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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission File Number 0-23078
MAPINFO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 06-1166630
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock,
$.002 Par Value Per Share
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $70,089,457 based on the closing price of the
Common Stock on the Nasdaq National Market on December 1, 1997.
The number of shares outstanding of the registrant's common stock, $.002 par
value per share as of December 1, 1997 was 5,939,251.
DOCUMENTS INCORPORATED BY REFERENCE
10-
DOCUMENT DESCRIPTION K PART
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Specifically Identified Portions of the Registrant's Proxy Statement
for the Annual Meeting of Stockholders to be held on February 25,
1998................................................................ III
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PART I
ITEM 1. BUSINESS
GENERAL
MapInfo Corporation (the "Company" or "MapInfo") designs, develops, markets,
licenses, and supports mapping software products, application development
tools, and data products, together with a range of consulting, training and
technical support services. These products and services enable business users
worldwide to correlate, visualize, and analyze corporate data using the common
theme of geography to help solve business problems related to sales and
marketing analysis, site selection, asset management, risk analysis, routing
and logistics, among others. By overlaying corporate data on any of the
thousands of digital maps sold by the Company or its data partners,
organizations can use geographic or demographic information as a framework for
viewing, interpreting and managing data.
MapInfo's business strategy emphasizes the development of a broad range of
software products for business mapping and spatial analysis, marketed through
multiple channels of distribution. Products range from stand-alone software
for the desktop PC to development tools for creating custom applications for
the PC, client/server, Internet and other networked environments. MapInfo(R)
software products operate in a multi-platform environment and permit file
sharing of geographic and demographic data across products and platforms.
There are currently over 400 third-party applications for use with MapInfo
software.
Although MapInfo operates in one industry segment (see Note 12 of the Notes to
Consolidated Financial Statements), the Company is organized into three
strategic business units to focus R&D activities, product development, and
worldwide market strategies on current and emerging developments in the
marketplace. The Desktop Business Unit is focused on the development of the
Company's desktop products and deployment of packaged applications and product
extensions of the core product, MapInfo Professional(R). The Enterprise
Business Unit is responsible for the development and deployment of all
enterprise products, including developers' tools, such as ProServer(TM),
MapInfo MapX(TM) and MapInfo MapXsite(TM), and database applications with
SpatialWare(TM). The Information Business Unit is responsible for the
development of MapInfo's data products and the Company's Web site as a sales
and delivery channel for MapInfo's full product line.
The Company's predecessor was incorporated in New York in 1986, ("MapInfo New
York"). On November 6, 1997, MapInfo New York merged with and into the
Company, then a wholly-owned subsidiary of the Company, for the sole purpose
of reincorporating MapInfo New York as a Delaware Corporation, and the Company
succeeded to all of the rights and liabilities of MapInfo New York. All
references herein for MapInfo or the Company refer to MapInfo New York for
periods or events prior to November 6, 1997.
BACKGROUND
In today's business environment, organizations are under constant competitive
pressure to acquire and retain customers, reduce costs, and improve operating
efficiencies. Many businesses are turning to information technology to meet
these challenges, yet in many cases organizations are overwhelmed by the vast
amount of data available to them, or have difficulty accessing and organizing
data to effectively make decisions. In order to meet their business goals and
manage the information overload, many companies are re-engineering common
business practices by turning to networked systems and distributed computing,
and providing information to managers at all levels within an organization.
Applying geography to business practices has become an increasingly important
way to leverage information technology across an organization. A significant
amount of all corporate data has a location component, such as an address or
postal code. By using the location component and positioning data on maps or
analyzing this data according to geographic relationships, MapInfo products
enable users to use data to make meaningful decisions by revealing patterns,
relationships and trends not previously recognized with conventional analysis
and reporting
1
methods. For many businesses, this approach provides a cost-effective solution
with improved operational efficiencies.
PRODUCTS AND SERVICES
The Company offers a range of mapping software and data products, in addition
to services that include consulting, training, and technical support for end
users, developers and original equipment manufacturers ("OEMs").
SOFTWARE
DESKTOP PRODUCTS:
MAPINFO PROFESSIONAL
MapInfo Professional is a full-featured, customizable mapping software
package for businesses and GIS analysts. It includes a wide range of data
visualization, management and analysis tools, plus open database
connectivity ("ODBC") to directly access corporate databases. It is
compatible with Microsoft's object linking and embedding ("OLE")
technology, allowing MapInfo maps to be easily integrated into other
applications. MapInfo Professional can be customized for specific industry
uses.
MAPBASIC(R)
MapBasic is a programming environment used by information system ("IS")
organizations and third-party developers to create customized mapping
applications for use with MapInfo Professional. MapBasic can be used to
focus or extend the functionality of MapInfo Professional, modify the user
interface to a specific business need, automate routine operations, and
integrate MapInfo Professional with other applications.
PACKAGED APPLICATIONS
Packaged Applications are complete solutions which combine MapInfo
Professional with third-party applications to solve specific business
problems. The first of these products, MAPINFO PROALIGN(TM), is a territory
management solution introduced in September 1997, that allows sales and
marketing managers to automatically re-align sales territories, optimize
workloads and analyze customer and competitive information.
ENTERPRISE PRODUCTS:
SPATIALWARE
SpatialWare is MapInfo server technology that stores and manages complex
spatial data along with traditional data types in corporate relational
database servers for ISO SQL3-based spatial querying. With it, users are
able to instantly incorporate mapping for visualization and analysis within
enterprise applications and data warehouse environments to support business
decisions. SpatialWare is available on Oracle(R), Informix(R), and IBM DB2.
MAPINFO MAPX
MapInfo MapX is an OCX component used by developers to embed mapping
functionality into new and existing applications. Developers can work from
within familiar object oriented development environments such as Visual
Basic(R), PowerBuilder(R), and Delphi(TM) to add a mapping object to an
application. Users can access mapping functionality from their familiar
business applications created by developers.
2
MAPINFO MAPXSITE
MapInfo MapXsite is a complete mapping package that enables Web developers
and Internet service providers to embed "dealer locator" capabilities in
Web sites. MapXsite was introduced in July 1997 and was first deployed on
Wal-Mart's Web site for finding the nearest stores, products and services
to a customer's location.
PROSERVER
ProServer is a suite of software and developer tools for creating
Internet/intranet mapping applications. With ProServer, the data and
application reside on a server for easy updating and distribution. It
allows end users to access mapping through standard Web browsers or other
custom interfaces using Internet protocols. The suite includes MapInfo
Professional and MapBasic, in addition to the ProServer software.
INFORMATION PRODUCTS
The Company's Information Products include a wide range of data products that
are developed and used with its software products and the Corporate Web site
which acts as the Internet distribution channel.
MAPINFO DATA PRODUCTS:
The Company's Data Products fall into three categories:
. Geocoding, address-matching and data cleansing products
. Geographic and geo-demographic information products
. Software utilities
GEOCODING PRODUCTS
Geocoding products assign latitude/longitude coordinates to corporate data
containing geographic references so that the data can be accurately displayed
on a map and analyzed geographically. MapInfo's geocoding products prepare
data for use in MapInfo Professional and other mapping applications.
MAPMARKER(R) and MAPMARKER PLUS are geocoding, address-matching and cleansing
products marketed in the United States. They are available as a client or
server-side product or as an ActiveX/OCX, and include a developer kit for
creating customized geocoding solutions to fit into specific business
processes, such as point-of-sale or geo-demographic analysis applications.
MapMarker can batch geocode entire databases or be used interactively in real
time to geocode addresses as they are entered in a geocoding DataBlade module
on an INFORMIX(R) Universal Data Option. The Company also markets geocoders
for use in the United Kingdom and Australia.
GEOGRAPHIC AND GEO-DEMOGRAPHIC INFORMATION PRODUCTS
The Company offers a broad line of worldwide geographic and geo-demographic
information products for use with MapInfo software. These products compile
extensive quantities of data derived from public and private sources. The
Company often re-engineers and aesthetically enhances this data so that the
resulting data product conforms to MapInfo standards and can be used more
effectively with MapInfo software products. The Company typically pays
royalties to third parties with respect to sales of data products that are
developed by outside sources.
The Company's geographic and geo-demographic data products include:
Street Products. The Company's street-based data products are based on
files available from the United States Census Bureau. The Company's
selection of street maps includes streets, highways, water boundaries,
railroad tracks, bridges and town boundaries. Address ranges are also
included in metropolitan areas. By overlaying any geocoded database with a
street address field, a user can display each record as a point in its
relative location. In addition to data for the United States, street-level
files are available for Canada,
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Germany, Italy, Belgium, Sweden, the Netherlands, Switzerland, France,
Austria, Spain, Poland, Australia, Israel, Mexico, Brazil, Argentina,
Chile, Columbia, Venezuela, and Uruguay.
Boundary Files. The Company's boundary maps allow users to shade, color or
add symbols that represent important information or business data contained
in these areas. These boundaries include ZIP Code areas, states, counties,
census tracks, block groups, Congressional districts and telecommunications
boundaries, such as area codes, exchanges, cellular and PCS market
boundaries in the United States. Boundaries for other countries include
postcodes, provinces, cantons, landers, and prefectures.
Geo-demographic Data. The Company offers thousands of map-compatible geo-
demographic data files for use with MapInfo software. Data available from
the Company includes information relating to population, income, retail
activity, employment, consumer trends and preferences, lifestyles,
manufacturing and other business data, Yellow Pages, and banking and
telecommunications data. Geo-demographic data, especially CLUSTERPLUS(TM)
lifestyle segmentation data, when combined with MapInfo software, create a
cutting edge means for identifying the best new markets for both consumer
and business-to-business products and services.
Other International Data. The Company offers digital map data with respect
to Canada, the European Community, Asia Pacific and other international
regions. For example, the Company offers maps showing all Canadian
highways, European postal code boundaries for 17 countries in Western
Europe and prefecture boundaries for China.
SOFTWARE UTILITIES
The Company offers additional software utilities that translate and convert
certain types of GIS or CAD files for use in MapInfo applications. These
utilities allow data from other formats to be registered and used in MapInfo
software and allow differing earth coordinate systems to be aligned with each
other for accuracy. The Company also offers a translator application
programming interface ("API") to third parties for development of data format
translators.
THE INTERNET:
MAPINFO CORPORATE WEB SITE
The Company continues to maintain and expand its corporate Web site
(www.mapinfo.com). The site serves dual purposes in that it is a vast resource
of information on the Company and its products and services, as well as a
launching pad to other sites the Company has created, such as
www.mapexpress.com, www.mapx.com and www.mapxsite.com. Activity on all the
sites continues to grow as information becomes more specialized and targeted.
MapInfo's presence via the Internet is allowing the Company to bring prospects
closer to a sale and to attract new audiences.
MAPINFO EXPRESS(TM) SUPERSTORE
To establish a vehicle for electronic commerce, the Company created the
MapInfo Express Superstore on its Web site. This vehicle is a cost-effective
distribution channel for the Company's products and Partner offerings, and
establishes a base for delivering mapping services via the Internet. The
Internet continues to offer new opportunities to build brand awareness and add
value for customers and prospects.
PRODUCT DEVELOPMENT
The software industry is characterized by extremely rapid changes in
technology, which require continuous expenditure on product research and
development to enhance existing products and create new products. The Company
believes that the timely development of new products and ongoing enhancements
to existing products is essential to maintain its competitive position in the
marketplace. The Company is committed to an open
4
systems, standards-based product architecture to provide software products
that can be integrated into existing mainstream business environments and be
adaptable as environments change.
Most of the Company's software products are developed internally. Internal
development allows the Company to maintain close technical control over
products in terms of enhancements and modifications based on customer needs,
and allows the Company to create a family of products that provides natural
migration paths for customers as their mapping needs change.
MARKETING & DISTRIBUTION
The Company has established multiple distribution channels to reach an array
of industries while simultaneously addressing specific vertical markets.
Distribution channels include an indirect channel of value-added resellers,
OEMs and distributors, a corporate accounts sales force, and a telemarketing
sales group. The Company has field sales offices in twelve locations in North
America, three locations in Europe, and three locations in Australia. The
Company also has direct sales offices in China, Hong Kong and Taiwan.
The Company's direct sales and marketing organization is complemented by a
network of corporate partners including resellers, system integrators, OEMs
and distributors who purchase the Company's products at a discount for resale.
These partners may provide training, consulting services, application
development, customization, and data products to end users. Outside North
America, distributors are the predominant channel of distribution. These
distributors generally build their own value-added reseller network in
addition to directly selling data products and consulting services.
The Company also has an established network of strategic alliances with
leading software companies including Microsoft(R), Oracle and Informix. The
Company conducts joint sales and marketing programs and has technology
agreements with these companies to integrate mapping into their solutions and
gain exposure to a wider range of potential customers.
To build corporate identity and generate demand in support of the sales
effort, the Company conducts comprehensive marketing programs, which include
advertising, public relations, trade shows, direct mail, MapWorld(R) Magazine,
Web-based promotions, and ongoing communications to customers about new
products. The Company additionally offers cooperative advertising and other
marketing support to its value-added reseller partners. The Company sponsors
an annual reseller's conference, which generates communication and support for
the reseller network. The Company also sponsors European and Asia Pacific
partner conferences, which foster communication and support on an
international level.
The Company is focused on information discovery--that is, delivering products
and solutions that help transform data into meaningful decisions. In addition
to desktop applications, organizations today are seeking more widespread
deployment of critical business applications and are demanding mapping and
geo-spatial solutions for networks, including the Internet, intranets and data
warehouses. They are also demanding tools that integrate mapping functionality
into other applications, as well as tools to manage complex geo-spatial data.
The Company has successfully 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.
COMPETITION
The Company encounters significant competition from various companies, in US
and foreign markets, offering mapping software. These competitors include
Environmental Systems Research Institute, AutoDesk, Small World, Tactician and
others.
INTELLECTUAL PROPERTY
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
5
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.
While the Company's competitive position may be affected by its ability to
protect its proprietary information, the Company believes that the trademark
and copyright protections are less significant to the Company's success than
other factors, such as the knowledge, ability and experience of the Company's
personnel, MapInfo name recognition and ongoing product development and
support.
The Company supplies MapInfo software products primarily under shrinkwrap
licenses. Shrinkwrap licenses are not negotiated with or signed by individual
licensees and take effect upon the opening of the product package. Certain
provisions of such licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the license program, may
be unenforceable under the laws of certain jurisdictions. In addition, 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. Accordingly, the
Company supplies its MapInfo products using a hardware access key in many
countries. 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.
MapInfo, MapInfo Professional, MapMarker, MapWorld and MapBasic are registered
trademarks or services marks of MapInfo Corporation in the United States.
ProServer, MapInfo MapX, MapInfo MapXsite, SpatialWare and ProAlign are
trademarks of MapInfo Corporation. All other trademarks mentioned herein are
the trademarks of their respective owners.
EMPLOYEES
At September 30, 1997, the Company had 362 full-time employees. The Company's
employees are not represented by any collective bargaining organization and
the Company has never experienced a work stoppage.
ITEM 2. PROPERTIES
The Company leases two premises totaling approximately 102,000 square feet of
office space in the Rensselaer Technology Park in Troy, New York, which leases
expire in 2002 and 2004. These offices house the corporate headquarters, the
principal research and development center and the principal sales, marketing
and administrative staff for the Americas. The Company leases office space of
approximately 11,000 square feet in Windsor, England, which houses the
European headquarters. The lease on this facility expires in 2012. In
addition, the Company leases eight sales offices in the United States, one
research and development center in Canada, two sales offices in Europe and
three sales offices in Australia.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 24, 1997, the Company held a Special Meeting of Stockholders for
the purpose of approving the Company's reincorporation from New York to
Delaware (the "Special Meeting"). The Special Meeting was adjourned to
September 30, 1997 and further adjourned to October 31, 1997. The stockholders
of the Company approved the reincorporation as follows:
For: 3,991,353
Against: 492,958
Abstain: 15,937
6
The reincorporation became effective on November 6, 1997 through the merger of
MapInfo New York with and into the Company, then a wholly-owned subsidiary of
MapInfo New York.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth (i) the name and age of each present executive
officer of the Company, (ii) the position(s) presently held by each person
named, and (iii) the principal occupations held by each person named for at
least the past five years.
Executive Officer Age Position
----------------- --- --------
Michael D. Marvin 52 Chairman of the Board
John C. Cavalier 58 President and Chief Executive Officer
John F. Haller 33 Vice President, Chief Technology Officer and Secretary
D. Joseph Gersuk 47 Executive Vice President, Treasurer and Chief Financial Officer
Mr. Marvin has served as Chairman of the Board since 1992 and served as acting
President and Chief Executive Officer from September 1, 1996, upon the
announced resignation of the Company's former President and Chief Executive
Officer, to November 1, 1996. From 1987 to 1992, Mr. Marvin served as Chief
Executive Officer of the Company. Mr. Marvin is a partner in Exponential
Business Development Co., a seed capital company. He is a director of Project
Software & Development, Inc. and various private companies. He is also Vice
Chairman of the New York Software Alliance.
Mr. Cavalier has served as President and Chief Executive Officer since
November 1, 1996. From 1993 to 1996, Mr. Cavalier served as President and
Chief Executive Officer of Antares Alliance Group. From 1990 to 1992, Mr.
Cavalier was President and Chief Executive Officer of Bimillenium Corporation.
Mr. Cavalier is a director of Focus Enhancements Incorporated.
Mr. Haller, a founder of the Company, has served as Vice President, Chief
Technology Officer and Secretary since April 1997. Mr. Haller had served as
Vice President--Technology and Secretary of the Company since the Company's
inception in 1986 until April 1997, except during a leave of absence from
March 1996 to June 1996.
Mr. Gersuk has served as Executive Vice President, Treasurer and Chief
Financial Officer since April 1997 and was previously Vice President,
Treasurer and Chief Financial Officer from October 1994 to April 1997. From
November 1992 to October 1994, Mr. Gersuk was a director of and Vice President
and Chief Financial Officer of DataEase Sapphire International Inc., a
computer software company. From 1988 to 1992, Mr. Gersuk served as Vice
President and Chief Financial Officer of Staveley NDT Technologies Inc.
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PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the Nasdaq National Market under the
symbol MAPS. The table below shows the high and low trading prices of the
Common Stock during the fiscal years ended September 30, 1996 and 1997.
1996
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PERIOD HIGH LOW
------ ------- ------
First Quarter............................................... $23.25 $17.75
Second Quarter.............................................. $21.00 $ 9.50
Third Quarter............................................... $18.00 $ 7.50
Fourth Quarter.............................................. $13.00 $ 9.50
1997
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PERIOD HIGH LOW
------ ------- ------
First Quarter............................................... $ 13.00 $9.625
Second Quarter.............................................. $ 11.25 $ 8.00
Third Quarter............................................... $12.125 $7.875
Fourth Quarter.............................................. $12.625 $ 9.50
The approximate number of holders of record of the Company's Common Stock at
December 1, 1997 was 452. This number does not include stockholders for whom
shares were held in nominee name.
The Company has never declared or paid cash dividends on its capital stock and
currently intends to retain all available funds for use in the operation of
its business. The Company does not anticipate paying cash dividends in the
foreseeable future.
8
ITEM 6. SELECTED FINANCIAL DATA
Years ended September 30,
----------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(in thousands, except earnings per share)
Income Statement data:
Net revenues $ 18,435 $ 29,720 $ 40,041 $ 41,532 $ 47,393
Cost of revenues 4,018 6,190 7,725 9,360 9,737
-------- -------- -------- -------- --------
Gross profit 14,417 23,530 32,316 32,172 37,656
-------- -------- -------- -------- --------
Operating expenses:
Research and development 2,672 4,102 5,752 6,984 9,020
Selling and marketing 7,069 11,736 17,541 19,565 22,864
General and administrative 1,802 3,077 4,749 5,688 7,036
-------- -------- -------- -------- --------
Total operating expenses 11,543 18,915 28,042 32,237 38,920
-------- -------- -------- -------- --------
Operating income (loss) 2,874 4,615 4,274 (65) (1,264)
Other income (expense), net (131) 406 1,035 975 931
-------- -------- -------- -------- --------
Income (loss) before
provision for income taxes 2,743 5,021 5,309 910 (333)
Provision for (benefit from)
income taxes 1,014 1,823 1,513 203 (338)
-------- -------- -------- -------- --------
Net income $ 1,729 $ 3,198 $ 3,796 $ 707 $ 5
======== ======== ======== ======== ========
Earnings per share:
Primary $ 0.41 $ 0.61 $ 0.65 $ 0.12 $ 0.00
Fully diluted $ 0.39 $ 0.61 $ 0.65 $ 0.12 $ 0.00
Weighted average shares
outstanding:
Primary 4,219 5,231 5,841 5,865 5,913
Fully diluted 4,464 5,236 5,841 5,865 5,915
Consolidated Balance Sheet
data:
Total assets $ 10,383 $ 37,254 $ 46,422 $ 49,091 $ 51,042
Long-term obligations,
less current portion $ 549 $ 265 $ 95 $ 17 $ --
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands, except earnings per share)
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).
Summarized information relating to Business Segments and International
Operations is included in the notes to consolidated financial statements.
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.
RESULTS OF OPERATIONS FOR 1995, 1996 AND 1997
NET REVENUES
1995 Change 1996 Change 1997
------------------------------------------------------------------
Software and data products $36,070 3% $36,980 16% $42,968
Services 3,971 15% 4,552 -3% 4,425
------------------------------------------------------------------
Net revenues $40,041 4% $41,532 14% $47,393
------------------------------------------------------------------
In 1997, the increase in revenues was due to increased unit sales of software
and data products in Europe and the Americas. Revenues from Asia-Pacific
remained constant compared to 1996, reflecting a change in the Company's
distribution model in Japan effective February 1997. Approximately half of the
increase in total Company revenues in 1997 resulted from sales of new or
recently introduced enterprise products, including SpatialWare, MapX, and
ProServer. Services revenues declined in 1997 primarily due to increased
reliance on value added resellers in the Americas to meet customer consulting
requirements.
In 1996, revenues increased due to increased sales in Asia-Pacific and Europe,
including the increased sales resulting from the acquisition of the Company's
master distributor in Australia in August 1995. This increase offset a decline
in revenues in the Americas primarily due to decreased unit sales of some
software and data products, a shift in the mix of products sold toward lower-
priced products, decreased technology licensing and development fees, and
decreased services revenues.
The Americas represented 70%, 52% and 50% of Company revenues in 1995, 1996
and 1997, respectively. In addition, Asia-Pacific represented 12%, 24% and
22%, and Europe represented 18%, 24% and 28% of Company revenues in 1995, 1996
and 1997, respectively. Sales to one distributor in the Asia-Pacific region
represented 7%, 9% and 7% of total net revenues in 1995, 1996 and 1997,
respectively. The next scheduled expiration/renewal date for the distribution
contract with this distributor is December 31, 1998.
The Company's operating results are affected by exchange rates. Approximately
10%, 25% and 27% of the Company's revenues were denominated in foreign
currencies during 1995, 1996 and 1997, respectively.
COST OF REVENUES
1995 Change 1996 Change 1997
---------------------------------------------------------------
Cost of revenues $7,725 21% $9,360 4% $9,737
Percentage of net revenues 19.3% 22.5% 20.5%
---------------------------------------------------------------
Cost of revenues as a percentage of net revenues decreased in 1997 due to an
increased percentage of sales from high margin software products, volume
license arrangements, and lower material costs. The percentage increased in
1996 compared to 1995 due to lower technology licensing and development fees
income, the cost of bundling other software products with MapInfo
Professional, and the write-off of obsolete inventory.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
(Dollars in thousands, except earnings per share)
OPERATING EXPENSES
1995 Change 1996 Change 1997
------------------------------------------------------------------
Research and development $ 5,752 21% $ 6,984 29% $ 9,020
Percentage of net revenues 14.4% 16.8% 19.0%
------------------------------------------------------------------
Selling and marketing $17,541 12% $19,565 17% $22,864
Percentage of net revenues 43.8% 47.1% 48.2%
------------------------------------------------------------------
General and administrative $ 4,749 20% $ 5,688 24% $ 7,036
Percentage of net revenues 11.9% 13.7% 14.8%
------------------------------------------------------------------
Research and development costs increased in 1997 primarily due to increased
headcount and other costs resulting from the purchase of SpatialWare
technology, increased costs for translating and localizing MapInfo products
into foreign languages, and lower capitalization of product development costs.
The increases in 1996 expenses resulted primarily from increased headcount,
higher compensation costs following a competitive review, and higher
depreciation and amortization expense in support of the Company's efforts to
accelerate product development. Research and development headcount increased
from 83 at the end of fiscal 1995 to 89 at the end of fiscal 1996 and to 97 at
the end of fiscal 1997. Capitalized product development costs were $594,
$1,316, and $333 (exclusive of additional capitalized product development
costs resulting from the purchase of SpatialWare technology) in 1995, 1996 and
1997, respectively. These amounts represented 9%, 16% and 3% of total research
and development costs in 1995, 1996 and 1997, respectively.
Selling and marketing expenses increased in 1997 primarily due to increases in
headcount and other costs associated with the introduction, marketing and sale
of SpatialWare and increases in sales and marketing activities in Europe.
These were offset by the reductions in other sales and marketing costs in the
Americas and in Asia-Pacific, primarily as a result of closing a support
office in Tokyo. Sales and marketing costs associated with the SpatialWare
product line accounted for nearly half of the increase in sales and marketing
expenses in 1997. In 1996, selling and marketing expenses increased primarily
due to operating costs in Australia and the costs of an office in Tokyo to
support the Company's master distributor in Japan.
General and administrative expenses increased in 1997 primarily due to
increased compensation costs, higher professional fees and increased MIS costs
in the Company's domestic and international operations. The increase in 1996
was primarily attributable to operating costs in Australia and increased costs
in the United Kingdom in support of the expansion of international operations.
OTHER INCOME, NET
1995 Change 1996 Change 1997
--------------------------------------------------
Other income, net $1,035 -6% $975 -5% $931
--------------------------------------------------
Other income consisted mainly of interest income of $1,141, $1,206 and $1,357
in 1995, 1996 and 1997, respectively. Interest income was derived from
investment activities. Interest income was offset by interest expense, foreign
currency losses and other expenses totaling $106, $231 and $426 in 1995, 1996
and 1997, respectively. Increases in interest income, resulting from a shift
in the investment portfolio from tax exempt to taxable investments, were
offset by increases in foreign exchange losses and miscellaneous expense
items.
PROVISION FOR (BENEFIT FROM) INCOME TAXES
1995 Change 1996 Change 1997
----------------------------------------------------------------
Provision for income taxes $1,513 -87% $ 203 -267% $ (338)
Effective tax rate 28.5% 22.4% (101.5%)
----------------------------------------------------------------
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
(Dollars in thousands, except earnings per share)
The 1997 benefit from income taxes was attributable to the current year pre-
tax loss and permanent differences arising from research and development tax
credits and tax exempt interest income earned before the investment portfolio
was substantially reinvested into taxable investments. In 1996, the decrease
in the effective tax rate was primarily due to an increased portion of pre-tax
income derived from tax-exempt investment income.
NET INCOME AND EARNINGS PER SHARE
1995 Change 1996 Change 1997
-------------------------------------------------------------
Net income $3,796 -81% $ 707 -99% $ 5
Percentage of net revenues 9.5% 1.7% 0.0%
Earnings per share $ 0.65 -81% $0.12 -99% $0.00
-------------------------------------------------------------
FINANCIAL CONDITION
The Company's cash and short-term investments totaled $31.2 million at
September 30, 1997, and represented 61% of total assets. The portfolio is
invested primarily in short-term, liquid securities.
MapInfo has no material long-term debt. The Company has a $20 million credit
facility with a bank that expires in December 1999. The Company also has a $10
million line of credit with a bank that expires in January 1998. The Company
anticipates that the line of credit will be renewed for a one-year period on
substantially similar terms. There were no outstanding borrowings under either
facility at September 30, 1997 and 1996.
In November 1996, the Company's Board of Directors authorized the repurchase
of up to $5.0 million of the Company's common stock. This authorization
expired on September 30, 1997. During the period from June 1997 to September
30, 1997, the Company repurchased 80,000 shares totaling $878.
Net cash from operating activities was $3,318, $6,099 and $3,502 in 1995, 1996
and 1997, respectively. Net cash from (used for) investing activities was $72,
$5,377 and ($5,847) in 1995, 1996 and 1997, respectively. During 1997 $2,369
was used for capital expenditures, primarily to upgrade computer equipment
worldwide, for a new accounting/information system and for leasehold
improvements in expanded facilities in the United Kingdom and Germany. The
Company also capitalized $1,440 of product development costs resulting from
the purchase of SpatialWare technology and purchased $1,705 of short-term
investments. Net cash from (used for) financing activities included the
proceeds from the exercise of stock options and share purchases under the
Company's Employee Stock Purchase Plan, which totaled $806, $593 and $765 in
1995, 1996 and 1997, respectively. In 1997, these proceeds were primarily
offset by purchases of ($878) of treasury stock.
Pursuant to an Agreement dated October 2, 1996, the Company acquired an
exclusive, worldwide license to distribute and sub-license SpatialWare
technology from Unisys Corporation. The Company is obligated to make
contingent cash payments, up to a maximum of $1,500, to Unisys. Such
obligation arises following the achievement of a specified threshold of
cumulative net revenues of the SpatialWare business as defined in the
Agreement. No royalties were earned or accrued as of September 30, 1997.
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.
THE DATA CONSULTANCY 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
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
(Dollars in thousands, except earnings per share)
Kingdom. The purchase price was approximately $4,200 in cash and stock. In
addition, the Company is obligated to make a contingent cash payment in
October 1998, up to a maximum of approximately $1,000, based on the financial
performance of The Data Consultancy in the year following the acquisition. The
acquisition will be accounted for as a purchase and, accordingly, the Company
will include The Data Consultancy's results of operations in its financial
statements from the date of acquisition.
OUTLOOK: ISSUES AND RISKS
This Annual Report on Form 10-K 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 Annual Report on Form 10-K and presented elsewhere by management from
time to time.
In addition to the other information in this Annual Report on Form 10-K, the
following issues and risks, among others, should be considered in evaluating
MapInfo's outlook and future.
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, the Company introduced a number of new products, including
SpatialWare, ProServer and MapX. The Company's future success depends, in
part, upon customer and market acceptance of these new products. 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.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
(Dollars in thousands, except earnings per share)
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,
reverse engineer or obtain and use information the Company regards as
proprietary. In addition, the Company's shrinkwrap 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 revenue mix, as well
as the distribution model, may affect cost of revenues as a percentage of net
revenues in the future.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Revenues outside the Americas
increased from 30% of revenues in fiscal 1995 to 48% of revenues in fiscal
1996 and to 50% of revenues in fiscal 1997. 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, reliance on
financial commitments from certain international distributors, difficulties in
localizing products and translating documentation into foreign languages,
fluctuations in the value of international currencies, 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 salable products rely on software
applications. The Company also relies on systems of other parties in regards
to its business, accounting and operational software. The Company believes
that its salable products, as well as its significant business, accounting and
operations software are year 2000 compliant. 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 systems and applications or those operated by other parties to properly
manage dates beyond 1999.
ACCOUNTING STANDARDS. Statement of Financial Accounting Standards No. 128-
"Earnings Per Share" is effective for fiscal years ending after December 15,
1997. The Company will adopt this Statement in fiscal year 1998. The following
represents the basic and dilutive earnings per share amounts had the Company
been required to adopt this statement for the years ended September 30, 1995,
1996 and 1997:
Years Ended September 30,
--------------------------
1995 1996 1997
--------------------------
(Amounts in thousands,
except per share data)
Net income $ 3,796 $ 707 $ 5
--------------------------
Weighted average shares for basic EPS 5,561 5,691 5,823
Effect of dilutive stock options 280 174 90
--------------------------
Weighted average shares and assumed exercise of
stock options for dilutive EPS 5,841 5,865 5,913
Basic EPS 0.68 0.12 0.00
Dilutive EPS 0.65 0.12 0.00
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
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
(Dollars in thousands, except earnings per share)
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.
15
QUARTERLY FINANCIAL INFORMATION (unaudited)
(Amounts in thousands, except earnings per share)
This information has been derived from unaudited quarterly consolidated
financial statements that, in the opinion of management include all normal
recurring adjustments necessary for a fair presentation of such information.
The operating results for any quarter are not necessarily indicative of
results for any future period.
Three months ended
---------------------------------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
1995 1996 1996 1996 1996 1997 1997 1997
---------------------------------------------------------------------------------
Net revenues $9,652 $10,660 $10,164 $11,056 $10,095 $12,236 $12,160 $12,902
Cost of revenues 1,936 2,500 2,495 2,429 2,151 2,413 2,600 2,573
---------------------------------------------------------------------------------
Gross profit 7,716 8,160 7,669 8,627 7,944 9,823 9,560 10,329
Operating expenses 7,895 8,215 7,775 8,352 9,190 9,948 9,618 10,164
---------------------------------------------------------------------------------
Operating income (loss) (179) (55) (106) 275 (1,246) (125) (58) 165
Other income, net 373 225 235 142 114 230 269 318
---------------------------------------------------------------------------------
Income (loss) before
taxes 194 170 129 417 (1,132) 105 211 483
Provision for (benefit
from) income taxes 58 20 26 99 (238) 22 44 (166)
---------------------------------------------------------------------------------
Net income (loss) $ 136 $ 150 $ 103 $ 318 $ (894) $ 83 $ 167 $ 649
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Earnings (loss) per
share:
Primary $ 0.02 $ 0.03 $ 0.02 $ 0.05 $ (0.15) $ 0.01 $ 0.03 $ 0.11
Fully diluted $ 0.02 $ 0.03 $ 0.02 $ 0.05 $ (0.15) $ 0.01 $ 0.03 $ 0.11
Weighted average shares
outstanding:
Primary 5,832 5,809 5,873 5,844 5,878 5,867 5,928 5,963
Fully diluted 5,832 5,809 5,873 5,844 5,878 5,867 5,928 5,964
16
MAPINFO CORPORATION
ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 1997
ITEM 8
FINANCIAL STATEMENTS
17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants 19
Consolidated Statements of Income for the years ended September 30, 1995,
1996 and 1997 20
Consolidated Balance Sheets as of September 30, 1996 and 1997 21
Consolidated Statements of Stockholders' Equity for the years ended
September 30, 1995, 1996 and 1997 22
Consolidated Statements of Cash Flows for the years ended September 30,
1995, 1996 and 1997 23
Notes to Consolidated Financial Statements 24
18
[COOPERS & LYBRAND LETTERHEAD APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of MapInfo Corporation and Subsidiaries
We have audited the consolidated financial statements and the financial
statement schedule of MapInfo Corporation and Subsidiaries listed in Item
14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MapInfo
Corporation and Subsidiaries as of September 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Albany, New York
November 5, 1997, except for Note 15, as to which the date is December 2, 1997
19
MAPINFO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30,
---------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
(Dollars in thousands, except earnings per share)
Net revenues:
Products $ 36,070 $ 36,980 $ 42,968
Services 3,971 4,552 4,425
---------------- ---------------- ----------------
Total net revenues 40,041 41,532 47,393
---------------- ---------------- ----------------
Cost of revenues:
Products 5,024 6,546 5,806
Services 2,701 2,814 3,931
---------------- ---------------- ----------------
Total cost of
revenues 7,725 9,360 9,737
---------------- ---------------- ----------------
Gross profit 32,316 32,172 37,656
---------------- ---------------- ----------------
Operating expenses:
Research and
development 5,752 6,984 9,020
Selling and marketing 17,541 19,565 22,864
General and
administrative 4,749 5,688 7,036
---------------- ---------------- ----------------
Total operating
expenses 28,042 32,237 38,920
---------------- ---------------- ----------------
Operating income (loss) 4,274 (65) (1,264)
Other income, net 1,035 975 931
---------------- ---------------- ----------------
Income (loss) before
provision for income
taxes 5,309 910 (333)
Provision for (benefit
from) income taxes 1,513 203 (338)
---------------- ---------------- ----------------
Net income $ 3,796 $ 707 $ 5
================ ================ ================
Earnings per share:
Primary $ 0.65 $ 0.12 $ 0.00
Fully diluted $ 0.65 $ 0.12 $ 0.00
Weighted average shares
outstanding (in
thousands):
Primary 5,841 5,865 5,913
Fully diluted 5,841 5,865 5,915
See accompanying notes.
20
MAPINFO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
-----------------------
1996 1997
----------- -----------
(Dollars in thousands,
except share data)
ASSETS
Current Assets:
Cash and cash equivalents $ 27,104 $ 24,711
Short-term investments, at cost 4,795 6,500
Accounts receivable, less allowance of $1,249 at
September 30, 1996 and $1,158 at September 30, 1997 7,581 9,291
Inventories 1,021 866
Other current assets 844 1,288
Income taxes receivable 260 188
Deferred income taxes 845 669
----------- -----------
Total current assets 42,450 43,513
Property and equipment--net 4,685 3,809
Product development costs--net 1,115 1,889
Deferred income taxes 385 1,146
Intangibles and other assets 456 685
----------- -----------
Total assets $ 49,091 $ 51,042
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,751 $ 1,778
Accrued expenses 4,820 5,603
Deferred revenue 1,451 2,380
Income taxes payable 536 575
----------- -----------
Total current liabilities 8,558 10,336
Other non-current liabilities 138 211
----------- -----------
Total liabilities 8,696 10,547
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.002 par value; 25,000,000 shares
authorized; 5,774,980 and 5,919,319 shares issued, in
1996 and 1997, respectively 12 12
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued -- --
Paid-in capital 29,824 30,795
Retained earnings 10,547 10,552
Translation adjustment 13 15
----------- -----------
40,396 41,374
Less treasury stock, at cost, 2,000 shares in 1996 and
82,000 shares in 1997 1 879
----------- -----------
Total stockholders' equity 40,395 40,495
----------- -----------
Total liabilities and stockholders' equity $ 49,091 $ 51,042
=========== ===========
See accompanying notes.
21
MAPINFO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1995, 1996 and 1997
Common Stock
---------------- Paid-in Retained Translation Treasury
Shares Amount Capital Earnings Adjustment Stock
------------------------------------------------------
(Dollars in thousands, except share data)
Balance, September 30,
1994 5,459,198 $11 $26,513 $ 6,044 $ -- $ (1)
Exercise of options and
sale of stock under the
Employee Stock Purchase
Plan 189,353 -- 806 -- -- --
Tax benefit from option
exercises -- -- 1,527 -- -- --
Net income -- -- -- 3,796 -- --
------------------------------------------------------
Balance, September 30,
1995 5,648,551 11 28,846 9,840 -- (1)
Exercise of options and
sale of stock under the
Employee Stock Purchase
Plan 126,429 1 593 -- -- --
Tax benefit from option
exercises -- -- 385 -- -- --
Net income -- -- -- 707 -- --
Foreign currency -- -- -- -- 13 --
------------------------------------------------------
Balance, September 30,
1996 5,774,980 12 29,824 10,547 13 (1)
Exercise of options and
sale of stock under the
Employee Stock Purchase
Plan 144,339 -- 765 -- -- --
Tax benefit from option
exercises -- -- 206 -- -- --
Net income -- -- -- 5 -- --
Foreign currency -- -- -- -- 2 --
Purchase of treasury
stock -- -- -- -- -- (878)
------------------------------------------------------
Balance, September 30,
1997 5,919,319 $12 $30,795 $10,552 $ 15 $(879)
------------------------------------------------------
------------------------------------------------------
See accompanying notes.
22
MAPINFO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30,
----------------------------
1995 1996 1997
-------- -------- --------
(Dollars in thousands)
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES
Net income $ 3,796 $ 707 $ 5
Depreciation and amortization 1,983 3,153 4,377
Allowance for doubtful accounts and sales
returns 616 189 18
Provision for deferred income taxes (816) (455) (585)
Other -- 200 --
Changes in operating assets and liabilities,
net of acquisition:
Accounts receivable (5,492) 1,646 (1,691)
Inventories 482 (669) 126
Other current assets (145) 304 (676)
Accounts payable and accrued expenses 2,207 426 768
Deferred revenue 580 429 1,043
Income taxes 107 169 117
-------- -------- --------
NET CASH FROM OPERATING ACTIVITIES 3,318 6,099 3,502
-------- -------- --------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES
Additions to property and equipment (2,002) (3,406) (2,369)
Capitalized product development costs (594) (1,316) (333)
Purchase of business, technology and other
assets (615) (76) (1,440)
Short-term investments 3,283 10,175 (1,705)
-------- -------- --------
NET CASH FROM (USED FOR) INVESTING ACTIVITIES 72 5,377 (5,847)
-------- -------- --------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES
Payments on notes payable, long term debt and
capital leases (183) (196) (95)
Purchase of common stock for treasury -- -- (878)
Proceeds from exercise of stock options and
ESPP purchases 806 593 765
Tax benefit from option exercises 1,527 385 206
-------- -------- --------
NET CASH FROM (USED FOR) FINANCING ACTIVITIES 2,150 782 (2)
-------- -------- --------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS -- -- (46)
-------- -------- --------
NET CHANGE IN CASH AND EQUIVALENTS 5,540 12,258 (2,393)
Cash and cash equivalents, beginning of period 9,306 14,846 27,104
-------- -------- --------
Cash and cash equivalents, end of period $ 14,846 $ 27,104 $ 24,711
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 32 $ 16 $ 40
Income taxes 662 170 173
See accompanying notes.
23
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company designs, develops, markets, licenses and supports business
mapping software products, application development tools, and data products,
together with a range of consulting, training and technical support services.
These products are sold through multiple distribution channels, including an
indirect channel of value-added resellers and distributors, a corporate
account sales force, and a telemarketing sales group. The Company markets its
products worldwide through sales offices in North America, Europe, Australia,
China, Hong Kong, Taiwan and Japan.
Basis of Consolidation
The consolidated financial statements include the accounts of MapInfo
Corporation and its wholly-owned subsidiaries. Significant intercompany
balances and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the cash flows statements, the Company defines cash and
cash equivalents as cash and investments with original maturities of three
months or less.
Inventories
Inventories are stated at the lower of cost or market as determined on the
average cost method and consist primarily of computer media, user manuals and
software packaging supplies.
Short-term Investments
The Company's short-term investments consist of debt securities with
maturity dates of one year or less. In accordance with SFAS No. 115, debt
securities have been classified in the accompanying consolidated balance
sheets as held-to-maturity securities and are reported at amortized cost
because the Company has the positive intent and ability to hold these debt
securities to maturity. Market value is determined by quoted market prices.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets (two to
ten years) for financial reporting purposes and accelerated methods for tax
purposes. When assets are sold, retired, or otherwise disposed of, the
applicable costs and accumulated depreciation are removed from the accounts
and the resulting gain or loss is recognized.
Product Development Costs
Product development costs, including product enhancements, are capitalized
after technological feasibility has been established. These costs are reported
at the lower of unamortized cost or net realizable value and are being
amortized on a straight-line basis over two to five years, the estimated
economic life of the products.
24
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Annual amortization under the straight-line method is greater than the ratio
of current gross revenue to total expected product revenues method.
Amortization expense is classified as research and development expense in the
accompanying consolidated statements of income.
Intangible Assets
Intangible assets represents the excess of cost over the fair value of net
assets acquired. Intangible assets are being amortized using the straight-line
method over five to seven years. The Company continually evaluates the
existence of goodwill impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the related
business unit.
Revenue Recognition
Product revenue: Revenue from software license and technology development
fees is recognized upon the later of shipment of product or completion of
significant obligations to customers, if collectibility of the resulting
receivable is probable. Upon the recognition of revenue, all costs associated
with insignificant obligations are accrued.
Postcontract customer support (PCS): Generally, PCS that is bundled with an
initial licensing fee is for one year or less and is recognized together with
the initial licensing fee on delivery of the software, if collectibility of
the resulting receivable is probable and enhancements and the costs of
providing these services are expected to be insignificant. When PCS is sold
under separate agreements, the revenue is recognized ratably over the term of
the agreement.
Reserve for Returns
The Company as a matter of policy provides the buyer the right to return
certain products within a stated period ranging from 30-60 days, for a refund
of the purchase price or replacement of the product. Accordingly, the Company
accrues for estimated future returns.
Income Taxes
Deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable for future
years to differences between financial statement and tax basis of existing
assets and liabilities. The effect of tax rate changes on deferred taxes is
recognized in the income tax provision in the period that includes the
enactment date.
Business tax credits are recorded by the flow-through method of accounting,
whereby they are applied as a reduction of income tax expense in the year the
credits are utilized.
Foreign Currency
The assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and the income statements are
translated at the average rates of exchange prevailing during the year. Gains
or losses resulting from translating non-U.S. currency financial statements
are accumulated in a separate component of stockholders' equity. Gains and
losses from foreign currency transactions are included in net income.
25
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Computation of Earnings Per Share
Earnings per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of stock options using the treasury stock
method.
Reclassifications
Certain reclassifications have been made to the 1995 and 1996 amounts to
conform with the 1997 presentation.
2. SHORT-TERM INVESTMENTS
At September 30, short-term investments consist of the following:
1996 1997
---------------------- -----------------------
Amortized Aggregate Amortized Aggregate
Type of Investment cost market value cost market value
------------------ --------- ------------ --------- -------------
Municipal bonds $4,759 $4,759 $4,506 $4,506
Commercial paper -- -- 1,968 1,968
Government bonds 36 35 26 26
------ ------ ------ ------
$4,795 $4,794 $6,500 $6,500
====== ====== ====== ======
Included in other income, net is interest income of $1,141, $1,206 and $1,357
in 1995, 1996 and 1997, respectively.
A board member of the Company is an officer/shareholder in an organization
which provides investment, advisory and custodial services to the Company. At
September 30, 1997, this organization was in custody of $20,790 of cash and
cash equivalents and short-term investments under an investment management
agreement. The Company paid investment fees to this related party of $27, $30
and $36, in 1995, 1996 and 1997, respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30,
----------------
1996 1997
------- -------
Computer hardware and software $ 7,365 $ 6,381
Equipment 945 788
Furniture and fixtures 1,335 860
Leasehold improvements 286 671
------- -------
9,931 8,700
Accumulated depreciation and amortization (5,246) (4,891)
------- -------
$ 4,685 $ 3,809
======= =======
During fiscal year 1997, the Company removed from the accounts fully
depreciated assets and their related accumulated depreciation of $3,196.
Depreciation and amortization expense for the years ended September 30, 1995,
1996 and 1997 was $1,377, $2,289 and $3,101, respectively.
26
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
4. PRODUCT DEVELOPMENT COSTS
Product development costs consist of the following:
September 30,
----------------
1996 1997
------- -------
Product development costs $ 2,802 $ 4,575
Accumulated amortization (1,687) (2,686)
------- -------
$ 1,115 $ 1,889
======= =======
Capitalized product development costs for the years ended September 30, 1995,
1996 and 1997 was approximately $594, $1,316 and $1,773 (inclusive of $1,440
resulting from the purchase of SpatialWare technology--see Note 13),
respectively.
Amortization of capitalized product development costs for the years ended
September 30, 1995, 1996 and 1997 was approximately $606, $743 and $999,
respectively.
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
September 30,
-------------
1996 1997
------ ------
Accrued payroll $1,088 $1,504
Accrued vacation 503 754
Accrued royalties 647 585
Accrued marketing 388 454
Accrued commission 296 603
Accrued other 1,898 1,703
------ ------
$4,820 $5,603
====== ======
6. CREDIT FACILITIES
The Company has a $10 million uncollateralized line of credit with a
commercial bank, none of which was drawn down at September 30, 1996 or 1997.
Interest is at the bank's prime rate. The line of credit expires on January
31, 1998.
The Company has a revolving convertible credit facility with a commercial bank
under which a maximum of $20 million can be borrowed for a two year period and
then converted into a three year term loan. Interest is at the bank's prime
rate, LIBOR plus 1.5%, or a fixed rate, at the Company's option. The credit
facility contains certain financial ratio covenants and is collateralized by
the common stock and distribution agreements of certain subsidiaries. None of
this credit facility was drawn down at September 30, 1996 or 1997. The
facility expires in December 1999.
7. COMMITMENTS AND CONTINGENCIES
Operating leases:
The Company leases two facilities in the Rensselaer Technology Park totaling
approximately 102,000 square feet of office space. These offices house the
corporate headquarters and the principal research and
27
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
development center, the principal sales, marketing and administrative staff
for the Americas. These leases contain a nominal escalation in rental payments
over the term of the lease, and in addition to monthly lease payments, the
Company is responsible for such costs as real estate taxes and maintenance.
The Company may acquire these facilities through the termination of these
leases at a negotiated purchase price. The leases expire in 2002 and 2004. The
Company also leases space of approximately 11,000 square feet in Windsor,
England, which houses the European headquarters. The lease on this facility
expires in 2012.
Future minimum rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess of one year as of
September 30, 1997 decline from $2.2 million in 1998 to $1.6 million in 2002.
Total rent expense for the years ended September 30, 1995, 1996 and 1997 was
approximately $722, $1,665 and $2,133, respectively.
Year 2000 Compliance:
The Company's salable products rely on software applications. The Company
also relies on systems of other parties in regards to its business, accounting
and operational software. The Company believes that its salable products, as
well as its significant business, accounting and operations software are year
2000 compliant. 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 systems and applications or those
operated by other parties to properly manage dates beyond 1999.
8. INCOME TAXES
Provision for (benefit from) income taxes consists of:
Year Ended September 30,
---------------------------
1995 1996 1997
-------- -------- --------
Current:
Federal $ 1,742 $ 484 $ 100
State 548 (50) 40
Foreign 39 224 107
-------- ------- -------
2,329 658 247
-------- ------- -------
Deferred income taxes:
Federal (664) (422) (685)
State (152) 28 (50)
Foreign -- (61) 150
-------- ------- -------
(816) (455) (585)
-------- ------- -------
Provision for (benefit from) income taxes $ 1,513 $ 203 $ (338)
======== ======= =======
The provision for income taxes has been reduced for research and development
tax credits of approximately $246, $65 and $193 in 1995, 1996 and 1997,
respectively. At September 30, 1997, the Company has approximately $856 of
research and development tax credit carryforwards which begin to expire in
2009 and approximately $105 of alternative minimum tax credit carryforwards
which have no expiration date.
28
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
8. INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the U.S. federal statutory income tax rate of 34% as follows:
Year Ended September 30,
---------------------------
1995 1996 1997
-------- -------- ---------
Federal statutory income tax rate 34% 34% (34%)
State taxes 5 2 (2)
Non-U.S. tax rates and other foreign charges -- 24 21
Tax-exempt investment income (6) (42) (59)
Research and development credit (5) (7) (58)
Non-deductible expenses and other 0.5 11.3 30.5
------- ------- ---------
28.5% 22.3% (101.5%)
======= ======= =========
U.S. income (loss) before taxes was $5,496, $684 and $(826) for the years
ended September 30, 1995, 1996 and 1997, respectively.
Deferred income taxes recorded in the consolidated balance sheets at September
30, 1996 and 1997 consist of the following temporary differences:
1996 1997
------ ------
Current deferred tax assets:
Accrued expenses $ 513 $ 347
Bad debt reserve 106 67
Inventory 31 53
Allowance for returns 195 202
------ ------
Net current deferred tax assets 845 669
------ ------
Long term deferred tax assets (liabilities):
Capitalized product development costs (269) (171)
Tax credit carryovers 379 961
Property and equipment 73 218
Accrued expenses 113 114
Other non-current assets 89 24
------ ------
Net long term deferred tax asset 385 1,146
------ ------
Net deferred tax asset $1,230 $1,815
====== ======
There are no valuation allowances recorded against the Company's deferred tax
assets, as it is more likely than not that all future tax benefits will be
realized against future taxable income. However, the amount of deferred tax
assets, considered realizable could be reduced in the near term if estimates
of future taxable income are reduced.
9. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS
Employee Stock Purchase Plan
Under the 1993 Employee Stock Purchase Plan, the Company is authorized to
issue up to 200,000 shares of common stock to its full-time employees, nearly
all of whom are eligible to participate. Under the terms of the
29
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
9. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS (CONTINUED)
plan, shares of the Company's common stock may be purchased at six-month
intervals at 85% of the lower of the fair value on the first or last day of
each six-month period. Employees may purchase shares having a value not
exceeding 10% of their gross compensation during an offering period. During
1995, 1996 and 1997, employees purchased 23,508, 42,148 and 62,441 shares,
respectively.
Stock Option Plans
The Company has stock option plans for directors, officers, and all
employees, which provide for non-qualified and incentive stock options. The
option exercise price is the fair market value at the date of grant. Options
granted prior to July 1996 vest over 5 years and 1 day and expire 10 years from
the date of grant. Options granted after July 1996 vest over 4 years and expire
10 years from the date of grant. At September 30, 1997, options for 216,861
shares were vested and 1,070,096 were available for future grants under the
plans.
In February 1997, the Company repriced certain options granted to employees and
officers. Option holders, holding options to purchase 561,363 shares with
exercise prices ranging from $9.88 to $19.00 per share were issued new options
on a one-for-one basis with an exercise price of $9.76 per share. This exercise
price was based on the closing price of the Company's common stock on January
31, 1997, plus ten percent. The closing price on that date was $8.875. In March
1996, the Company repriced certain options granted to employees under this plan
on a four-for-five basis. Option holders, holding options to purchase an
aggregate of 327,177 shares with exercise prices ranging from $17.25 to $35.25
per share were issued 267,741 new options with an exercise price of $12.00 per
share, the closing price of the Company's common stock on the date of the
repricing. The repricings are included in the table below.
Stock options outstanding were as follows:
Outstanding Options
-----------------------
Weighted
Number Average
of Exercise
Shares Price
----------- ----------
Balance, September 30, 1994 609,757 $ 6.00
-----------
Options granted 351,394 22.36
Options forfeited (87,007) 8.99
Options exercised (165,845) 2.55
-----------
Balance, September 30, 1995 708,299 14.56
-----------
Options granted 614,741 10.16
Options forfeited (532,042) 19.34
Options exercised (84,281) 1.95
-----------
Balance, September 30, 1996 706,717 8.63
-----------
Options granted 592,650 10.02
Options forfeited (147,373) 9.72
Options exercised (81,898) 3.51
-----------
Balance, September 30, 1997 1,070,096 9.65
===========
30
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except earnings per share)
9. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS (CONTINUED)
For various price ranges, weighted average characteristics of outstanding
stock options at September 30, 1997 were as follows:
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Number Weighted Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 9/30/97 Contractual Life Exercise Price at 9/30/97 Exercise Price
- --------------- ----------- ----------------- -------------- ----------- --------------
$0.02
to
$9.75 155,537 6.46 $ 6.09 56,771 $ 1.88
$9.76
to
$9.76 465,731 8.03 9.76 115,244 9.76
$9.81
to
$10.00 217,500 9.06 9.88 500 10.00
$10.13
to
$13.25 222,918 9.55 11.04 36,318 11.13
$19.00
to
$30.25 8,410 7.10 25.81 8,028 26.13
--------- -------
1,070,096 8.32 9.65 216,861 8.53
========= =======
The Company follows APB Opinion No. 25, Accounting for Stock Issued to
Employees, to account for stock option and employee stock purchase plans. No
compensation cost is recognized because the option exercise price is equal to
the market price of the underlying stock on the date of grant. Had
compensation cost for these plans been determined based on the Black-Scholes
value at the grant dates for awards as prescribed by SFAS No. 123, Accounting
for Stock-Based Compensation, pro forma net income (loss) and earnings (loss)
per share would have been:
1996 1997
----- --------
Pro forma net income (loss) $ 351 $(1,483)
Pro forma earnings (loss) per share $0.06 $ (0.25)
The weighted average fair value of options granted under the plans during
fiscal years 1996 and 1997 were $9.90 and $6.10, respectively. The weighted
average assumptions for the various option plans range from:
1996 1997
--------------------- ---------------------
Risk-free interest rate 5.3% to 6.0% 5.2% to 6.6%
Expected term 6 months to 7.3 years 6 months to 7.3 years
Company's expected volatility 60% 60%
Dividend yield None None
10. DEFERRED COMPENSATION (401(K)) PLAN
The Company has a deferred compensation (401(k)) plan which covers
substantially all U.S.-based employees who have met certain service
requirements. Employees may contribute up to 15% of their pretax income and
10% on an after-tax basis (up to the maximum established by the IRS each year)
to the plan. Beginning January 1, 1997, the Company may at its option
contribute up to 50% of the first two thousand dollars contributed by each
employee to the plan. Deferred compensation expense for the years ended
September 30, 1995, 1996 and 1997 was $94, $110 and $220, respectively.
31
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
11. CONCENTRATION OF CREDIT RISK
The Company's investment portfolio is diversified and consists of short-term
investment grade securities. At September 30, 1997, the Company had $113 in
U.S. banks in excess of insured limits and $981 in uninsured foreign banks.
The Company sells a significant portion of its product through third-party
distributors. Sales to one distributor represented 7% of total net revenues
for the year ended September 30, 1997, and 11% of total accounts receivable at
September 30, 1997. The next scheduled expiration/renewal date for this
distribution contract is December 31, 1998. There can be no assurance that
this distribution contract will be renewed.
12. BUSINESS SEGMENT AND INTERNATIONAL OPERATIONS
The Company operates in one industry segment consisting of the development,
marketing, licensing and support of mapping software and data products.
Summarized information relating to international operations is as follows:
September 30,
-------------------------
1995 1996 1997
------- ------- -------
Sales to unaffiliated customers:
United States $26,298 $19,688 $22,203
Europe 3,457 10,067 13,090
Australia 607 5,127 5,691
Export sales from United States 9,679 6,650 6,409
------- ------- -------
Total sales to unaffiliated customers $40,041 $41,532 $47,393
======= ======= =======
Operating income (loss)
United States $ 4,406 $ (473) $(1,956)
Europe (149) 366 467
Australia 17 42 225
------- ------- -------
Total operating income (loss) $ 4,274 $ (65) $(1,264)
======= ======= =======
Identifiable assets
United States $41,815 $42,367 $42,592
Europe 3,110 4,980 6,395
Australia 1,497 1,744 2,055
------- ------- -------
Total identifiable assets $46,422 $49,091 $51,042
======= ======= =======
Export sales from the United States include sales primarily to Canada, Japan,
Hong Kong and for the first half of 1995, Europe. Australia accounted for 2%,
12% and 12% of total Company revenue for the years ended September 30, 1995,
1996 and 1997. International revenues, including export sales, outside the
Americas was 30%, 48% and 50% of total revenue in 1995, 1996 and 1997,
respectively. 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. Changes in international business conditions could have
a material adverse effect on the Company's business and results of operations
in the near term.
32
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except earnings per share)
13. ACQUISITION
Pursuant to an Agreement dated October 2, 1996, the Company acquired an
exclusive, worldwide license to distribute and sub-license SpatialWare
technology from Unisys Corporation for a six month period. Under the agreement,
the Company also acquired an option to purchase the underlying intellectual
property and certain fixed assets and to employ the staff of people engaged in
the development, sales and marketing of SpatialWare in Canada, the United
States, and Europe. The purchase option was exercised on April 2, 1997. Total
purchase consideration, which was principally for intellectual property, was
$1,440 in cash and is classified as product development costs.
The Company is obligated to make contingent cash payments, up to a maximum of
$1,500. Such obligation arises following the achievement of a specified
threshold of cumulative net revenues of the SpatialWare business as defined in
the Agreement. No royalties were earned or accrued as of September 30, 1997.
14. OTHER DEVELOPMENTS
Statement of Financial Accounting Standards No. 128-"Earnings Per Share" is
effective for fiscal years ending after December 15, 1997. The Company will
adopt this Statement in fiscal year 1998. The following represents the basic
and dilutive earnings per share amounts had the Company been required to adopt
this statement for the years ended September 30, 1995, 1996 and 1997:
Years Ended September 30,
--------------------------
1995 1996 1997
-------- -------- --------
(Amounts in thousands,
except per share data)
Net income $ 3,796 $ 707 $ 5
-------- -------- --------
Weighted average shares for basic EPS 5,561 5,691 5,823
Effect of dilutive stock options 280 174 90
-------- -------- --------
Weighted average shares and assumed exercise of
stock options
for dilutive EPS 5,841 5,865 5,913
Basic EPS 0.68 0.12 0.00
Dilutive EPS 0.65 0.12 0.00
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.
15. SUBSEQUENT EVENTS
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
33
MAPINFO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands)
15. SUBSEQUENT EVENTS (CONTINUED)
("The Data Consultancy") and engaged in the sale of market analysis solutions
and information products in the United Kingdom. The purchase price was
approximately $4,200 in cash and stock. In addition, the Company is obligated
to make a contingent cash payment in October 1998, up to a maximum of
approximately $1,000, based on the financial performance of The Data
Consultancy in the year following the acquisition. The acquisition will be
accounted for as a purchase and, accordingly, the Company will include The
Data Consultancy's results of operations in its financial statements from the
date of acquisition.
Reincorporation
On October 31, 1997, the Company's stockholders approved the Company's
reincorporation from New York to Delaware. The reincorporation became
effective on November 6, 1997 through the merger of MapInfo New York with and
into the Company, then a wholly-owned subsidiary of MapInfo New York.
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption "Executive
Officers of the Company" in Part I hereof, and the remainder is contained in
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held on February 25, 1998 (the "1998 Proxy Statement") under the caption
"Election of Directors" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is contained in the Company's 1998 Proxy Statement
under the captions "Director Compensation," "Executive Compensation,"
"Compensation Committee Interlocks and Insider Participation," "Other Matters"
and "Section 16(a) Beneficial Ownership Reporting Compliance" and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Beneficial Ownership of Common Stock" and is incorporated
herein by reference.
ITEM 13. OTHER MATTERS
The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Other Matters" and is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) See Item 8 for Index to Consolidated Financial Statements
Consolidated Financial Statement Schedules for the years ended September 30,
1995, 1996 and 1997 included in Item 14(d):
Schedule VIII--Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and the notes thereto.
35
Listing of Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Restated Certificate of Incorporation of the Registrant. (A)
3.2 By-Laws of the Registrant. (A)
4 Specimen Certificate for shares of the Registrant's Common Stock.
10.1+ Employee Non-Qualified Stock Option Plan I, as amended to date.
(B)
10.2+ Employee Non-Qualified Stock Option Plan II, as amended to date.
(B)
10.3+ 1993 Stock Incentive Plan, as amended to date. (C)
10.4+ 1993 Director Stock Option Plan, as amended to date. (C)
10.5 Lease Agreement dated as of August 1, 1993 by and between the
Registrant and Rensselaer Polytechnic Institute. (B)
10.6+ Employee Patent and Confidential Information Agreement dated as of
May 1, 1988 by and between the Registrant and Michael D. Marvin.
(D)
10.7+ Employee Patent and Confidential Information Agreement dated as of
May 3, 1988 by and between the Registrant and John F. Haller. (D)
10.8+ Amended and Restated Employment Agreement, dated as of April 1,
1997 by and between the Registrant and D. Joseph Gersuk. (E)
10.9+ Employee Intellectual Property, Confidential Information and Non-
Competition Agreement dated as of April 10, 1997 by and between
the Registrant and D. Joseph Gersuk. (E)
10.10+ Employee Patent, Confidential Information and Non-Competition
Agreement dated as of August 21, 1989 by and between the
Registrant and Elizabeth A. Ireland. (F)
10.11+ Employment Agreement, dated as of February 6, 1995 by and between
the Registrant and F. Steve Weick. (G)
10.12+ Employee Patent, Confidential Information and Non-Competition
Agreement dated as of February 7, 1995 by and between the
Registrant and F. Steven Weick. (G)
10.13 Two Global View Lease Agreement dated as of January 10, 1995
between Rensselaer Polytechnic Institute and the Registrant. (G)
10.14+ Amended and restated Employment Agreement dated as of September
30, 1996 by and between the Registrant and Michael D. Marvin. (H)
10.15+ Employment Agreement dated as of September 28, 1996 by and between
the Registrant and John C. Cavalier. (H)
10.16+ Employee Patent, Confidential Information and Non-Competition
Agreement dated September 30, 1996 by and between the Registrant
and John C. Cavalier. (H)
10.17+ Amended and Restated Employment Agreement, dated as of October 1,
1995 by and between the Registrant and Elizabeth A. Ireland. (I)
10.18 Loan Agreement dated October 21, 1996 by and between the
Registrant and D. Joseph Gersuk (I)
10.19 Unsecured Promissory Note dated June 2, 1997 by and between the
Registrant and John C. Cavalier. (E)
11 Statement regarding computation of per share earnings.
36
EXHIBIT NO. DESCRIPTION
----------- -----------
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
- --------
(A) Incorporated herein by reference from the exhibits to the Form 8-K dated
November 6, 1997.
(B) Incorporation herein by reference from the exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 33-72866).
(C) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended March 31, 1997.
(D) Incorporated herein by reference from the exhibits to the Form 10-K for
the year ended September 30, 1994.
(E) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended June 30, 1997.
(F) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended December 31, 1994.
(G) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended March 31, 1995.
(H) Incorporated herein by reference from the exhibits to the Form 10-K for
the year ended September 30, 1996.
(I) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended December 31, 1996.
+ Management contract or compensation plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K with the Securities and Exchange
Commission during the fiscal quarter ended September 30, 1997.
37
MAPINFO CORPORATION
ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 1997
ITEM 14(D)
FINANCIAL STATEMENT SCHEDULE
38
MAPINFO CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE VIII
(Dollars in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- ---------- ------------ -------------- ---------- ----------
BALANCE AT ADDITIONS ADDITIONS BALANCE AT
BEGINNING CHARGED TO CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSE, NET OTHER ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ------------ -------------- ---------- ----------
Year ended September 30,
1995:
Deducted from asset
accounts:
Allowance for doubtful
accounts and
sales returns $ 333 218 466(2) (68)(1) $ 949
Year ended September 30,
1996:
Deducted from asset
accounts:
Allowance for doubtful
accounts and
sales returns $ 949 301 147(2) (148)(1) $1,249
Year ended September 30,
1997:
Deducted from asset
accounts:
Allowance for doubtful
accounts and
sales returns $1,249 92 93(2) (276)(1) $1,158
- --------
(1)Uncollectible accounts written off.
(2)Allowance for sales returns.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
/s/ John C. Cavalier
By: ________________________________
John C. Cavalier
President and Chief Executive
Officer
Date:December 22, 1997
---------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
President and Chief Executive December 22,
/s/ John C. Cavalier Officer (Principal Executive 1997
- ------------------------- Officer)
John C. Cavalier
Chairman of the Board December 22,
/s/ Michael D. Marvin 1997
- -------------------------
Michael D. Marvin
Executive Vice President, December 22,
/s/ D. Joseph Gersuk Treasurer and Chief Financial 1997
- ------------------------- Officer (Principal Financial
D. Joseph Gersuk and Accounting Officer)
/s/ John F. Haller Vice President, Chief December 22,
- ------------------------- Technology Officer, Secretary 1997
John F. Haller and Director
/s/ Laszlo C. Bardos Director December 22,
- ------------------------- 1997
Laszlo C. Bardos
/s/ George C. McNamee Director December 22,
- ------------------------- 1997
George C. McNamee
/s/ James A. Perakis Director December 22,
- ------------------------- 1997
James A. Perakis
/s/ John F. Burton Director December 22,
- ------------------------- 1997
John F. Burton
40
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Restated Certificate of Incorporation of the Registrant. (A)
3.2 By-Laws of the Registrant. (A)
4 Specimen Certificate for shares of the Registrant's Common Stock.
10.1+ Employee Non-Qualified Stock Option Plan I, as amended to date.
(B)
10.2+ Employee Non-Qualified Stock Option Plan II, as amended to date.
(B)
10.3+ 1993 Stock Incentive Plan, as amended to date. (C)
10.4+ 1993 Director Stock Option Plan, as amended to date. (C)
10.5 Lease Agreement dated as of August 1, 1993 by and between the
Registrant and Rensselaer Polytechnic Institute. (B)
10.6+ Employee Patent and Confidential Information Agreement dated as of
May 1, 1988 by and between the Registrant and Michael D. Marvin.
(D)
10.7+ Employee Patent and Confidential Information Agreement dated as of
May 3, 1988 by and between the Registrant and John F. Haller. (D)
10.8+ Amended and Restated Employment Agreement, dated as of April 1,
1997 by and between the Registrant and D. Joseph Gersuk. (E)
10.9+ Employee Intellectual Property, Confidential Information and Non-
Competition Agreement dated as of April 10, 1997 by and between
the Registrant and D. Joseph Gersuk. (E)
10.10+ Employee Patent, Confidential Information and Non-Competition
Agreement dated as of August 21, 1989 by and between the
Registrant and Elizabeth A. Ireland. (F)
10.11+ Employment Agreement, dated as of February 6, 1995 by and between
the Registrant and F. Steve Weick. (G)
10.12+ Employee Patent, Confidential Information and Non-Competition
Agreement dated as of February 7, 1995 by and between the
Registrant and F. Steven Weick. (G)
10.13 Two Global View Lease Agreement dated as of January 10, 1995
between Rensselaer Polytechnic Institute and the Registrant. (G)
10.14+ Amended and restated Employment Agreement dated as of September
30, 1996 by and between the Registrant and Michael D. Marvin. (H)
10.15+ Employment Agreement dated as of September 28, 1996 by and between
the Registrant and John C. Cavalier. (H)
10.16+ Employee Patent, Confidential Information and Non-Competition
Agreement dated September 30, 1996 by and between the Registrant
and John C. Cavalier. (H)
10.17+ Amended and Restated Employment Agreement, dated as of October 1,
1995 by and between the Registrant and Elizabeth A. Ireland. (I)
10.18 Loan Agreement dated October 21, 1996 by and between the
Registrant and D. Joseph Gersuk (I)
10.19 Unsecured Promissory Note dated June 2, 1997 by and between the
Registrant and John C. Cavalier. (E)
11 Statement regarding computation of per share earnings.
EXHIBIT NO. DESCRIPTION
----------- -----------
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
- --------
(A) Incorporated herein by reference from the exhibits to the Form 8-K dated
November 6, 1997.
(B) Incorporation herein by reference from the exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 33-72866).
(C) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended March 31, 1997.
(D) Incorporated herein by reference from the exhibits to the Form 10-K for
the year ended September 30, 1994.
(E) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended June 30, 1997.
(F) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended December 31, 1994.
(G) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended March 31, 1995.
(H) Incorporated herein by reference from the exhibits to the Form 10-K for
the year ended September 30, 1996.
(I) Incorporated herein by reference from the exhibits to the Form 10-Q for
the quarter ended December 31, 1996.
+ Management contract or compensation plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.