FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[xx] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1997.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________________ to
______________________________
Commission file number 0-18090
CAERE CORPORATION
(Exact name of registrant as specified in the charter:)
Delaware 94-2250509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Cooper Court, Los Gatos, California 95032
(Address of principal Offices)
Registrant's telephone number, including area code: (408) 395-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Preferred Share Purchase Rights
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. [ x ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Common Stock on March
1, 1998, as reported by Nasdaq, was approximately $160,136,000.
The number of shares of the Registrant's Common Stock outstanding as of
March 1, 1998, was 13,006,008.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Definitive proxy statement filed with the Securities and Exchange
Commission relating to the Company's 1997 Annual Meeting of Stockholders to be
held May 13, 1998 (Part III of Form 10-K).
(2) Portions of the Annual Report to Stockholders for the fiscal year ended
December 31, 1997 (Parts II and IV of Form 10-K).
PART I
Item 1. BUSINESS.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this Item 1, the section
entitled "Additional Risk Factors," and Item 7.
Caere(R) Corporation ("Caere" or the "Company") designs, develops,
manufactures, and markets optical character recognition ("OCR") software and
hardware for converting scanned and faxed images into computer usable text, as
well as desktop electronic forms and information management products. For many
applications, the Company's products provide a low cost accurate alternative to
manual data entry, which is slow, tedious, and error prone.
In March 1997, Caere acquired Formonix, Inc. ("Formonix"), a privately
held corporation that provides electronic forms products. The acquisition was
accounted for using the purchase method of accounting, and, accordingly, the
operating results of Formonix are included in the consolidated results of the
Company since the date of acquisition.
Business Model
Fiscal 1997 marked the third full year of the Company's "bundle and
upgrade" strategy. The Company previously shifted to the bundle and upgrade
model to take advantage of the changing dynamics in the OCR marketplace. In the
past, OCR was primarily a "niche" market characterized by relatively high prices
and low unit volumes. Today, driven by the increased power of personal
computers, new scanner products with significantly lower prices, continuing
improvements in OCR accuracy, and the education of the marketplace, scanning and
OCR solutions are reaching the mainstream.
Beginning in the fourth quarter of 1994, Caere began to "bundle"
versions of its OmniPage(R), OmniPage Limited Edition(TM), and WordScan(R)
recognition products with scanner products from various manufacturers. The
Company's objective in bundling its products with scanners was to expand the
overall market for OCR software by providing a larger number of scanner
purchasers with experience in the advantages of optical character recognition.
"Light" versions, with limited capabilities, are now bundled with a majority of
scanners being sold. This aggressive seeding of the rapidly growing base of
scanner owners has greatly expanded the number of Caere product users. The
success of this business model, compared to Caere's former model of selling its
software primarily at higher prices with lower unit volumes, will depend upon a
decision by a significant proportion of customers who first receive OCR software
in a bundled form to upgrade to a newer or more fully featured version of the
Company's software. Such an upgrade is typically sold at a substantially lower
price than the price of a fully featured, non-upgrade product.
The Company shipped approximately 2,800,000 bundled units in 1997,
compared to approximately 1,800,000 bundled units in 1996. The bundle and
upgrade business model resulted in a 12 percent increase in revenues of
Windows-based OCR software in 1997, helping to offset a 32 percent decline in
Macintosh-based OCR revenues during the same time frame. The Company experienced
a 14 percent increase in unit shipments of OCR upgrade products in 1997 compared
to 1996. Customers took advantage of key improvements in the Company's OCR
technology by upgrading to its fully featured, flagship product, OmniPage
Professional for Windows 95/NT version 8.0, which began shipping in September
1997. The Company believes that bundles and upgrades will continue to become a
larger portion of its total revenues and unit sales in the future.
There can be no assurance that Caere's continued transition to the
bundle and upgrade business model will be successful and provide sufficient
increases in unit volume in the future to offset reduced per-unit revenue and
gross margin. In addition, customers using the bundled products may defer or
forego the purchase of Caere's more fully featured versions of OmniPage if they
find that the bundled product satisfies their recognition needs.
Products
The Company offers a product line designed to accommodate the diversity
of information and data entry requirements. Caere's products fall into two
general categories:
(1) SOFTWARE: Software products, which accounted for 86 percent of
total revenues in 1997, for the information management market
that offer a range of OCR, electronic forms, and document
management products that provide personal computer users tools
to manage, intelligently and efficiently, the documents,
images, forms, and faxes that cross their desktops.
(2) HARDWARE: Hardware products, which accounted for 14 percent of
total revenues in 1997, for the data capture market, which
include bar code scanners and OCR readers for transaction
processing applications such as high-volume data entry and
check verification. Customers of these products include retail
establishments, government agencies, banks, utility companies,
and other organizations. Additionally, the Millennium
Series(R) provides both hardware and software solutions for
high-volume, commercial OCR applications.
Caere's products can be used with a range of computer systems, such as
IBM, IBM-compatible, and Apple Macintosh personal computers, as well as most
desktop operating systems, such as Windows, Windows95, Windows NT, and System 7.
Each product is designed to accomplish the same overall goal: to improve the
speed, accuracy, and simplicity of desktop information management.
Software Products
OmniPage Professional(R)
Caere's flagship product, OmniPage Professional for Windows and Windows
95 ("OmniPage Pro(R)"), is a customizable, fully featured page recognition
solution. OmniPage Pro is designed for the scanner user who needs more than
basic OCR capabilities. OmniPage Pro is an OCR product that allows the user to
recognize, edit, and save complex documents containing text and images in their
original, full-page formats. Using Caere's True Page(R) technology, the user can
edit graphics contained on a recognized page simply by clicking on the image.
OmniPage Pro utilizes a combination of technologies, including neural networks,
linguistic analysis, character experts, and grayscale data to improve accuracy
on degraded documents.
OmniPage Professional for Macintosh includes all of the features found
in OmniPage Pro for Windows. It also offers many advanced System 7 capabilities,
including support of Publish, which allow users to scan a document once and
electronically publish it to subscribers on a network. The program also supports
Apple Events, which allows other software programs to access OmniPage Pro.
OmniPage Limited Edition
OmniPage Limited Edition is a limited feature version of OmniPage that
allows an end user to perform OCR on a scanned document and save the document to
a file. OmniPage Limited Edition is bundled with most scanners offered by the
Company's scanner partners. The product is designed to allow the scanner
purchaser to experience the advantages of optical character recognition in order
to encourage the purchaser to upgrade to a fully featured product.
WordScan Plus(TM)
WordScan Plus is a full featured and accurate page recognition product
that is sold primarily to customers of independent software vendors who have
incorporated Caere's OCR technology into their own application products.
WordScan Plus integrates with the most popular products being used in Windows.
Features like OLE 2.0 support, drag and drop recognition capability, and a
Chameleon Toolbar(TM) that automatically takes on the look and feel of the
user's office suite enable WordScan Plus to benefit from popular Windows
programs. WordScan Plus directly integrates with all leading office suites, word
processors, electronic mail systems, and facsimile applications.
Recognita Plus(R)
Recognita Plus is a leading, full featured, multilingual, and
font-independent OCR software product that integrates with most popular word
processing, desktop publishing, and spreadsheet applications available for
Windows. Recognita Plus includes Self Assertion Technology(TM), which provides
improved character recognition using a two-step reading process. Recognita Plus
also provides OCR training for use on severely degraded documents or stylized
typefaces. The product can also recognize text in more than 100 languages with
the addition of its Language Enhancement(TM) Package.
PageKeeper(R)
PageKeeper, a document management software solution, incorporates
leading technology, such as "weighted relevance searching" and "document
similarity," as it examines the content of the documents under review.
PageKeeper takes information from a local hard disk, network, or scanner and
creates a supercompressed database of both text and images. PageKeeper
incorporates the OmniPage AnyFont(R) recognition capability to convert scanned
documents into computer-literate files automatically. Because PageKeeper stores
both text and images, users can electronically file documents in their original
format. Magazine articles with charts and graphs, datasheets with illustrations,
or letters with signatures can be stored using minimal disk space. PageKeeper
automatically indexes the database, eliminating the need to manually index or
assign keywords to the information. It presents the results of search requests
in the order of relevance to original search requests using its weighted
relevance retrieval feature.
OmniForm(R)
OmniForm converts paper forms to electronic forms with the click of a
button. Simply scan or fax documents into a computer and OmniForm creates an
electronic version using some of Caere's OCR technologies. OmniForm users also
can design their own forms, complete with fonts, graphics, and logos, using the
custom toolset and Form Assistant(TM). In addition, OmniForm allows for
efficient completion and processing of forms by accepting input, performing
calculations, validating entries, and creating databases, which can be searched,
sorted, imported, and exported to popular database applications.
OmniForm Internet Publisher(TM)
OmniForm Internet Publisher is the first paper-to-electronics forms
solution for intranets and the Internet. The product converts existing paper
forms to electronic versions, retaining and recognizing the various form
elements on the form, bridging the gap between the paper world and the
electronic world. The product allows users to save the forms to a variety of
Web-ready formats incorporating such form intelligence as field validation and
calculations, enabling companies to collect and distribute data-associated
business transactions such as invoices, purchase orders, expense reports, or
questionnaires.
License of Technology
In addition to the application products described above, Caere
continues to license its OCR technology to a broad range of computer equipment
manufacturers, systems integrators, and developers for inclusion as components
in more complex end-user products, including document management and retrieval
systems, forms processing systems, resume screening systems, and stand-alone
systems.
The chart below shows system requirements and suggested retail price
for the Company's significant software products.
Selected Software Products
Product System Requirements Estimated Street Price*
OmniPage Pro - Windows 80386 or above based personal computer, 8 MB RAM, 20 $499
MB disk space, Microsoft Windows 3.1 or later
OmniPage Pro - Mac Macintosh computer with 68020 processor or above, 8 $499
MB RAM, 8 MB disk space, System 7.0 or above
OmniPage Pro - Windows 80386 or above based personal computer, 8 MB RAM, 20 $129
Retail Upgrade MB disk space, Microsoft Windows 3.1 or later
OmniPage Pro - Mac Macintosh computer with 68020 processor or above, 8 $129
Retail Upgrade MB RAM, 8 MB disk space, System 7.0 or above
WordScan Plus - Windows 80386 or above based personal computer, 4 MB RAM, 13 $349
MB disk space, Microsoft Windows 3.1 or later
Recognita Plus - Windows 80386 or above based personal computer, 4 MB RAM, 10 $695
MB disk space, Microsoft Windows 3.1 or later
Recognita Plus - Windows 80386 or above based personal computer, 4 MB RAM, 10 $199
Retail Upgrade MB disk space, Microsoft Windows 3.1 or later
PageKeeper Personal(TM)- 80386 or above based personal computer, 8 MB RAM, 15 $149
Windows MB disk space, Microsoft Windows 3.1 or later
OmniForm - Windows 80386 or above based personal computer, 8 MB RAM, 8 $149
MB disk space, Microsoft Windows 3.1 or later
OmniForm - Mac Power Macintosh or Macintosh computer with 68020 $149
processor or above, 12 MB RAM, 10 MB disk space,
System 7.1 or above
OmniForm Internet Publisher 80486 or above based personal computer, 12 MB RAM, 8 $799
MB disk space, Microsoft Windows 95 or NT 4.0 or later
* Estimated Street Prices as of March 1, 1998.
Note: All Caere products support a wide range of output file formats and
scanners. Output file formats include, but are not limited to: Microsoft Word
for Windows, WordPerfect, Lotus 1-2-3, and Microsoft Excel. Supported scanners
include, but are not limited to: Hewlett Packard, Microtek, Epson, Apple, Canon,
and Fujitsu.
Page Recognition Process
The process by which Caere's recognition products recognize text
involves converting the electronic output of a scanner into computer usable
files through a series of complex software algorithms. The electronic image
produced by the scanner is comprised of white or black picture elements
(pixels), usually 90,000 pixels per square inch, each rendered to the computer
as a 0 or a 1, representing either a white or a black pixel. Before the
application of recognition products such as OmniPage, a scanner's electronic
output could be displayed and manipulated only as an image on a computer's
monitor; the computer did not recognize that image as a data file usable in an
application program such as a word processor or spreadsheet.
The graphic below illustrates the process by which scanned text or
numeric data is converted into computer usable form by the Company's OmniPage,
WordScan, and Recognita products.
(ARTWORK HERE)
Caere's products recognize an image in two steps. First, they analyze
the image of the page to determine which parts are text and numeric data and
determine the structure of the page layout. Tables, columns, and paragraphs are
identified and located. They then examine and identify the characters and
produce a file of the character data contained in words, including page
formatting information such as tables, columns, paragraphs, spacing, bold,
italics, and underlines that are necessary to allow manipulation of the data as
a text file.
OmniPage Pro employs a combination of technologies, referred to as
Caere's 3D OCR(TM) and AnyFont(TM) technologies, to achieve the highest degree
of accuracy on many different types of documents. OmniPage Pro is the first OCR
product to utilize grayscale information to analyze characters the way a human
eye does. Character experts view certain character attributes like a closed loop
or crossed downward stroke to identify the unique set of features inherent in
each character. Neural networks have been developed on powerful mainframe
computers to "learn" what makes up one character versus another, a methodology
known as "feature recognition." Caere's page recognition products analyze each
character image according to proprietary algorithms. Feature recognition enables
the OmniPage products to provide the AnyFont capability that recognizes text in
almost any type style and size.
Hardware Products
OCR Systems
Caere has produced high-quality handheld and slot-reader OCR systems
since 1977. This line of data capture OCR systems reads single lines of
characters. These desktop systems -- consisting of an input device, such as a
wand, slot-reader or motorized slot-reader, a controller, and an interface cable
- -- are designed for transaction processing applications that do not require
variable font recognition technology, but demand extremely high accuracy. Common
applications involve entering customer account numbers or data from billing
documents into a computer. Caere's systems accelerate transaction processing,
while reducing operator fatigue and key entry errors.
Caere's 800 Series Combo Reader, which works with a wide variety of
computers, integrates OCR, bar code, and magnetic stripe reading capabilities in
a single unit. This provides cost-effective and versatile functionality for a
wide range of applications in remittance processing, banking, and point-of-sale
environments. The 800 Series is also widely used by government organizations,
post offices, and the public utility industry.
In 1997, Caere developed a new series of single-line OCR readers for
remittance processing. Much of the year was invested in developing this new
platform for line scanning that removes some of the limitations of previous line
scanning products. The new 5000 Series OCR Line Readers(TM) read a variety of
common office fonts and utilize a visible light source to handle print from ink
jet printers. Processing power has increased from an 8-bit processor to a 32-bit
processor, and flash memory will make field upgrades easier. The 5000 Series OCR
Line Readers were introduced in the fourth quarter of 1997. Shipments are
expected to begin in early 1998.
A significant portion of Caere's OCR data capture business is the
result of original equipment manufacturer (OEM) sales, that is, sales to firms
that purchase Caere's OCR data capture technology and then integrate it into
their own products.
Bar Code Systems
Bar code readers recognize documents printed with series of vertical
bars and spaces that represent data. They are used in high-volume transaction
processing applications, such as point-of-sale operations, where human
readability of data is not necessary. Bar code systems tolerate lower-quality
media than limited-font OCR systems, and are typically less expensive than OCR
systems. Caere's bar code product line, introduced in 1983, includes both
stand-alone decoders that can be attached externally to personal computers and
internal board-level decoders used in personal computers for cost and space
savings.
Caere's bar code products cater to the higher end of the market with
feature-rich decoders and one of the industry's first five-year warranties.
Caere's decoders are used in manufacturing, retail point of sale, inventory,
asset tracking, and myriad applications where value-added resellers need more
functionality from bar code readers than just decoding.
Caere's Easy-ScannerTM Series bar code systems are decoder/wedges that
can accommodate several input devices. With three input ports, these
decoder/wedges can accept input from a bar code wand, charge-coupled device
("CCD"), laser, badge reader, or magnetic stripe reader, and/or serial data from
portable data terminals and scales. Any data received can be filtered for
acceptance, then transmitted, re-formatted, or rejected to fit the host
application with over 90 built-in data editing commands. The Easy-Scanner also
features multiple output ports to accommodate a variety of interfaces, such as
RS-232, parallel, and keyboard wedge protocols (for simple interfacing to over
450 different types of computers and terminals).
In 1997, the Company began shipping Model 2014 Network Data Collection
Terminals. These easy to integrate terminals provide all the hardware necessary
for a value-added reseller ("VAR") to create a simple RS-485 network for shop
floor data collection, access control, time and attendance, or work-in-process
tracking.
The Company partnered with Photographic Sciences Corporation ("PSC"),
one of the industry's leading bar code laser manufacturers, in 1997 to build
Caere's bar code decoding and interfacing technologies into the housing of PSC's
small platform laser scanner for Caere's distribution. This partnership gives
Caere a low cost laser scanning solution that keeps pace with the price,
performance, and size requirements of the industry. Caere introduced Model 1760
Integrated Laser Scanner in the fourth quarter of 1997. Shipments are expected
to begin early in 1998.
M/Series II OCR Accelerator Board
M/Series II OCR Accelerator Board is available for Windows 3.1x and
Windows 95 PC users. Supported by the M/Series Professional application software
and through Caere's Professional Developer's Kit 6.1, the M/Series II OCR
Accelerator Board converts images into text at throughput rates of up to 750
pages per hour, three times faster than the previous board from Caere. For even
faster throughput, multiple M/Series II OCR Accelerator Boards can be run in
parallel in the same PC. The M/Series II OCR Accelerator Board includes the new
M/Text(TM) OCR Engine.
M/Series Professional OCR Server for Windows NT
M/Series Professional OCR Server for Windows NT is a software
application that runs on a Windows NT Server and/or workstation and manages
M/Series Professional's scan, zone, edit, and export functions from Windows 3.1x
and Windows 95 clients on a network. Rapid image to text conversion (OCR) is
performed on the server, using highly accurate single or multiple M/Text OCR
software engines.
M/Series Professional Software-Windows 3.1 and Windows 95
Available for use with the M/Series II OCR Accelerator Board, the
M/Series Professional software allows users on a network to simultaneously
capture documents, zone fields or templates, edit text created by the OCR
process, and export files to popular output file formats.
Professional Developer's Kit
Available as a set of DLLs, VBXs, and OCXs for Microsoft Visual Basic
and Microsoft Visual C/C++ developers, the Professional Developer's Kit enables
independent software developers the ability to incorporate Caere's OCR
technology into their application products or systems.
The chart below shows typical applications, features, available
interfaces, and input devices for selected Caere OCR and bar code transaction
processing products.
Products Typical Applications Features Available Interfaces Input Devices
OCR
800 Series Point of sale Reads the following fonts: Apple Macintosh Handheld wand
OCR/Bar Remittance processing OCR-A Full AT&T Fixed slot
Code Combo, Document control Alphanumeric Burroughs Fixed mount
1500 Series Manufacturing applications OCR-A Eurobanking DEC CCD scanner
Document Hospitals OCR-B ECMA11 IBM Magnetic stripe
Processor Banking OCR-B Eurobanking IBM PC and Bar code pen
Government E13B (MICR) compatibles Badge reader
Office file tracking PostNET ITT
Postal Most one-dimensional bar Etc. (over 350)
code symbologies
Dual-track magnetic stripe
Fully user programmable
Bar Code
1000 Series, Manufacturing applications Reads and autodiscriminates Apple Macintosh Wand
1700 Series, Inventory control the following symbologies: AT&T Slot
2000 Series Work-in-process tracking Code 39, Code 128, DEC Laser scanner
Shop floor control Codabar, Interleaved 2 of IBM CCD scanner
5,
Warehousing UPC, EAN and MSI IBM PC and Magnetic stripe
Point of sale Plessey compatibles Badge reader
Hospital health industry Fully user programmable ITT
Video cassette rental Dual-track Memorex
Government Magnetic stripe NCR
Document tracking UNISYS
Wyse
Etc. (over 300)
Distribution and Support
Domestically, the Company markets its software products through
distributors, including Ingram Micro, Merisel, Tech Data; computer superstores,
such as Best Buy, CompUSA, Computer City, and Egghead; mail order houses,
including PC Connection, MicroWarehouse, and Computer Discount Warehouse; and
office superstores, such as OfficeMax and Office Depot. High-speed and
integrator products are primarily sold through Law Cypress Distributing Company,
which works with the Company to serve value-added resellers and systems
integrators of imaging products. Accordingly, the Company will be dependent upon
the continued reliability and financial stability of such distributors and
resellers, which are not under the direct control of the Company.
Sales of software products to Ingram Micro represented approximately 23
percent, 28 percent, and 22 percent of the Company's net revenues during 1997,
1996, and 1995, respectively. Should this customer have a significant change in
its quarterly buying pattern or its financial condition, the Company could
experience a material adverse impact on its business and financial results. In
addition, there are increasing numbers of companies competing for access to
distribution channels. Distributors and retailers often carry competing
products. Retailers of Caere's products typically have a limited amount of shelf
space and promotional resources for which there is intense competition. There
can be no assurance that distributors and retailers will continue to provide the
Company's products with adequate levels of shelf space and promotional support.
Failure to do so would have a material adverse effect on the Company's results
of operations.
The Company markets its transaction processing OCR and bar code
products primarily through independent distributors, VARs, and hardware OEMs.
The Company's agreements with OEMs typically grant an OEM the right to
distribute the Company's products with the OEMs' microcomputers and other data
collection equipment. VARs purchase the Company's products and incorporate them
into systems integrated with the products of other manufacturers.
Internationally, the Company's products are sold through distributors.
At December 31, 1997, the Company had distributors servicing Western and Eastern
Europe, Canada, Australia, New Zealand, South Korea, Mexico, and Japan.
International revenues in 1997, 1996, and 1995 were approximately $18,659,000,
$16,367,000, and $15,154,000, respectively. In most cases, the Company bills its
international customers in U.S. dollars; therefore, such revenues are not
subject to foreign currency fluctuations. However, fluctuations in exchange
rates could affect demand for the Company's products by causing their prices to
be out of line with products priced in the local currency. The Company's
international revenues are subject to certain risks, such as export controls,
import restrictions, longer payment cycles, greater difficulties in accounts
receivable collections, and the requirement of complying with a wide variety of
foreign laws. Although Caere has not previously experienced any difficulties
under foreign law in exporting its products to other countries, there can be no
assurance that the Company will not experience such difficulties in foreign
countries in the future. Any such difficulties would have a material adverse
effect on the Company's international sales. The Company is not currently
affected adversely by such controls or regulations and is not aware of pending
changes in export regulations that would adversely affect its international
business or its ability to collect foreign receivables.
The Company's agreements with its distributors generally provide for a
limited right of return, with the distributors' receiving full credit of the
product's purchase price, less any discounts, against a purchase order of equal
or greater value. The Company monitors its returns and records provisions for
estimated returns as shipments are made. During 1997, 1996, and 1995, returns
have represented 2.6 percent, 3.2 percent, and 3.7 percent of revenues,
respectively. Although Caere believes that it provides adequate allowances for
returns, there can be no assurance that actual returns will not exceed the
Company's allowances. Any product returns in excess of recorded allowances could
result in a material adverse effect on operating results of the Company.
The Company has a domestic sales and support staff of approximately 50
employees located throughout the United States and a European sales office,
Caere GmbH, in Munich, Germany. In December 1996, the Company acquired Recognita
Rt., a Hungarian provider of OCR and forms software solutions. Domestically,
software product customers who register with the Company currently receive
limited hotline technical support and product information at no cost. Additional
technical support services are available on a "fee for support" basis
thereafter. Outside of the U.S., software product customers currently receive
technical support from a variety of Caere partners on a non-fee basis. The
Company warrants to end users that software disks are free from media defects
for three months. OCR and bar code hardware customers receive free telephone
support, including assistance with installation, programming, and trouble
shooting. OCR hardware products are warranted for one year, while bar code
hardware products are warranted for between one and five years. In addition, the
Company provides hardware customers with spare parts and repair services. OCR
and bar code hardware customers also may purchase annual service contracts under
which the Company performs service work as needed for the duration of the
service contract.
Competition
The information management market is highly competitive and subject to
rapid change along with constant pressure to reduce prices. The Company believes
that the principal competitive factors in the software products market include
accuracy, ease of understanding and use, product reliability, tolerance for poor
media, product features and functions, price/performance characteristics, brand
recognition, and quality of product support. Caere's competition within the
microcomputer software industry ranges from large corporations to small
independent software vendors. Caere also expects to encounter continued
competition, both from established companies and from new companies that are now
developing, or may develop, competing products. Competition in the software
products market can be grouped into the following categories:
The OmniPage, WordScan, and Recognita families of page recognition
products contend with competition in two markets. First, several companies offer
packaged OCR application programs through the retail distribution channel. These
include ScanSoft, Inc. ("ScanSoft"), a division of Xerox Corporation, and
several small, independent software vendors. The Company faces significant price
competition in the retail channel. The second competitive market for the
OmniPage family of recognition products is the OEM and reseller market in which
companies license OCR technology to incorporate into different application
software products, or "bundle" the technology with related hardware products,
such as scanners or fax modems. Competitors include ScanSoft and several small
independent software vendors. The Company experiences significant price
competition in the OEM market and expects this to continue. In addition, the
"bundled" OCR products themselves present competition to the Company's fully
featured shrinkwrap product.
PageKeeper has several direct competitors offering competing products
in the growing desktop document management market. The competing products
include, but are not limited to, PaperPort Deluxe by Visioneer, Paper Master by
DocuMagix, Inc., and Pagis by ScanSoft. In addition, with decreasing prices
driving affordable scanning solutions into the mainstream, Caere expects to face
increasing competition in this product category from a variety of software
developers in the future.
OmniForm competes against various products in the electronic forms
marketplace. In the forms creation segment, where OmniForm's technology takes an
existing paper form and converts it into an electronic version, OmniForm has no
direct competition. In the forms design and print segment of the electronic
forms market, OmniForm competes with products such as Form Tool Gold by IMSI. In
the form filling and submit segment of the electronic forms market, OmniForm
competes with products including JetForm and FormFlow by JetForm Corporation.
Finally, in the Internet/intranet publish and submit segment of the electronic
forms market, OmniForm competes with JetForm by JetForm Corporation.
The Company believes that the principal competitive factors in the
hardware products market include accuracy, tolerance for poor media, product
features and functions, and reliability. Price is also an important factor in
the bar code market. The major competition in the OCR segment of the Company's
hardware business is Siemens CGK. In the bar code segment of the hardware
business there are numerous competitors, including Symbol Technologies.
Many of the Company's competitors have substantially greater financial,
marketing, recruiting, and training resources than the Company. There can be no
assurance that the Company will be successful in competing in the information
management market.
Product Development
The development and enhancement of the Company's OCR and desktop
document management products have recently absorbed and are expected to continue
to consume the greatest part of the Company's development effort. The Company
believes that it must continue to upgrade and enhance its existing products to
ensure that its products remain competitive. The introduction of new or enhanced
products requires Caere to manage the transition from older products. Caere must
manage new product introductions so as to minimize disruption in customer
ordering patterns, avoid excessive levels of older product inventories, and
ensure that adequate supplies of new products can be delivered to meet customer
demands. There can be no assurance that future product transitions will be
managed successfully by the Company.
During 1997, 1996, and 1995, research and product development expenses
were approximately $9,370,000, $7,069,000, and $7,915,000, respectively. In
addition to internal product development, the Company incorporates software
produced by other companies into its products. All such incorporation or use is
pursuant to licensing agreements. See also "Product Protection." There can be no
assurance that the research and development expenses incurred will not exceed
development budgets or that new products will achieve market acceptance and
generate sales sufficient to offset development costs.
From time to time, the Company has experienced delays in product
development and "debugging" efforts, and could experience such delays in the
future. Significant delays in developing, completing, or shipping new or
enhanced products could adversely affect the Company's financial results.
Furthermore, as the Company's products become more complex, development cycles
become longer and more expensive. There can be no assurance that the Company
will be able to respond effectively to technological changes or new product
announcements by others, or that the Company's product development efforts will
be successful.
Backlog
The majority of the Company's net revenues in a particular quarter has
typically resulted from orders booked in that quarter. The Company considers
backlog to be orders received and due to be filled within six months. Orders
included in backlog typically may be canceled or rescheduled by customers
without significant penalty. The Company's backlog at December 31, 1997, was
approximately $930,000, compared to backlog at December 31, 1996, of
approximately $694,000. Backlog primarily represents orders for the Company's
hardware products, which represented approximately 14 percent of net revenues
during 1997. There is typically little or no backlog for the Company's software
products, as these products ship as soon as orders are received. Backlog as of
any particular date should not be relied upon as indicative of the Company's net
revenues for any future period.
Manufacturing and Suppliers
The Company's manufacturing operations for its OCR and bar code
business products and its M/Series Professional Card Systems consist of final
assembly, test, burn in, and quality control for its systems, subassemblies, and
components. Components for products are procured by the Company and then
supplied to third party contractors. Many of these components are tested and
burned in prior to delivery to contractors to reduce failure rates. Major
subassemblies such as printed circuit boards are contracted to third parties for
assembly and initial testing.
Most of the components used in the manufacture of the Company's
products are available from multiple sources of supply. Certain components used
in the manufacture of the Company's OCR products are currently available only
from a single source. Although the Company generally maintains a several-month
inventory level of these components, failure of a single-source supplier to
deliver required quantities of such materials could materially and adversely
affect the Company's operating results. The Company believes that, if necessary,
it could develop alternative sources of supply for these components and parts,
or re-engineer the products. However, any delays in developing such alternative
sources of supply or in the re-engineering of the products could have a material
adverse effect on the Company's results of operations.
Product Protection
The Company relies upon proprietary technology, trade secrets,
know-how, continuing technological innovations and licensing opportunities to
maintain its competitive position. The Company attempts to protect its
technology, and trade secrets with patents, copyrights, trade secret laws,
technical measures, and non-disclosure agreements. The Company's policy is to
file patent and copyright applications to protect technology, inventions, and
improvements that are important to the development of its business. The Company
has been issued a series of patents which directly relate to its products.
Assurance cannot be given, however, that any patents issued to the Company will
not be challenged, invalidated, or circumvented or that the rights granted by
the patents will provide competitive advantages to the Company.
In order to protect its ownership rights in its software products, the
Company licenses such products to OEMs and resellers on a non-exclusive basis
with contractual restrictions on reproduction, distribution, and
transferability. In addition, the Company generally licenses its software in
object code form only. The Company licenses its software products to end users
by use of a "shrink-wrap" customer license that restricts the end user to
personal use of the product. Despite these contractual restrictions, it may be
possible for competitors or users to illegally copy the software or obtain
information which the Company regards as proprietary.
The Company also relies on trade secrets and proprietary know-how. The
Company has been, and will continue to be, required to disclose its trade
secrets and proprietary know-how to employees and consultants. Although the
Company seeks to protect its trade secrets and proprietary know-how by entering
into confidentiality agreements with such persons, there can be no assurance
that these agreements will not be breached, that the Company would have an
adequate remedy for any breach, or that the Company's trade secrets will not
otherwise become known or be independently discovered by competitors.
Because of technological developments in the industry in which the
Company markets its products, it is possible that certain of the Company's
products may infringe third party proprietary rights. From time to time the
Company has received, and in the future may receive, notices of claims of
infringement. In response to these claims, the Company may have to obtain
licenses for an allegedly infringing product or stop selling such product and be
liable for damages. There can be no assurances that any required licenses or
rights could be obtained on commercially reasonable terms.
In addition, Caere has developed products in the past that incorporate
technology based on licenses received from third parties. The Company's ability
to continue to develop and commercialize its products will be affected by its
ability to renew existing technology licenses and to obtain technology licenses
from third parties in the future. There can be no assurance that the Company
will be able to renew its current licenses or obtain any necessary licenses in
the future. The failure to renew existing licenses or to obtain any licenses
that may be required in the future could have a material adverse effect on the
Company.
Policing unauthorized use of technology is difficult, especially in the
software industry. Software piracy can be expected to be a persistent problem
for the software industry for the foreseeable future. Such piracy can be
particularly egregious in international markets in which the Company distributes
its products. The Company believes that, due to the rapid pace of technological
change in the industry, factors such as knowledge, ability, frequent product
enhancements, timeliness and quality of product support, and the experience of
the Company's employees are more significant as a means to protect the Company's
competitiveness than patent, copyright, and trade secret protection.
Employees
As of December 31, 1997, Caere employed 293 people. None of the
Company's employees is represented by a labor union. The Company has experienced
no work stoppages and believes that its employee relations are good. The Company
has utilized the services of consultants, third-party developers, and other
vendors extensively in its sales, development, and manufacturing activities.
Competition in the recruiting of personnel in the computer and data
recognition industry is intense. The Company believes that its future success
will depend in part on its continued ability to hire and retain qualified
management, marketing and technical employees, and independent contractors.
There can be no assurance that the Company will be able to attract and retain
enough qualified employees. Caere does not carry any key person life insurance
with respect to any of its personnel.
Additional Risk Factors
Fluctuating Revenues and Operating Results
Caere's revenues and operating results have fluctuated in the past, and
the Company's future revenues and operating results are likely to do so in the
future, particularly on a quarterly basis.
Caere's experience has been that a disproportionately large percentage
of shipments has occurred in the third month of each fiscal quarter and that
shipments tend to be concentrated in the latter half of that month. Backlog
early in a quarter is generally not large enough to assure that Caere will meet
its revenue target for any particular quarter. A shortfall in shipments at the
end of any particular quarter may cause the operating results for that quarter
to fall significantly short of anticipated levels.
The Company's quarterly operating results may continue to fluctuate due
to numerous other factors. Some of these factors include the demand for the
Company's products, seasonality, customer order deferrals in anticipation of new
versions of the Company's products, the introduction of new products and product
enhancements by the Company or its competitors, including the effects of filling
the distribution channels following such introductions and of potential delays
in availability of announced or anticipated products, price changes by the
Company or its competitors, product sales mix, timing of acquisitions and
associated costs, and timing of significant marketing and sales promotions.
Lack of Product Revenue Diversification
Caere derived approximately 72 percent of sales in 1997 and 1996 from
the OmniPage and WordScan line of products. Caere expects that these software
products will continue to account for a majority of the Company's sales in the
future. A decline in demand for these products as a result of competition,
technological change, or other factors would have a material adverse effect on
the Company's results of operations.
Mature Markets for Certain OCR Products
For fiscal years ended December 31, 1997, 1996, and 1995, Caere derived
approximately 13 percent, 14 percent, and 16 percent, respectively, of its net
revenues from sales of its transaction processing OCR and bar code products. The
market for both of these sets of products is relatively mature and may not be
subject to growth or expansion in the future. Moreover, mature markets are
typically characterized by severe price competition. There can be no assurance
that Caere's hardware-based transaction processing products will continue to be
a significant source of revenues or profitability for the Company.
Possible Volatility of Caere Stock Price
The prices for Caere's Common Stock have fluctuated widely in the past.
The management of Caere believes that such fluctuations may have been caused by
announcements of new products, quarterly fluctuations in the results of
operations, and other factors, including, but not limited to, changes in
conditions of the personal computer industry in general. Stock markets have
experienced extreme price volatility in recent years. This volatility has had a
substantial effect on the market prices of securities issued by Caere and other
high technology companies, often for reasons unrelated to the operating
performance of the specific companies. Caere anticipates that prices for Caere
Common Stock may continue to be volatile. Such future stock price volatility for
Caere's Common Stock may provoke the initiation of securities litigation, which
may divert substantial management resources and have an adverse effect on Caere
and on the Company's results of operations.
Effect of Antitakeover Provisions of Delaware Law and Caere's Charter Documents
Caere is a corporation organized under the laws of the state of
Delaware. Certain provisions of Delaware General Corporation Law ("Delaware
Law"), and the charter documents of Caere may have the effect of delaying,
deferring, or preventing changes in control or management of Caere. Caere is
subject to the provisions of Section 203 of the Delaware Law, which has the
effect of restricting changes in control of a company. In addition, Caere's
Board of Directors is divided into three separate classes. Caere's Board has
authority to issue up to 2,000,000 shares of Preferred Stock and to fix the
rights, preferences, privileges, and restrictions, including voting rights, of
such shares without any further vote or action by its stockholders. Caere also
has a Preferred Share Rights Plan (the "Shareholder Rights Plan"). The effect of
the antitakeover protections of the Delaware Law, the Caere charter documents,
and the Shareholder Rights Plan could be to make it more difficult for a third
party to acquire, or could discourage a third party from acquiring, a majority
of the outstanding stock of Caere.
Item 2. PROPERTIES.
The Company's principal administrative, marketing, manufacturing, and
product development facilities consist of approximately 56,000 square feet in
two buildings in Los Gatos, California. The Company occupies this space under a
lease agreement that expires in 2002. In addition, the Company leases office and
storage space in four locations in the United States for use by its regional
field sales and support staff. Caere GmbH also leases office space in Munich,
Germany, for its operations, while Recognita leases office space in Budapest,
Hungary. The Company believes that its existing facilities are adequate for its
needs for at least the next twelve months.
Item 3. LEGAL PROCEEDINGS.
The Company is involved in certain claims arising in the normal course
of business. The extent to which these matters will be pursued by the claimants
or the eventual outcome is not presently determinable. However, Company
management, after review and consultation with the Company's counsel, believes
that the ultimate resolution of these matters will not have a material adverse
effect on its consolidated financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Incorporated by reference to the section of the Company's 1997 Annual
Report to Stockholders entitled "Quarterly Results of Operations," page 32.
Item 6. SELECTED FINANCIAL DATA.
Incorporated by reference to the section of the Company's 1997 Annual
Report to Stockholders entitled "Financial Highlights," page 2.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference to the section of the Company's 1997 Annual
Report to Stockholders entitled "Management's Discussion and Analysis," pages 16
through 20.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference to the sections of the Company's 1997 Annual
Report to Stockholders entitled "Financial Statements," pages 21 through 32.
Supplementary data for the year ending December 31, 1996, is as
follows:
QUARTERLY RESULTS OF OPERATIONS (Unaudited)
Year
(In thousands, except per share data) 1996, Quarter Ended
Mar 31 Jun 30 Sep 30 Dec 31 Dec 31, 1996
Net revenues $13,556 $13,989 $13,403 $13,580 $54,528
Gross margin 9,241 9,532 9,130 10,152 38,055
In-process research and development -- -- -- 4,373 4,373
Write-down of investment in ZyLAB -- -- -- 2,616 2,616
Earnings (loss) before income taxes 1,609 1,844 1,691 (4,648) 496
Net earnings (loss) 1,300 1,475 1,522 (3,901) 396
Net earnings (loss) per share $.10 $.11 $.11 $(.31) $.03
Shares used in per share calculations 13,459 13,820 13,342 12,596 13,319
Common stock price per share:
High $9.00 $13.38 $12.50 $11.50 $13.38
Low 6.63 8.63 8.00 7.63 6.63
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to the sections of the Company's definitive
proxy statement for the 1998 Annual Meeting of Stockholders to be held May 13,
1998, entitled "Election of Directors" and "Management."
Item 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the sections of the Company's definitive
proxy statement for the 1998 Annual Meeting of Stockholders entitled "Executive
Compensation," "Compensation of Directors," and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the section of the Company's definitive
proxy statement for the 1998 Annual Meeting of Stockholders entitled "Security
Ownership of Management and Principal Stockholders."
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to the section of the Company's definitive
proxy statement for the 1998 Annual Meeting of Stockholders entitled "Executive
Compensation," "Compensation of Directors," and "Stock Option Grants and
Exercises."
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Index to Financial Statements
The following documents are incorporated in Part II of this
Annual Report by reference to the 1997 Annual Report to Stockholders:
Annual Report to
Stockholders
Consolidated Balance Sheets as of December 31, 1997 and 1996 Page 21
Consolidated Statements of Earnings for each of the years in the three-year
period ended December 31, 1997 Page 22
Consolidated Statements of Stockholders' Equity for each of the years in the
three-year period ended December 31, 1997 Page 23
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1997 Page 24
Notes to the Consolidated Financial Statements Pages 25-32
Independent Auditors' Report Page 32
With the exception of the information expressly incorporated
by reference into Items 5, 6, 7, and 8 of this Annual Report, the 1997
Annual Report to Stockholders, attached as Exhibit 13.1, is not deemed
filed as part of this report.
2. Financial Statement Schedules
The following financial statement schedule is filed as a part
of this Annual Report and should be read in conjunction with the
Financial Statements:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not required,
or not applicable, or because the required information is included in
the 1997 Annual Report to Stockholders, filed as Exhibit 13.1.
3. Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization dated as of October 14, 1994, between the Company and
Calera Recognition Systems, Inc. (5)
3.1 Certificate of Incorporation of the Company. (1) (exhibit 3.4)
3.1(i) Certificate of Amendment filed with the Delaware Secretary of State October 13, 1994. (6)
3.1(ii) Agreement of Merger between the Caere Acquisition Corporation and Calera Recognition
Systems, Inc. as filed with the California Secretary of State December 20, 1994. (6)
(exhibit 3.5)
3.2 By-laws of the Company. (1) (exhibit 3.5)
4.1 Reference is made to Exhibits 3.1 and 3.2.
*10.1 1981 Incentive Stock Option Plan, as amended, and related form of incentive stock option
agreement. (4) (exhibit 10.1)
*10.2 1981 Supplemental Stock Option Plan, as amended, and related form of supplemental stock
option agreement. (4) (exhibit 10.2)
10.3 Lease Agreement for 100 Cooper Court, dated November 27, 1991, between the Company and
Vasona Business Park. (7)
10.4 Lease Agreement for 104 Cooper Court, dated November 27, 1991, between the Company and
Vasona Business Park. (7)
10.5 Form of Indemnity Agreement between the Company and its officers and directors. (1)
(exhibit 10.12)
*10.7 Employee Stock Purchase Plan. (2) (exhibit 10.15)
*10.8 1992 Officer Bonus Plan. (4) (exhibit 10.9)
*10.9 1992 Non-Employee Directors' Stock Option Plan. (4) (exhibit 10.10)
10.10 Preferred Share Purchase Rights Plan. (3) (exhibit 1)
*10.11 Executive Compensation and Benefits Continuation Agreement, Robert G. Teresi, dated
December 28, 1994. (6)
11.1 Statement regarding computation of net earnings (loss) per share.
13.1 1997 Annual Report to Stockholders.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney. Reference is made to page 18.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Registration Statement on Form S-1, as amended (File
No. 33-30842).
(2) Incorporated by reference to the corresponding exhibit in the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1990.
(3) Incorporated by reference to the indicated exhibit in the Company's
Form 8-K Current Report filed on April 18, 1991.
(4) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 1991.
(5) Incorporated by reference to Caere's Registration Statement on Form
S-4 (File No. 33-85840). (6) Incorporated by reference to the
corresponding or indicated exhibit to the Company's Form 10-K Annual
Report for the fiscal year ended December 31, 1994.
(7) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 1995.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CAERE CORPORATION
Dated: March 25, 1998 By: /S/Blanche M. Sutter
Blanche M. Sutter
Executive Vice President,
Chief Financial Officer and
Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert G. Teresi and Blanche M. Sutter,
or either of them, his or her attorney-in-fact, each with the power of
substitution, for him or her, in any and all capacities, to sign any amendments
to this Report, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.
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.
Signature Title Date
/S/Robert G. Teresi Chairman of the Board, March 25, 1998
Robert G. Teresi Chief Executive Officer
(Principal Executive Officer)
/S/James K. Dutton Director March 25, 1998
James K. Dutton
/S/Robert J. Frankenberg Director March 25, 1998
Robert J. Frankenberg
/S/Blanche M. Sutter Executive Vice President, March 25, 1998
Blanche M. Sutter Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
EXHIBIT 11.1
CAERE CORPORATION
------------------------------------
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
----------------------------------------------
1997 1996 1995
----------------------------------------------
----------------------------------------------
Net earnings $3,140 $396 $2,397
==============================================
Weighted average common shares outstanding for
basic earnings per share calculation 13,123 13,120 13,172
Effect of dilutive common equivalents
shares - stock options outstanding 142 199 366
Weighted average common shares and dilutive
common equivalent shares outstanding for diluted ==============================================
earnings per share calculation 13,265 13,319 13,538
==============================================
Basic earnings per share $0.24 $0.03 $0.18
==============================================
Diluted earnings per share $0.24 $0.03 $0.18
==============================================
There were no reconciling items in the numerators between the basic and diluted
earnings per share computations. Options excluded from the computation of
earnings per share because their effect on earnings per share was antidilutive,
but which could dilute basic earnings per share in future periods, were as
follows: 564 in 1997, 26 in 1996, and 84 in 1995.
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Caere FSC Corporation, Guam
Caere GmbH, Germany
Recognita Rt., Hungary
Formonix, Inc., Colorado
EXHIBIT 23.1
REPORT ON FINANCIAL STATEMENT SCHEDULE
AND CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Caere Corporation:
The audits referred to in our report dated January 26, 1998, included the
related consolidated financial statement schedule for each of the years in the
three-year period ended December 31, 1997, included in the annual report on Form
10-K. This consolidated financial statement schedule is the responsibility of
the Company's management. Or responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
We consent to incorporation by reference in the registration statements (Nos.
33-35033, 33-49114, 33-32992, 33-66430, 33-81708, 33-87824, 33-81680, 33-60027,
333-02293, 33-10803, 333-30993, and 333-31019) on Form S-8 of Caere Corporation
of our reports dated January 26, 1998, relating to the consolidated balance
sheets of Caere Corporation and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1997, and the related schedule, which reports appear or are incorporated by
reference in the December 31, 1997, annual report on Form 10-K of Caere
Corporation.
KPMG Peat Marwick LLP
Mountain View, California
March 24, 1998
CAERE CORPORATION
INDEX OF EXHIBITS
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization dated as of October 14, 1994,
between the Company and Calera Recognition Systems, Inc. (5)(exhibit 2.01)
3.1 Certificate of Incorporation of the Company. (1)(exhibit 3.4)
3.1(i) Certificate of Amendment filed with the Delaware Secretary of State
October 13, 1994. (6)
3.1(ii) Agreement of Merger between the Caere Acquisition Corporation and
Calera Recognition Systems, Inc. as filed with the California Secretary
of State December 20, 1994. (6)
3.2 By-laws of the Company. (1)(exhibit 3.5)
4.1 Reference is made to Exhibits 3.1 and 3.2.
*10.1 1981 Incentive Stock Option Plan, as amended, and related form of
incentive stock option agreement. (4)(exhibit 10.1)
*10.2 1981 Supplemental Stock Option Plan, as amended, and related form of
supplemental stock option agreement. (4)(exhibit 10.2)
10.3 Lease Agreement for 100 Cooper Court, dated November 27, 1991,
between the Company and Vasona Business Park. (7)(exhibit 10.3)
10.4 Lease Agreement for 104 Cooper Court, dated November 27, 1991,
between the Company and Vasona Business Park. (7)(exhibit 10.4)
10.5 Form of Indemnity Agreement between the Company and its officers
and directors. (1)(exhibit 10.12)
*10.7 Employee Stock Purchase Plan. (2)(exhibit 10.15)
*10.8 1992 Officer Bonus Plan. (4)(exhibit 10.9)
*10.9 1992 Non-Employee Directors' Stock Option Plan. (4)(exhibit 10.10)
10.10 Preferred Share Purchase Rights Plan. (3)(exhibit 1)
10.11 Executive Compensation and Benefits Continuation Agreement,
Robert G. Teresi, dated December 28, 1994. (6)
11.1 Statement regarding computation of net earnings (loss) per share.
13.1 1997 Annual Report to Stockholders.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney. Reference is made to page 18.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Registration Statement on Form S-1, as amended (File
No. 33-30842).
(2) Incorporated by reference to the corresponding exhibit in the
Company's Form 10-K Annual Report for the fiscal year ended December
31, 1990.
(3) Incorporated by reference to the indicated exhibit in the Company's
Form 8-K Current Report filed on April 18, 1991.
(4) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 1991.
(5) Incorporated by reference to Caere's Registration Statement on Form
S-4 (File No. 33-85840). (6) Incorporated by reference to the
corresponding or indicated exhibit to the Company's Form 10-K Annual
Report for the fiscal year ended December 31, 1994.
(7) Incorporated by reference to the corresponding or indicated exhibit
to the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 1995.
CAERE CORPORATION
SCHEDULE II
---------------
VALUATION AND QUALIFYING ACCOUNTS
December 31, 1997
(In Thousands)
Additions
---------------------------------
Balance at Charged to Charged Balance
Beginning Costs and To Other at End of
Description of Period Expenses Accounts Deductions Period
Year Ended December 31, 1995
Allowance for returns, coop advertising
and other customer credits $2,273 $1,828 $ $2,399 $1,702
--
=========================================================================
Accumulated amortization of
software development costs $2,730 $683 $ $ -- $3,413
--
=========================================================================
Year Ended December 31, 1996
Allowance for returns, coop advertising
and other customer credits $1,702 $1,578 $ $1,765 $1,515
--
=========================================================================
Accumulated amortization of
software development costs $3,413 $734 $ $ -- $4,147
--
=========================================================================
Year Ended December 31, 1997
Allowance for returns, coop advertising
and other customer credits $1,515 $2,189 $ $1,617 $2,087
--
=========================================================================
Accumulated amortization of
software development costs $4,147 $508 $ $ -- $4,655
--
=========================================================================