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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
_____________________
Commission File Number 0-23078
MAPINFO CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 06-1166630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE GLOBAL VIEW
TROY, NEW YORK 12180
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (518) 285-6000
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
----- ------
The number of shares outstanding of the registrant's common stock, $.002 par
value per share, as of August 1, 1996 was 5,738,763.
1
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MAPINFO CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Income Statements
for the three and nine months ended June 30, 1996 and 1995 1
Balance Sheets
as of June 30, 1996 and September 30, 1995 2
Cash Flows Statements
for the nine months ended June 30, 1996 and 1995 3
Notes to Financial Statements 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAPINFO CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
----------------- -------------------
1996 1995 1996 1995
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $ 10,164 $ 9,953 $ 30,476 $ 28,759
Cost of revenues 2,495 1,855 6,931 5,326
-------- ------- -------- --------
Gross profit 7,669 8,098 23,545 23,433
-------- ------- -------- --------
Operating ecpenses:
Research and development 1,847 1,368 5,236 4,314
Selling and marketing 4,429 4,873 14,423 12,670
General and administrative 1,499 1,181 4,227 3,250
-------- ------- -------- --------
Total operating expenses 7,775 7,422 23,886 20,234
-------- ------- -------- --------
Operating income (loss) (106) 676 (341) 3,199
Other income (expense)-net 235 328 834 792
-------- ------- -------- --------
Income before income taxes 129 1,004 493 3,991
Income tax provision 26 201 105 1,165
-------- ------- -------- --------
Net income $ 103 $ 803 $ 388 $ 2,826
======== ======= ======== ========
Earnings per share
Primary $ 0.02 $ 0.14 $ 0.07 $ 0.48
Fully diluted $ 0.02 $ 0.13 $ 0.07 $ 0.48
Weighted average common and common eqivalent
shares outstanding
Primary 5,873 5,939 5,866 5,847
Fully diluted 5,873 5,954 5,866 5,895
</TABLE>
See accompanying notes.
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MAPINFO CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
----------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 15,879 $ 14,846
Short-term investments, at cost 13,502 14,970
Accounts receivable, less allowance of $1,243 at June 30,
1996, and $949 at September 30, 1995, respectively 7,399 9,527
Inventories 956 241
Other current assets 799 1,148
Income taxes receivable 203
Deferred income taxes 893 893
--------- ---------
Total current assets 39,631 41,625
Property and equipment - net 4,781 3,564
Product development costs - net 1,140 542
Intangibles and other assets 637 691
--------- ---------
Total assets $ 46,189 $ 46,422
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,473 $ 1,542
Accrued expenses 3,672 4,721
Deferred revenue 1,124 970
Income taxes payable 107
--------- ---------
Total current liablities 6,269 7,340
Other non-current liabilities 166 268
Deferred income taxes 118 118
--------- ---------
Total liabilities 6,553 7,726
--------- ---------
Stockholders' Equity:
Common stock 11 11
Paid in capital 29,421 28,846
Retained earnings 10,235 9,847
Translation adjustment (30) (7)
--------- ---------
39,637 38,697
Less treasury stock 1 1
--------- ---------
Total stockholders' equity 39,636 38,696
--------- ---------
Total liablities and stockhoders' equity $ 46,189 $ 46,422
========= =========
</TABLE>
See accompanying notes.
4
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MAPINFO CORPORATION AND SUBSIDIARIES
CASH FLOWS STATEMENTS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1996 1995
----------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income $ 388 $ 2,826
Depreciation and amortization 2,161 1,337
Allowance for doubtful accounts, sales returns and inventory 394 451
Changes in operating assets and liabilities:
Accounts receivable 1,834 (2,813)
Inventories (815) (87)
Other current assets 146 (2,299)
Other current liabilities (1,264) 1,509
Deferred revenue 154
--------- ---------
NET CASH FORM OPERATIONS 2,998 924
--------- ---------
CASH FLOWS USED FOR INVESTMENTS
Additions to property and equipment (2,833) (1,617)
Capitalized product development costs (1,054) (318)
Short-term investments 1,468 (2,134)
Other assets (35) (200)
--------- ---------
NET CASH USED FOR INVESTMENTS (2,454) (4,269)
CASH FLOWS FROM FINANCING
Payments on long term debt and capital leases (63) (154)
Proceeds from exercise of stock options and ESPP purchases 369 1,612
Tax benefit from option exercises 206 1,054
--------- ---------
NET CASH FROM FINANCING 512 2,512
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (23)
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS 1,033 (833)
Cash and equivalents, beginning of period 14,846 9,306
--------- ---------
Cash and equivalents, end of period $ 15,879 $ 8,473
========= =========
</TABLE>
See accompanying notes.
5
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MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses.
Actual results could differ from those estimates. Interim results are not
necessarily indicative of results for a full year. The information included in
this Form 10-Q should be read in conjunction with Management's Discussion and
Analysis of financial statements and notes thereto included in the MapInfo
Corporation 1995 Annual Report on Form 10-K.
1. EARNINGS PER SHARE
Earnings per share is computed on the basis of the weighted average number of
common shares outstanding and the dilutive effect of outstanding stock options,
using the treasury stock method.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
MapInfo Corporation develops, manufactures, markets, licenses and supports
desktop mapping software, mapping application development tools, and geographic
and demographic information products for personal computers, workstations, and
servers on a worldwide basis.
REVENUES
Revenues of $10.2 million for the third quarter of fiscal 1996 increased 2% over
revenues of $10.0 million reported in the year earlier period. For the nine
months ended June 30, 1996, revenues increased to $30.5 million, a 6% increase
over the corresponding period in the prior year. The increase in net revenues
in the third quarter and nine months ended June 30, 1996 was primarily
attributable to increased unit sales of the Company's software products in Asia-
Pacific and European markets and the increased sales resulting from the
acquisition of the Company's master Australian distributor in the fourth quarter
of fiscal 1995, offsetting a decline in revenues in North America. Sales to one
distributor represented 13% of revenues in the third quarter and 10% of revenue
for the nine months ended June 30, 1996. Revenues outside North America
increased from 30% of revenues in the third quarter of fiscal 1995 to 53% of
revenues in the third quarter of fiscal 1996. In North America, the decline in
revenues in the third quarter was primarily attributable to reduced productivity
during the rebuilding of the field sales organization, changing market
conditions, and, in general, the continued transition to an enterprise sales
model.
COST OF REVENUES, OPERATING EXPENSES, AND INCOME TAXES
Cost of revenues as a percentage of revenues increased from 18.6% of revenues in
the third quarter of fiscal 1995 to 24.5% of revenues in the third quarter of
fiscal 1996. As a result, the gross profit margin decreased from 81.4% in the
third quarter of fiscal 1995 to 75.5% in the third quarter of fiscal 1996. For
the nine months ended June 30, 1996, the gross profit margin decreased to 77.3%
from 81.5% in the corresponding prior year period. The decline in gross profit
margin in the third quarter was attributable primarily to the revenue mix and
the write off of obsolete inventory in North America.
Research and development expenses increased 35% to $1.8 million or 18.2% of
revenues in the third quarter of fiscal 1996 from $1.4 million or 13.7% of
revenues in the corresponding prior year period. Fiscal year to date
expenditures increased 21.4% to $5.2 million from $4.3 million in the prior
period. The increase in research and development expenses resulted primarily
from the planned hiring of software engineers and the associated support costs
as the Company accelerated product development activities in response to
changing market conditions.
7
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Selling and marketing expenses decreased 9.1% to $4.4 million in the third
quarter of fiscal 1996 from $4.9 million in the corresponding quarter of fiscal
1995. As a percentage of revenues, selling and marketing expenses were 43.6%
and 49.0% in the third quarters of fiscal 1996 and 1995, respectively. For the
nine months ended June 30, 1996, selling and marketing expenses increased 14% to
$14.4 million, up from $12.7 million in the comparable prior year period. As a
percentage of revenues, selling and marketing expenses were 47.3% and 44.1% for
the nine months ended June 30, 1996 and 1995, respectively. The decline in
selling and marketing expense in the third quarter was primarily attributable to
lower sales headcount in North America and Europe compared to the prior year
period. The year to date increase in selling and marketing expenses was
primarily due to marketing costs associated with the launch of MapInfo
Professional in the second quarter of fiscal 1996, the expansion of sales
activities in international markets, selling and marketing costs in Australia
following the Company's acquisition of its master Australian distributor in
August 1995, and selling costs in Japan where a sales office was established in
May 1995.
General and administrative expenses of $1.5 million were 14.7% of revenues in
the third quarter of fiscal 1996 compared to $1.2 million or 11.9% of revenues
in the third quarter of fiscal 1995. General and administrative expenses were
$4.2 million and $3.3 million for the nine months ended June 30, 1996 and 1995,
respectively, representing 13.9% and 11.3% of revenues in the respective period.
The increase in expenses reflects the costs of establishing decentralized
accounting and support operations in Europe and general and administrative costs
in Australia following the Company's acquisition of its master distributor.
The effective income tax rate was 20% in the third quarters of both fiscal 1996
and fiscal 1995. For the nine months ended June 30, 1996 and 1995, the
effective income tax rate was 21% and 29%, respectively. The decrease in the
Company's effective tax rate was due to the increased portion of pre-tax income
represented by tax-exempt investment income.
FINANCIAL CONDITION
The Company's cash and short-term investments portfolio totaled $29.4 million at
June 30, 1996, and represented 64% of total assets. The portfolio is invested
primarily in short-term, liquid, tax-exempt securities.
The Company has a $20 million credit facility with a bank that expires in
December 1997, and a $10 million credit facility with a bank that expires in
January 1997. There are no outstanding borrowings under either facility at June
30, 1996. Cash generated from operations for the nine months ended June 30,
1996 was $3.0 million, compared to $.9 million for the nine months ended June
30, 1995. Cash used for investments of $2.5 million included $2.8 million in
purchases of property and equipment, of which approximately $.9 million was used
to furnish the new research and development facility occupied as of February
1996.
Inventories increased from $241,000 at September 30, 1995 to $956,000 at June
30, 1996. The increase is primarily associated with the introduction of MapInfo
8
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Professional and MapInfo Desktop and increases in inventories for sale in Europe
and Australia as sales and marketing activities are increased in such markets.
Management believes existing cash and short-term investments together with funds
generated from operations should be sufficient to meet the Company's operating
requirements for at least the next 12 months.
There were no material commitments for capital expenditures as of June 30, 1996.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
The following important factors, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.
New products and technological change. The desktop mapping software business is
characterized by rapid technological change, evolving industry standards, and
frequent new product introductions. There can be no assurance that the Company
will successfully complete the development of new or enhance products or
successfully manage transitions from one product release to the next, or that
the Company's future products will achieve market acceptance.
Competition. The Company encounters significant competition in the market for
desktop mapping systems. Increased competition may lead to pricing pressures
that could adversely affect the Company's gross margins.
Dependence on emerging desktop mapping market. The Company markets it products
to the desktop mapping market, which is relatively new and emerging. Many of
the Company's customers have purchased only a single copy of MapInfo software,
and there can be no assurance that these customers will broadly implement
desktop mapping applications or purchase additional copies of MapInfo software.
Prices. Future prices the Company is able to obtain for its products may
decrease from previous levels depending upon market or competitive pressures or
distribution channel factors.
Shift in distribution model. At the beginning of 1995, the Company implemented
a sales and marketing strategy in North America that placed increased emphasis
on third party distribution channels, principally using value added resellers,
for selling the Company's products and services in the North American market.
This resulted in an increasing percentage of the Company's North American
revenues coming from value added resellers and a decreasing percentage of
revenues coming from direct sales efforts. The average selling prices of the
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Company's products and services when sold to value added resellers are typically
lower than the average selling prices realized by the Company when selling
through direct sales channels. In 1995, the Company's revenues in North America
grew more slowly than its revenues in international markets and the Company's
future success will depend, in part, on its ability to grow revenues in North
America.
Technology development and licensing fees. In 1995, the Company derived a
portion of its product revenues from technology development and licensing fees
from customers that embedded MapInfo technology into their own software
applications. While the Company continues to invest in research and
development, there can be no assurance that such technology development and
licensing fees will continue in the future.
Cost of revenues. Although cost of revenues as a percentage of net revenues
declined slightly from 1993 to 1994 to 1995, it varies with the mix of
technology development and licensing fees, product revenues, and service
revenues, as well as with the distribution channel mix. Changes in the revenue
mix, as well as in the distribution model, may affect cost of revenues as a
percentage of revenues in the future.
Risks Associated with International Operations. Revenues outside North America
increased from 30% of revenues in the third quarter of fiscal 1995 to 53% of
revenues in the third quarter of fiscal 1996. The international portion of the
Company's business is subject to a number of inherent risks, including the
difficulties in building and managing international operations, difficulties in
localizing products and translating documentation into international languages,
fluctuations in the value of international currencies, fluctuating import/export
duties and quotas, and unexpected regulatory, economic, or political changes in
international markets.
10
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MAPINFO CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The exhibits listed in the Exhibit Index filed as part of this report are
filed as part of this report or are included in this report.
(a) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1996.
11
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MAPINFO CORPORATION
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.
MAPINFO CORPORATION
Date: August 14, 1996 By: /s/ D. Joseph Gersuk
-------------------------
D. Joseph Gersuk,
Vice President and
Chief Financial Officer
(Principal Financial Officer)
12
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MAPINFO CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
11 Statement regarding computation of per share
earnings
27 Financial Data Schedule
13
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EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
----------------- -------------------
1996 1995 1996 1995
-------- ------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 5,702 5,594 5,672 5,537
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 171 345 194 310
-------- ------- -------- --------
Total 5,873 5,939 5,866 5,847
======== ======= ======== ========
Net income $ 103 $ 803 $ 388 $ 2,826
======== ======= ======== ========
Per share amount $ 0.02 $ 0.14 $ 0.07 $ 0.48
======== ======= ======== ========
FULLY DILUTED
Average shares outstanding 5,702 5,594 5,672 5,537
Net effect of dilutive stock options -
based on the treasury stock method
using the year-end market price, if
higher than average market price 171 360 194 358
-------- ------- -------- --------
Total 5,873 5,954 5,866 5,895
======== ======= ======== ========
Net income $ 103 $ 803 $ 388 $ 2,826
======== ======= ======== ========
Per share amount $ 0.02 $ 0.13 $ 0.07 $ 0.48
======== ======= ======== ========
</TABLE>
1
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,879
<SECURITIES> 13,502
<RECEIVABLES> 7,399
<ALLOWANCES> 1,243
<INVENTORY> 956
<CURRENT-ASSETS> 39,631
<PP&E> 4,781
<DEPRECIATION> 4,573
<TOTAL-ASSETS> 46,189
<CURRENT-LIABILITIES> 6,269
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 39,626
<TOTAL-LIABILITY-AND-EQUITY> 46,189
<SALES> 10,164
<TOTAL-REVENUES> 10,164
<CGS> 2,495
<TOTAL-COSTS> 7,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 129
<INCOME-TAX> 26
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
