<PAGE>
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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, 1998
_____________________
Commission File Number 0-23078
MAPINFO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 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 July 31, 1998 was 5,729,747.
================================================================================
<PAGE>
MAPINFO CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Income Statements
for the three and nine months ended June 30, 1998 and 1997 1
Balance Sheets
as of June 30, 1998 and September 30, 1997 2
Cash Flows Statements
for the nine months ended June 30, 1998 and 1997 3
Notes to Financial Statements 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAPINFO CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
----------------- -----------------
1998 1997 1998 1997
------ ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues $15,451 $12,160 $43,493 $34,491
Cost of revenues 3,454 2,600 9,658 7,164
------- ------- ------- -------
Gross profit 11,997 9,560 33,835 27,327
------- ------- ------- -------
Operating expenses:
Research and development 2,519 2,458 7,626 6,754
Selling and marketing 6,633 5,427 18,855 16,927
General and administrative 2,164 1,733 5,791 5,075
------- ------- ------- -------
Total operating expenses 11,316 9,618 32,272 28,756
------- ------- ------- -------
Operating income (loss) 681 (58) 1,563 (1,429)
Other income - net 425 269 904 613
------- ------- ------- -------
Income (loss) before provision for 1,106 211 2,467 (816)
income taxes
Provision for (benefit from) income taxes 275 44 568 (172)
------- ------- ------- -------
Net income (loss) $ 831 $ 167 $ 1,899 $ (644)
======= ======= ======= =======
Earnings (loss) per share:
Basic $ 0.14 $ 0.03 $ 0.32 $ (0.11)
Dilutive $ 0.14 $ 0.03 $ 0.32 $ (0.11)
Weighted average shares outstanding:
Basic 5,836 5,847 5,863 5,803
Dilutive 5,955 5,928 5,976 5,803
</TABLE>
See accompanying notes.
1
<PAGE>
MAPINFO CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 16,061 $ 24,711
Short-term investments, at cost 11,125 6,500
Accounts receivable, less allowance of $1,300 and $1,158
at June 30, 1998 and September 30, 1997, respectively 12,707 9,291
Inventories 906 866
Other current assets 1,612 1,288
Income taxes receivable 86 188
Deferred income taxes 664 669
-------- --------
Total current assets 43,161 43,513
Property and equipment - net 4,693 3,809
Product development costs - net 1,285 1,739
Deferred income taxes 1,146 1,146
Intangibles and other assets 5,100 835
-------- --------
Total assets $ 55,385 $ 51,042
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,428 $ 1,778
Accrued liabilities 9,248 5,603
Deferred revenue 3,168 2,380
Income taxes payable 829 575
-------- --------
Total current liabilities 14,673 10,336
Other non-current liabilities 247 211
-------- --------
Total liabilities 14,920 10,547
-------- --------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.002 par value 12 12
Preferred stock, $.01 par value - -
Paid-in capital 31,172 30,795
Retained earnings 12,452 10,552
Translation adjustment (214) 15
-------- --------
43,422 41,374
Less treasury stock, at cost 2,957 879
-------- --------
Total stockholders' equity 40,465 40,495
--------- --------
Total liabilities and stockholders' equity $ 55,385 $ 51,042
======== ========
</TABLE>
See accompanying notes.
2
<PAGE>
MAPINFO CORPORATION AND SUBSIDIARIES
CASH FLOWS STATEMENTS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months
Ended June 30,
------------------------------
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income (loss) $ 1,899 $ (644)
Depreciation and amortization 3,218 3,109
Allowance for doubtful accounts and returns 195 317
Provision for deferred income taxes - (241)
Changes in operating assets and liabilities, net of effect from
acquisition:
Accounts receivable (3,049) (171)
Inventories (23) 75
Other current assets (183) (752)
Accounts payable and accrued liabilities 1,222 (95)
Deferred revenue 810 892
-------- -------
NET CASH FROM OPERATING ACTIVITIES 4,089 2,490
-------- -------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES
Additions to property and equipment (2,431) (1,738)
Capitalized product development costs (211) (295)
Acquisition of business, technology and other assets (2,088) (1,590)
Other long-term assets (1,171) -
Short-term investments (4,625) 2,502
-------- -------
NET CASH USED FOR INVESTING ACTIVITIES (10,526) (1,121)
-------- -------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
Payments on notes payable, long term debt and capital leases - (95)
Purchase of common stock for treasury (2,837) (220)
Proceeds from exercise of options and ESPP stock purchases 716 431
-------- -------
NET CASH FROM (USED FOR) FINANCING ACTIVITIES (2,121) 116
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (92) (28)
-------- -------
NET CHANGE IN CASH AND EQUIVALENTS (8,650) 1,457
Cash and equivalents, beginning of period 24,711 27,104
-------- -------
Cash and equivalents, end of period $ 16,061 $28,561
======== =======
</TABLE>
See accompanying notes.
3
<PAGE>
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
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 and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The results of operations for the interim period
are not necessarily indicative of the results of operations for the full year.
The year-end balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.
Certain reclassifications have been made to amounts previously reported to
conform to the 1998 presentation.
2. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128 -
- - "Earnings Per Share" in 1998. The following represents the reconciliation of
the basic and dilutive earnings per share amounts for the three months and nine
months ended June 30, 1998 and 1997. Amounts presented for 1997 have been
restated to conform to the provisions of SFAS No. 128.
<TABLE>
<CAPTION>
Three months Nine months
Ended June 30 Ended June 30,
------------------------------- --------------------------
1998 1997 1998 1997
------------- ------------- ----------- -----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income (loss) $ 831 $ 167 $ 1,899 $ (644)
============= ============= =========== ===========
Weighted average shares for basic EPS 5,836 5,847 5,863 5,803
Effect of dilutive stock options 119 81 113 -
------------- ------------- ----------- -----------
Weighted average shares and assumed
exercise of stock options for dilutive EPS 5,955 5,928 5,976 5,803
============= ============= =========== ===========
Basic EPS $ 0.14 $ 0.03 $ 0.32 $ (0.11)
Dilutive EPS $ 0.14 $ 0.03 $ 0.32 $ (0.11)
</TABLE>
4
<PAGE>
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" (SFAS No. 130) is effective for fiscal years beginning after December
15, 1997. This Statement establishes standards for reporting and disclosure of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company will adopt SFAS No. 130 effective October 1,
1998. Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments of an Enterprise and Related Information" (SFAS No. 131) is effective
for fiscal years beginning after December 15, 1997 and requires disclosures
about operating segments and enterprise-wide disclosures about products and
services, geographic areas and major customers. Effective October 1, 1998, the
Company will adopt SFAS No. 131. Statement of Position 97-2 "Software Revenue
Recognition" is effective for fiscal years beginning after December 15, 1997.
This statement provides guidance on recognizing revenue on software
transactions. The Company will adopt Statement of Position 97-2 effective
October 1, 1998. Management believes the implementation of these accounting
standards will not have a material impact on the financial condition, results of
operations or liquidity of the Company.
4. COMMON STOCK REPURCHASE PROGRAM
The Board of Directors has authorized the Company to implement a Common Stock
repurchase program under which the Company is authorized to purchase a maximum
of $5,000,000 of Common Stock on the open market or in negotiated transactions
from time to time. The program will remain in effect until September 30, 1998
unless discontinued earlier by the Board of Directors. The Company intends to
use the repurchased shares for issuance upon the exercise of employee stock
options, purchases under the Company's stock purchase plan, or other corporate
purposes. During the nine months period ended June 30, 1998, the Company
repurchased 235,000 shares at a cost of $2.8 million under this program. To
date the Company has repurchased 315,000 shares under this program at a cost of
$3.7 million, of which 67,662 shares have been reissued.
5. ACQUISITION
Pursuant to a Share Sale and Purchase Agreement dated December 2, 1997, the
Company acquired all of the issued share capital of The URPI Group Limited, an
English company trading as The Data Consultancy ("The Data Consultancy") and
engaged in the sale of market analysis solutions and information products in the
United Kingdom. The purchase price was approximately $4.2 million, consisting
of $3.8 million in cash and $400 thousand in stock. In addition, the Company is
obligated to make a contingent cash payment in March 1999, up to a maximum of
approximately $1.0 million, based on the financial performance of The Data
Consultancy in the year following the acquisition. The acquisition was
accounted for as a purchase and, accordingly, the Company has included The Data
Consultancy's results of operations in its financial statements from the date of
acquisition. Intangible assets resulting from the acquisition, including
goodwill, are being amortized on a straight-line basis over a period of seven
years.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
MapInfo designs, develops, manufactures, markets, licenses and supports business
mapping software and data products on a worldwide basis. The Company's products
and services include software, application development tools, geographic and
demographic data products, consulting services, training and technical support
for personal computers, workstations, and servers. The Company has organized
its operations into three principal geographic operating units: the Americas,
Europe and Asia-Pacific (inclusive of Australia). Additionally, in 1997, the
Company established three business units, focused on customer requirements that
encompass all of MapInfo's products. The business units are Desktop, Enterprise
and Information.
NET REVENUES
Revenues for the third quarter of fiscal 1998 increased 27% to $15.5 million
from $12.2 million in the same period in fiscal 1997. The increase was primarily
attributed to an increase in revenues of the Company's software products and
data products, which accounted for 51% and 45%, respectively of the overall
increase. Included in data revenues was the effect of the acquisition in
December 1997 of The Data Consultancy, which contributed $1.0 million or 31% of
the overall revenue increase. On a geographic basis, revenues increased
approximately 27% in the Americas and 56% in Europe. Approximately two-thirds
of the increase in Europe's revenue was attributed to the acquisition of The
Data Consultancy. Asia-Pacific revenues decreased 3% primarily due to the
decline of the Australian dollar versus the US dollar and lower royalty income
from Greater China. Excluding the effect of the translation of the Australian
dollar, Asia-Pacific revenue would have increased 7% for the quarter.
For the nine months ending June 30, 1998, revenues increased 26% to $43.5
million from $34.5 million in the same period in fiscal 1997. The increase in
revenues was primarily attributed to a 21% increase in revenues of the Company's
software products and a 62% increase in data revenues. Included in the data
revenues was the effect of the acquisition of The Data Consultancy, which
contributed $2.4 million or 27% of the overall revenue increase. On a geographic
basis, revenues increased approximately 25% in the Americas and 42% in Europe.
Approximately two-thirds of the increase in Europe's revenue was attributed to
the acquisition of The Data Consultancy. On a year-to-date basis, Asia-Pacific
revenues increased by 7% primarily due to increased unit sales of software
products in Australia and a 25% increase in royalty income from Japan, partially
offset by the decline in the Australian dollar versus the US dollar. Excluding
the effect of the translation of the Australian dollar, the increase in Asia-
Pacific revenue would have been 16% for the nine months ending June 30, 1998.
COST OF REVENUES, OPERATING EXPENSES, AND INCOME TAXES
Cost of revenues as a percentage of revenues increased to 22.4% in the third
quarter of 1998 from 21.4% in 1997. As a result, the gross margin decreased to
77.6% from 78.6%. For the nine months ending June 30, 1998, gross margin
decreased to 77.8% from 79.2% during the same
6
<PAGE>
period in 1997. The gross margin decline was primarily attributable to an
increase in revenue from data products as a percentage of total revenues as a
result of the acquisition of The Data Consultancy.
Research and development (R&D) expenses of $2.5 million in the third quarter of
fiscal 1998 remained consistent with the corresponding prior year period. For
the nine months ending June 30, 1998, R&D expenses increased 13% to $7.6 million
from $6.8 million in the same period in fiscal 1997. The increase in R&D
expenses was primarily attributed to increased headcount resulting from the
acquisition of SpatialWare technology and The Data Consultancy, partially offset
by lower costs in the Troy, New York, development operations. Excluding the
effect of acquisitions, R&D expenses decreased approximately 9% from prior year.
As a percentage of revenues, R&D expenses were 17.5% and 19.6% for the nine
months ending June 30, 1998 and 1997, respectively.
Selling and marketing expenses increased 22% to $6.6 million in the third
quarter of fiscal 1998 from $5.4 million in 1997. For the nine months ending
June 30, 1998, selling and marketing expenses increased 11% to $18.9 million
from $16.9 million in the same period in fiscal 1997. The increase in selling
and marketing expenses in the third quarter and year-to-date was primarily
attributable to a 28 person increase in selling and marketing headcount in
Europe to support expanded operations. The acquisition of The Data Consultancy
accounted for one-third of this increase. In addition, the headcount in the
Americas increased by 17 primarily in support of the Company's business unit
strategy. As a percentage of revenues, selling and marketing expenses declined
to 43.4% for the nine months ending June 30, 1998 from 49.1% for the same period
in 1997, due to improved expense leveraging.
General and administrative (G&A) expenses increased 25% to $2.2 million in the
third quarter of fiscal 1998 from $1.7 million in 1997. For the nine months
ending June 30, 1998, general and administrative expenses increased 14% to $5.8
million from $5.1 million in the same period in fiscal 1997. The increase in G&A
expenses for the quarter and year-to-date was primarily due to The Data
Consultancy acquisition and associated amortization of intangible assets ($200
thousand in the quarter; $400 thousand year-to-date) as well as an increase in
European general and administrative expenses to support growing operations.
Excluding the effects of the acquisition, G&A expenses for the nine months
ending June 30, 1998 increased 5% as compared to prior year. For the nine months
ending June 30, 1998, general and administrative expenses as a percentage of
revenues declined to 13.3% as compared to 14.7% for the same period in 1997.
Other income increased by $156 thousand in the third quarter of 1998 as compared
to the same period in fiscal 1997 due primarily to foreign exchange gains of
$136 thousand. For the nine months ending June 30, 1998, other income
increased by $291 thousand relative to the corresponding period last year as a
result of increased interest income associated with moving a substantial amount
of the Company's short-term investments from tax-exempt to higher yielding
taxable securities.
The effective income tax rate for the nine months ended June 30, 1998 and 1997
was approximately 23% and 21%, respectively.
7
<PAGE>
FINANCIAL CONDITION
The Company's cash and short-term investments totaled $27.2 million at June 30,
1998, compared to $31.2 million at September 30, 1997. At June 30, 1998, the
Company's investment portfolio consisted primarily of short-term, liquid,
taxable securities.
MapInfo has no material long-term debt. The Company has a $20 million credit
facility with a bank that expires in December 1999, and a $10 million credit
facility with a bank that expires in January 1999. There were no outstanding
borrowings under either facility at June 30, 1998.
Net cash generated from operating activities was $4.1 million for the nine
months ended June 30, 1998, compared to $2.5 million for the corresponding
period in the prior year. The increase in fiscal 1998 was due principally to an
increase in net income, accounts payable and accrued liabilities partially
offset by an increase in accounts receivable. Net cash used for investing
activities of $10.5 million included $2.1 million for the acquisition of The
Data Consultancy, $2.4 million for purchases of property and equipment and $4.6
million in purchases of short-term investments.
The Board of Directors has authorized the Company to implement a Common Stock
repurchase program under which the Company is authorized to purchase a maximum
of $5,000,000 of Common Stock on the open market or in negotiated transactions
from time to time. The program will remain in effect until September 30, 1998
unless discontinued earlier by the Board of Directors. The Company intends to
use the repurchased shares for issuance upon the exercise of employee stock
options, purchases under the Company's stock purchase plan, or other corporate
purposes. During the nine months ended June 30, 1998, the Company repurchased
235,000 shares at a cost of $2.8 million under this program. To date the
Company has repurchased 315,000 shares under this program, at a cost of $3.7
million, of which 67,662 shares have been reissued.
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 the next twelve months.
ACQUISITION OF THE DATA CONSULTANCY
Pursuant to a Share Sale and Purchase Agreement dated December 2, 1997, the
Company acquired all of the issued share capital of The URPI Group Limited, an
English company trading as The Data Consultancy ("The Data Consultancy") and
engaged in the sale of market analysis solutions and information products in the
United Kingdom. The purchase price was approximately $4.2 million, consisting
of $3.8 million in cash and $400 thousand in stock. In addition, the Company is
obligated to make a contingent cash payment in March 1999, up to a maximum of
approximately $1.0 million in cash, based on the financial performance of The
Data Consultancy in the year following the acquisition. The acquisition has
been accounted for as a purchase and, accordingly, the Company has included The
Data Consultancy's results of operations in its financial statements from the
date of acquisition. Intangible assets resulting from the acquisition, including
goodwill, are being amortized on a straight-line basis over a period of seven
years.
8
<PAGE>
INVESTMENT IN OBJECT/FX CORPORATION
Pursuant to a Purchase Agreement dated April 3, 1998, the Company invested $1.1
million in the form of convertible debt and a minority equity interest in
Object/FX Corporation, a Minnesota company engaged in the development and sale
of Java mapping technology. As part of the investment, the Company also
received a warrant to acquire additional shares over a period of 5 years at a
total cost of $550,000 and options from existing stockholders to acquire a
majority interest in Object/FX Corporation at any time during the period
commencing October 3, 2000 and ending April 3, 2001. In addition, MapInfo and
Object/FX Corporation entered into a non-exclusive worldwide marketing
agreement, under which the Company will enhance and sell Object/FX Java-based
products. The investment in Object/FX has been accounted for under the cost
method.
ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" (SFAS No. 130) is effective for fiscal years beginning after December
15, 1997. This Statement establishes standards for reporting and disclosure of
comprehensive income and its components in a full set of general-purpose
financial statements. The Company will adopt SFAS No. 130 effective October 1,
1998. Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments of an Enterprise and Related Information" (SFAS No. 131) is effective
for fiscal years beginning after December 15, 1997 and requires disclosures
about operating segments and enterprise-wide disclosures about products and
services, geographic areas and major customers. Effective October 1, 1998, the
Company will adopt SFAS No. 131. Statement of Position 97-2 "Software Revenue
Recognition" is effective for fiscal years beginning after December 15, 1997.
This statement provides guidance on recognizing revenue on software
transactions. The Company will adopt Statement of Position 97-2 effective
October 1, 1998. Management believes the implementation of these accounting
standards will not have a material impact on the financial condition, results of
operations or the liquidity of the Company.
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, including
without limitation statements concerning the sufficiency of the Company's
capital resources and the impact of new accounting standards. 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, should be considered in evaluating MapInfo's outlook and future.
9
<PAGE>
NEW PRODUCTS AND TECHNOLOGICAL CHANGE. The mapping software and information
business is characterized by extremely rapid technological change, evolving
industry standards, and frequent new product introductions. These conditions
require continuous expenditures on product research and development to enhance
existing products and to create new products. The Company believes that the
timely development of new products and continuing enhancements to existing
products is essential to maintain its competitive position in the marketplace.
During fiscal 1997 and 1998, the Company introduced a number of new products,
including ProServer, SpatialWare, DB Planner and Target Pro. The Company's
future success depends, in part, upon customer and market acceptance of these
new products. The Company's future success will also depend in part on its
ability to integrate the operations of The Data Consultancy and any other
acquired businesses with its existing operations. Any failure to achieve
acceptance of these and other new product offerings could have a material
adverse effect on the Company's business and results of operations. There can be
no assurance that the Company will successfully complete the development of new
or enhanced products or successfully manage transitions from one product release
to the next.
COMPETITION. The Company encounters significant competition in the market for
business mapping systems worldwide. Increased competition may lead to pricing
pressures that could adversely affect the Company's gross margins. Prices of
software in Europe and Asia are generally higher than in the Americas to cover
localization costs and higher costs of distribution. Such price uplifts could
erode in the future.
RELIANCE ON THIRD PARTIES. The Company relies in part on strategic partners and
independent developers for the development of specialized data products that use
MapInfo software. Failure by such strategic partners or independent developers
to continue to develop such data products, or changes in the contractual
arrangements with such strategic partners or independent developers, could have
a material adverse effect on the Company's business and results of operations.
EXPANSION TO ENTERPRISE MARKET. The Company has previously marketed its
products primarily in the desktop mapping market. The Company has recently
expanded its product offerings beyond the desktop market to the enterprise and
Internet/intranet markets. Sales to the enterprise and Internet/intranet
markets are directed to different decision-makers within customer organizations
and require different selling and marketing programs than are used in the
desktop market. The failure of these products to achieve market acceptance
could have a material adverse effect on the Company's business and results of
operations.
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.
INTELLECTUAL PROPERTY RIGHTS. The Company regards its software as proprietary
and attempts to protect it with a combination of copyright, trademark and trade
secret laws, employee and third party non-disclosure agreements, and other
methods of protection. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information the Company regards as
proprietary.
10
<PAGE>
In addition, the Company's shrink-wrap licenses, under which the Company
licenses its products, may be unenforceable under the laws of certain
jurisdictions; and the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Any misappropriation of the Company's intellectual property could have a
material adverse effect on the Company's business and results of operations.
Furthermore, there can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to current or
future products. Any such assertion could require the Company to enter into
royalty arrangements or result in costly litigation.
COST OF REVENUES. Cost of revenues varies with the mix of technology
development and licensing fees, product revenues, and services revenues, as well
as with the distribution channel mix. Changes in the Company's revenue mix, as
well as its distribution model, may continue to affect cost of revenues as a
percentage of net revenues in the future.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company's operating results
are affected by foreign exchange rates. Revenues outside the Americas were 51%
and 49% of total Company revenues for the nine months ending June 30, 1998 and
1997, respectively. The Company does not engage in any hedging transactions.
However, since much of the Company's international costs of goods sold and
operating expenses are also incurred in local currencies, the impact of exchange
rates is partially mitigated. In addition, the international portion of the
Company's business is subject to a number of other inherent risks, including the
difficulties in building and managing international operations, reliance on
financial commitments from certain international distributors, difficulties in
localizing products and translating documentation into international languages,
fluctuations in import/export duties and quotas, and unexpected regulatory,
economic, or political changes in international markets. Changes in
international business conditions could have a material adverse effect on the
Company's business and results of operations.
YEAR 2000 COMPLIANCE. The Company's saleable products rely on software
applications. The Company also relies on systems of other parties in regard to
its business, accounting and operational software. The Company believes that
its saleable products are year 2000 compliant, with exception to certain minor
products. These exceptions do not represent a material portion of revenue. The
Company is conducting a comprehensive review of the year 2000 compliance of
significant internal information systems. To date, the Company believes
significant business, accounting and operations software are either compliant or
can be remediated without material impact on business operations. However,
there can be no assurance that the Company will not experience difficulties with
the conversion of these systems. The Company's business, financial condition or
results of operations could be materially adversely affected by the failure of
its saleable products, systems and applications or those operated by other
parties to properly manage dates beyond 1999.
11
<PAGE>
MAPINFO CORPORATION
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Stockholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and intended to be
presented at the Company's 1999 Annual Meeting of Stockholders must be received
by the Company not later than September 18, 1998 in order to be considered for
inclusion in the Company's proxy materials for that meeting.
The Company's Amended and Restated By-Laws (the "By-Laws") also establish
advance notice procedures with respect to a stockholder nomination of candidates
for election as Directors (a "Director Nomination") and for the conduct of other
business to be brought before an annual meeting by a stockholder ("Other
Business"). A notice regarding a Director Nomination or a proposal for Other
Business must be received by the Company not less than 60 days nor more than 90
days prior to the applicable stockholder meeting, provided, however, that in the
event that less than 70 days' notice or prior disclosure of the date of the
meeting is given or made to the Company's stockholders, the notice must be
received by the Company not later than the tenth day following the date on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. Any such notice must contain certain specified
information concerning the persons to be nominated and/or the Other Business and
the stockholder submitting the Director Nomination or proposal for Other
Business, all as set forth in the By-Laws. The presiding officer of the meeting
may refuse to acknowledge any Director Nomination or proposal for Other Business
not made in compliance with such advance notice requirements. The Company has
not yet publicly announced the date of the 1999 Annual Meeting. The advance
notice provisions of the Company's by-laws supersede the notice requirements
contained in recent amendments to Rule 14a-4 under the Exchange Act.
Director Nominations or stockholder proposals for Other Business should be
mailed to Secretary, MapInfo Corporation, One Global View, Troy, New York 12180.
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.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1998.
12
<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.
MAPINFO CORPORATION
Date: August 14, 1998 By: /s/ D. Joseph Gersuk
---------------------
D. Joseph Gersuk,
Executive Vice President,
Finance and International
Operations, Chief Financial
Officer and Treasurer
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INCOME
STATEMENT AND BALANCE SHEET 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-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 16,061
<SECURITIES> 11,125
<RECEIVABLES> 14,007
<ALLOWANCES> 1,300
<INVENTORY> 906
<CURRENT-ASSETS> 43,161
<PP&E> 12,183
<DEPRECIATION> 7,490
<TOTAL-ASSETS> 55,385
<CURRENT-LIABILITIES> 14,673
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 40,453
<TOTAL-LIABILITY-AND-EQUITY> 55,385
<SALES> 43,493
<TOTAL-REVENUES> 43,493
<CGS> 9,658
<TOTAL-COSTS> 9,658
<OTHER-EXPENSES> 32,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,467
<INCOME-TAX> 568
<INCOME-CONTINUING> 1,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,899
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
