<PAGE>
===============================================================================
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 December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-26772
VISIO CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
WASHINGTON 91-1448389
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
520 PIKE STREET, SUITE 1800, SEATTLE, WASHINGTON 98101-4001
(Address of principal executive offices) (Zip code)
(206) 521-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Shares outstanding as of January 31, 1998
----------------------------- -----------------------------------------
<S> <C>
Common Stock ($.01 par value) 28,662,041
</TABLE>
================================================================================
<PAGE>
VISIO CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Balance Sheets as of December 31, 1997 and September 30, 1997............................................................. 2
Statements of Income for the three months ended December 31, 1997 and 1996................................................ 3
Statements of Cash Flows for the three months ended December 31, 1997 and 1996............................................ 4
Notes to Financial Statements............................................................................................. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 7
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................................................... 15
SIGNATURES..................................................................................................................... 16
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
VISIO CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 83,739 $ 79,594
Accounts receivable 12,192 6,360
Inventories 1,181 1,079
Prepaid expenses 4,614 3,991
Deferred income taxes 6,872 7,291
-------- --------
Total current assets 108,598 98,315
Equipment and leasehold improvements 8,872 8,039
Capitalized technology 2,744 2,861
-------- --------
Total assets $120,214 $109,215
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,558 $ 5,954
Accrued compensation and benefits 4,221 2,706
Other accrued liabilities 11,965 10,717
Deferred revenue 6,741 8,998
Income taxes payable 4,489 2,988
Current portion of notes payable 1,039 1,024
-------- --------
Total current liabilities 34,013 32,387
-------- --------
Shareholders' equity :
Common stock 53,513 52,258
Retained earnings 32,688 24,570
-------- --------
Total shareholders' equity 86,201 76,828
-------- --------
Total liabilities and shareholders' equity $120,214 $109,215
======== ========
</TABLE>
See accompanying notes.
2
<PAGE>
VISIO CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues $37,046 $19,010
Cost of revenues 3,349 1,977
------- -------
Gross profit 33,697 17,033
------- -------
Operating expenses:
Research and development 5,897 2,705
Sales and marketing 15,362 7,490
General and administrative 2,773 1,366
------- -------
Total operating expenses 24,032 11,561
------- -------
Operating income 9,665 5,472
Interest and other income, net 1,141 452
------- -------
Income before income taxes 10,806 5,924
Provision for income taxes 2,810 1,540
------- -------
Net income $ 7,996 $ 4,384
======= =======
Basic earnings per share $0.28 $0.16
======= =======
Shares used in computation of basic earnings per share 28,195 27,050
======= =======
Diluted earnings per share $0.26 $0.15
======= =======
Shares used in computation of diluted earnings per share 30,926 30,135
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
VISIO CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 7,996 $ 4,384
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization 1,246 499
Deferred income taxes 419 (517)
Changes:
Accounts receivable (5,881) (1,047)
Inventories (104) (75)
Prepaid expenses (652) 222
Accounts payable (387) (294)
Accrued compensation and benefits 1,520 (96)
Deferred revenue (2,256) 605
Other accrued liabilities 1,286 483
Income taxes payable 2,334 2,073
-------- -------
Net cash from operations 5,521 6,237
-------- -------
CASH FLOWS USED FOR INVESTMENTS:
Purchases of short-term investments (29,699) --
Purchases of equipment and leasehold improvements (2,027) (608)
-------- -------
Net cash used for investments (31,726) (608)
-------- -------
CASH FLOWS FROM FINANCING:
Issuance of common stock 636 618
Payments on long-term obligations -- (85)
-------- -------
Net cash from financing 636 533
-------- -------
Net increase (decrease) in cash and cash equivalents (25,569) 6,162
Effect of exchange rate changes on cash (42) 53
Cash and cash equivalents, beginning 58,222 42,506
-------- -------
Cash and cash equivalents, end 32,611 48,721
Short-term investments 51,128 18,540
-------- -------
Cash and short-term investments $ 83,739 $67,261
======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
VISIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of Visio Corporation ("Visio" or the "Company") at
December 31, 1997 and for the three month periods ended December 31, 1997 and
1996 are unaudited and reflect all adjustments, consisting of only normal
recurring items which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations for the interim
periods. The financial statements should be read in conjunction with the
financial statements and notes thereto for the fiscal year ended September 30,
1997 included in Visio's Annual Report on Form 10-K. The results of operations
for the three months ended December 31, 1997 are not necessarily indicative of
the results to be expected for the full fiscal year.
Visio's fiscal year is a 52/53-week period. Accordingly, all references as
of and for the periods ended December 31, 1997, September 30, 1997 and December
31, 1996 reflect amounts as of and for the periods ended January 2, 1998,
October 3, 1997 and December 27, 1996, respectively.
In January 1998, Visio completed the merger of MarComp, Inc. ("MarComp")
in exchange for 50,014 shares of Visio common stock. The merger will be
accounted for as a pooling of interests. The results of operations of MarComp
were not material to Visio's consolidated financial statements, and therefore,
amounts prior to the date of acquisition were not restated to reflect the
combined operations of the companies.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which the Company has adopted effective for periods
ending December 31, 1997. Pursuant to the requirements of Statement No. 128, the
Company has changed the method previously used to compute earnings per share and
has restated all prior periods whereby the calculation of primary and fully
diluted earnings per share have been replaced by basic and diluted earnings per
share. Under the new requirements for calculating basic earnings per share,
the dilutive effective stock options and stock warrants is excluded.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------
BASIC DILUTED
---------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
Weighted average common shares outstanding 28,282 27,486 28,282 27,486
Restricted stock subject to repurchase (87) (436) n/a n/a
Net effect of dilutive stock options and warrants
calculated using the treasury stock method and the
average stock price n/a n/a 2,644 2,649
------- ------- ------- ------
Total 28,195 27,050 30,926 30,135
======= ======= ======= =======
Net Income $ 7,996 $ 4,384 $ 7,996 $ 4,384
======= ======= ======= =======
Earnings per share $ 0.28 $ 0.16 $ 0.26 $ 0.15
======= ======= ======= =======
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market and consist of the
following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(in thousands)
<S> <C> <C>
Raw Materials $ 405 $ 299
Finished Goods 776 780
------ ------
$1,181 $1,079
====== ======
</TABLE>
SUBSEQUENT EVENTS
On January 22, 1998, Visio agreed to merge with MarComp Inc. ("MarComp"), a
privately held provider of programming toolkits for access to Autodesk AutoCAD
.dwg and .dxf file formats. MarComp is located in Parkton, Maryland. Under the
terms of the reorganization agreement, Visio exchanged 50,014 shares of its
unregistered common stock for all of the outstanding shares of MarComp. The
transaction will be accounted for as a pooling of interests.
On February 10, 1998, the Company agreed to acquire InfoModelers, Inc.
("InfoModelers"), a privately held, leading supplier of database and data
warehouse visual design, access and query tools, located in Bellevue,
Washington. The transaction will be accounted for using the purchase method.
5
<PAGE>
Under the terms of the agreement, Visio issued 200,000 shares of its common
stock for substantially all of the assets of InfoModelers. Based upon closing
stock prices in February 1998, the transaction will be valued at approximately
$7.8 million for InfoModeler shareholders. This transaction will result in one-
time charges of approximately $6.7 million with respect to in-process research
and development and approximately $0.2 million in other acquisition related
charges.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Visio, which commenced operations in September 1990, develops drawing and
diagramming software for the general business personal computer user. All of
the Company's products have been developed for the Microsoft Windows 3.1,
Windows 95 and Windows NT operating systems and are marketed under the Visio
brand. The Company's primary products are Visio Standard, Visio Technical and
Visio Professional. The Company's first product, Visio Standard, which first
shipped in November 1992, began creating a new market for business diagramming.
The Company shipped its second significant product, Visio Technical for
technical drawing, in November 1994. The Company introduced its third
significant product in January 1997: Visio Professional, for information systems
and network design and documentation.
When used in this discussion, the words "expects," "believes,"
"anticipates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Factors
which could affect the Company's financial results and cause such results to
differ materially from quarter to quarter include but are not limited to
fluctuations in quarterly performance, dependence on other products, including
Microsoft Windows, competition in the business drawing and diagramming software
market, timing and customer acceptance of new products, the Company's ability to
manage growth and integrate acquired technology, potential changes in licensing
and marketing methods and changes in general economic conditions. Additional
information concerning these and other risks is described in the "Certain Risk
Factors that may Impact Future Results of Operations" section of the Company's
Form 10-K for the fiscal year ended September 30, 1997, and, from time to time,
in other reports filed by the Company with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
- - - - - - - - - - - -
VISIO is a registered trademark of Visio Corporation.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth statement of income data as a percentage of
revenues for the fiscal periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------
1997 1996
------ ------
<S> <C> <C>
Revenues................................... 100.0% 100.0%
Cost of revenues........................... 9.0 10.4
----- -----
Gross margin............................... 91.0 89.6
----- -----
Operating expenses:
Research and development................. 15.9 14.2
Sales and marketing...................... 41.5 39.4
General and administrative............... 7.5 7.2
----- -----
Total operating expenses................... 64.9 60.8
----- -----
Income from operations..................... 26.1 28.8
Other income, net.......................... 3.1 2.4
----- -----
Income before income taxes................. 29.2 31.2
Provision for income taxes................. 7.6 8.1
----- -----
Net income................................. 21.6% 23.1%
===== =====
</TABLE>
REVENUES
Revenues include the license of software products, maintenance and support
contracts, net of reserves for estimated future returns and allowances. License
revenues are derived from packaged software products, volume licenses,
international royalties and certain OEM arrangements.
In August 1997 Visio upgraded its most significant products, Visio
Standard, Visio Technical and Visio Professional to version 5.0. Revenues for
the first quarter of fiscal 1998 increased 95% over the same quarter in the
prior year. The increase in revenues was due primarily to sales volume growth
across product groups, distribution channels and geographic regions.
The following table sets forth revenues by product group with the
corresponding percentage of total revenues and the year-to-year percentage
change for the fiscal periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------
1997 1996 CHANGE
-------------- --------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Business diagramming................ $12,132 32.7% $11,722 61.7% 3.8%
Technical drawing................... 8,969 24.2 7,288 38.3 23.1%
IS design and documentation......... 15,945 43.1 -- -- --
------- ----- ------- -----
Total revenues................... $37,046 100.0% $19,010 100.0% 94.9%
======= ===== ======= =====
</TABLE>
8
<PAGE>
Product Groups: Visio Professional, the Company's first product in the
IS design and documentation product group which initially shipped in the second
quarter of fiscal 1997, significantly impacted the revenue mix within the
product groups for the quarter ended December 31, 1997. Visio Professional
contributed 43% of total revenues for the three months ended December 31, 1997.
The business diagramming product group revenues increased 4% for the quarter
ended December 31, 1997 over the comparable period in fiscal 1997. The Company
believes that the percentage growth in the business diagramming product group
has been impacted by cannibalization from Visio Professional. The Company
believes that customers who may otherwise have purchased Visio Standard are
choosing Visio Professional for it's added features and content. Many Visio
Standard customers in the past were information technology professionals who can
now choose Visio Professional, which provides them with more of the
functionality they need. The technical drawing product group revenues increased
23% for the quarter ended December 31, 1997 over the comparable period in fiscal
1997. The Company believes that the percentage growth in the technical drawing
product group has also been impacted by cannibalization from Visio Professional.
Sales Channels: Visio classifies its revenues in four sales channels:
"Distribution," "Direct," "Volume Licensing," and "OEM." Distribution revenues
represent sales of packaged products through national distributors and
corporate, retail and mail order resellers. Direct revenues represent sales of
packaged products directly by the Company, including upgrades, generally to end
users responding to advertising or marketing promotions. Volume Licensing
revenues are derived from volume licenses, which are generally administered
through corporate resellers after the Company's sales staff has negotiated the
sale. The typical sales cycle for a volume license is six to eighteen months.
Volume Licensing revenues usually do not include any significant amount of
packaged goods, but do include maintenance and support revenues, which are
priced separately and recognized over the lives of the contracts. OEM revenues
include licenses of Visio products to hardware and software manufacturers for
bundling arrangements. OEM revenues include packaged product sales, as well as
royalty payments with no associated product costs.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Distribution................ $26,778 72.3% $13,960 73.4% 91.8 %
Direct...................... 3,340 9.0 1,440 7.6 131.9 %
Volume Licensing............ 6,897 18.6 3,371 17.7 104.6 %
OEM......................... 31 0.1 239 1.3 (87.0)%
------- ----- ------- -----
Total revenues......... $37,046 100.0% $19,010 100.0% 94.9 %
======= ===== ======= =====
</TABLE>
Growth in the Distribution channel was driven by the strength of Visio
Professional as well as increased upgrade revenues. Direct channel growth was
from increased upgrade revenues as well as revenues from Visio Network Equipment
which is sold primarily in the direct channel. Volume Licensing channel revenues
grew 105% for the three month period ended December 31, 1997, over the
comparable period in fiscal 1997. This strong growth reflects continued
investment in the corporate volume licensing program.
9
<PAGE>
The following table sets forth revenues by geography with the corresponding
percentage of total revenues and the year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------
1997 1996 CHANGE
--------------- --------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
North America $21,000 56.7% $10,970 57.7% 91.4%
Europe 10,219 27.6 4,841 25.5 111.1%
Rest of world 5,827 15.7 3,199 16.8 82.2%
------- ----- ------- -----
Total international 16,046 43.3 8,040 42.3 99.6%
------- ----- ------- -----
Total revenues $37,046 100.0% $19,010 100.0% 94.9%
======= ===== =====
</TABLE>
Geography: Revenues in the U.S. and Canada for the quarter ended December
31, 1997 increased over the comparable period of fiscal 1997 primarily due to
the contribution of Visio Professional, which was not available in the
comparable quarter in fiscal 1997. International revenues for the quarter ended
December 31, 1997 increased over the comparable period of fiscal 1997 primarily
due to the contribution of Visio Professional, which was first introduced in
French and Kanji in the December 1997 quarter, the upgrade to version 5.0 and
the continued growth of Visio Technical.
10
<PAGE>
COST OF REVENUES
The following table sets forth cost of revenues with the corresponding
percentage of revenues and year-to-year percentage change for the fiscal periods
indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1997 1996 CHANGE
--------------- ---------------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $3,349 9.0% $1,977 10.4% 69.4%
</TABLE>
Cost of revenues varies with the mix of Distribution, Direct, Volume
Licensing and OEM revenues, due to relative variations in the standard product
costs associated with each revenue category, and with fluctuations in period
costs. Standard product costs consist primarily of documentation, packaging,
media duplication, assembly and material management costs. Period costs consist
primarily of certain royalties, technical support, production management,
freight and fulfillment, amortization of capitalized acquired technology,
standard material variances and inventory valuation adjustments.
Standard costs associated with each revenue category are primarily
determined by the amount of packaged product delivered in that revenue category.
Accordingly, most of the Company's standard costs are associated with
Distribution and Direct revenues, all of which are derived from sales of
packaged products. Volume Licensing revenues have the lowest standard cost
because they generally do not include any significant amount of packaged goods.
The decrease in cost of revenues as a percentage of revenues for the
quarter ended December 31, 1997 over the comparable period of fiscal 1997
resulted from the increased use of lower cost CD-ROM media and other raw
material cost reductions, an increase in the percentage of revenue from Visio
Professional and Visio Technical which have lower standard product costs as a
percentage of revenues than Visio Standard and increased Volume Licensing
revenues which have little or no standard product costs. These decreases were
partially offset by increased royalty costs for licensed technology including
Visual Basic for Applications (VBA) from Microsoft Corporation and increased
amortization costs of capitalized technology.
11
<PAGE>
RESEARCH AND DEVELOPMENT
The following table sets forth research and development expenses with the
corresponding percentage of revenues and year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1997 1996 CHANGE
----------------- ------------------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $5,897 15.9% $2,705 14.2% 118.0%
</TABLE>
Research and development expenses consist primarily of personnel, contract
services, occupancy and equipment costs required to conduct the Company's
product development efforts. Product development includes product engineering,
documentation development, localization, usability testing, quality assurance
and advanced research and development costs. Product localization costs and lump
sum payments for technology such as file converters are capitalized and
amortized to development over the lesser of the useful life or 18 months. Such
amortization has not been significant. Research and development expenses are
charged to operations as incurred. The Company has not capitalized certain
software development costs subsequent to the establishment of technological
feasibility, as these costs have been immaterial.
Increases in research and development expenses in absolute terms for the
quarter ended December 31, 1997 over the quarter ended December 31, 1996
resulted primarily from planned additions to the Company's development
organization. The increase in research and development as a percentage of
revenues resulted primarily from the costs associated with developing
IntelliCAD, the Company's new PC CAD product that is expected to be released in
March 1998.
SALES AND MARKETING
The following table sets forth sales and marketing expenses with the
corresponding percentage of revenues and year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1997 1996 CHANGE
----------------- ------------------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $15,362 41.5% $7,490 39.4% 105.1%
</TABLE>
Sales and marketing expenses have increased in absolute terms as the
Company continues building its worldwide sales, marketing and customer service
infrastructure. The increase in sales and marketing expenses in absolute terms
in the first fiscal quarter of 1998 over the comparable quarter in fiscal 1997
was primarily due to expansion in international markets, increased product
marketing costs to support new products and upgrades to existing products and
additions to the corporate sales force. The increase in sales and marketing
expenses as a percentage of revenues was primarily from increased marketing
support for the international release of Visio upgrades to version 5.0 and
marketing investments associated with the upcoming IntelliCAD release.
The Company believes substantial spending on marketing awareness and
corporate sales staffing is essential to achieve revenue growth and to maintain
and enhance the Company's competitive position. Accordingly, Visio expects sales
and marketing expenses will continue to increase in absolute terms over time.
12
<PAGE>
GENERAL AND ADMINISTRATIVE
The following table sets forth general and administrative expenses with the
corresponding percentage of revenues and year-to-year percentage change for the
fiscal periods indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1997 1996 CHANGE
--------------- ------------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Three months ended $2,773 7.5% $1,366 7.2% 103.0%
</TABLE>
General and administrative expenses increased in absolute terms in the
first quarter of fiscal 1998 over the corresponding periods of fiscal 1997
primarily due to increased staffing to support the Company's growth as well as
the establishment of Visio's operational headquarters for the Asia Pacific
region in the second quarter of fiscal 1997. The Company expects to show
increased general and administrative expenses in absolute terms in future
periods for infrastructure to support the Company's revenue growth.
INTEREST AND OTHER INCOME, NET
Interest income for the first quarter of fiscal 1998 of $1.0 million
increased 84% over the first quarter of fiscal 1997. The increase in fiscal 1998
was primarily due to a larger cash and short-term investment balance. Other
income includes grant income from the Industrial Development Agency of Ireland
and foreign currency transaction gains and losses. Visio currently hedges
foreign exchange transaction exposures.
INCOME TAXES
The Company's effective income tax rate was 26% for both the fiscal 1998
and fiscal 1997 periods.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and short-term investments
totaling $83.7 million, an increase of $4.1 million from September 30, 1997.
The increase in cash and short-term investments was due primarily to cash
generated from operations and cash proceeds from the issuance of shares through
the employee stock option program. The Company has an unused $1.0 million
unsecured bank line of credit, which matures on February 28, 1998. The Company
anticipates renewal of this line of credit under substantially similar terms.
At December 31, 1997, the Company's principal commitments consisted
primarily of leases on its facilities. The Company's capital expenditures
totaled $2.0 million in the first three months of fiscal 1997. At December
31,1997, the Company did not have any material commitments for capital. The
Company believes that its current cash balances, funds available under its line
of credit and cash flow from operations will be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
From time to time, the Company evaluates potential acquisitions of
businesses, products or technologies that complement the Company's business. At
December 31, 1997, the Company had no material agreements or commitments with
respect to any such transactions requiring cash payments.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Accounting Standards Executive Committee has issued Statement of
Position 97-2, "Software Revenue Recognition" ("SOP 97-2"), which supersedes SOP
91-1, the former literature on software revenue recognition. This Statement will
be effective beginning in fiscal year 1999. The Company believes it is in
13
<PAGE>
compliance with the provisions of SOP 97-2, and its adoption is not expected to
have a material impact on the financial position or results of operations of the
Company.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
27.1 Financial Data Schedule which is submitted electronically to the
Securities and Exchange Commission for information purposes only
and not filed.
(b) Reports on Form 8-K:
None.
ITEMS 1, 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
15
<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.
Date: February 17, 1998 VISIO CORPORATION
By: /s/ STEVE GORDON
----------------------------------------
Steve Gordon
Senior Vice President, Finance
and Operations;
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
16
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
27.1 Financial Data Schedule which is submitted
electronically to the Securities and Exchange
Commission for information purposes only and
not filed.
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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