redeemable convertible preferred stock..... -- (164)
---------- -----------
Net income applicable to common
stockholders............................. $ 12,007 $ 1,563
========== ===========
Denominator:
Weighted average number of common shares
outstanding................................. 49,462 42,150
Basic net income applicable to common
stockholders per share.................. $ 0.24 $ 0.04
========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three months ended
June 30,
------------------------
2000 1999
---------- -----------
<S> <C> <C>
DILUTED NET INCOME PER SHARE COMPUTATION
Numerator:
Net income.................................. $ 12,007 $ 1,727
Accretion of Series C, D and E mandatorily
redeemable convertible preferred stock..... -- (164)
---------- -----------
Net income applicable to common
stockholders............................. $ 12,007 $ 1,563
========== ===========
Denominator:
Weighted average number of common shares
outstanding................................. 49,462 42,150
Effect of dilutive securities:
Convertible preferred stock and stock
warrants................................ 16 865
Stock options and restricted stock........ 7,160 7,218
---------- -----------
Total.......................................... 56,638 50,233
========== ===========
Diluted net income applicable to common
stockholders per share......................... $ 0.21 $ 0.03
========== ===========
</TABLE>
The table below presents potentially dilutive securities that are excluded
from the diluted net income per share calculation because their effects would be
antidilutive (in thousands):
<TABLE>
<CAPTION>
Three months ending
June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Preferred stock...................... -- 2,382
Stock options........................ 19 26
------------ ------------
Total .......................... 19 2,408
============ ============
</TABLE>
5. COMPREHENSIVE INCOME
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, which establishes the
standards for the reporting of comprehensive income and its components, requires
unrealized gains or losses on the Company's available-for-sale securities to be
included in other comprehensive income. The only component of the Company's
Other Comprehensive Income is unrealized gains (losses) on securities classified
as available-for-sale. The following table sets forth the calculation of
comprehensive income, net of tax (in thousands):
<TABLE>
<CAPTION>
Three months ending
June 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income........................... $ 12,007 $ 1,727
Unrealized gain on securities...... 2 283
------------ ------------
Comprehensive income............... $ 12,009 $ 2,010
============ ============
</TABLE>
7
<PAGE>
MACROMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
6. INCOME TAXES
The Company provides for income taxes during interim reporting periods based
upon an estimate of the annual effective tax rate. Such an estimate reflects an
effective tax rate lower than the federal statutory rate primarily due to the
utilization of research and experimentation tax credits, and foreign operating
results, which are taxed at rates lower than the U.S. statutory rate. The
effective rate used for the three months ended June 30, 2000 on operations was
23%.
7. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Macromedia has two segments that offer different product lines: Software and
shockwave.com. The Software segment develops software that creates Web site
layout, graphics and rich media content for Internet users and develops
solutions for analyzing Web traffic and personalizing Web sites. shockwave.com
designs, develops and markets aggregated content to provide online entertainment
on the Web. The Company evaluates operating segment performance based on net
revenues and total operating expenses of the segment. The operating segments'
accounting policies are the same as those described in the summary of
significant accounting policies in the Company's annual report on Form 10-K for
the year ended March 31, 2000. Included in the June 30, 2000 revenues is
$932,000 of intersegment transactions which represent royalty revenues paid by
shockwave.com. These revenues are eliminated in the Company's consolidation
process. The Company did not have any material intersegment transactions for the
three months ended June 30, 1999. At June 30, 1999 the Company did not allocate
assets to shockwave.com and currently considers it impracticable to do so.
Information about reported segment income or loss for the three months ended
June 30, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
shockwave-
Three months ended June 30, Software .com Total
------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
2000
Revenues..................... $ 90,313 $ 4,451 $ 94,764
Cost of revenues............. 9,470 641 10,111
---------- ---------- ----------
Gross margin............... 80,843 3,810 84,653
---------- ---------- ----------
Direct operating expenses.... 60,695 12,007 72,702
Acquisition related expenses
and certain non-cash charges. 2,124 1,789 3,913
---------- ---------- ----------
Total operating income
(loss)....................... $ 18,024 $ (9,986) $ 8,038
========== =========== ==========
Total assets................. $ 332,526 $ 50,641 $ 383,167
========== ========== ==========
1999
Revenues..................... $ 50,091 $ 1,141 $ 51,232
Cost of revenues............. 5,392 362 5,754
---------- ---------- ----------
Gross margin............... 44,699 779 45,478
---------- ---------- ----------
Direct operating expenses.... 38,466 3,610 42,076
Acquisition related expenses
and certain non-cash charges. 505 -- 505
---------- ---------- ----------
Total operating income
(loss).................. $ 5,728 $ (2,831) $ 2,897
========== =========== ==========
Total assets.............. $ 217,165 $ -- $ 217,165
========== ========== ==========
</TABLE>
8
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MACROMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
A reconciliation of the totals reported for the combined operating segments
to the applicable line items in the consolidated financial statements for the
three months ended June 30, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended June 30,
2000 1999
------------ ------------
<S> <C> <C>
Total operating income from operating segments........ $ 8,038 $ 2,897
Other income.......................................... 3,633 1,351
Minority interest..................................... 3,922 --
------------ ------------
Income before taxes................................... $ 15,593 $ 4,248
============ ============
</TABLE>
8. SUBSEQUENT EVENT
In July 2000, the Company purchased all of the outstanding stock of
Middlesoft, Inc., a California corporation, for approximately $9.0 million. The
acquisition will be accounted for using the purchase method of accounting and
recorded during the second quarter of fiscal year 2001.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements such as statements of our expectations,
plans, objectives and beliefs. These forward-looking statements are subject to
material risks and uncertainties discussed in this Form 10-Q, including those
set forth under Factors that May Affect Future Results of Operations, contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations. As a result, our actual results could differ materially from those
described in the forward-looking statements.
RESULTS OF OPERATIONS
We have two segments that offer different product lines: Software and
shockwave.com. The Software segment develops software that creates Web site
layout, graphics and rich media content for Internet users and develops
solutions for analyzing Web traffic and personalizing Web sites. shockwave.com
designs, develops and markets aggregated content to provide online entertainment
on the Web. We evaluate operating segment performance based on net revenues and
total operating expenses of the segment. The operating segments' accounting
policies are the same as those described in the summary of accounting policies
in the annual report on Form 10-K for the year ended March 31, 2000. Included in
the June 30, 2000 revenues is $932,000 of intersegment transactions that
represent royalty revenues paid by shockwave.com.. These revenues are eliminated
in our consolidation process. For the three months ended June 30, 2000, the
Software business' operating margin before acquisition related charges and
certain non-cash charges approximate $20.1 million, or 22%, whereas
shockwave.com's operating loss approximates $8.2 million or 184%.
The following table sets forth certain financial data as a percentage of
revenues for the three months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Consolidated Software shockwave.com
----------------- --------------- -----------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... 100% 100% 100% 100% 100% 100%
Cost of revenues....................... 11 11 10 11 14 32
Gross margin.................. 89 89 90 89 86 68
Operating expenses:
Sales and marketing............... 41 45 38 43 105 131
Research and development.......... 26 25 21 22 130 186
General and administrative........ 9 11 8 12 35 --
Acquisition related expenses...... 2 -- 2 -- -- --
Non-cash compensation............. 2 -- -- -- 40 --
Amortization of intangibles....... -- 1 -- -- -- --
Total operating expenses...... 80 82 70 77 310 317
Operating margin....................... 9 7 20 12 (224) (249)
Minority interest...................... 4 -- -- -- 88 --
Other income, net...................... 4 3 3 3 11 --
Provision for income taxes............. 4 5 4 3 -- --
Net income (loss)............ 13 3 19 10 (125) (249)
</TABLE>
REVENUES. We sell our products through a network of distributors,
value-added resellers (VARs), our own sales force and Web site, and to original
equipment manufacturers (OEMs) in North America, Europe, Asia Pacific and Latin
America. In addition, we derive revenues from advertising and sponsorships on
our Web sites, and from software maintenance and technology licensing
agreements.
Consolidated revenues have increased $43.5 million or 85% for the three
months ended June 30, 2000 as compared to the three months ended June 30,
1999. Revenues generated by the Software segment have grown by $40.2 million
to $90.3 million this quarter from $50.1 in the first quarter of fiscal year
2000. The majority of the increase is attributable to an increase in sales of
the Dreamweaver, Flash, and UltraDev products. Included in our consolidated
revenue is $4.5 million and $1.1 million of shockwave.com revenues for the
three months ended June 30, 2000 and 1999, respectively. The increase in
shockwave.com revenues is due to the increase in advertising and sponsorship
revenue resulting from a higher volume of advertising and new revenue
streams, mainly sponsorship revenues.
North American revenues have increased $24.4 million to $54.8 million in the
first quarter of fiscal year 2001 from $30.4 million in the first quarter of
fiscal year 2000. International revenues increased $19.2 million to $40.0
million from the first quarter of fiscal year 2000 to the same period for fiscal
year 2001. (See Factors That May Affect Future Results of Operations - Risks of
International Operations for additional information.) The following table
summarizes revenue by geography (in millions, except percentages):
10
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<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------------------
2000 1999 % Change
---------- ---------- -----------
<S> <C> <C> <C>
North America................... $ 54.8 $ 30.4 80%
% OF TOTAL REVENUES........... 58% 59%
International................... $ 40.0 $ 20.8 92%
% OF TOTAL REVENUES........... 42% 41%
---------- ----------
Total revenues............. $ 94.8 $ 51.2 85%
</TABLE>
GROSS MARGIN. Gross margin as a percentage of revenue for the Software
business for the three months ended June 30, 2000 remained relatively
consistent at 90% when compared with a gross margin of 89% for the three
months ended June 30, 1999. Gross margin as a percentage of revenue for
shockwave.com for the three months ended June 30, 2000 was 86% as compared to
68% for the three months ended June 30, 1999. The increase in the
shockwave.com margin is primarily due to an increase in advertising revenues.
Gross margin on a consolidated basis was $84.7 million in the first quarter
of fiscal year 2001, up 86% from the prior year, relatively consistent with
revenue growth.
SALES AND MARKETING. Sales and marketing expenses on a consolidated basis
have decreased as a percentage of revenues from 45% in the first quarter of
fiscal year 2000 to 41% in the first quarter of fiscal year 2001, but
increased in absolute dollars by $15.6 million to $38.9 million. The Software
segment's sales and marketing expenses increased by $12.4 million to $34.2
million and shockwave.com's increased by $3.2 million to $4.7 million from
the three months ended June 30, 1999. The increase from the first quarter of
fiscal year 2000 for the Software segment is primarily due to expenses
related to headcount growth, advertising costs related to marketing,
facilities charges due to the need for increased physical space to
accommodate the headcount growth, and information technology infrastructure
costs. The increase in shockwave.com's sales and marketing expenses is a
result of increased headcount growth and growth of information technology
infrastructure costs.
RESEARCH AND DEVELOPMENT. Research and development expenses on a
consolidated basis have increased $11.9 million from $12.9 million or 25% of
revenues in the first quarter of fiscal year 2000 to $24.9 million or 26% of
revenues in the first quarter of fiscal year 2001. Research and development
expenses for the Software segment have increased $8.3 million during this
time frame to $19.1 million. Similarly, shockwave.com's research and
development expenses have increased to $5.8 million, representing a $3.6
million increase from the first quarter of fiscal 2000. Research and
development expenses for both segments have increased in absolute dollars
primarily due to headcount growth, and the resulting increases in compensation
and benefits and information technology infrastructure costs. In addition,
shockwave.com incurred increased costs for the development of entertainment
content.
GENERAL AND ADMINISTRATIVE. General and administrative expenses on a
consolidated basis have increased in absolute dollars by $3.1 million, from
$5.8 million in the first quarter of fiscal 2000 to $8.9 million in the first
quarter of fiscal year 2001, but decreased slightly to 9% of revenues for the
first quarter of fiscal year 2001 compared to the same period in fiscal year
2000. General and administrative expenses for the Software segment have
increased $1.5 million to $7.3 million for the three months ended June 30,
2000. shockwave.com has experienced a $1.6 million increase in general and
administrative expenses resulting from the business performing administrative
functions that it did not perform in the first quarter of fiscal year 2000.
General and administrative expenses for the Software segment have increased
primarily due to headcount growth and the resulting increases in compensation
and benefits and information technology infrastructure costs.
ACQUISITION RELATED EXPENSES. During the three months ended June 30, 2000
we purchased certain technology rights and related software products from
Bitcraft, Inc. for approximately $1.7 million. We intend to utilize this
intellectual property in the research and development of specific products,
and have determined that the technology does not have any alternative future
uses. As a result, the $1.7 million has been expensed in acquisition related
expenses.
NON-CASH COMPENSATION. We recorded non-cash compensation charges of $1.9
million for the three months ended June 30, 2000, a $1.7 million increase from
the same period in the prior year. The increase is primarily due to the issuance
of shockwave.com warrants and the continued amortization of the deferred
compensation associated with previously granted shockwave.com options.
shockwave.com issued options to employees that had, for accounting purposes, an
exercise price less than the fair value of the underlying common stock at the
date of grant. Additionally, shockwave.com issued warrants in connection with
certain content development agreements entered into with non-employees. We will
continue to incur expenses associated with the amortization of deferred
compensation from the granting of options.
AMORTIZATION OF INTANGIBLES. Amortization of intangible assets increased
$59,000 to $316,000 when comparing the three months ended June 30, 2000 to 1999.
Amortization of intangible assets consists primarily of goodwill and other
intangibles resulting from purchase transactions, as well as trademarks.
OTHER INCOME. Other income on a consolidated basis has increased $2.2
million to $3.6 million when comparing the first quarter of fiscal year 2001
to the same period in fiscal year 2000. Other income for the Software segment
has increased $1.8
11
<PAGE>
million to $3.1 million when comparing this same time frame, primarily due to
foreign exchange gains recorded in the first quarter of fiscal year 2001. Other
income for both periods include investment gains and interest income.
PROVISION FOR INCOME TAXES. Our provision for income taxes for the first
quarter of fiscal year 2001 increased $1.1 million. The effective tax rate on
operations for the quarterly provision was 23%. The decrease in the effective
tax rate reflects the utilization of research and experimentation tax credits
and foreign operating results that were taxed at rates lower than the U.S.
statutory rate.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, we had cash, cash equivalents and short-term investments
of $212.0 million. For the three months ended June 30, 2000, cash provided by
operating activities of $21.8 million was primarily attributable to,
depreciation and amortization, decreased accounts receivables, increased accrued
liabilities and tax benefits from employee stock plans; partially offset by an
increase in other assets. Cash used in investing activities of $36.4 million was
used primarily to purchase and develop equipment and software for infrastructure
growth, including for shockwave.com, and for the purchase of investments. Cash
provided by financing activities of $28.7 million is from the exercise of common
stock options and issuance of preferred stock. Collectively, the above activity
resulted in a net increase of $14.1 million from the March 31, 2000 balances of
cash and cash equivalents. Working capital increased by $20.0 million from the
March 31, 2000 balance of $182.1 million, to $202.1 million at June 30, 2000. We
anticipate future capital expenditures of approximately $40.0 million for the
remainder of fiscal year 2001.
We have non-current cash of approximately $4.5 million that is restricted
as to its use. The restrictions on these funds concern security deposits on a
lease of real property. These funds can not be withdrawn without the written
consent of the landlord or such time that the amount of security deposit is
reduced pursuant to the terms of the lease.
During the first three months of fiscal year 2001, we made investments in
property and equipment of $17.0 million. This amount includes $1.1 million
related to the development of a new web infrastructure for sales and marketing,
customer support, online product distribution and technical support for our
entire company, including shockwave.com. The costs capitalized under the project
are comprised primarily of consulting fees for software development and related
hardware and purchased software. Amortization of the project approximated $1.3
million in the first fiscal quarter of 2001. Amortization will continue and will
increase, as additional phases of the project are ready for use.
We believe that existing cash and investments, together with cash generated
from operations, will be sufficient to meet our operating requirements through
at least June 30, 2001.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Except for the historical information contained in this Quarterly Report,
the matters discussed herein are forward-looking statements that involve risks
and uncertainties, including those detailed below, and from time to time in our
other reports filed with the Securities and Exchange Commission. The actual
results that we achieve may differ materially from any forward-looking
statements due to such risks and uncertainties.
INTENSE COMPETITION -- The markets for our products are highly competitive
and characterized by pressure to reduce prices, incorporate new features, and
accelerate the release of new product versions and enhanced services. A number
of companies currently offer products and services that compete directly or
indirectly with one or more of our products. With respect to our Software
business, competitors include Adobe Systems Inc., Corel Corporation, Accrue
Software, Inc. and Net Perceptions, Inc. As we compete with larger competitors
such as Adobe across a broader range of product lines and different platforms,
we may face increasing competition from such companies. In addition, our
shockwave.com subsidiary competes with a number of other Internet community,
gaming and entertainment sites, including Disney.com, Gamesville.com, AOL.com,
and Yahoo.com. Many of these businesses are much larger than our consumer
business, and they have more resources devoted to these business efforts. It is
anticipated that our consumer business will face competition from these other
Web sites both for consumers and for advertising and other future revenue
sources on which the future success of the consumer business is dependent.
RAPIDLY CHANGING TECHNOLOGY -- The developing digital media, Internet and
online services markets, and the personal computer industry are characterized by
rapidly changing technology, resulting in short product life cycles and rapid
price declines. We must continuously update our existing products, services and
content to keep them current with changing technology and consumer tastes and
must develop new products, services and content to take advantage of new
technologies and consumer preferences that could render our existing products
obsolete. Our future prospects are highly dependent on our ability to increase
functionality of existing products and services in a timely manner and to
develop new products and services that address new technologies and achieve
market acceptance.
12
<PAGE>
New products and enhancements must keep pace with competitive offerings,
adapt to new platforms and emerging industry standards, and provide
additional functionality. There can be no assurance that we will be
successful in these efforts.
The success of our Software and shockwave.com businesses is dependent upon
the existence and future growth of the Internet as a business, entertainment and
communications platform. A change in the Internet or the technology used for
operation of the Internet or a decline in the growth of the Internet could have
a material adverse effect on our results of operations.
FLUCTUATIONS OF OPERATING RESULTS; PRODUCT INTRODUCTION DELAYS -- Our
quarterly operating results may vary significantly depending on the timing of
new product introductions and enhancements. A substantial portion of our revenue
is derived from our products. We have in the past experienced delays in the
development of new products and enhancement of existing products, and such
delays may occur in the future. In addition, we have only recently entered the
eBusiness software products market through our acquisition of Andromedia in
December 1999. If we were unable, due to resource constraints or technological
or other reasons, to develop and introduce products in a timely manner, this
inability could have a material adverse effect on our results of operations. If
we do not ship new versions of our products as planned, sales of existing
versions decline, or new products do not receive market acceptance, our results
of operations in a given quarter could be materially adversely affected.
Furthermore, our success depends upon our ability to attract and retain a larger
number of consumers on our shockwave.com Web site by delivering original and
compelling content and services. If we are unable to do so, advertising revenue
will decline and the economic value of the properties may be affected.
Our quarterly results of operations also may vary significantly depending on
the impact of any of the following: the timing of product and service
introductions by competitors, changes in pricing, execution and volume of
technology licensing agreements, the volume and timing of orders received during
the quarter for software products, which are difficult to forecast, expenses
related to the expansion of shockwave.com, and finally, any acquisitions of
other companies or technologies. Our future operating results may fluctuate as a
result of these and other factors, including our ability to continue to develop
or acquire innovative products and services, its product, service, and customer
mix, and the level of competition. Our results of operations may also be
affected by seasonal trends. A significant portion of our operating expenses is
relatively fixed, and planned expenditures are based primarily on sales
forecasts. As a result, if revenues do not meet our forecasts, operating results
may be materially adversely affected. There can be no assurance that sales of
our existing products will either continue at historical rates or increase, or
that new products introduced by us, whether developed internally or acquired,
will achieve market acceptance. Our historical rates of growth should not be
taken as indicative of growth rates that can be expected in the future.
UNPROVEN BUSINESS MODEL -- Our shockwave.com business model depends upon its
ability to leverage its existing and future Web traffic and consumer audience to
grow revenues and in the future, generate multiple revenue streams. The
potential profitability of this business model is unproven, and to be
successful, we must, among other things, develop and market content that
achieves broad market acceptance by our user community, Internet advertisers and
commerce vendors. There can be no assurance that the consumer business will be
able to effectively implement this business model, and even if the
implementation is successful, there can be no assurance that the business model
will prove to be able to sustain revenue growth or generate significant profits,
if any. Furthermore, for the foreseeable future, we anticipate that the
shockwave.com business will require significant expenditures, particularly
related to sales and marketing and brand promotion, and that such expenditures
may or may not result in revenue growth. Given our limited operating experience
related to the shockwave.com business, the prediction of future revenue growth
or operating performance for the consumer business is difficult at best. In
addition to the foregoing, the shockwave.com business will depend in part on
success in building strategic alliances with other Internet companies and media
companies in order to be able to grow the user base and to provide compelling
content to attract and maintain the user base. There can be no assurances that
such alliances can be created or maintained over an extended period of time.
DEPENDENCE ON DISTRIBUTORS -- A substantial majority of our revenue is
derived from the sale of our software products through a variety of distribution
channels, including traditional software distributors, mail order, educational
distributors, VARs, OEMs, hardware and software superstores, retail dealers, and
direct sales. Domestically, our products are sold primarily through
distributors, VARs, and OEMs. In particular, one distributor, Ingram Micro,
Inc., accounted for 25% and 23% of revenues for the three months ending June 30,
2000 and 1999, respectively. In addition, the next three distributors combined,
two of which are international distributors, accounted for 19% and 17% of
revenues for the first quarter of fiscal year 2001 and 2000, respectively. In
addition, we believe that certain distributors are reducing their inventory in
the channel and returning unsold products to better manage their inventories.
Distributors are increasingly seeking to return unsold product, particularly
when a new version or upgrade of a product has superseded such products. If our
distributors were to seek to return increasing amounts of products, such returns
could have a material adverse effect on our revenues and results of operations.
The loss of, or a significant reduction in sales volume to, a significant
reseller could have a material adverse effect on our results of operations.
13
<PAGE>
RISKS OF INTERNATIONAL OPERATIONS -- For the three months ended June 30,
2000, we derived approximately 42% of our revenues from international sales. We
expect that international sales will continue to generate a significant
percentage of our revenues. We rely primarily on distributors for sales of our
software products in foreign countries and, accordingly, are dependent on their
ability to promote and support our software products, and in some cases, to
translate them into foreign languages. International business is subject to a
number of special risks, including: foreign government regulation; general
geopolitical risks such as political and economic instability, hostilities with
neighboring countries and changes in diplomatic and trade relationships; more
prevalent software piracy; unexpected changes in, or imposition of, regulatory
requirements, tariffs, import and export restrictions and other barriers and
restrictions; longer payment cycles, greater difficulty in accounts receivable
collection, potentially adverse tax consequences, the burdens of complying with
a variety of foreign laws; foreign currency risk; and other factors beyond our
control.
We enter into foreign exchange forward contracts to reduce economic exposure
associated with sales and asset balances denominated in various European
currencies and Japanese Yen. As of June 30, 2000, the notional principal of
forward contracts outstanding amounted to $45.5 million. There can be no
assurance that such contracts will adequately hedge our exposure to currency
fluctuations.
EURO CURRENCY -- On January 1, 1999, eleven of the fifteen member countries
of the European Union adopted the Euro as the common legal currency and
established fixed rates of conversion between their existing sovereign
currencies and the Euro. The Euro trades on currency exchanges and is available
for non-cash transactions. A three-year transition period is underway during
which transactions can be made in the old currencies. The conversion to the Euro
has alleviated currency exchange risk between the member counties.
There can be no assurance that all issues related to the Euro conversion
have been identified, and we may be at risk if any of our principal suppliers
are unable to deal with the impact of the Euro conversion. To date, none of our
international suppliers have expressed an intention to invoice in Euros.
RISK ASSOCIATED WITH ACQUISITIONS--We have grown in part because of
business combinations with other companies. We recently closed our acquisitions
of Andromedia, Inc., ESI Software, Inc. and Middlesoft, Inc. and we may make
further material acquisitions in the future. Acquisitions involve significant
risks including difficulties in the assimilation of the operations, services,
technologies and corporate culture of the acquired companies, diversion of
management's attention from other business concerns and overvaluation of the
acquired companies. Furthermore, because certain of our recent acquisitions have
been related to the eBusiness market, we are also subject to the risks
associated with the acceptance of the acquired companies' products and services
by our customers. In addition, further acquisitions would likely result in the
incurrence of dilution, if stock is issued, or debt and contingent liabilities
and an increase in amortization expenses related to goodwill and other
intangible assets, which could have a material adverse effect on our financial
condition, results of operations and liquidity. For all these reasons, any
future acquisitions or failure to effectively integrate acquired companies could
result in a material adverse effect on our results of operations.
MANAGEMENT OF GROWTH.--Both our shockwave.com business and our Software
business have experienced and may continue to experience rapid growth, which has
placed, and could continue to place, a significant strain on our managerial,
financial and operational resources. Our workforce grew from 584 full-time
employees as of June 30, 1999 to 1,214 full-time employees as of June 30, 2000.
shockwave.com alone grew its workforce from 32 employees as of June 30, 1999 to
166 employees as of June 30, 2000, representing a growth rate of more than 418%.
We expect that the number of our employees will continue to increase for the
foreseeable future. We anticipate that we will need to implement a variety of
new and upgraded operational and financial systems, procedures and controls,
including the ongoing improvement of our accounting and other internal
management systems. We also will need to continue to expand, train, manage and
motivate our workforce. All of these endeavors will require substantial
management effort. In the future, we may need to expand our facilities or
relocate some or all of our employees or operations from time to time to support
our growth. These relocations could result in temporary disruptions of our
operations or a diversion of management's attention and resources. If we are
unable to effectively manage expanding operations, our business, financial
condition and results of operations could be materially and adversely affected.
Furthermore, shockwave.com continues to depend on Macromedia for several of
its administrative, financial, marketing and human resources functions, and may
not be able to perform these functions independently in a timely fashion.
shockwave.com must continue to improve its operational and financial systems and
managerial controls and procedures, and will need to continue to expand, train
and manage its workforce. shockwave.com's systems, procedures or controls may
not be adequate to support its operations or Macromedia may not be able to
manage growth of shockwave.com effectively. For example, Macromedia expects that
the variety of shockwave.com's revenue generating lines of business will expand,
increasing demands on the shockwave.com's billing and collection systems and
requiring additional resources to properly determine pricing and discounting
structures. If shockwave.com does not manage growth effectively, the
shockwave.com business would be harmed.
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<PAGE>
VOLATILITY OF STOCK -- Our future earnings and stock price may be subject to
significant volatility, particularly on a quarterly basis. Any shortfall in
revenue or earnings from levels expected by securities analysts could have an
immediate and significant adverse effect on the trading price of our common
stock in any given period. Additionally, we may not learn of such shortfalls
until late in the fiscal quarter, which could result in an even more immediate
and adverse effect on the trading price of our common stock. Finally, we
participate in a highly dynamic industry. In addition to factors specific to us,
changes in analysts' earnings estimates for us or our industry and factors
affecting the corporate environment or the securities markets in general will
often result in significant volatility of our common stock price.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES -- We prepare our financial
statements in conformity with generally accepted accounting principles ("GAAP").
GAAP are subject to interpretation by the American Institute of Certified Public
Accountants, the Securities and Exchange Commission, and various bodies formed
to interpret and create appropriate accounting policies. A change in these
policies can have a significant effect on our reported results, and may even
affect the reporting of transactions completed prior to the announcement of a
change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. As stated in our policy, we are adverse to
principal loss and ensures the safety and preservation of its invested funds by
limiting default and market risks. We place our investments with high
credit-quality issuers, and the portfolio includes only high quality marketable
securities with active secondary or resale markets to ensure portfolio
liquidity. We do not use derivative financial instruments in our investment
portfolio. All investments have a fixed or floating interest rate and are
carried at market value, which approximates cost.
The table below represents carrying amounts, fair value and related weighted
average effective interest rates by year of maturity for our investment
portfolio as of June 30, 2000 (in thousands).
<TABLE>
<CAPTION>
2003 and
2001 2002 thereafter Total Fair value
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Cash equivalents................ $ 91,203 $ -- $ -- $ 91,203 $ 91,203
Average interest rate........ 6.56% -- -- 6.56%
Short-term investments.......... $ 33,187 $ 46,004 $ -- $ 79,191 $ 81,896
Average interest rate........ 6.19% 6.47% -- 6.48% --
--------- --------- --------- --------- ---------
Total investments............ $ 124,390 $ 46,004 $ -- $ 170,394 $ 173,099
========= ========= ========= ========= =========
</TABLE>
We also have loans outstanding to related parties totaling $11.4 million as
of June 30, 2000. The stated loan amounts approximate fair value.
FOREIGN CURRENCY RISK
We enter into forward contracts to reduce our exposure to foreign currency
fluctuations involving probable anticipated, but not firmly committed,
transactions and transactions with firm foreign currency commitments occurring
within a 90-day period. We do not enter into derivative financial instruments
for trading purposes.
15
<PAGE>
As a result of this activity, we had outstanding forward contracts in
various European currencies and Japanese Yen outstanding as of June 30, 2000.
The forward contracts are accounted for on a mark-to-market basis, with realized
gains or losses recognized in the consolidated statement of operations. As of
June 30, 2000, the contract amount of the forward contracts amounted to $45.5
million. The future value of these contracts is subject to market risk resulting
from foreign exchange rate volatility. Current market rates at the consolidated
balance sheet date were used to estimate the fair value of foreign currency
forward contracts.
The table below provides information about our outstanding forward contracts
as of June 30, 2000. The information is provided in US dollar equivalents, in
thousands. The table presents the notional amount of the respective contracts
and their fair value (at rates in effect as of June 30, 2000):
<TABLE>
<CAPTION>
Notional
amount Fair value
--------- ---------
<S> <C> <C>
Euro.................. $ 20,807 $ 21,220
Japanese Yen.......... 24,740 24,434
--------- ---------
Total.............. $ 45,547 $ 45,654
========= =========
</TABLE>
We are exposed to credit loss in the event of nonperformance by counter parties
but we do not anticipate nonperformance by these counter parties.
DISCLOSURE OF LIMITATIONS OF THE TABULAR PRESENTATION
As the tables above incorporate only those exposures that exist as of June
30, 2000, it does not consider those exposures or positions that could arise
after that date. Also, because the foreign currency denominated financial
assets and anticipated transactions are not presented in the table above, the
information presented has limited predictive value. As a result, our ultimate
realized gain or loss with respect to foreign currency fluctuations will depend
on the exposures that arise during the period, our hedging strategies at the
time, and foreign currency rates.
MARKET PRICE RISK
We are exposed to market risk from changes in the price of our equity
securities available-for-sale, which were recorded at a fair value of
approximately $16.8 million at June 30, 2000. The equity investments held by us
have exposure to price risk, which is estimated as the potential loss in fair
value due to a hypothetical change of 10% in quoted market prices. This
hypothetical change would reduce our investments as well as unrealized gains on
investment securities available for sale that are included as a component of
stockholders' equity.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 31, 1997, a complaint entitled Rosen et al. v. Macromedia, Inc.
et al., (Case No. 988526) was filed in the Superior Court for San Francisco,
California. The complaint alleges that Macromedia and five of its former or
current officers and directors engaged in securities fraud in violation of
California Corporations Code Sections 25400 and 25500 by seeking to inflate
the value of Macromedia stock by issuing statements that were allegedly false
or misleading (or omitted material facts necessary to make any statements
made not false or misleading) regarding the Company's financial results and
prospects. Four similar complaints by persons seeking to represent the same
class of purchasers subsequently have been filed in San Francisco Superior
Court, and have been consolidated for pre-trial purposes with Rosen.
Defendants filed demurrers to the complaint and other motions, which were
argued on December 9, 1997 and January 5, 1998. Before the demurrers could be
heard, one defendant, Richard Wood, died in an automobile accident. In March
1998, the Courts sustained in part and overruled in part the demurrers.
Claims against Susan Bird were dismissed and the Court overruled the
demurrers as to Macromedia, John Colligan, James Von Her, II, and Kevin
Crowder. In May 1999, the Court granted plaintiffs' motion for certification
of a class of all persons who purchased Macromedia common stock from April
18, 1996 through January 9, 1997. Trial has been set for March 12, 2001. On
April 20, 2000, the parties proposed that the Court continue the trial date
to September 10, 2001.
The consolidated complaint seeks damages in unspecified amounts, as well
as other forms of relief. We believe the complaint is without merit and
intend to vigorously defend the action.
On September 25, 1997, a complaint entitled City Nominees v. Macromedia, Inc
et al., (Case No. C-97-3521-SC) was filed in the United States District Court
for the Northern District of California. The complaint alleges that Macromedia
and five of its former or current officers and directors engaged in securities
fraud in violation of Sections 10 and 20(a) of the Securities and Exchange Act
of 1934 by seeking to inflate the value of Macromedia
16
<PAGE>
stock by issuing statements that were allegedly false or misleading (or omitted
material facts necessary to make any statements made not false or misleading)
regarding the Company's financial results and prospects. Plaintiffs seek to
represent a class of all persons who purchased Macromedia common stock from
April 18, 1996 through January 9, 1997. Three similar complaints by persons
seeking to represent the same class of purchasers subsequently have been filed
in United States District Court for the Northern District of California. All of
these cases have been consolidated. Lead plaintiffs and lead counsel have been
appointed under the provisions of the Private Securities Law Reform Act by the
District Court. A consolidated complaint was filed in February 1998. Defendants
moved to dismiss that complaint on the grounds that plaintiffs' claims were
barred by the applicable statute of limitations. In May 1998, the United States
District Court for the Northern District of California granted defendants'
motion to dismiss with prejudice, and entered judgment in favor of defendants.
Plaintiffs have appealed to the United States Court of Appeals for the Ninth
Circuit, which reversed on April 21, 2000 and remanded the action to the
District Court for further proceedings. On July 7, 2000, the District Court
granted the plaintiff's motion to voluntarily dismiss the action without
prejudice.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
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
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit number Exhibit title
-------------- -------------
<S> <C>
2.01 Amended and Restated Agreement and Plan of Reorganization
by and among Registrant, ESI Software, Inc. and Dynamo
Acquisition Corp. dated July 8, 1999 as amended August 30,
1999. (a)
2.02 Amended and Restated Agreement and Plan of Reorganization
by and among Registrant, Andromedia, Inc. and Peak
Acquisition Corp. dated October 6, 1999 as amended November
23, 1999. (b)
3.01 Registrant's Amended and Restated Certificate of
Incorporation. (c)
3.02 Certificate of Amendment of Registrant's Amended and
Restated Certificate of Incorporation. (d)
3.03 Registrant's Bylaws. (e)
3.04 Amendment to Registrant's Bylaws effective October 15,
1993. (e)
10.01 1992 Equity Incentive Plan and related documents, as
amended to date. (l)
10.02 1993 Directors Stock Option Plan and related documents, as
amended to date. (f).
10.03 Non-Plan Form Agreements. (j)
10.04 Registrant's Form of Non-Plan Stock Option Grant, (l)
10.05 ESI Software, Inc. 1996 Equity Incentive Plan. (l)
10.06 Registrant's 1999 Stock Option Plan. (m)
10.07 Andromedia, Inc. 1996 Stock Option Plan (m)
10.08 Andromedia, Inc. 1997 Stock Option Plan (m)
10.09 Andromedia, Inc. 1999 Stock Option Plan (m)
10.10 Form of Indemnification Agreement entered into by
Registrant with its directors and executive officers. (e)
10.11 Twelfth Amendment to Lease Agreement by and between
Registrant and Toda Development, Inc. dated November 26,
1996 and Thirteenth Amendment to Lease Agreement by and
between Registrant and Toda Development, Inc. dated
February 25, 1997 and Fourteenth Amendment to Lease
Agreement by and between Registrant and Toda Development,
Inc. dated February 25,
</TABLE>
17
<PAGE>
<TABLE>
Exhibit number Exhibit title
-------------- -------------
<S> <C>
1997. (g)
10.12 Employment Agreement between the Registrant and Robert K.
Burgess dated August 25, 1996 (h). 10.13 Loan Agreement
between Registrant and Brian and Sharon Allum, dated July
15, 1997. (i) 10.14 Loan Agreement between Registrant and
Steven A. and Nancy M. Elop, dated April 24, 1998. (k)
10.15 Lease Agreement by and between Registrant and Zoro
LLC, dated April 15, 1999.* 10.16 First Amendment to Lease
agreement by and between Registrant and Zoro LLC, dated
July 1, 1999.(n)
10.17 Lease Agreement by and between Registrant and Oelsner
Commercial Properties, dated February 28, 2000.(n)
10.18 Employment Agreement between the Registrant and Brian Allum
dated July 22, 1997. (n)
10.19 Built-to-suit lease, dated April 20, 2000 between the
Registrant, Kaufman Family Partnership, Ronald H. Kaufman
and Barbara Kaufman.(*)
27.01 Financial Data Schedules
</TABLE>
(a) Incorporated by reference to the Registrant's Current Report on Form
8-K/A filed on October 26, 1999.
(b) Incorporated by reference to the Registrant's Current Report on Form
8-K/A filed February 14, 2000.
(c) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 (Registration Statement No. 33-89092).
(d) Incorporated by reference to the Registrant's Amendment No. 1 to
Registration Statement on Form 8-A filed on October 5, 1995.
(e) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration Statement No. 33-70624).
(f) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed on September 24, 1998 (Registration Statement No.
333-64141).
(g) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 1997.
(h) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996.
(i) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1997.
(j) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed on October 31, 1997 (Registration Statement No.
333-39285).
(k) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998.
(l) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed on October 18, 1999 (Registration Statement No.
333-89247).
(m) Incorporated by reference to the Registrant's Registration Statement on
Form S-8 filed on December 07, 1999 (Registration Statement No.
333-92233).
(n) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended March 31, 2000.
(*) Filed herewith.
(b) Reports on Form 8-K:
None.
18
<PAGE>
This page is left blank intentionally.
19
<PAGE>
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.
MACROMEDIA, INC.
Date: August 11, 2000 By: /s/ Elizabeth A. Nelson
----------------------------------------
Elizabeth A. Nelson
Executive Vice President and Chief
Financial Officer, and Secretary
(Principal Accounting Officer and
Duly Authorized Officer)
20
