Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter ended September 30, 1994. Commission File
No. 0-13442
MENTOR GRAPHICS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0786033
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (503) 685-7000
NO CHANGE
Former name, and former
fiscal year, if changed since last report
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
Number of shares of common stock, no par value, outstanding as of
November 1, 1994: 48,741,696
MENTOR GRAPHICS CORPORATION
Index to Form 10Q
PART I FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Consolidated Statements of Operations for the three 3
months ended September 30, 1994 and 1993
Consolidated Statements of Operations for the nine 4
months ended September 30, 1994 and 1993
Consolidated Balance Sheets as of September 30, 1994 5
and December 31, 1993
Consolidated Statements of Cash Flows for the 6
nine months ended September 30, 1994 and 1993
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9-14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Mentor Graphics Corporation
Consolidated Statements of Operations
(In thousands, except net income per share)
(Unaudited)
Three Months Ended
September 30,
1994 1993
Revenues:
System and software $ 40,946 $ 46,208
Service and support 41,807 38,742
Total revenues 82,753 84,950
Cost of revenues:
System and software 8,944 12,161
Service and support 17,307 16,411
Total cost of revenues 26,251 28,572
Gross margin 56,502 56,378
Expenses:
Research and development (R&D) 18,181 19,203
Marketing, general and administration 31,368 35,287
Charge for in-process R&D 8,265 --
Restructuring adjustment (5,600) --
Total expenses 52,214 54,490
Operating income 4,288 1,888
Other income, net 1,205 502
Income before income taxes 5,493 2,390
Provision for income taxes 900 900
Net income $ 4,593 $ 1,490
Net income per common and
common equivalent share $ .09 $ .03
Weighted average number of common and common
equivalent shares outstanding 49,430 47,507
See accompanying notes to unaudited consolidated financial
statements.
Mentor Graphics Corporation
Consolidated Statements of Operations
(In thousands, except net income (loss) per share)
(Unaudited)
Nine Months Ended
September 30,
1994 1993
Revenues:
System and software $ 133,270 $ 146,477
Service and support 115,464 109,528
Total revenues 248,734 256,005
Cost of revenues:
System and software 28,060 39,618
Service and support 50,552 51,424
Total cost of revenues 78,612 91,042
Gross margin 170,12 164,963
Expenses:
Research and development (R&D) 53,756 58,284
Marketing, general and
administration 100,811 107,475
Charge for in-process R&D 8,265 --
Restructuring adjustment (5,600) --
Total expenses 157,232 165,759
Operating income (loss) 12,890 (796)
Other income (expense), net 2,094 (22)
Income (loss) before
income taxes 14,984 (818)
Provision for income taxes 2,800 1,700
Net income (loss) $ 12,184 $ (2,518)
Net income (loss) per common and
common equivalent share $ .25 $ (.05)
Weighted average number of common and common
equivalent shares outstanding 49,524 46,126
See accompanying notes to unaudited consolidated financial
statements.
Mentor Graphics Corporation
Consolidated Balance Sheets
(In thousands)
As Of As Of
September 30, 1994 December 31, 1993
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 116,211 $ 95,958
Short-term investments 4,296 13,610
Trade accounts receivable, net 74,642 72,655
Other receivables 3,686 4,167
Inventory 631 2,299
Prepaid expenses and
other (note 4) 10,894 9,399
Total current assets 210,360 198,088
Property, plant and equipment, net 97,817 104,912
Cash and investments, long-term 30,000 30,000
Other assets (notes 2 and 5) 29,684 20,584
Total $ 367,861 $ 353,584
Liabilities & Stockholders' Equity
Current liabilities:
Short-term borrowings $ 2,526 $ 6,364
Accounts payable 8,415 10,637
Income taxes payable 12,356 9,974
Accrued and other liabilities 49,225 57,139
Deferred revenue 17,844 17,638
Total current liabilities 90,366 101,752
Long-term debt 54,046 54,321
Other long-term deferrals 1,764 1,800
Total liabilities 146,176 157,873
Stockholders' equity:
Common stock 251,578 243,951
Accumulated deficit (42,695) (55,779)
Foreign currency
translation adjustment 12,802 7,539
Total stockholders' equity 221,685 195,711
Total $ 367,861 $ 353,584
See accompanying notes to unaudited consolidated financial
statements.
Mentor Graphics Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
1994 1993
Operating Cash Flows:
Net income (loss) $ 12,184 $ (2,518)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization of
property, plant & equipment 18,651 21,224
Deferred taxes (54) 1,005
Amortization of other assets 5,390 5,964
Charge for in process R&D 8,265 --
Restructuring adjustment (5,600) --
Changes in operating assets and liabilities:
Trade accounts receivable 2,847 (169)
Inventory 284 6,167
Prepaid expenses and other assets (1,819) 6,032
Accounts payable (4,978) (4,333)
Accrued liabilities (5,910) (7,278)
Other liabilities and deferrals 2,398 (6,305)
Net cash provided by operating activities 31,658 19,789
Investing Cash Flows:
Maturities of short-term investments 9,314 13,170
Purchases of property and equipment (8,328) (19,691)
Capitalization of software
development costs (4,064) (3,292)
Purchase of business (note 2) (9,345) --
Purchases of technology (1,770) --
Net cash used by investing activities (14,193) (9,813)
Financing Cash Flows:
Proceeds from issuance
of common stock 7,627 5,850
Decrease in short-term borrowings (4,826) (2,029)
Proceeds (repayment) of
long-term debt (2,982) 1,836
Dividends paid to stockholders -- (8,291)
Net cash used by financing activities (181) (2,634)
Effect of exchange rate changes on
cash and cash equivalents 2,969 1,550
Net change in cash and cash equivalents 20,253 8,892
Cash and cash equivalents at
beginning of period 95,958 72,012
Cash and cash equivalents at
end of period $ 116,211 $ 80,904
See accompanying notes to unaudited consolidated financial
statements.
MENTOR GRAPHICS CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
(1) General - The accompanying financial statements have
been prepared in conformity with generally accepted
accounting principles. However, certain information an
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements
include all adjustments necessary for a fair presentation of
the results of the interim periods presented. Certain
reclassifications have been made in the accompanying
financial statements for 1993 to conform with the 1994
presentation.
(2) Acquisitions- On September 30, 1994, the Company
completed the acquisition of Anacad Electrical Engineering
Software GmbH (Anacad). Anacad is primarily engaged in
developing, marketing and supporting analog and mixed signal
simulation and optimization software for the integrated circuit
and printed circuit board markets of the electronic design
automation (EDA) industry. Anacad's product offerings are
complementary to the Company's current broad line of EDA
tools and systems. The total purchase price of $12,000 was
financed with cash of $9,345 and the issuance of a short-term
obligation classified under accrued liabilities totalling
$2,655. The majority of the short-term obligation was paid
in October 1994.
The acquisition has been accounted for as a purchase, and
therefore, the consolidated balance sheet of Anacad has been
included in the accompanying consolidated balance sheets as
of September 30, 1994. The cost of the acquisition has been
allocated on the basis of estimated fair value of the assets
and liabilities assumed. This allocation resulted in a
charge for in-process R&D of $8,265, goodwill of $2,897 and
other intangible technology of $4,735. The charge for in-
process R&D is a result of allocating a portion of the cost
to Anacad's in-process product development that has not
reached technological feasibility. The goodwill costs will be
amortized over a three year period to R&D expense primarily to
recognize the value of the development work-force acquired.
The technology costs will be amortized over a three year
period to system and software cost of revenues. Future
financial results subsequent to the acquisition date will be
included in the consolidated statements of operations and
cashflows. The separate operational results of Anacad are
not material compared to the Company's overall results of
operations, and accordingly pro-forma financial statements of
the combined entities have been omitted.
(3) Restructuring- Implementation of the Company's
restructuring plan approved by management in December, 1993,
continued during the third quarter of 1994. Costs accrued
for execution of the restructuring plan included direct costs
associated with severance and relocation of employees,
facilities closures, and write-offs of excess equipment and
intangible software technology assets related to discontinued
product development activities.
During the third quarter of 1994, several elements of
the restructuring plan were completed by the Company's
divisional and regional units. Costs incurred to complete
these actions were lower than originally estimated, due
primarily to over estimates of costs of certain actions
implemented internationally and cost saving modifications to
original planned actions. In addition, greater-than-
anticipated voluntary employee attrition during the first
nine months of 1994 has resulted in reduced estimates of the
costs for actions still in progress. As a result, the
Company recorded a $5,600 credit during the third quarter of
1994 reflecting these lower costs.
(4) Change in Accounting Principle, Accounting for
Certain Investments in Debt and Equity Securities- In
May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." Statement No. 115 requires reporting of
investments as either held to maturity, trading or available
for sale. The Company owns common stock and common stock
warrants of an independent public company with an original
carrying cost of $0 and a market value of $900 as of
September 30, 1994. Under Statement No. 115, the securities
have been classified as held for sale, which requires the
difference between original carrying cost and market value to
be recognized. This difference is included on the
consolidated balance sheet in prepaid and other assets and as
a reduction of the same amount in accumulated deficit. No
other investments owned by the Company are expected to be
materially impacted by provisions of this Statement as the
underlying carrying values approximate market.
(5) Capitalization of Software Development Costs -
During the first nine months of 1994 and 1993, $4,064 and
$3,292 of new product development costs were capitalized and
included in other assets on the consolidated balance sheets,
respectively. Amortization of capitalized software
development costs amounted to $5,027 and $5,368 for the nine
months ended September 30, 1994 and 1993, respectively, and
is included in system and software cost of revenues on the
consolidated statements of operations.
(6) Supplemental Disclosures of Cash Flow Information -
The following provides additional information concerning cash
flow activities:
Nine Months Ended
September 30,
1994 1993
Interest paid $ 1,686 $ 3,316
Income taxes paid, net of refunds $ 2,054 $ 1,531
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
(All numerical references are in thousands, except percentages)
RESULTS OF OPERATIONS
REVENUES AND GROSS MARGINS
System and Software
System and software revenues for the quarter ended September 30,
1994, totaled $40,946, a decrease of $5,262 or 11% from the third
quarter of 1993. For the first nine months of 1994, system and
software revenues declined $13,207 or 9% from the same period a
year ago. Third quarter system and software gross margins
increased to 78% in 1994 compared to 74% in the same period of
1993. For the first nine months of 1994, system and software
gross margins improved to 79%, up from 73% in the same period of
1993.
During the first nine months of 1994 system and software revenues
were flat for the European region compared to the same period last
year while North America and Japan experienced 12% and 6%
reductions for the same periods, respectively. Revenues for the
past three years have been negatively impacted by a poor Japanese
economy. From December 31, 1993 to September 30, 1994, the U.S.
dollar weakened approximately 6% on a revenue-based weighted
average against the Japanese yen, resulting in higher U.S. dollar
revenue from Japanese yen based sales. Exclusive of currency
exchange rate changes, our Japanese business continues to reflect
weakness. While difficult to predict, the Company's revenues may
continue to be negatively impacted by general weakness in Japan
for the next several quarters. For North America, the reduction
is attributable to a planned reduction in hardware revenue. Also,
the North American sales force executed a reorganization during
the first quarter of 1994 which resulted in reduced productivity
in the region. The goal of the reorganization was to streamline
operations by reducing two layers of management and better align
the sales team with their respective territories.
Overall growth in the EDA industry has been slowing down over the
last several years due to the maturation of the industry. To
achieve additional revenue growth, EDA vendors must increase
market share by either developing or acquiring new technologies
that provide additional competitive solutions. The purchase of
Anacad in the third quarter is a result of the Company's strategy
to evaluate "make or buy" alternatives to achieve revenue growth.
Anacad's mixed signal simulation and optimization product
offerings are complementary to the Company's current product lines
and will contribute to revenue growth in 1995. This growth may be
offset as some of the Company's current maturing product offerings
reach the late stages of their product life cycles during the
coming year.
Historically the Company experiences improved order activity in
the second and fourth quarters while the first and third quarters
are slower. The Company's fourth quarter order levels should
result in higher system and software revenue levels than the third
quarter of 1994. System and software revenue levels are dependent
on order activity, as such increased revenue performance for the
next quarter is not guaranteed.
While the software component of system and software revenue was
comparable for the first nine months of 1994 and 1993, the level
of hardware sales continues to decline. The Company continues to
sell some hardware to meet customer requests when gross margins
are above a minimum level. In the first nine months of 1994, the
hardware component of system and software revenue declined to 9%
from 17% for the same period last year. This mix shift resulted
in improved gross margins as software gross margins are much
higher than hardware gross margins. The Company expects the
decline of hardware revenue to continue at a much slower rate and
eventually level off during 1995.
Gross margins are significantly impacted by levels of amortization
of purchased technology and amortization of software development
costs. Amortization of previously capitalized software
development costs to system and software cost of revenues was
$1,540 and $5,027 for the third quarter and first nine months of
1994, respectively, compared to $1,920 and $5,368 for the same
periods a year ago. Amortization of purchased technology will
increase in the fourth quarter and beyond due to the acquisition
of Anacad and other technologies during the third quarter of 1994.
The additional quarterly purchased technology amortization to
system and software cost of revenues for the next three years is
expected to be approximately $500. This increase will be
partially offset by reduced amortization of software development
costs as several capitalized projects became fully amortized in
the third quarter of 1994.
Service and Support
Service and support revenues for the third quarter of 1994 were
$41,807, an increase of 8% from the comparable quarter of 1993.
For the first nine months of 1994, service and support revenues
totaled $115,464, an increase of 5% from the same period of 1993.
The increase in service and support revenues is attributable to
growth in the Company's installed customer base, continued success
of the Company's software support programs and growth in
professional and other services. These positive factors were
offset by a reduction in hardware support revenues as many
customers contracted directly with primary providers of hardware
service. The reduction in hardware support revenue reflects the
Company's planned shift towards a software-only business model.
Professional and other service revenue improved 13% in the first
nine months of 1994 compared to the same period of 1993. The
change is attributable to increased non-recurring engineering
services performed during the first nine months of 1994 compared
to the same period a year ago. Consulting and training services
were slightly down for the first nine months of 1994, compared to
the same period of 1993. The expected trend for professional
services is an increase in revenue levels over time as the
business develops.
Service and support gross margins were 59% and 58% for the
quarters ended September 30, 1994 and 1993, respectively, and 56%
and 53% for the first nine months of 1994 and 1993, respectively.
The increase in service and support gross margins is primarily
attributable to the mix shift in revenues towards higher gross
margin software support and away from lower gross margin hardware
support. In the first nine months of 1994, the hardware component
of service and support revenue declined to 1% from 5% in the same
period last year.
OPERATING EXPENSES
Gross research and development (R&D) expenses were $19,172 and
$57,820 for the third quarter and first nine months of 1994,
respectively compared to $20,101 and $61,576 for the same periods
of 1993, respectively. During the third quarter and first nine
months of 1994, the Company capitalized R&D costs of $991 and
$4,064, respectively compared to $898 and $3,292 for the same
periods of 1993, respectively. Net R&D costs were $18,181 for the
quarter ended September 30, 1994, compared to $19,203 for the same
period of 1993. For the first nine months of 1994 and 1993, net
R&D costs were $53,756 and $58,284, respectively.
Lower gross R&D expenses are attributable to a lower headcount
plan that was achieved through attrition and some layoffs.
Expenses also declined due to lower depreciation expense as some
capital equipment was retired or became fully depreciated during
the year. The Company closed an Integrated Circuit Division R&D
site during the first quarter of 1994, consolidating activities
with other pre-existing locations. Other divisional reductions
also contributed to the lower expense level. See restructuring
costs discussion below. The acquisition of Anacad will increase
overall operating expenses by approximately $2,200 a quarter
beginning in the fourth quarter of 1994. The increase should
primarily impact R&D expenses.
During the third quarter and the first nine months of 1994,
marketing, general and administration (MG&A) expenses were $31,368
and $100,811, respectively, compared to $35,287 and $107,475 for
the same periods of 1993, respectively. The reduction of MG&A
expenses is attributable primarily to lower headcount and lower
depreciation expense. Expense reductions for MG&A will be
somewhat offset by the impact of the Anacad acquisition discussed
above. Fourth quarter operating expenses also should increase due
to fewer vacations, more commissions and travel associated with
increased year-end selling activities.
CHARGE FOR IN-PROCESS R&D
On September 30, 1994, the Company completed the acquisition of
Anacad Anacad is primarily engaged in developing, marketing and
supporting analog and mixed signal simulation and optimization
software for the integrated circuit and printed circuit board
markets of the electronic design automation (EDA) industry. The
acquisition has been accounted for as a purchase, and therefore,
the consolidated balance sheet of Anacad has been included in the
accompanying consolidated balance sheets as of September 30, 1994.
The cost of the acquisition has been allocated on the basis of
estimated fair value of the assets and liabilities assumed. This
allocation resulted in a charge for in-process R&D of $8,265,
goodwill of $2,897 and other intangible technology of $4,735. The
charge for in-process R&D is a result of allocating a portion of
the cost to Anacad's in-process product development that has not
reached technological feasibility.
RESTRUCTURING COSTS
Implementation of the Company's restructuring plan approved by
management in December, 1993, continued during the third quarter
of 1994. Costs accrued for execution of the restructuring plan
included direct costs associated with severance and relocation of
employees, facilities closures, and write-offs of excess equipment
and intangible software technology assets related to discontinued
product development activities.
During the third quarter of 1994, several elements of the
restructuring plan were completed by the Company's divisional and
regional units. Costs incurred to complete these actions were
lower than originally estimated, due primarily to over estimates
of costs of certain actions implemented internationally and cost
saving modifications to original planned actions. In addition,
greater-than-anticipated voluntary employee attrition during the
first nine months of 1994 has resulted in reduced estimates of the
costs for actions still in progress. As a result, the Company
recorded a $5,600 credit during the third quarter of 1994
reflecting these lower costs.
Management continues to estimate that implementation of the
restructuring plan should reduce expenses by approximately $10,000
in 1994. These savings may be partially offset by increased
expenditures in other areas. When all elements of the
restructuring plan have been fully implemented, the Company
expects future expenses will be reduced even further.
Approximately $11,200 of the 1993 restructuring charge is expected
to result in cash outflows during 1994. For the first three
quarters, restructure-related cash outflows were approximately
$7,600. For the fourth quarter of 1994, disbursements are
anticipated to be near $3,600. Approximately $8,900, primarily
related to facilities closures and employee relocation, is
expected to be disbursed after 1994. The expenditures estimated
for 1995 are for actions originally accrued in December 1993 which
have taken more time to implement than originally estimated.
OTHER INCOME (EXPENSE)
During the third quarter and the first nine months of 1994, other
income was $1,205 and $2,094, compared to other income of $502 and
other expense of $22 for the same periods of 1993, respectively.
Interest income from investments was $1,369 and $3,452 for the
third quarter and first nine months of 1994, respectively,
compared to $1,066 and $3,244 for the same periods of 1993.
During the third quarter and first nine months of 1994, interest
expense amounted to $351 and $1,855, respectively, down from $920
and $3,520 for the comparable periods in 1993. The quarterly
reduction in interest expense is attributable to an accounting
correction from the prior quarter, while the year-to-date
reduction is attributable to lower average debt outstanding during
the comparable periods.
PROVISION FOR INCOME TAXES
The provision for income taxes amounted to $900 for the quarter
ended September 30, 1994, as compared to $900 for the same period
in 1993. For the first nine months of 1994, the provision for
income taxes was $2,800 compared to $1,700 for the same period a
year ago. The Company's income tax position for each year
combines the effects of available tax benefits in certain
countries where the Company does business, benefits from available
net operating loss carrybacks, and tax expense for subsidiaries
with pre-tax income. As such, the Company's income tax position
and resultant effective tax rate is uncertain for the remainder of
1994.
EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS
The Company experienced a foreign currency transaction gain of
$194 and $141 during the third quarter and first nine months of
1994, respectively, compared to a net loss of $72 and a net gain
of $228 during the same periods a year ago. These amounts are
comprised of realized gains and losses on cash transactions
involving various foreign currencies, and unrealized gains and
losses related to foreign currency receivables and payables
resulting from exchange rate fluctuations between the various
currencies in which the Company operates. Foreign currency gains
and losses are included as a component of other income. The
"foreign currency translation adjustment," as reported in the
equity section of the consolidated balance sheet at September 30,
1994, increased to $12,802 from $7,539 at the end of 1993. This
reflects the increase in the value of net assets denominated in
foreign currencies against the U.S. dollar since year-end 1993.
From December 31, 1993 to September 30, 1994, the U.S. dollar
weakened approximately 12% against the Japanese yen. In addition,
the U.S. dollar weakened approximately 9% against the European
currencies during the first nine months of 1994. Generally, a
weakening of the U.S. dollar makes the Company's products less
expensive in foreign markets, which has a positive impact on the
Company's revenues over time. In addition, a weakening U.S.
dollar results in higher reported revenues and operating expenses
due to translation of local currency activity to U.S. dollars for
consolidated financial reporting.
The Company generally realizes approximately half of its revenue
outside the United States and expects this to continue in the
future. As such, the Company's business and operating results may
be impacted by the effects of future foreign currency
fluctuations.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND INVESTMENTS
Total cash and investments at September 30, 1994 were $150,507
compared to $139,568 at the end of 1993. Cash provided by
operations was $31,658 for the first nine months of 1994 compared
to $19,789 during the same period of 1993. Accrued liabilities
decreased $5,910 in the first nine months of 1994 due primarily to
restructure-related cash outflows. Accounts payable decreased
$4,978 reflecting the Company's shift towards a software-only
business model, resulting in significantly lower pass-through
computer hardware payment activity. Cash and short-term
investments for the nine months ended September 30, 1994 were
positively impacted by proceeds from the issuance of common stock
of $7,627 as a result of increased employee option exercises due
to an improved average stock price during the first quarter,
offset by investment in property, plant and equipment of $8,328
and the cash component of the purchase of Anacad of $9,345.
INVENTORY
Inventory levels at September 30, 1994 totaled $631, down $1,668
since December 31, 1993. The reduction in inventory reflects the
Company's shift towards a software-only business model resulting
in the reclassification of demonstration equipment to property,
plant and equipment. In 1994 it is anticipated that demonstration
equipment will not be promoted for sale as it was in prior years.
The remaining balance in inventory primarily consists of
documentation and CD ROM media for software updates. Inventory is
expected to be at approximately current levels for the balance of
1994. For any remaining hardware requests from customers, the
Company will use a drop ship approach, shipping directly from the
hardware vendor to the customer.
OTHER ASSETS
Other assets increased to $29,684 at September 30, 1994 from
$20,584 at year-end 1993. The September 1994 acquisition of
Anacad resulted in the addition of goodwill of $2,897 and other
intangible technology of $4,735 in other assets. The goodwill
costs will be amortized over a three year period to R&D expense.
The technology costs will be amortized over a three year period to
system and software cost of revenues. Net capitalized software
development costs decreased by $963 as capitalization and
amortization were $4,064 and $5,027, respectively, during the
first nine months of 1994. Also, capitalized purchased technology
increased by $1,770 in 1994.
CAPITAL RESOURCES
Total capital expenditures decreased to $8,328 through September
30, 1994, compared to $19,691 for the same period of 1993. The
decrease in capital expenditures is a result of completing a
planned transition of the Company's R&D equipment to a more
complete UNIX-based operating system environment in 1993. Future
capital expenditure plans include maintaining a state of the art
development environment, maintaining updated sales demonstration
equipment, and implementing a new business information system
which should begin in the fourth quarter of this year.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule
(b) No reports were filed on Form 8-K during the
quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, on
November 10, 1994.
MENTOR GRAPHICS CORPORATION
(Registrant)
R. Douglas Norby
R. Douglas Norby
Senior Vice President, and
Chief Financial Officer
James J. Luttenbacher
James J. Luttenbacher
Corporate Controller, and
Chief Accounting Officer
VIA ELECTRONIC TRANSMISSION
November 10, 1994
Securities and Exchange Commission
450 Fifth Street NW
Judiciary Plaza
Washington, DC 20549
Attention: Division of Corporate Finance
Re: Mentor Graphics Corporation
File No. 0-13442
On behalf of Mentor Graphics Corporation (Company), I enclose for
filing the Company's Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-Q for the
quarter ended September 30, 1994.
Please inform me of receipt of the enclosed material via the
Company's MCI mail address, 313-4100.
Sincerely yours,
MENTOR GRAPHICS CORPORATION
Frank S. Delia
Frank S. Delia
Vice President and Chief Administrative Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<CASH> 116,211
<SECURITIES> 0
<RECEIVABLES> 74,642
<ALLOWANCES> 0
<INVENTORY> 631
<CURRENT-ASSETS> 210,360
<PP&E> 215,316
<DEPRECIATION> 117,499
<TOTAL-ASSETS> 367,861
<CURRENT LIABLILITIES> 90,366
<BONDS> 0
<COMMON> 251,578
0
0
<OTHER-SE> 29,893
<TOTAL-LIABILITY-AND-EQUITY> 367,861
<SALES> 248,734
<TOTAL-REVENUES> 248,734
<CGS> 78,612
<TOTAL-COSTS> 157,232
<OTHER-EXPENSES> (2,094)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,855
<INCOME-PRETAX> 14,984
<INCOME-TAX> 2,800
<INCOME-CONTINUING> 12,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,184
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
