<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarter Ended September 30, 2000. Commission File No. 0-13442
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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 including zip code of principal executive offices)
Registrant's telephone number, including area code: (503) 685-7000
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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,
2000: 64,570,388
<PAGE>
MENTOR GRAPHICS CORPORATION
Index to Form 10-Q
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations for the three 3
months ended September 30, 2000 and 1999
Consolidated Statements of Operations for the nine 4
months ended September 30, 2000 and 1999
Consolidated Balance Sheets as of September 30, 2000 5
and December 31, 1999
Consolidated Statements of Cash Flows for the 6
nine months ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 10-16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 16-18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18-19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Mentor Graphics Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000 1999
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IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C>
REVENUES:
System and software $ 79,555 $ 59,211
Service and support 62,383 54,870
----------------- -----------------
Total revenues 141,938 114,081
----------------- -----------------
COST OF REVENUES:
System and software 7,057 6,517
Service and support 21,643 21,406
----------------- -----------------
Total cost of revenues 28,700 27,923
----------------- -----------------
Gross margin 113,238 86,158
----------------- -----------------
OPERATING EXPENSES:
Research and development 32,119 29,828
Marketing and selling 49,546 37,486
General and administration 12,705 10,711
----------------- -----------------
Total operating expenses 94,370 78,025
----------------- -----------------
OPERATING INCOME 18,868 8,133
Other income (expense), net 159 (612)
----------------- ------------------
Income before income taxes 19,027 7,521
Income tax expense 4,186 1,655
----------------- -----------------
Net income $ 14,841 $ 5,866
================= =================
Net income per share:
Basic $ .23 $ .09
================ ================
Diluted $ .22 $ .09
================ ================
Weighted average number of shares outstanding:
Basic 64,202 65,841
================ ================
Diluted 67,651 66,309
================ ================
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</TABLE>
3
<PAGE>
Mentor Graphics Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000 1999
-----------------------------------------------------------------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C>
REVENUES:
System and software $ 230,209 $ 198,621
Service and support 177,915 157,540
----------------- -----------------
Total revenues 408,124 356,161
----------------- -----------------
COST OF REVENUES:
System and software 19,904 20,931
Service and support 64,966 65,748
----------------- -----------------
Total cost of revenues 84,870 86,679
----------------- -----------------
Gross margin 323,254 269,482
----------------- -----------------
OPERATING EXPENSES:
Research and development 93,287 86,384
Marketing and selling 143,280 121,266
General and administration 37,817 34,497
Special charges 6,521 21,831
----------------- -----------------
Total operating expenses 280,905 263,978
----------------- -----------------
OPERATING INCOME 42,349 5,504
Other expense, net (2,253) (9,120)
------------------ -----------------
Income (loss) before income taxes 40,096 (3,616)
Income tax expense (benefit) 8,821 (795)
----------------- -----------------
Net income (loss) $ 31,275 $ (2,821)
================= =================
Net income (loss) per share:
Basic $ .49 $ (.04)
================ =================
Diluted $ .47 $ (.04)
================ =================
Weighted average number of shares outstanding:
Basic 63,998 66,042
================= =================
Diluted 67,104 66,042
================= =================
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</TABLE>
4
<PAGE>
Mentor Graphics Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, 2000 DECEMBER 31, 1999
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IN THOUSANDS (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 115,151 $ 95,637
Short-term investments 34,379 37,550
Trade accounts receivable, net 131,118 125,417
Prepaid expenses and other 24,491 21,361
Deferred income taxes 10,846 10,954
----------------- -----------------
Total current assets 315,985 290,919
PROPERTY, PLANT AND EQUIPMENT, NET 80,519 83,970
TERM RECEIVABLES, LONG-TERM 25,047 31,695
OTHER ASSETS, NET 45,403 42,755
----------------- -----------------
Total assets $ 466,954 $ 449,339
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable $ 7,549 $ 9,979
Income taxes payable 27,589 22,599
Accrued payroll and related liabilities 43,609 41,628
Accrued liabilities 28,043 37,085
Deferred revenue 60,205 46,425
----------------- -----------------
Total current liabilities 166,995 157,716
OTHER LONG-TERM DEFERRALS 1,221 1,221
MINORITY INTEREST 2,341 1,622
STOCKHOLDERS' EQUITY:
Common stock 270,066 289,478
Retained earnings (accumulated deficit) 10,913 (20,362)
Accumulated other comprehensive income - foreign
currency translation adjustment 15,418 19,664
----------------- -----------------
Total stockholders' equity 296,397 288,780
----------------- -----------------
Total liabilities and stockholders' equity $ 466,954 $ 449,339
================= =================
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</TABLE>
5
<PAGE>
Mentor Graphics Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000 1999
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IN THOUSANDS
<S> <C> <C>
OPERATING CASH FLOWS:
Net income (loss) $ 31,275 $ (2,821)
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation and amortization of
property, plant and equipment 14,429 16,844
Deferred taxes 232 (415)
Amortization of other assets 4,236 2,817
Write-down of assets 4,504 18,134
Business disposals - 4,497
Gain on sale of property, plant, and equipment, net (3,118) -
Gain on sale of investments - (3,669)
Changes in operating assets and liabilities, net of assets acquired:
Trade accounts receivable (8,019) 5,502
Prepaid expenses and other (5,445) 2,726
Term receivables, long-term 6,068 6,454
Accounts payable (2,493) (2,226)
Accrued liabilities (7,565) (26,920)
Other liabilities and deferrals 19,872 6,582
----------------- -----------------
Net cash provided by operating activities 53,976 27,505
----------------- -----------------
INVESTING CASH FLOWS:
Net maturities of short-term investments 3,170 17,073
Purchases of property, plant and equipment, net (12,881) (11,709)
Purchases of businesses and equity interests (8,458) (7,572)
Proceeds from sale of property, plant, and equipment 4,725 3,009
Proceeds from sale of investments - 8,191
----------------- -----------------
Net cash provided (used) by investing activities (13,444) 8,992
------------------ -----------------
FINANCING CASH FLOWS:
Proceeds from issuance of common stock 22,122 9,891
Repayment of short-term borrowings - (24,000)
Repurchase of common stock (41,534) (32,548)
------------------ ------------------
Net cash used by financing activities (19,412) (46,657)
------------------ ------------------
Effect of exchange rate changes on cash and cash equivalents
(1,606) 305
------------------ -----------------
Net change in cash and cash equivalents 19,514 (9,855)
Cash and cash equivalents at beginning of period 95,637 118,512
----------------- -----------------
Cash and cash equivalents at end of period $ 115,151 $ 108,657
================= =================
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
MENTOR GRAPHICS CORPORATION
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
(1) GENERAL - The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information and 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 1999 to conform with the 2000 presentation.
(2) SPECIAL CHARGES - During the first nine months of 2000 the Company recorded
special charges of $6,521. The charges consisted of costs attributable to
two acquisitions accounted for as purchases and impairment in value of
certain goodwill and purchased technology. In addition, the Company
incurred certain costs for employee terminations, including terminations
resulting from the acquisition of Escalade Corp. (Escalade). Substantially
all of the costs associated with these charges were expended during the
second quarter of 2000 and the remainder should be expended by the end of
2000.
In May 2000, the Company acquired Descon Informationssysteme GMBH (Descon),
a provider of applications that focus on the component, library and design
management needs of electronic manufacturing enterprises. The total
purchase price including cash and transaction costs, net of assets acquired
was $5,212 and the acquisition was accounted for as a purchase. The cost of
the acquisition was allocated on the basis of the estimated fair value of
assets and liabilities assumed. This allocation resulted in a charge for
in-process research and development of $2,220. Capitalized goodwill and
technology allocations were $252 and $2,740, respectively. The goodwill and
technology is being amortized to research and development (R&D) and system
and software product cost of goods sold over five years, respectively. The
separate results of operations were not material compared to the Company's
overall results of operations, and accordingly pro-forma financial
statements of the combined entities have been omitted.
In May 2000, the Company acquired Escalade, a provider of Hardware
Description Language (HDL) graphical design tools for application specific
integrated circuits (ASICs) and field programmable gate arrays (FPGAs). The
total purchase price including cash and transaction costs, net of assets
acquired was $2,673 and the acquisition was accounted for as a purchase.
The cost of the acquisition was allocated on the basis of the estimated
fair value of assets assumed. This allocation resulted in a charge for
in-process research and development of $940. In addition, capitalized
goodwill and technology allocations were $903 and $830, respectively. The
goodwill and technology is being amortized to R&D and system and software
product cost of goods sold over three years, respectively.
The following Mentor Graphics and Escalade pro forma information assumes
the acquisition occurred as of the beginning of each period presented. The
pro forma results are not necessarily indicative of what actually would
have occurred had the acquisition been in effect for the periods presented.
In addition, they are not intended to be a projection of future results
that may be achieved from the combined operations.
<TABLE>
<CAPTION>
Nine months ended September 30, 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 409,333 $ 358,275
Net income (loss) $ 29,282 $ (8,556)
Basic net income (loss) per share $ 0.46 $ (0.13)
Diluted net income (loss) per share $ 0.44 $ (0.13)
------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
During the first nine months of 1999, the Company recorded special charges
of $21,831. The charges consisted of acquisition related costs attributable
to the purchase of the minority interest of a subsidiary, costs
attributable to the terminated tender offer for Quickturn Design Systems,
Inc. (Quickturn) net of a gain from the sale of acquired stock, two
subsidiary divestitures and related employee terminations. Substantially
all of these costs were disbursed in the first half of 1999. In January of
1999, the Company completed the purchase of the remaining minority interest
of its then 84% owned subsidiary, Exemplar Logic, Inc. (Exemplar) for cash
and stock options valued at $13,003. The cost of the acquisition was
allocated on the basis of the estimated fair value of assets assumed. This
allocation resulted in charges for in process R&D and compensation and
other related costs of $624 and $6,951, respectively. In addition,
capitalized goodwill and technology allocations were $4,452 and $976,
respectively. The goodwill and technology is being amortized to R&D over
five years and system and software product cost of goods sold over three
years, respectively.
(3) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - The following provides
additional information concerning cash flow activities:
<TABLE>
<CAPTION>
Nine months ended September 30, 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 713 $ 650
Income taxes paid, net of refunds $ 5,325 $ 718
Issuance of stock options for purchase of
Minority interest of subsidiary $ - $ 5,232
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</TABLE>
(4) COMPREHENSIVE INCOME - The following provides a summary of
comprehensive income:
<TABLE>
<CAPTION>
Nine months ended September 30, 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ 31,275 $ (2,821)
Foreign currency translation adjustment (4,246) 3,046
----------------- -----------------
Comprehensive income $ 27,029 $ 225
================= =================
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</TABLE>
(5) REVENUE RECOGNITION - The Company has adopted the provisions of Statement
of Position (SOP) 97-2, "Software Revenue Recognition" and SOP 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to
Certain Transactions", which amends SOP 97-2 and supercedes SOP 98-4. Under
SOP 97-2, license revenues are recognized when persuasive evidence of an
arrangement exists, delivery of the product has occurred, no significant
company obligations remain, the fee is fixed or determinable and
collectibility is probable. Revenues from system and software licenses are
recognized at the time of shipment, except for those that include rights to
future software products or have significant other delivery requirements.
Product revenues from term or installment sales agreements which include
either perpetual or term licenses are with the Company's top-rated credit
customers and are recognized upon shipment while any maintenance revenues
included in these arrangements are deferred and recognized ratably over the
contract term. Revenues from subscription-type term license agreements,
which typically include software, rights to future software products, and
services, are deferred and recognized ratably over the term of the
subscription period. Training and consulting contract revenues are
recognized using the percentage of completion method or as contract
milestones are achieved.
8
<PAGE>
SOP 98-9 amends certain paragraphs of SOP 97-2 to require recognition of
revenue using the "residual method" in circumstances outlined in the SOP.
Under the residual method revenue is recognized as follows: (1) the total
fair value of undelivered elements, as indicated by vendor specific
objective evidence (VSOE), is deferred and subsequently recognized in
accordance with the relevant sections of SOP 97-2 and (2) the difference
between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered
elements. SOP 98-9 is effective for the Company's fiscal year 2000. The
Company has applied the residual method to multi-element transactions when
VSOE was not present for all delivered elements. Application of the
residual method did not have a material impact on the Company's
consolidated financial statements.
(6) SEGMENT REPORTING - The Company operates exclusively in the EDA industry.
The Company markets its products primarily to customers in the
communications, computer, semiconductor, consumer electronics, aerospace,
and transportation industries. The Company sells and licenses its products
through its direct sales force in North and South America (Americas),
Europe, Japan and Pacific Rim, and through distributors where a direct
sales presence is not warranted. The Company's reportable segments are
based on geographic area.
All intercompany revenues and expenses are eliminated in computing revenues
and operating income (loss). The corporate component of operating income
(loss) represents research and development, corporate marketing and
selling, corporate general and administration, special, and merger and
acquisitions related charges. Reportable segment information is as follows:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
--------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Americas................. $ 72,943 $ 51,060 $ 197,277 $ 170,385
Europe................... 36,768 36,563 119,287 107,386
Japan.................... 25,143 19,772 70,338 60,100
Pacific Rim.............. 7,084 6,686 21,222 18,290
--------------- --------------- --------------- ---------------
Total......................... $ 141,938 $ 114,081 $ 408,124 $ 356,161
=============== =============== =============== ===============
OPERATING INCOME (LOSS)
Americas................. $ 38,906 $ 26,207 $ 104,662 $ 87,224
Europe................... 17,348 18,280 54,226 48,449
Japan.................... 14,282 10,872 38,846 29,455
Pacific Rim.............. 5,078 4,074 14,048 10,770
Corporate................ (56,746) (51,300) (169,433) (170,394)
--------------- ---------------- --------------- --------------
Total......................... $ 18,868 $ 8,133 $ 42,349 $ 5,504
=============== =============== ============== ==============
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</TABLE>
(7) SUBSEQUENT EVENT - On October 2, 2000, the Company acquired HSL Holdings
Limited for $13,900 in cash and $6,100 in notes payable due December 31,
2004. The business combination will be accounted for as a purchase and will
include acquisition related costs and the cost of net liabilities. These
costs will be allocated on the basis of estimated fair value of assets and
liabilities assumed and will likely include a charge for in-process R&D for
development that had not yet reached technological feasibility. The
purchase price allocation including amount of capitalized goodwill and
technology and in-process R&D charge has yet to be determined.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
(ALL NUMERICAL REFERENCES IN THOUSANDS, EXCEPT FOR PERCENTAGES)
RESULTS OF OPERATIONS
REVENUES AND GROSS MARGINS
SYSTEM AND SOFTWARE
System and software revenues for the three months and nine months ended
September 30, 2000 totaled $79,555 and $230,209, respectively, representing an
increase of $20,344 or 34% and $31,588 or 16% from the comparable periods of
1999. The increases were attributable to software product revenue. The growth in
software product revenue was primarily due to growth in the Company's newer
product offerings and the acquisition of VeriBest, Inc. (VeriBest) in the fourth
quarter of 1999. In addition, growth of software product revenue is attributable
to recovery from weak sales in the third quarter of 1999. Lower sales in the
third quarter of 1999 were a result of a consolidation of third party sales
channels and a late third quarter 1999 enhancement release of the Company's
Field Programmable Gate Array simulation product offering.
System and software gross margins were 91% for the third quarter and first nine
months of 2000, compared to 89% and 90% for the same periods a year ago. Gross
margins were favorably impacted in 2000 by improved gross margins on accelerated
verification systems sales. Amortization of purchased technology to system and
software cost of goods sold was $754 and $2,013 for the third quarter and first
nine months of 2000, respectively, compared to $332 and $985 for the comparable
periods in 1999. The increase in amortization of purchased technology is
attributable to the acquisitions of VeriBest, Escalade and Descon.
SERVICE AND SUPPORT
Service and support revenues for the three months and nine months ended
September 30, 2000 totaled $62,383 and $177,915, respectively, representing an
increase of $7,513 or 14% and $20,375 or 13% from the comparable periods of
1999. The increase compared to 1999 is due to higher software support and
professional services. The increase in software support revenue was attributable
to the acquisition of VeriBest, continued success of software product offerings
and a larger installed base of customers. The increase in professional service
revenue was attributable to better utilization of global consulting personnel.
Service and support gross margins were 65% and 63% for the third quarter and
first nine months of 2000, compared to 61% and 58% for the comparable periods in
1999. The increase in overall service and support gross margins is due to higher
revenues and improved professional service utilization.
10
<PAGE>
GEOGRAPHIC REVENUES INFORMATION
Americas revenues including service and support revenues, increased 43% from the
third quarter of 1999 to the third quarter of 2000 and increased 16% from first
nine months of 1999 to the first nine months of 2000. Revenues outside of the
Americas for the third quarter and first nine months of 2000 were 49% and 52% of
total revenues compared to 55% and 52% for comparable periods of 1999. Compared
to the respective prior periods, European revenues increased 1% and 11% in the
third quarter and the first nine months of 2000 and Japanese revenues increased
27% and 17% in the third quarter and first nine months of 2000. Exchange rate
changes in Europe resulted in negative impact to revenue of approximately 7% for
both the third quarter and the first nine months of 2000. Exclusive of currency
effects, higher revenue levels in Europe were primarily due to continued
strength in all areas of the business. Japanese revenues were positively
impacted by exchange rate changes in the comparable periods, where the Japanese
yen strengthened against the U.S. dollar by approximately 7% and 10% in the
third quarter and the first nine months of 2000. Exclusive of currency effects,
higher revenue levels in Japan were primarily due to growth in sales of newer
software product offerings. Since the Company generates approximately half of
its revenues outside of the U.S. and expects this to continue in the future,
revenue results should continue to be impacted by the effects of future foreign
currency fluctuations.
OPERATING EXPENSES
Research and development expenses totaled $32,119 and $29,828 or 23% and 26% of
revenues for the third quarters of 2000 and 1999, respectively and $93,287 and
$86,384 or 23% and 24% of revenues for the first nine months of 2000 and 1999,
respectively. Marketing and selling expenses totaled $49,546 and $37,486 or 35%
and 33% of revenues for the third quarters of 2000 and 1999, respectively and
$143,280 and $121,266 or 35% and 34% of revenues for the first nine months of
2000 and 1999, respectively. General and administration expenses totaled $12,705
and $10,711 or 9% of revenues for the third quarters of 2000 and 1999,
respectively and $37,817 and $34,497 or 9% and 10% for the first nine months of
2000 and 1999, respectively. The increase in absolute dollars is primarily
attributable to the VeriBest acquisition, increased variable compensation
related to stronger performance and annual and competitive salary adjustments.
SPECIAL CHARGES
During the first nine months of 2000 the Company recorded special charges of
$6,521. The charges consisted of costs attributable to two acquisitions
accounted for as purchases and impairment in value of certain goodwill and
purchased technology. In addition, the Company incurred certain costs for
employee terminations, including terminations resulting from the acquisition of
Escalade. Substantially all of the costs associated with these charges were
expended during the second quarter of 2000 and the remainder should be expended
by the end of 2000.
In May 2000, the Company acquired Descon, a provider of applications that focus
on the component, library and design management needs of electronic
manufacturing enterprises. The total purchase price including cash and
transaction costs, net of assets acquired was $5,212 and the acquisition was
accounted for as a purchase. The cost of the acquisition was allocated on the
basis of the estimated fair value of assets and liabilities assumed. This
allocation resulted in a charge for in-process research and development of
$2,220. Capitalized goodwill and technology allocations were $252 and $2,740,
respectively. The goodwill and technology is being amortized to R&D and system
and software product cost of goods sold over five years, respectively.
In May 2000, the Company acquired Escalade, a provider of Hardware Description
Language (HDL) graphical design tools for application specific integrated
circuits (ASICs) and field programmable gate arrays (FPGAs). The total purchase
price including cash and transaction costs, net of assets acquired was $2,673
and the acquisition was accounted for as a purchase. The cost of the acquisition
was allocated on the basis of the estimated fair value of assets assumed. This
allocation resulted in a charge for in-process research and development of $940.
In addition, capitalized goodwill and technology allocations were $903 and $830,
respectively. The goodwill and technology is being amortized to R&D and system
and software product cost of goods sold over three years, respectively.
11
<PAGE>
During the first nine months of 1999, the Company recorded special charges of
$21,831. The charges consisted of acquisition related costs attributable to the
purchase of the minority interest of a subsidiary, costs attributable to the
terminated tender offer for Quickturn Design Systems, Inc. (Quickturn) net of a
gain from the sale of acquired stock, two subsidiary divestitures and related
employee terminations. Substantially all of these costs were disbursed in the
first half of 1999. In January of 1999, the Company completed the purchase of
the remaining minority interest of its then 84% owned subsidiary, Exemplar
Logic, Inc. (Exemplar) for cash and stock options valued at $13,003. The cost of
the acquisition was allocated on the basis of the estimated fair value of assets
assumed. This allocation resulted in charges for in process R&D and compensation
and other related costs of $624 and $6,951, respectively. In addition,
capitalized goodwill and technology allocations were $4,452 and $976,
respectively. The goodwill and technology is being amortized to R&D over five
years and system and software product cost of goods sold over three years,
respectively.
OTHER INCOME (EXPENSE), NET
Other income (expense), net totaled $159 and ($2,253) for the third quarter and
first nine months of 2000 compared to ($612) and ($9,120) for the same periods
of 1999. The year to year change is attributable in part to a gain on the sale
of a parcel of land adjacent to the Company's headquarters of $3,118 during
2000. In addition, other expense was positively impacted by lower legal costs
associated with the ongoing patent litigation with Quickturn which totaled
$1,331 and $7,620 in the third quarter and first nine months of 2000,
respectively compared to $1,773 and $9,656 for comparable periods of 1999. See
"Part II - Item 1. Legal Proceedings" for further discussion. The decrease in
other expense is also attributable to a 1999 legal settlement of $3,000 for the
Portland, Oregon SimExpress trial. Interest income was $2,731 and $6,881 for the
third quarter and the first nine months of 2000, compared to $1,606 and $5,233
for comparable periods of 1999. Interest expense was $465 and $1,390 for the
third quarter and first nine months of 2000, compared to $235 and $691 for
comparable periods in 1999.
PROVISION (BENEFIT) FOR INCOME TAXES
The provision for income taxes amounted to $8,821 for the nine months ended
September 30, 2000, as compared to a benefit of $795 for the same period in
1999. The tax expense (benefit) is the result of the mix of profits earned by
the Company and its subsidiaries in tax jurisdictions with a broad range of
income tax rates.
Because 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 carryforwards and tax expense for
subsidiaries with pre-tax income, the Company's income tax position and
resultant effective tax rate is uncertain for 2000 and beyond.
EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS
Approximately half of the Company's revenues are generated outside of the United
States. For 2000 and 1999, approximately half of European and all of Japanese
revenues were subject to exchange rate fluctuations as they were booked in local
currencies. The effects of these fluctuations were substantially offset by local
currency cost of revenues and operating expenses, which resulted in an
immaterial net effect on the Company's results of operations.
The "accumulated other comprehensive income - foreign currency translation
adjustment," as reported in the stockholders' equity section of the Consolidated
Balance Sheets, decreased to $15,418 at September 30, 2000, from $19,664 at the
end of 1999. This reflects the decrease in the value of net assets denominated
in foreign currencies since year-end 1999 as a result of a stronger U.S. dollar
as of September 30, 2000.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH AND INVESTMENTS
Total cash and short-term investments at September 30, 2000 were $149,530
compared to $133,187 at the end of 1999. Cash provided by operations was $53,976
for the first nine months of 2000 compared to $27,505 during the same period of
1999. During the first nine months of 2000 operating cash was positively
impacted by net income from operations of $31,275 while for 1999, it was
negatively impacted by the net loss from operations of $2,821. Cash used by
investing activities, excluding short-term investments, was $16,614 and $8,081
in the first nine months of 2000 and 1999, respectively. Investing activities in
the first nine months of 2000 included capital expenditures and purchase of
Descon and Escalade for $8,458 offset by sale of land adjacent to the Company's
Wilsonville headquarters to a third party for $4,725. Investing activities in
the first half of 1999 included purchase of the minority interest in Exemplar
for $7,572 and capital expenditures offset by sale of Quickturn stock for
$8,191. Cash used by financing activities was $19,412 for the first nine months
of 2000 compared to $46,657 during the same period of 1999. Cash and short-term
investments were positively impacted by the proceeds from issuance of common
stock upon exercise of stock options and employee stock plan purchases in the
amount of $22,122 and $9,891 in 2000 and 1999, respectively. Cash used for
financing activities in 2000 included a repurchase of 2,500 shares of common
stock for $41,534. The financing use of cash in 1999 included the pay-down of a
short-term borrowing of $24,000 and a repurchase of 3,528 shares of common stock
for $32,548.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable increased to $131,118 at September 30, 2000 from
$125,417 at year-end 1999. Excluding the current portion of term receivables of
$66,670 and $54,375, average days sales outstanding were 41 days at September
30, 2000 and December 31, 1999. Average days sales outstanding in total accounts
receivable increased from 73 days at the end of 1999 to 83 days at the end of
the third quarter of 2000. The increase in average total accounts receivable
days sales outstanding was primarily due to less extended term contract sales in
the third quarter of 2000 compared to the fourth quarter of 1999. In the
quarters where term contract revenue is recorded only about one-third, or twelve
months, of the receivable is reflected in current accounts receivable. In the
following quarters, the same amount is reflected in current accounts receivable
without the corresponding revenue. In addition, the Company sold short-term
accounts receivable of $15,094 and $23,011 to a financing institution on a
non-recourse basis in the third quarter of 2000 and the fourth quarter of 1999,
respectively.
PREPAID EXPENSES AND OTHER
Prepaid expenses and other increased $3,130 from December 31, 1999 to September
30, 2000. This increase was primarily due to higher accelerated verification
systems inventory, which is expected to ship in the fourth quarter of 2000. In
addition, prepaid income taxes and benefits costs increased from year-end 1999.
TERM RECEIVABLES, LONG-TERM
Term receivables, long-term decreased to $25,047 at September 30, 2000 compared
to $31,695 at December 31, 1999. Balances under term agreements that are due
within one year are included in trade accounts receivable and balances that are
due in more than one year are included in term receivables, long-term. The
Company uses term agreements as a standard business practice and has a history
of successfully collecting under the original payment terms without making
concessions on payments, products or services. The decrease is due to greater
run-off of balances on older term agreements compared to new term agreements.
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<PAGE>
CAPITAL RESOURCES
Total capital expenditures increased to $12,881 through September 30, 2000,
compared to $11,709 for the same period of 1999. Expenditures in the first nine
months of 2000 and 1999 did not include any individually significant projects.
The Company anticipates that current cash balances, anticipated cash flows from
operating activities, and existing credit facilities will be sufficient to meet
its working capital needs for at least the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes methods
of accounting for derivative financial instruments and hedging activities
related to those instruments as well as other hedging activities. In June 1999,
the FASB issued Statement No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133.
Statement No. 137 defers the effective date of Statement No. 133 for one year.
Statement No. 133 is now effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not expect that this statement
will have a significant impact on its financial condition or results of
operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of the Staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. In June 2000, SAB 101B was issued which
defers the implementation date of SAB 101 until October 1, 2000. The Company is
currently evaluating the adoption of SAB 101 and its potential impact on its
financial condition or results of operations.
In March 2000, the Financial Accounting Standards Board, or FASB, issued
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION - AN INTERPRETATION OF APB OPINION NO. 25, (FIN 44). FIN 44 applies
prospectively to new awards, exchanges of awards in a business combination,
modifications to outstanding awards, and changes in grantee status that occur on
or after July 1, 2000, except for the provisions related to repricings and the
definition of an employee, which apply to awards issued after December 15, 1998.
The provisions related to modifications to fixed stock options awards to add a
reload feature are effective for awards modified after January 12, 2000. The
Company does not expect that this statement will have a significant impact on
its financial condition or results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
Certain statements contained in this report that are not statements of
historical fact, including without limitation, statements containing the words
"believes," "expects," and words of similar import, constitute forward-looking
statements that involve a number of risks and uncertainties. Moreover, from time
to time the Company may issue other forward-looking statements and outlook
estimates of its future financial results. The following discussion highlights
factors that could cause actual results to differ materially from
forward-looking statements. The forward-looking statements should be considered
in light of these factors.
The Company competes in the highly competitive and dynamic electronic design
automation (EDA) industry. The Company's success is dependent upon its ability
to develop and market products and selling models that are innovative,
cost-competitive and meet customer expectations. Competition in the EDA industry
is intense, which can create adverse effects including, but not limited to,
price reductions, lower product margins, loss of market share and additional
working capital requirements. Additionally, new pricing and selling models in
the industry, including the use of fixed term licenses and subscription
transactions versus traditional perpetual licenses further complicate the
Company's ability to effectively price and package large multi-element contracts
that are competitive and profitable.
The Company's business is largely dependent upon the success and growth of the
electronics industry. From time to time the electronics industry cuts costs
through employee layoffs and reductions in the number of electronic
14
<PAGE>
design projects which could reduce demand for the Company's products and
services. In addition, there have been a number of mergers in the electronics
industry worldwide, which could result in decreased or delayed capital spending
patterns. The above business challenges for the electronics and related
industries may have a material adverse effect on the Company's financial
condition and results of operations.
The Company's Meta Division is in the hardware development and assembly
business. Risk factors include procuring hardware components on a timely basis
from a limited number of suppliers, assembling and shipping systems on a timely
basis with appropriate quality control, developing new distribution and shipment
processes, managing inventory and related obsolescence issues, developing new
processes to deliver customer support of the hardware and placing new demands on
the sales force. In addition, the Company is engaged in litigation with
Quickturn, a subsidiary of Cadence Design Systems, Inc., in which Quickturn has
asserted that the Company and Meta are infringing Quickturn patents. See "Part
II-Item 1. Legal Proceedings" for further discussion. The Company has been
prohibited from using, selling or marketing its first generation SimExpress
emulation products in the United States and Germany. While the Company settled
one SimExpress court case in the second quarter of 1999, other legal proceedings
and litigation continue. These actions could adversely effect the Company's
ability to sell its accelerated verification products in other jurisdictions
worldwide and may negatively affect demand for accelerated verification products
for the Company worldwide until the outcome is determined. This litigation could
result in lower sales of accelerated verification products, increase the risk of
inventory obsolescence and have a materially adverse effect on the Company's
results of operations.
A material amount of the Company's software product revenue is usually the
result of current quarter order performance of which the majority is usually
booked in the last few weeks of each quarter. In addition, the Company's revenue
often includes multi-million dollar contracts. The timing of the completion of
these contracts and the terms of delivery of software, hardware and other
services can have a material impact on revenue recognition for a given quarter.
The combination of these factors impairs and delays the Company's ability to
identify shortfalls or overages from quarterly revenue targets.
The Company's margin may vary as a result of the mix of products and services
sold. The margin on software products is typically greater than that for
hardware products, software support and professional services. Additionally, the
margin on software products will vary quarter to quarter depending on the amount
of third party royalties due for the mix of products sold.
The Company uses term or installment sales agreements as a standard business
practice and has a history of successfully collecting under the original payment
terms without making concessions on payments, products or services. These
multi-year, multi-element term license and perpetual license term agreements are
from the Company's top-rated credit customers and average between one and three
years in length. These agreements may increase the element of risk associated
with collectibility from customers that can arise for a variety of reasons
including ability to pay, product satisfaction or disagreements and disputes. If
collectibility for any of these multi-million dollar agreements becomes a
problem the Company's results of operations could be adversely affected.
The Company generally realizes approximately half of its revenues outside the
U.S. and expects this to continue in the future. As such, the effects of foreign
currency fluctuations can impact the Company's business and operating results.
To hedge the impact of foreign currency fluctuations, the Company enters into
foreign currency forward contracts. However, significant changes in exchange
rates may have a material adverse impact on the Company's results of operations.
International operations subject the Company to other risks including, but not
limited to, longer receivables collection periods, economic or political
instability, government trade restrictions, limitations on repatriation of
earnings, licensing and intellectual property rights protection.
The Company's operating expenses are generally committed in advance of revenue
and are based to a large degree on future revenue expectations. Operating
expenses are incurred to generate and sustain higher future revenue levels. If
the revenue does not materialize as expected, the Company's results of
operations can be adversely impacted. Additionally, outlook estimates do not
contemplate the effects of recent or possible future acquisitions.
Acquisitions of complementary businesses are a part of the Company's overall
business strategy. There are several challenges associated with this strategy
including integration of sales channels, training and education of the sales
15
<PAGE>
force for new product offerings, integration of product development efforts,
retention of key employees, integration of systems of internal controls, and
integration of information systems. All of these factors can impair the
Company's ability to forecast, to meet quarterly revenue and earnings targets
and to effectively manage the business for long-term growth. There can be no
assurance that these challenges will be effectively met.
The Company has been able to recruit and retain necessary personnel to research
and develop, market, sell and service products that satisfy customers' needs.
There can be no assurance that the Company can continue to recruit and retain
such personnel.
Generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and
contingencies at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting periods. Actual results could
differ from those estimates. In addition, new or revised accounting standards,
interpretation of standards and rules are issued from time to time. Although
they are not expected to have a material impact on the reported financial
results, they could have such an effect.
Because 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 carryforwards and tax expense for
subsidiaries with pre-tax income, the Company's income tax position and
resultant effective tax rate is uncertain for 2000 and beyond.
The Company is involved in various litigation and administrative matters. There
can be no assurance that they will not have a material adverse impact on the
Company's business, financial position or results of operations. See "Part
II-Item 1. Legal Proceedings" for further discussion. The pending litigation and
any future litigation may result in substantial legal costs and divert the
efforts of management personnel.
Due to the factors above, as well as other market factors outside the Company's
control, the Company's future earnings and stock price may be subject to
significant volatility. Past financial performance should not be considered a
reliable indication of future performance. The investment community should use
caution in using historical trends to estimate future results or trends. In
addition, if future results vary significantly from expectations of analysts,
the Company's stock price could be adversely impacted.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
(ALL NUMERICAL REFERENCES IN THOUSANDS, EXCEPT FOR RATES AND PERCENTAGES)
INTEREST RATE RISK
The Company's exposure to market risk for changes in interest rates relates
primarily to its investment portfolio. The Company does not use derivative
financial instruments for speculative or trading purposes. The Company places
its investments in instruments that meet high credit quality standards, as
specified in the Company's investment policy. The policy also limits the amount
of credit exposure to any one issuer and type of instrument. The Company does
not expect any material loss with respect to its investment portfolio.
16
<PAGE>
The table below presents the carrying value and related weighted-average
interest rates for the Company's investment portfolio. The carrying value
approximates fair value at September 30, 2000. In accordance with the Company's
investment policy all investments mature in twelve months or less.
<TABLE>
<CAPTION>
Carrying Average
Principal (notional) amounts in U.S. dollars Amount Interest Rate
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash equivalents - fixed rate $ 33,437 6.58%
Short-term investments - fixed rate 34,379 6.38%
----------------- -------------
Total interest bearing instruments $ 67,816 6.48%
================= =============
--------------------------------------------------------------------------------------------------------------
</TABLE>
FOREIGN CURRENCY RISK
The Company enters into foreign exchange options for highly anticipated sales
transactions between its foreign subsidiaries. These instruments provide the
Company the right to sell foreign currencies to third parties at future dates
with fixed exchange rates. The premium on such instruments is immaterial and is
amortized over the life of the contracts to other income (expense). The Company
currently has foreign currency options outstanding to sell Japanese yen over the
next 3 months with contract values totaling approximately $8,283 at average
contract exchange rates of approximately JPY 108.66. At September 30, 2000 the
difference between the recorded value and the fair value of the Company's
foreign exchange position related to these option contracts was approximately
zero.
The Company entered into a forward contract to stabilize the currency effects on
a portion of the Company's net investment in its Japanese subsidiary. This
contract to sell 735.7 million Japanese yen will guarantee the Company $6,985 at
the contract's expiration. Any differences between the contracted currency rate
and the currency rate at each balance sheet date will impact the foreign
currency translation adjustment component of the stockholders' equity section of
the consolidated balance sheet. The result is a partial offset of the effect of
Japanese currency changes on stockholders' equity during the contract term. This
forward contract should not impact current or future consolidated statements of
operations. At September 30, 2000, the difference between the recorded value and
the fair value of the Company's foreign exchange position related to this
contract was approximately zero.
The Company also enters into forward foreign exchange contracts as a hedge
against foreign currency sales commitments and intercompany balances.
Remeasurement gains and losses on forward contracts are deferred and recognized
when the sale occurs. All subsequent remeasurement gains and losses are
recognized as they occur to offset remeasurement gains and losses recognized on
the related foreign currency accounts receivable balances. These contracts
generally have maturities which do not exceed twelve months. At September 30,
2000, the difference between the recorded value and the fair value of the
Company's foreign exchange position related to these contracts was approximately
zero.
The Company does not anticipate non-performance by the counter-parties to these
contracts. Looking forward, the Company does not expect any material adverse
effect on its consolidated financial position, results of operations, or cash
flows resulting from the use of these instruments. There can be no assurance
that these strategies will be effective or that transaction losses can be
minimized or forecasted accurately.
17
<PAGE>
The following table provides information about the Company's foreign exchange
forward contracts at September 30, 2000. Due to the short-term nature of these
contracts, the contract rate approximates the weighted-average contractual
foreign currency exchange rate and the amount in U.S. dollars approximates the
fair value of the contract at September 30, 2000. These forward contracts mature
in approximately thirty days. The following table presents short-term forward
contracts to sell and buy foreign currencies in U.S. dollars related to customer
receivables and intercompany balances:
<TABLE>
<CAPTION>
Short-term forward contracts Amount Contract Rate
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Japan yen $ 29,833 $ 103.15
Euro 12,977 0.86
Sweden krona 6,764 9.80
France franc 5,819 6.80
Israel shekel 1,498 4.07
United Kingdom pound 1,390 1.47
Switzerland franc 1,016 1.77
Italy lira 1,005 1,990.00
Other 870 -
-----------------------------------------------------------------------------------------------
</TABLE>
The unrealized gain (loss) on the outstanding forward contracts at September 30,
2000, was not material to the Company's consolidated financial statements. The
realized gain (loss) on these contracts as they matured was not material to the
Company's consolidated financial position, results of operations, or cash flows
for the periods presented.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During 1995, the Company filed suit in U.S. Federal District Court in Portland,
Oregon, against Quickturn Design Systems, Inc. (Quickturn) for a declaratory
judgment of non-infringement, invalidity and unenforceability of three of
Quickturn's patents. This action related to the SimExpress products of Meta
Systems SRL (Meta), a French company acquired by the Company in 1996. Quickturn
filed a counterclaim against the Company alleging infringement of six Quickturn
patents, including the three patents subject to the declaratory judgment action.
The counterclaim sought a permanent injunction prohibiting sales of the
Company's SimExpress products in the U.S., compensatory and punitive damages and
attorneys' fees. In June 1999, the Company and Quickturn settled this
litigation. The Company agreed that five Quickturn patents are valid and
enforceable, and were infringed by the Company's sale in the U.S. of its
SimExpress product from 1995-1997. Mentor Graphics also paid Cadence Design
Systems, Quickturn's parent company, $3 million in damages for infringement,
with each side to bear its own fees and costs. The court directed that the
Company's payment and its consent to the validity and infringement of the
Quickturn patents may not be used as evidence or for any other purpose in
litigation outside the U.S., and that the settlement does not address in any way
the issue of whether the Company's Celaro product infringes any patent issued in
the U.S. or other countries.
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<PAGE>
Quickturn filed an administrative complaint with the U.S. International Trade
Commission (ITC) in 1996 seeking to prohibit the importation of SimExpress
products in the U.S. In December 1997, the ITC issued a Cease and Desist Order
prohibiting the Company from importing certain hardware emulation products or
components and from providing repair or maintenance services to its existing
U.S. customers. That order took effect in 1998. In October 1997, Quickturn filed
an action against the Company's German subsidiary in a German District Court
alleging infringement by SimExpress of a European patent. The German court ruled
in April 1999 that the Company's German subsidiary's sales of SimExpress
violated a European patent owned by Quickturn and awarded unspecified damages.
The Company's German subsidiary no longer offers the SimExpress product in
Germany. Although the Company is appealing the ruling, the Company can give no
assurance as to the outcome of such proceeding.
In October 1998, Quickturn filed an action against Meta and the Company in
France alleging infringement by SimExpress and Celaro of a European patent.
There have been no rulings by the French court regarding the merits of this case
to date.
In February 1998, Meta filed a patent infringement action against Quickturn in
the U.S. District Court for the Northern District of California in San
Francisco, California. The complaint, based on a patent licensed to the Company
and Meta and which Meta obtained a right to enforce, sought damages for
infringement as a result of Quickturn's manufacture and sale of certain
emulation equipment. Meta was joined in the suit by Aptix Corporation of San
Jose, California. In June 2000, the court granted a motion brought by Quickturn
to dismiss the case on the ground that Aptix's CEO Dr. Amr Mohsen falsified and
destroyed evidence during the litigation. Due to Dr. Mohsen's misconduct, the
court found the Aptix patent to be unenforceable by anyone, including Meta. The
court specifically made no findings that either Meta or the Company engaged in
any misconduct. The court ordered Aptix to pay Quickturn certain of its
attorneys' fees and expenses. No sanctions were awarded against Meta or the
Company. Meta has appealed the court's decision, and the Company has filed suit
against Aptix for fraud and other claims arising out of the actions of Aptix.
In July 1999, the Company filed suit in U.S. District Court for the District of
Delaware against Quickturn alleging infringement of two Mentor Graphics patents
by Quickturn's Mercury product ("Mercury lawsuit"). That lawsuit was transferred
to the Northern District of California. The Company's suit has been amended to
allege that Quickturn's Mercury and Mercury Plus products infringe five patents
held by the Company. The Company is seeking a permanent injunction prohibiting
sales of Quickturn's Mercury and Mercury Plus products in the U.S., along with
damages and attorney's fees.
In March 2000, the Company filed a misappropriation of trade secret case in U.S.
District Court in San Francisco. This case alleges that Quickturn
misappropriated Meta trade secrets during Quickturn's evaluation of Meta's
technology in connection with a possible acquisition of Meta in 1994 and 1995.
This case has been consolidated with the Mercury lawsuit for purposes of
discovery and scheduling. In September 2000, Mentor Graphics filed suit in U.S.
District Court in San Francisco against Quickturn and Cadence alleging
infringement of an additional patent. Mentor Graphics has requested a
preliminary injunction hearing prohibiting sales of Quickturn's Mercury Plus
product in the U.S.
In addition to the above litigation, from time to time the Company is involved
in various disputes and litigation matters that arise from the ordinary course
of business. These include disputes and lawsuits relating to intellectual
property rights, licensing, contracts, and employee relation matters.
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10. C. 1986 Stock Plan.
(b) Reports on Form 8-K
On July 24, 2000, the Company filed a Current Report on Form 8-K/A Amendment No.
1 to amend its previously filed Form 8-K relating to the merger on May 8, 2000
with Escalade Corp. The amendment includes under Item 7 the consolidated
financial statements of Escalade as of and for each of the years in the two-year
period ended December 31, 1999, and pro forma financial information as of and
for the year ended December 31, 1999.
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.
Dated: November 10, 2000. MENTOR GRAPHICS CORPORATION
(Registrant)
--------------------
Gregory K. Hinckley
Executive Vice President and
Chief Operating Officer /
Chief Financial Officer
20
