<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1996 Commission File No. 0-19730
- ------------------------------------------- ---------------------------
VIEWLOGIC SYSTEMS, INC.
-----------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 04 - 2830649
------------ ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
293 Boston Post Road West, Marlboro, MA 01752
- --------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (508) 480-0881
--------------
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of each Class
------------------------------
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting Common Stock held by non-affiliates
of the registrant was $228,221,543 based on the last reported sale price of
the Common Stock on the NASDAQ consolidated transaction reporting system on
February 28, 1997.
Number of shares outstanding of the registrant's Common Stock as of
February 28, 1997: 16,530,910.
Documents incorporated by reference: Annual Report to Stockholders for the
year ended December 31, 1996 -- Part II; Proxy Statement for the 1997 Annual
Meeting of Stockholders -- Part III.
Page 1 of 60 pages
Exhibit Index begins on page 17
1
<PAGE>
PART I
ITEM 1. BUSINESS.
Viewlogic Systems, Inc. ("Viewlogic" or the "Company") was
founded in 1984 and is a leading supplier of Electronic Design
Automation (EDA) software which is used to accelerate and
automate the design and verification of advanced Application
Specific Integrated Circuits (ASIC's), Printed Circuit Boards
(PCB's) and electronic systems. Viewlogic develops and markets a
comprehensive family of software products and consulting services
to help its customers optimize their design processes and deliver
high quality products to market sooner. Viewlogic markets its
products to many of the world's largest and most sophisticated
Integrated Circuit (IC) and electronic system manufacturers in
industries such as semiconductor, computer, communication,
automotive and consumer electronics. The Company sells its
products worldwide through a broad distribution channel
consisting of direct sales, distributors, value added resellers
(VAR's) and telesales.
ORGANIZATION AND PRODUCTS
Viewlogic develops and sells EDA software to companies whose
end product may be a single IC, an ASIC, a Field Programmable
Gate Array (FPGA), a PCB or an entire electronic system. To best
address the diverse needs of its broad customer base, Viewlogic
is organized into four business groups. The four business groups
are: ASIC Group, Systems Group, Software Group and Advanced
Development Group. Each group delivers products and solutions
which address the specific design challenges of its particular
customer segment. Technology is shared wherever possible to fully
leverage the Company's research and development investment.
ASIC GROUP
The ASIC market has evolved rapidly, driven by advances in
silicon manufacturing technology. The complexity of
semiconductor technology has increased dramatically for the last
fifteen years. With each new generation of technology came a new
set of design challenges. While it was possible to successfully
design a high-end ASIC two to three years ago with average design
tools, this is no longer the case. Complex ASIC design now
requires an integrated suite of advanced tools and design
methodologies which consider both the logical and physical
aspects of the design.
Viewlogic's ASIC Group develops state-of-the-art software
and methodologies required to design today's most complex ASIC's.
Viewlogic today offers some of the leading products used in the
complex ASIC design flow process. These products include the
Chronologic VCS(TM) simulator, Quad Motive(TM) static timing analyzer
and Sunrise TestGen(TM) design-for-test tool. In 1996, the Company
initiated the ASIC 2000 Project which will combine the Company's
best-in-class tools with strategic third-party tools and support
from leading ASIC vendors. The project is designed to address the
new challenges of deep sub-micron silicon technology, which
require designers to consider the co-dependencies of the logical
and physical implementation of the design process. Most of the
ASIC Group's products operate on the Windows NT and UNIX
operating systems.
SYSTEMS GROUP
The Systems Group develops products and services which
enable the design of FPGA's, PCB's, and complete electronic
systems. This group also develops much of the Company's
integration technology, such as data storage mechanisms, design
management and interoperability technology, which is required to
produce complete solutions. The Systems Group develops and
supports complete solutions for the Windows NT and UNIX operating
systems.
The FPGA market has traditionally been very strong for
Viewlogic. In the early 1990's, the Company established strategic
relationships with many of the leading FPGA vendors under which
the vendors licensed and shipped Viewlogic design software as
part of an original equipment manufacturer (OEM) relationship to
offer a complete solution. The vendors added their placement and
routing software which allowed users to create an optimal
physical implementation. These relationships created a customer
base to which the Company may sell other, complementary software.
The FPGA market is currently going though significant
change. Driven by the same silicon manufacturing advances seen in
the ASIC market, the density of FPGA's has grown significantly
over the past few
2
<PAGE>
years. Devices with 100,0000 gates of available logic are now being
shipped requiring changes in design methodology similar to those
seen in ASIC more than five years ago.
The PCB market is undergoing significant change as well. The
speed of PCBs is increasing rapidly and the number of components
on the board is decreasing due to the use of more ASIC's and
FPGA's. The PCB design problem has changed from one of verifying
the logic design to making sure that the interconnect between
components meets rigid timing and physical constraints. To
address these problems, Viewlogic introduced ISIS(TM) in 1996. ISIS
is a suite of tools, including Viewlogic's Quad XTK(TM) and Prevue(TM)
high speed board analysis technology, for electronic design
engineers involved in high speed PCB and systems design. ISIS
provides the tools needed to concurrently design both high speed
logic and PCB interconnect.
The traditional offering of the Systems Group is solutions
optimized for the Computer Aided Engineering (CAE) portion of the
board design process. This includes design entry and analysis,
simulation, library and data management and interfaces to
physical design implementation. This is where at least 50% of the
board design process takes place. Viewlogic offers two product
lines targeted at this segment: Powerview(R) and Workview Office(R).
The Powerview product family consists of a broad range of tools
integrated into a comprehensive CAE solution and is based on an
open, standards-based environment. Powerview operates on the UNIX
operating system and most major industry hardware platforms.
Workview Office was introduced in December 1995 and is
targeted at providing a comprehensive CAE solution operable on
the rapidly growing Windows NT operating systems. Workview
Office combines UNIX-level performance with substantially
improved levels of tool interoperability on the PC platform.
Significant advancements in Personal Computer (PC) performance
together with new capabilities and robustness of the NT operating
system have made PC/ NT the operating platform of choice for many
customers. In fact, market research predicts that the PC-based
EDA market will reach $400 million by the year 2000. As in the
Powerview product line, Workview Office combines Viewlogic's
advanced technology into complete solutions which run on the PC.
The Company believes it is well positioned to take advantage of
the rapid growth in this market.
SOFTWARE GROUP
Viewlogic's Software Group was founded in October 1996 and
strengthened in February of 1997 with the acquisition of Eagle
Design Automation ("Eagle"). Eagle was the first company to
deliver hardware (HW)/ software (SW) co-verification solutions
and continues to be a leader in this technology. HW/ SW co-
verification is the process of simulating the HW and SW component
of the electronic system together, before developing a prototype.
The group's charter is to provide tools, services and integration
to shorten the development time of embedded systems through HW/
SW co-development. The term embedded systems describes electronic
designs, either boards or ICs, which include a microprocessor or
microcontroller. With the growing software component in embedded
systems and the growing size of software programs, HW/ SW
integration is becoming a larger part of the overall design
cycle. An estimated 50% of the overall embedded systems design
time is spent in HW/ SW design and debug, and prototype debug.
Hardware and software development is becoming more interdependent
making it necessary to consider the interaction earlier in the
design cycle. This problem is expected to worsen with the
migration toward 32 bit and 64 bit embedded processors.
Another emerging trend in embedded systems is the use of
embedded processors in system ASIC's. System Level Integration
(SLI) ASIC's, as market research firm (Dataquest) refers to them,
are defined as an ASIC which includes 100,000 gates of logic,
memory and at least one processor. Dataquest predicts that the
SLI market will reach $14 billion by the year 2000. When a
processor is embedded within the ASIC, designers must perform HW/
SW co-development. The high dollar cost of multiple SLI
iterations, in addition to the time to market penalty, will make
hardware/ software co-verification of system level ASIC's
essential. Viewlogic believes this is a very strategic technology
for the Company. Major products developed by the Software Group
include Eaglei(TM) which is used for full system integration testing
and EagleV(TM) which is used for verification of embedded processors
within an ASIC.
ADVANCED DEVELOPMENT GROUP
Viewlogic's Advanced Development Group was formed in October
of 1996. It is chartered with investigating which new
technologies will be required in the next two to five years and
then performing the initial technical feasibility study and
preliminary research and development. The Advanced Development
Group is not charged with specific product development and
delivery, but is responsible for developing algorithms and new
3
<PAGE>
technology. These technologies will then be incorporated into new
products developed and supported by the Company's product groups.
The Advanced Development Group does primary research onsite and
also works with leading research groups and individuals within
academia and industry.
PRODUCT PACKAGING, LICENSING AND PRICING
The Company generally licenses its products for use on a
single computer or for network use for a one-time fee. The end-
user license fee depends on the exact configuration and features
selected by the customer. The Company offers individual tools and
solution packages specifically tailored for each of several
electronic design categories including ASIC, FPGA, PCB, system
and software design. For UNIX-based systems, each of these
solutions bundles the design framework with a collection of tools
and library support, targeted at solving a particular design
problem.
A range of capabilities is offered from basic design entry
to advanced solutions packages for sophisticated design needs.
For example, Powerview pricing ranges from $12,000 to $150,000
for packages. Workview Office pricing ranges from $2,000 to
$55,000. Motive and XTK pricing on Unix Workstations range from
$24,000 to $55,000. TestGen licenses for a single computer range
from $95,000 to $150,000. Prices for the Chronologic VCS
Simulator range from $20,000 to $40,000.
SALES
Viewlogic has developed multiple distribution channels,
including a direct sales organization, telesales, independent
distributors, VARs, and strategic sales alliances with certain
significant semiconductor and PCB layout software vendors.
DIRECT SALES ORGANIZATION - The Company markets its products
in North America, Europe and Japan primarily through a direct
sales organization, which consisted of 222 salespersons and
applications engineers as of February 28, 1997. The Company
currently has 29 sales offices located throughout North America,
Europe, Japan, India and the Far East.
Direct sales teams, consisting of one salesperson and one
applications engineer, focus on large accounts in assigned
territories. These sales teams are responsible for all sales
activities within their assigned territories and coordinate the
activities of distributors, VARs and Silicon Design Alliance
(SDA) and PCB Design Alliance (PDA) partners. Applications
engineers specializing in certain products are assigned to each
sales territory and support individual sales teams. Each member
of the Company's direct sales and support teams is assigned sales
quotas and has a significant portion of his or her compensation
based on sales performance. Approximately 50% and 30% of expected
compensation for salespersons and application engineers,
respectively, is typically based on sales performance.
A Telesales channel was established in 1993 to complement
the sales activities of the direct sales organization and the
North American based VAR channel. The telesales channel consists
of telesales representatives covering assigned geographic
territories in North America. These representatives are an inside
counterpart to the field, focusing on upgrading and servicing the
installed customer base. They provide sales support for renewal
maintenance, handle all sales operations of Viewlogic's
University Program and otherwise upgrade existing customers by
selling additional seats and "after market" components.
Approximately 45% of expected compensation for a telesales
representative is based on sales performance.
DISTRIBUTORS - Viewlogic appoints independent distributors to
market its products to customers not served by the Company's
direct sales organization. Viewlogic uses distributors as its
principal distribution channel in much of Asia, and currently has
distributors covering Israel, Taiwan, Korea, Australia,
Singapore, China and India. Distributors are also appointed in
the United States, Japan and Europe to supplement the Company's
direct sales efforts by focusing on customers not served by
direct sales teams.
VAR - The Company has established a broad-based VAR
distribution network. This group primarily focuses on selling
Viewlogic's Workview Office tools to the small and medium size
accounts of electronic engineers in North America.
STRATEGIC SALES ALLIANCES - Viewlogic has established
strategic relationships with certain significant semiconductor
suppliers who resell Viewlogic products along with their own
proprietary design kits as part of Viewlogic's SDA. These
partners include Actel Corporation, Altera Inc., Motorola Inc.,
Xilinx Inc., American Telephone & Telegraph Company, Atmel, NEC
Corporation, Lattice Semiconductor Corporation and Matsushita
4
<PAGE>
Electric Corporation. The Company believes that the SDA program
has allowed Workview Office to become widely used in the FPGA
design area. The SDA program has also facilitated the creation of
a significant installed base of the Company's products by
utilizing the sales organizations of the Company's partners, many
of which have greater sales and marketing resources than
Viewlogic. Viewlogic has established a similar alliance called
Viewlogic's PDA, with certain major PCB CAD companies, including
Harris EDA, Inc. and Zuken-Redac Ltd., who resell a range of
Viewlogic products along with their CAD design tools.
Additionally, Viewlogic is an OEM supplier to PADs Software and
Anacad, a subsidiary of Mentor Graphics. The Anacad partnership
also includes Viewlogic supplying its VCS Verilog simulator to
Anacad. Certain Quad products are resold on an OEM basis through
Intergraph Corporation, Racal-Redac and Mentor Graphics who sell
these tools in conjunction with their own design automation
solutions.
PRODUCT DEVELOPMENT
The Company's product development efforts are focused on
enhancing and broadening its current line of products, including
the development of new products and the release of improved
versions of existing products on a regular basis. Most of the
Company's new products to date have represented the evolution of
its core Workview Office and Powerview product lines, plus
ongoing developments leveraging resources and technologies gained
in recent acquisitions and partnerships. The Company also
maintains research programs in a number of advanced technical
areas including logic synthesis, simulation technology, VHDL
simulation, timing analysis, signal integrity, test, database
development and frameworks, which may generate future EDA
software products and consulting services. As of February 28,
1997, the Company's product development and customer support
staff consisted of 276 persons. The Company's product development
staff receives support from both the Company's engineering
services personnel and its product and industry marketing
organization to enable it to develop products that satisfy market
requirements.
The Company maintains cooperative relationships with most
major hardware vendors on which the Company's products operate,
as well as with new hardware vendors who desire the Company to
port its products to their systems. Viewlogic believes that these
relationships allow it to design products that respond to
emerging trends in computing, graphics and networking
technologies. In certain instances, these relationships include
joint marketing agreements which primarily outline a procedure
for communication between Viewlogic and the vendor with respect
to technology and possible sales leads.
During 1994, 1995 and 1996 Viewlogic's research and
development expenses were $20,255,000, $22,644,000, and
$27,412,000, respectively. The Company believes that it must
continue to commit substantial resources to enhance and extend
its product line to remain competitive. The Company intends to
continue to devote substantial resources to its internally-funded
product development and, if appropriate, to enter into
development agreements with third-parties.
SERVICE AND SUPPORT
A key part of Viewlogic's strategy to help make its
customers successful is to provide a wide range of support
services including on-site and hot-line support for designers, in-
house and on-site training on all products and consulting
services for specialized tool development, tool and methodology
training and design work. The Company believes its focus on
customer service has helped it achieve a high degree of customer
satisfaction.
Product support is provided pursuant to maintenance
agreements which extend for one year after the expiration of the
product warranty, which is generally thirty days, and are
renewable annually thereafter. The annual standard maintenance
fee charged to end-user customers is currently 15% of the then-
current list price for the product. The Company's distributors
and strategic sales partners charge their end-user customers for
maintenance and remit a negotiated portion to the Company.
Historically, approximately 80% of Viewlogic's customers have
renewed their maintenance agreements annually. Training and
consulting services are generally not included in the Company's
software license or maintenance fees and are usually provided on
a separately negotiated basis.
PRODUCT REVISIONS AND UPGRADES - Customers with maintenance
agreements receive all product revisions without additional
charge. Product upgrades, which add significant new product
functionality, are provided to customers for a fee equal to the
difference between the list price for such upgrade and the
license fee previously paid by the customer for the applicable
product. Viewlogic also provides a credit to customers of its SDA
and PDA partners, who desire to upgrade to full-functionality
Workview Office or Powerview systems.
5
<PAGE>
ON-SITE AND HOT LINE SUPPORT - Support is available to the
Company's software users on both a pre- and post-sale basis.
Application engineers work directly with the Company's direct
sales force to provide on-site support that is often needed
during critical stages of the user's evaluation and design
process.
The majority of the Company's customers requiring support
contact the Company through Viewlogic's toll-free hot-lines,
which put users directly in touch with engineers who are
knowledgeable in the use of the product. Support is available
from 8:30 a.m. to 8:00 p.m. eastern time, Monday through Friday.
In addition to the Viewlogic hot-line, questions or suggestions
can be submitted by fax, an electronic bulletin board or the
Internet network mail system.
In addition, post-sales product application support is
provided to customers through a series of automated support
channels:
- - quarterly Technical Support Newsletter providing answers to
common questions,
- - electronic bulletin board system providing a forum for
exchanging data and ideas and
- - fax-on-demand system enabling customers to retrieve faxes of
technical application notes.
An automatic call distribution system transparently connects
North American support-callers with technical support engineers
based in Marlboro, Massachusetts and Fremont, California.
Additionally, technical support engineers based in Massachusetts,
California, the United Kingdom and Japan have immediate access to
shared, problem-solving technical information via a sophisticated
on-line software support system.
CUSTOMER TRAINING - The Company offers a variety of training
programs for users ranging from introductory, broad-based courses
to advanced and specialized courses. Training is offered at the
Company's facilities in Marlboro, Massachusetts, Fremont,
California, London, Tokyo, Marseilles and Munich. On-site
training is also available.
VIEWLOGIC CONSULTING SERVICES - The Viewlogic Consulting
Services Group (VCSG) is a global consulting organization staffed
by experts in electronic design. VCSG's goal is to meet the
diverse and demanding needs of customers designing today's
complex IC's, boards, and systems. VCSG provides a complete line
of consulting services including training, product jumpstart
programs, methodology assessment and re-engineering, custom
software development and partial or full design implementation.
Other specialized services include systems integration, design
database translation, and custom library development.
CUSTOMERS
Over 51,000 Viewlogic systems have been sold to
approximately 3,500 companies. End-users of the Company's
products range from small companies to some of the world's
largest manufacturing organizations. Industries represented
include computers, consumer electronics, semi-conductors,
telecommunications, military/ defense, aerospace, industrial,
medical equipment and universities.
COMPETITION
The EDA software industry is highly competitive and is
characterized by rapidly advancing technology. In order to
maintain or improve its position in this industry, the Company
must enhance its current products continually and develop and
introduce new products which address the rapidly changing needs
of the marketplace.
The Company's competitors consist of large companies, many
of which have greater market share and substantially greater
financial and other resources than the Company; emerging
companies with new and innovative technology; and customers who
develop their own EDA tools.
The Company believes that it competes effectively in the EDA
market on the basis of product functionality, price/performance
characteristics, product portability, ease of product use and
support services. However, there can be no assurance that the
Company will be able to continue to compete effectively in the
EDA market or that its profitability or financial performance
will not be adversely affected by increased competition.
PROPRIETARY RIGHTS
The Company relies on a combination of contracts, patents,
copyright and trade secret law to establish and protect
proprietary rights in its technology. The Company licenses and
distributes its products under written
6
<PAGE>
agreements providing for non-exclusive licenses. The licensed
software may be used solely for internal operations on designated
computers at specified sites. The source code of the Company's
products is protected both as a trade secret and as an unpublished
copyrighted work and is not made available to third-parties. Despite
these precautions, it may be possible to unlawfully copy or otherwise
obtain and use the Company's products or technology without
authorization.
The Company believes that, due to the rapid pace of
innovation within the CAE software industry, factors such as the
technological and creative skills of its personnel are more
important to establishing and maintaining a technology leadership
position than are the various legal protections of its
technology.
The Company currently has two patents and six pending patent
applications.
The Company has registered Viewlogic, Powerview, Workview
Office, ViewScript, ViewPLD, ViewDraw, ViewBase, ViewPlace,
ViewFPGA, ViewSynthesis, ViewFlow, WorkviewPLUS and other
trademarks in the United States and in various foreign countries.
The Company's United States trademark registrations have terms of
ten to twenty years and are renewable indefinitely for additional
ten-year terms so long as the Company continues to use the
trademarks subject to such registrations. The Company also
asserts common law trademark protection for certain of its
products.
BACKLOG
The Company generally ships its products within 30 days
after acceptance of a customer purchase order and execution of a
license agreement. Accordingly, the Company does not believe that
its backlog at any particular point in time is indicative of
future sales levels.
EMPLOYEES
As of February 28, 1997, the Company had 693 employees,
including 280 in marketing and sales, 207 in product research and
development, 115 in customer support, consulting and training, 24
in manufacturing and sales administration and 67 in general and
administrative activities. None of the Company's employees is
represented by a labor union or is subject to a collective
bargaining agreement. The Company has never experienced a work
stoppage and believes that its employee relations are excellent.
EXECUTIVE OFFICERS OF THE REGISTRANT
The current Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <S>
Alain J. Hanover 48 Chairman of the Board of Directors
William J. Herman 37 President, Chief Executive Officer and Director
David A. Adey 50 Vice President, Human Resources
Ronald R. Benanto 48 Senior Vice President of Finance, Chief
Financial Officer and Treasurer
David P. Burow 44 Group Vice President, ASIC Group
Gordon B. Hoffman 53 Group Vice President, Software Group and Director
Peter T. Johnson 49 Vice President, General Counsel and Secretary
Harold E. Julsen 56 Senior Vice President of World-wide Sales
Richard G. Lucier 37 Group Vice President, Systems Group
Lawrence M. Rubin 43 Group Vice President, Advanced Development Group
Shiv Tasker 37 Senior Vice President, Corporate Marketing and
Consulting Services
</TABLE>
7
<PAGE>
Mr. Hanover, a founder of the Company, has served as
Chairman of the Board of the Company since its organization in
October l984. He served as the Company's Chief Executive Officer
from its organization to January 1997 and as President from its
organization to January 1996. From February 1980 to September
1984, he was the Manager of the VLSI Advanced Development Group
at Digital Equipment Corporation. On January 30, 1997, Mr.
Hanover announced his resignation as Chairman of the Board,
effective May 13, 1997.
Mr. Herman, a founder of the Company, has served as the
President and Chief Executive Officer since January 1997, as
President and Chief Operating Officer of the Company from January
1996 to January 1997 and as Executive Vice President and Chief
Operating Officer of the Company from March 1995 to January 1996.
He previously served as Senior Vice President of Engineering of
the Company from May 1991 to November 1992 and as Vice President
of Engineering of the Company from 1988 to 1991. From February
1994 to March 1995, Mr. Herman was President of Silerity, Inc., a
computer-aided engineering software company. Mr. Herman served as
President of Scopus Technology, Inc., a computer software
company, from 1992 to February 1994.
Mr. Adey joined Viewlogic in April 1996 as Vice President,
Human Resources. Previously, he served for 8 years as Senior Vice
President, Administration at LTX Corporation, an automatic test
equipment company, where he was responsible for worldwide Human
Resources, Management Information Systems, and Facilities. From
1978 through 1988, Mr. Adey was Corporate Vice President, Human
Resources for M/A-Com Inc, a global telecommunications company.
He has also held Human Resources positions in Digital Equipment
Corporation and Bethlehem Steel Corporation.
Mr. Benanto joined Viewlogic as Senior Vice President of
Finance, Chief Financial Officer and Treasurer in October 1991.
Previously, he served for three years as Vice President, Finance
and Operations and Chief Financial Officer at Symbolics, Inc., an
artificial intelligence company. During 1988, Mr. Benanto was the
President, Chief Executive Officer and Chief Financial Officer of
Infoplus, Inc., an electronic publishing company. From September
1985 through January 1988 he served as Senior Vice President,
Finance and Administration, and Chief Financial Officer of Data
Architects, Inc., a financial services software company.
Mr. Burow has served as Group Vice President of the
Company's ASIC Group since October 1996. He joined Viewlogic in
August 1995 as the Group Vice President of the High Level Design
Group from the Silicon Architects Group of Synopsys. Prior to the
acquisition by Synopsys in May 1995, he served in several key
management roles from October 1991 at Silicon Architects, a
company that offered ASIC design technology, including its own
EDA tools and libraries. Preceding Silicon Architects, Mr. Burow
held other management positions within the EDA and semiconductor
industries including: President of CrossCheck, a test company
from August 1989 to July 1991; General Manager of the Analog
Division at Dazix; and President of Simucad, Inc., a simulation
company.
Mr. Hoffman joined Viewlogic in February 1997 as Group Vice
President of the Software Group with the acquisition of Eagle,
which he co-founded in 1994 and served as President and CEO. He
has also served as a Director of Viewlogic since 1992. Prior to
founding Eagle, he was a Partner in Technologies and Transitions
Corp., a consulting firm, from 1991 to 1994. Previously he was
Director of Systems Engineering Programs for Mentor Graphics,
which he joined in 1987 with the acquisition of Caedent
Corporation, where he was founder, CEO, and President from 1985
to 1987. Prior to this position he served in senior management
roles at United Technologies Corporation and Mostek Corporation
over a 13-year period.
Mr. Johnson joined Viewlogic in June 1995 as Vice President
and General Counsel. From June 1993 to February 1995 he served
as General Counsel and Secretary at Phoenix Technologies LTD.
Mr. Johnson was the General Counsel and Vice President of Finance
and Administration at Bitstream, Inc., a software company, from
1988 to 1993.
Mr. Julsen joined Viewlogic in October 1995 as Senior Vice
President of World-wide Sales. Prior to joining Viewlogic, he
served as Senior Vice President of Sales from September 1993 to
1995 at Frame Technology Corporation. From 1988 to 1993 Mr.
Julsen was Senior Vice President of Sales and Marketing at Iomega
Corporation.
Mr. Lucier joined Viewlogic in 1986 and has held the
position of Group Vice President of the Systems Group since
October 1996. From January 1995 to October 1996 he served as the
Group Vice President of the PC Group. From 1986 to 1995 he has
held numerous positions within Viewlogic including Vice President
of Product Engineering, Director of Viewlogic's Consulting
Services Group, Product Marketing Manager and Engineering Manager
of the Systems and Core groups.
8
<PAGE>
Mr. Rubin has served as Group Vice President of the
Company's Advanced Development Group since October 1996.
Previously he served as Group Vice President of the Quad Design
Group. He joined the Company after its 1993 acquisition of Quad
Design Technology, Inc. where he was a founder and its president
since its inception in 1987.
Mr Tasker joined Viewlogic in May 1996 as Senior Vice
President of Corporate Marketing. He was also appointed Senior
Vice President of Consulting Services in October 1996. Before
joining Viewlogic, he held various management positions at
Cadence Design Systems, Inc. from 1991 to 1996, including Vice
President - Practice Development, Vice President and General
Manager, Systems Group and Vice President, Marketing System
Design Division. Prior to that he held various marketing
positions at Valid Logic Systems, Inc. from 1988 to 1991, before
Valid was acquired by Cadence. Previously, he worked for
Intergraph Corporation from 1982 to 1988 in various engineering
and marketing roles.
ITEM 2. PROPERTIES.
The Company occupies 101,634 square feet of space at its
headquarters in Marlboro, Massachusetts under a lease expiring in
2002, subject to the Company's right to extend for up to six
additional years. The Company also leases 57,567 square feet in
Fremont, California for its ASIC Group, 10,547 square feet in
Cupertino, California for its Chronologic subsidiary, 16,965
square feet in San Jose, California for its Western Sales
operations, 21,000 square feet in Camarillo, California for the
Advanced Development Group, 13,829 square feet of office space in
the United Kingdom, 9,800 square feet in India and a number of
small sales and support offices in 27 additional locations in
North America, Europe and Asia.
ITEM 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of
the Company, through solicitation of proxies or otherwise, during
the last quarter of the fiscal year ended December 31, 1996.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Common Stock of Viewlogic Systems, Inc. has been traded
on the Nasdaq National Market System under the symbol of VIEW
since December 17, 1991. Prior to December 17, 1991, the
Company's Common Stock was not publicly traded. On March 19,
1997, the closing price of the Company's Common Stock as reported
on the Nasdaq National Market System was $15.50 per share. The
following table sets forth, for the periods indicated, the high
and low closing sales prices per share of the Common Stock as
reported by the Nasdaq National Market System.
<TABLE>
<CAPTION>
l996
-----------------
High Low
---- ---
<S> <C> <C>
Fourth Quarter.......... $11.50 $ 8.63
Third Quarter........... $14.50 $10.50
Second Quarter.......... $17.23 $11.63
First Quarter.......... $11.25 $ 9.63
<CAPTION>
l995
-----------------
High Low
---- ---
<S> <C> <C>
Fourth Quarter.......... $13.50 $ 9.75
Third Quarter........... $15.13 $11.75
Second Quarter.......... $13.38 $ 8.56
First Quarter.......... $10.63 $ 8.00
</TABLE>
On March 19, 1997, the Company had approximately 735
stockholders of record. The Company has never paid dividends on
its Common Stock. The Company currently intends to reinvest its
earnings for use in the business and does not expect to pay cash
dividends in the foreseeable future.
ITEMS 6-8.
The information required for Items 6-8 in this Annual Report
on Form 10-K is incorporated by reference from the Company's
Annual Report to Stockholders for the year ended December 31,
1996, which is appended to this Annual Report on Form 10-K. Such
information contained in the Annual Report to Stockholders is
under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Consolidated
Financial Statements", "Selected Quarterly Financial Data" and
"Five-Year Summary of Selected Financial Data".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
10
<PAGE>
PART III
ITEMS 10-13.
The information required for Part III in this Annual Report
on Form 10-K is incorporated by reference from the Company's
definitive proxy statement for the Company's 1997 Annual Meeting
of Stockholders. Such information is contained in the sections of
such proxy statement captioned "Election of Directors", "Board
and Committee Meetings", "Compensation of Executive Officers",
"Compensation of Directors", "Stock Ownership of Certain
Beneficial Owners and Management", "Compliance with Section 16
Reporting Requirements" and "Certain Transactions". Information
regarding executive officers of the Company is also furnished in
Part I of this Annual Report on Form 10-K under the heading
"Executive Officers of the Registrant".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) The following documents are included as part of this Annual
Report on Form 10-K or are incorporated by reference from the
Company's 1996 Annual Report to Stockholders.
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. The following financial statements (and related
notes) of the Company are incorporated by
reference from the Company's 1996 Annual Report
to Stockholders.
Consolidated Balance Sheets at December 31,1996 17*
and 1995
Consolidated Statements of Operations for the 18*
Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for 19*
the Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the 20*
Years Ended December 31, 1996, 1995 and 1994
Notes to the Consolidated Financial Statements 21*
Independent Auditors' Report 29*
* Refers to page number of 1996 Annual Report to Stockholders
2. The Schedule listed below and the Independent
Auditors' Report are filed as part of this Annual
Report on 10-K.
(i) Independent Auditors' Report S-1
(ii) Schedule VIII - Valuation and Qualifying Accounts S-2
3. All other schedules are omitted as the information
required is inapplicable or the information is
presented in the consolidated financial statements
or the related notes.
4. The Exhibits listed in the Exhibit Index immediately
preceding the Exhibits are filed as a part of this
Annual Report on Form 10-K.
</TABLE>
11
<PAGE>
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last
quarter of 1996.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------- -------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amendment to the Restated Certificate of Incorporation
of the Company.
3.3 Amended and Restated By-Laws of the Company.
4 Specimen Certificate of Common Stock of the Company.
10.1 1991 Restated Stock Option Plan.
10.2 Amendment to 1991 Restated Stock Option Plan.
10.3 1991 Outside Directors' Stock Option Plan.
10.4 Office Lease Standard Form dated November 16, 1989
between Rosewood III Associates Limited Partnership
and the Company, First Lease Amendment thereto dated
June 15, 1990 and Second Lease Amendment thereto,
dated August 22, 1991.
10.5 Third Lease Amendment dated October 30, 1991 and Fourth
Lease Amendment dated September 17, 1993 to the Office
Lease Standard Form dated November 16, 1989 between
Rosewood III Associates Limited Partnership and the
Company, as amended.
10.6 Investment Agreement by and among the Company, Transitions
Three, Limited Partnership, Eagle Design Automation, Inc.,
Gordon B. Hoffman and Geoffrey J. Bunza, dated
December 6, 1994.
10.7 Shareholders' Agreement by and among the Company,
Transitions Three, Limited Partnership, Eagle Design
Automation, Inc., Gordon B. Hoffman and Geoffrey J.
Bunza, dated December 6, 1994.
10.8 Fifth Lease Amendment dated February 7, 1995 and Sixth
Lease Amendment dated February 13, 1996 to the Office Lease
Standard Form dated November 16, 1989 between Rosewood III
Associates Limited Partnership and the Company, as amended.
10.9 1996 Outside Director's Stock Option Plan.
10.10 1996 Employee Stock Purchase Plan.
10.11 Stock Purchase Agreement among the Company, Silerity, Inc.,
and the Stockholders of Silerity, Inc, dated March 27, 1995
and the Amendment to that Stock Purchase Agreement dated
December 15, 1995.
12
<PAGE>
10.12 Revolving Credit Agreement dated as of March 1, 1996 between
Silicon Valley Bank and the Company.
10.13 Agreement by and among the Company, Eagle Design Automation,
Inc. ("Eagle"), Transitions Three, Limited Partnership and
certain of the shareholders of Eagle, dated as of
December 17, 1996.
10.14 Stock Purchase Agreement by and among the Company, Eagle
Design Automation, Inc. ("Eagle") and all of the
shareholders of Eagle, dated as of February 19, 1997.
10.15 Seventh Lease Amendment dated October 30, 1996 to the
Office Lease Standard Form dated November 16, 1989 between
Rosewood III Associates Limited Partnership and the Company,
as amended.
11 Statement regarding computations of per share earnings.
13 Annual Report to Stockholders for the year ended
December 31, 1996 which shall not be deemed to be
"filed" except for portions expressly incorporated
herein by reference.
21 Subsidiaries of the Company.
23 Independent Auditors' Consent.
27 Financial Data Schedule.
</TABLE>
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VIEWLOGIC SYSTEMS, INC.
By: /s/ William J. Herman
----------------------
William J. Herman
President and
Chief Executive Officer
Date: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<C> <S> ) <C>
/s/ William J. Herman President, Chief Executive )
- --------------------- Officer and Director )
William J. Herman (principal executive officer) )
)
/s/ Ronald R. Benanto Senior Vice President of Finance,)
- --------------------- Chief Financial Officer and )
Ronald R. Benanto Treasurer (principal financial )
and accounting officer) )
) March 28, 1997
/s/ Alain J. Hanover Chairman of the Board )
- -------------------- )
Alain J. Hanover )
)
/s/ Gregory T. George Director )
- --------------------- )
Gregory T. George )
)
/s/ Gordon B. Hoffman Director )
- --------------------- )
Gordon B. Hoffman )
)
/s/ Larry E. Reeder Director )
- ------------------- )
Larry E. Reeder )
)
/s/ Gregory A. White Director )
- -------------------- )
Gregory A. White )
)
/s/Allyn C. Woodward,Jr. Director )
- ------------------------ )
Allyn C. Woodward, Jr. )
</TABLE>
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Viewlogic Systems, Inc.
Marlboro, Massachusetts
We have audited the consolidated financial statements of Viewlogic Systems,
Inc. as of December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996 and have issued our report thereon dated
January 29, 1997 (February 19, 1997 as to the second paragraph of Note 3);
such consolidated financial statements and report are included in your 1996
Annual Report to stockholders and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of
Viewlogic Systems, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth herein.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
January 29, 1997
S-1
15
<PAGE>
Schedule II
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Allowance for
doubtful
accounts $ 716 $1,803 $(1,657)(a) $ 862
------ ------ ----------- ------
1995
Allowance for
doubtful
accounts $ 862 $ 589 $ (236)(a) $1,215
------ ------ ----------- ------
1996
Allowance for
doubtful
accounts $1,215 $ 372 $ (84)(a) $1,503
------ ------ ----------- ------
<FN>
(a) Represents amounts written off.
</TABLE>
S-2
16
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------------ ------------------------------------ ----
<C> <S> <C>
3.1(1) Restated Certificate of Incorporation of the Company. --
3.2(2) Amendment to the Restated Certificate of Incorporation --
of the Company.
3.3(3) Amended and Restated By-Laws of the Company. --
4(3) Specimen Certificate of Common Stock of the Company. --
*10.1(3) 1991 Restated Stock Option Plan. --
*10.2(4) Amendment to 1991 Restated Stock Option Plan. --
*10.3(3) 1991 Outside Directors' Stock Option Plan. --
10.4(3) Office Lease Standard Form dated November 16, 1989
between Rosewood III Associates Limited Partnership
and the Company, First Lease Amendment thereto dated
June 15, 1990 and Second Lease Amendment thereto,
dated August 22, 1991. --
10.5(2) Third Lease Amendment dated October 30, 1991 and
Fourth Lease Amendment dated September 17, 1993 to
the Office Lease Standard Form dated November 16,
1989 between Rosewood III Associates Limited
Partnership and the Company, as amended. --
10.6(4) Investment Agreement by and among the Company,
Transitions Three, Limited Partnership, Eagle Design
Automation, Inc., Gordon B. Hoffman and Geoffrey J.
Bunza, dated December 6, 1994. --
10.7(4) Shareholders' Agreement by and among the Company,
Transitions Three, Limited Partnership, Eagle Design
Automation, Inc., Gordon B. Hoffman and Geoffrey J.
Bunza, dated December 6, 1994. --
10.8(5) Fifth Lease Amendment dated February 7, 1995 and
Sixth Lease Amendment dated February 13, 1996 to the
Office Lease Standard Form dated November 16, 1989
between Rosewood III Associates Limited Partnership
and the Company, as amended. --
*10.9(5) 1996 Outside Director's Stock Option Plan. --
*10.10(5) 1996 Employee Stock Purchase Plan. --
10.11(5) Stock Purchase Agreement among the Company, Silerity,
Inc., and the Stockholders of Silerity, Inc, dated
March 27, 1995 and the Amendment to that Stock
Purchase Agreement dated December 15, 1995. --
17
<PAGE>
10.12(5) Revolving Credit Agreement dated as of March 1,
1996 between Silicon Valley Bank and the Company. --
10.13(6) Agreement by and among the Company, Eagle Design
Automation, Inc. ("Eagle"), Transitions Three,
Limited Partnership and certain of the shareholders
of Eagle, dated as of December 17, 1996. --
10.14(6) Stock Purchase Agreement by and among the Company,
Eagle Design Automation, Inc. ("Eagle") and all of
the shareholders of Eagle, dated as of
February 19, 1997. --
10.15 Seventh Lease Amendment dated October 30, 1996 to
the Office Lease Standard Form dated November 16,
1989 between Rosewood III Associates Limited
Partnership and the Company, as amended. 19
11 Statement regarding computations of per share
earnings. 22
13 Annual Report to Stockholders for the year ended
December 31, 1996 which shall not be deemed to be
"filed" except for portions expressly incorporated
herein by reference. 23
21 Subsidiaries of the Company. 59
23 Independent Auditors' Consent. 60
27(7) Financial Data Schedule. --
- ------------
<FN>
(1) Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.
(2) Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
(3) Incorporated herein by reference to the Company's Registration
Statement on Form S-1 (File No. 33-43668).
(4) Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
(5) Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
(6) Incorporated herein by reference to the Company's Current Report
on Form 8-K filed on March 5, 1997.
(7) In electronic version only.
* Management Contract or Compensatory Plan or arrangement filed as
an exhibit to this Form 10-K pursuant to Items 14(a) and 14(c)
of Form 10-K.
</TABLE>
18
<PAGE>
Exhibit 10.15
SEVENTH LEASE AMENDMENT
-----------------------
Agreement made this 28th day of October, 1996 by and between
Rosewood III Associates, L.P., with mailing address at 293 Boston
Post Road West, Suite 320, Marlborough, Massachusetts, 01752
(hereinafter referred to as "Landlord") and Viewlogic Systems,
Inc., with a principal place of business at 293 Boston Post Road
West, Marlborough, Massachusetts, 01752, (hereinafter referred to
as "Tenant").
WHEREAS, Landlord and Tenant have entered into a certain lease
dated November 16, 1989 and subsequent Amendments dated June 15,
1990, August 22, 1991, October 30, 1991, September 17, 1993,
February 7, 1995, February 12, 1996 (hereinafter referred to as
the "Lease") relating to a certain space at 293 Boston Post Road
West, Marlborough, Massachusetts, 01752.
WHEREAS, Landlord and Tenant have agreed to modify and amend the
Lease by modifying the Annual Fixed Rent and to make such other
modifications and amendments to the Lease as may be necessary,
all as more fully set forth hereinbelow, which modifications and
amendments shall be effective as of November 1, 1996.
NOW THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, Landlord and
Tenant hereby agree as follows:
Section 1.01 of said Article 1 is hereby further modified and
amended by deleting therefrom the dates "February 12, 1990 to
February 28, 2000" set forth in the subsection thereof entitled
(Term) and by substituting therefor the dates "February 12, 1990
to October 31, 2002".
Landlord and Tenant hereby agree that except as hereinabove
specifically modified and amended, the Lease is and shall remain
in full force and effect in accordance with the terms and
provisions set forth in the Lease.
IN WITNESS WHEREOF. Landlord and Tenant have duly executed the
Seventh Lease Amendment under seal as of the 30th day of October,
1996.
LANDLORD: TENANT:
Rosewood III Associates, L.P. Viewlogic Systems, Inc
/s/ Robert J. Depietri, Jr. /s/ David Adey
- --------------------------- ------------------
Robert J. Depietri, Jr. David Adey
Its: General Partner Its: Vice President of Human
Resources
19
<PAGE>
VIEWLOGIC
RENT SCHEDULE A
<TABLE>
<CAPTION>
OFFICE OFFICE STORAGE STORAGE
ANNUAL TOTAL ANNUAL TOTAL TOTAL
DATE FIXED MONTHLY FIXED MONTHLY MONTHLY
RENT OFFICE RENT FIXED STORAGE RENT FIXED FIXED
DUE SF P.S.F. RENT SF P.S.F. RENT RENT
- ----- ------ ------ -------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C>
1/1/96 92,340 $16.00 $123,120.00 6,414 $5.00 $2,672.50 $125,792.50
2/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
3/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
4/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
5/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
6/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
7/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
8/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
9/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
10/1/96 92,340 16.00 123,120.00 6,414 5.00 2,672.50 125,792.50
- -----------------------------------------------------------------------------
11/1/96 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
12/1/96 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
1/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
2/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
3/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
4/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
5/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
6/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
7/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
8/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
9/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
10/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
11/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
12/1/97 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
1/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
2/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
3/1/98 95,220 16.00 126,960.00 6,414 5.00 2,672.50 129,632.50
- -----------------------------------------------------------------------------
4/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
5/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
6/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
7/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
8/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
9/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
10/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
11/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
12/1/98 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
1/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
2/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
3/1/99 95,220 16.25 128,943.75 6,414 5.00 2,672.50 131,616.25
- -----------------------------------------------------------------------------
4/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
5/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
6/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
7/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
8/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
9/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
10/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
11/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
12/1/99 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
1/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
2/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
3/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
4/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
20
<PAGE>
5/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
6/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
7/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
8/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
9/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
10/1/2000 95,220 16.50 130,927.50 6,414 5.00 2,672.50 133,600.00
- -----------------------------------------------------------------------------
11/1/2000 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
12/1/2000 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
1/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
2/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
3/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
4/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
5/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
6/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
7/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
8/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
9/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
10/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
11/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
12/1/2001 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
1/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
2/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
3/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
4/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
5/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
6/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
7/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
8/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
9/1/2002 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
10/1/202 95,220 17.00 134,895.00 6,414 5.00 2,672.50 137,567.50
</TABLE>
21
<PAGE>
Exhibit 11
VIEWLOGIC SYSTEMS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average number of
shares outstanding:
Common stock 16,512 16,936 16,973
Common equivalent shares resulting
from stock options and warrants
(treasury stock method) 879 359 483
Less: Repurchased shares (46) (352)
------ ------- -------
Total 17,391 17,249 17,104
====== ======= =======
Net income (loss) $ (6,317) $ 2,861 $11,276
======== ======= =======
Net income (loss) per common share $ (0.36) $ 0.17 $ 0.66
======= ======= =======
</TABLE>
22
<PAGE>
Exhibit 13
WHAT IF...
VIEWLOGIC
SYSTEMS,
INC.
1996
ANNUAL
REPORT
Cover Photo: front portion of an automobile.
23
<PAGE>
<TABLE>
<CAPTION>
Contents
- --------
<S> <C>
EXECUTIVES' LETTER TO STOCKHOLDERS 1
REVIEW OF OPERATIONS 3
FINANCIAL REVIEW 12
COPRORATE INFORMATION 32
</TABLE>
Financial Highlights
- --------------------
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Total revenue $132,919 $120,960
Operating income $ 12,126 $ 6,234
Net income $ 11,276 $ 2,861
Net income per share $ 0.66 $ 0.17
Non-recurring charges $ 6,023
Net income per share excluding
non-recurring charges $ 0.52
Working capital $ 57,241 $ 56,437
Total assets $131,209 $118,983
Stockholders' equity $ 82,474 $ 77,291
- ----------------------------------------------------------------------------
</TABLE>
Graphs depicting the following information:
<TABLE>
<CAPTION>
REVENUES PRE-TAX PROFIT
$ millions $ millions
(before non-recurring items)
<C> <C> <C>
1996 $132.9 $18.3
1995 $121.0 $14.2
1994 $118.6 $17.1
1993 $ 97.9 $20.0
1992 $ 71.0 $12.3
1991 $ 52.0 $ 5.9
1990 $ 36.4 $ 2.1
</TABLE>
24
<PAGE>
TO OUR STOCKHOLDERS
At the beginning of 1996, we set out to achieve a difficult goal:
to shift our primary business focus from Electronic Design Automation
(EDA) for PCB design to EDA for ASIC design. We chose to make this radical
change because the ASIC segment of the market is growing considerably
faster than the PCB segment. We are pleased to report that our transition
has exceeded our internal plans.
Sales of our ASIC solutions on both the NT and UNIX platforms
represented 44 percent of our annual revenues in 1996 compared with
approximately 30 percent in 1995. Year-over-year, our ASIC product revenues
grew 65 percent in 1996, and in the fourth quarter they grew 82 percent
compared with the 1995 fourth quarter. That strong ASIC performance, led by
our high-performance simulation, timing and test solutions, helped to
make the fourth quarter of 1996 the largest sales quarter in Viewlogic's
history.
We obtained significant ASIC vendor endorsement of our technology
in 1996 in the form of sign-off support from five of the leading ASIC
vendors for our VCS(TM) simulator. VCS retained its leadership as the
fastest available simulator at the behavioral level, and attained a
new leadership position as the fastest simulator at the gate level.
And MOTIVE(TM), our timing analysis product, continues to be the only
commercially available static timing analysis tool worldwide with ASIC
vendor sign-off.
Additionally, Workview Office(TM), our unique PC-based offering
which provides a complete suite of Windows(R) compliant electronic design
tools, achieved record customer acceptance in 1996. Sales of this product
suite were up 18 percent in 1996 compared with a year ago, and increased
29 percent in the fourth quarter compared with the same period in 1995.
25
<PAGE>
Sales of the high-performance Windows NT segment exceeded our
expectations.
Our introduction of software solutions for hardware/software co-
development also was extremely successful. We achieved in excess of
$1 million in orders for our Eagle(TM) software solutions in the fourth
quarter, and in February 1997, we completed the acquisition of Eagle
Design Automation. This strategic initiative is in recognition of
the growing importance of software in the product design process as
engineers pursue design methodologies which afford them maximum
flexibility and return on investment.
Our balance sheet remains very strong. We have no debt, and we
continue to generate significant cash from operations. At year-end, our
cash and marketable securities balance was $67.3 million, an increase
of $6.0 million over year-end 1995. This increase occurred despite the
$7.0 million we paid out in our 1996 stock repurchase program and the $2.8
million we disbursed as part of the payment schedule for our acquisition
of Silerity, Inc.
Internationally, our investment in direct sales and service operations
in Japan resulted in a 47 percent growth in revenues in Japan year-over-year.
We appointed a new managing director for Europe in November, and commenced
direct operations in the Benelux nations following our acquisition of TCC,
our former distributor, in December.
We also made several key appointments to strengthen the Company's
executive management group. Shiv Tasker, an EDA industry veteran, joined
the Company as Senior Vice President - Corporate Marketing and Consulting
Services. David Adey was appointed Vice President - Human Resources, and
Michael Northwood joined us as Managing Director - European Operations. Hal
Julsen completed his first full year as Senior Vice President -
World-wide Sales. (*Also see box, this page.) We believe these appointments
provide Viewlogic with an extraordinary depth of management talent.
We are gratified by all that our employees accomplished in 1996,
and in particular, we are pleased with the pace of business with which we
finished the year. We believe Viewlogic is better equipped today to address
the challenges of the worldwide electronics marketplace, with a renewed
focus on the fastest growing segments of that market, a strong management
team, and a technology base and product leadership which will enable us to
help our customers succeed in their markets.
Sincerely,
/s/ Alain J. Hanover
Alain J. Hanover
Chairman
/s/ William J. Herman
William J. Herman
President and Chief Executive Officer
Photo: Alain J. Hanover and William J. Herman.
On January 30, 1997, Alain J. Hanover, Chairman, announced the appointment
of William J. Herman as President and Chief Executive Officer of Viewlogic
Systems, Inc. Mr. Hanover had been Chief Executive Officer as well as
Chairman. Mr. Herman was President as well as Chief Operating Officer.
In making the announcement, Mr. Hanover said: "Will has taken on
increasing responsibility within Viewlogic since he rejoined the Company
two years ago as part of our acquisition of Silerity, Inc. As President,
he has done an excellent job of building a strong management team,
rejuvenating our technology and bringing the Company together with a common
focus. Will's promotion to CEO reflects well deserved recognition of this
leadership."
26
<PAGE>
WHAT IF...?
That's the question most frequently asked by product design engineers in
today's nanosecond world as they battle to develop new, complex electronic
systems which will satisfy the market's craving for products that are
faster, more powerful, less expensive, and easier to use.
In industry after industry, the pace of electronics innovation is
staggering; the pursuit of change, relentless; the need to invent, improve
or enhance, imperative. Stop to smell the roses, and the competition
stomps your garden.
The rapid pace of electronics innovation has substantially altered the
economies of product development, a major concern made even more challenging
by the demands for shorter time to-market, higher product quality, increased
production volumes, and lower unit costs.
The adrenaline rush of product design is fueled by the urgency to adopt
new, more efficient electronic design methods, which are prerequisite to
further tightening the product development orbit.
"What if we change...?"
"What if we find a way?"
"What if we could...?"
"What if...?"
"HERE'S HOW!"
That is the response of Viewlogic's engineering teams as they focus on
developing computer-aided engineering solutions for product design engineers
in the burgeoning worldwide electronics marketplace.
Their mission is to provide those engineers with the best Viewlogic(R)
solutions and services which will enable them to design electronic systems
faster and still meet all their requirements.
Solutions which address the critical steps of the product design
process: design simulation, synthesis, timing analysis, signal integrity,
and test; sophisticated Viewlogic software solutions which move beyond
traditional hardware verification into the realm of hardware/software
co-development; and advanced initiatives in disciplines as varied as
electro-mechanical verification, power analysis, IC signal integrity
and timing analysis.
Viewlogic's challenge is to anticipate: to understand not only
the problems faced today by product design engineers, but those they will
be battling tomorrow - and to deliver to those customers the range of
technologies, processes and services which will enable them to triumph.
What if...?
Here's how.
27
<PAGE>
WHAT IF WE CHANGE...
Photo: cellular telephone.
28
<PAGE>
The telecommunications industry is literally rocketing into the Twenty-
first century, fueled by a worldwide demand to compress the planet by
transmitting voice, video, and data communications at superfast speeds
using sophisticated wireless, mobile and satellite technologies
unavailable just a decade ago.
These product design engineers function in a three dimensional
competitive pressure cooker which stretches outward around the globe as
well as skyward to earth-orbiting satellites; a kind of "Star Wars"
technological battleground requiring superior electronic design tools
and high-performance design methodologies which enable them to develop,
simulate, test, analyze, and verify highly complex network products in
parallel, rather than serially, one component at a time.
Viewlogic's Powerview(R) family of high-performance design automation
tools, in combination with the company's SpeedWave(TM) and VCS(TM) simulators,
enable engineers to modify multiple characteristics of a complex system
online, without time-consuming physical prototyping, and quickly evaluate
the impact of the alterations on real-life performance.
Photo: cellular telephone (continued).
29
<PAGE>
WHAT IF WE FIND A WAY...
Photo: video camera.
30
<PAGE>
The complex electronic designs which give thousands of consumer products
their sex appeal are a major migraine for product design engineers
confronted by the market's relentless demands for "cheaper/smaller/better/
faster - now!"
Repeatedly infusing those products with innovative features, increased
power, and enhanced performance necessitates the development of integrated
circuits (ICs) with extraordinary chip densities and signal speeds. Engineers
are pushing miniaturization to the point where it begins to collide with
the rules of quantum physics. Detecting distortions such as cross-talk as
electrons scream through submicron tunnels in these high-performance circuits
is critical to the successful production of semiconductors and printed
circuit boards (PCBs).
Product design engineers use Viewlogic's MOTIVE(TM) timing analysis and
XTK(TM) signal integrity solutions as the "critical enablers" to find
potential failure, isolate and control signal distortion, and simulate,
localize and quantify electromagnetic interference.
Photo: video camera (continued).
31
<PAGE>
WHAT IF WE COULD...
Photo: patient heart rhythm printout.
32
<PAGE>
The ability to embrace new technologies and incorporate them into the design
of highly sophisticated, precision instruments is most evident in the field
of medical diagnostics, where discovery on the understanding and treatment
of disease is often linked directly to the invention of equipment which makes
discovery possible.
Product design engineers in this highly competitive industry face
tremendous technical challenges, as well as relentless pressure to perfect
the complex designs on tighter development schedules in order to meet the
demands of a market which feeds on innovation. Increasingly, they are
integrating the front-end logic and back-end physical design steps to improve
communication between what might work and what really does, a methodology
which demands hardware and software design tools that possess extraordinary
intelligence.
Viewlogic's Workview Office(TM) suite is the dominant solution for
computer-assisted engineering of electronic systems design on Windows(R)
platforms, providing engineers with extraordinary design flexibility at an
affordable price.
Photo: patient heart rhythm printout (continued).
33
<PAGE>
WHAT IF WE MODIFY...
Photo: front portion of an automobile.
34
<PAGE>
Among the most vexing product design problems faced by automotive
engineers is developing the electronic modules and interconnect harnesses
which link the complex web of mechanical and electrical systems that control
vehicle performance, safety, fuel efficiency and emissions, and operator/
passenger comfort.
Their goal is to electronically "fabricate" the logic of a new module/
harness design and link it to a simulated physical wiring configuration
without ever leaving their workstation keyboards; then analyze and verify
the "real world" performance of the entire system online, modifying,
adjusting and changing components and software without having to undertake
time-consuming and costly repetitive steps for each design iteration.
Design engineers rely upon Viewlogic's Eagle(TM) hardware/software
co-development solutions to thoroughly check and test multiple software
configurations to create complex electro-mechanical systems which provide
the specific capabilities consumers require in their automobiles.
Photo: front portion of an automobile (continued).
35
<PAGE>
<TABLE>
<CAPTION>
Financial Review
- ----------------
<S> <C>
MANAGEMENT'S DISCUSSION 13
CONSOLIDATED FINANCIAL STATEMENTS 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21
INDEPENDENT AUDITORS' REPORT 29
SELECTED QUARTERLY FINANCIAL DATA 30
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA 31
</TABLE>
36
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDIDITON
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company's revenue increased 9.9% from $120,960,000 in 1995 to
$132,919,000 in 1996 and net income increased 294.1% from $2,861,000 in
1995 to $11,276,000 in 1996. Excluding the non-recurring expense of
$6,023,000 in 1995 associated with the fourth quarter acquisition
of Silerity, Inc. ("Silerity") and net gain from investments of $3,898,000
in 1996, net income was $8,884,000 in 1995 and $8,877,000 in 1996.
On December 19, 1996, the Company acquired The CAE Company B.V. ("TCC")
and Electronic Design Automation Services Europe B.V. ("EDAS"). The
acquisition has been accounted for as a purchase, and accordingly, the
consolidated financial statements and management's discussion and analysis
reflect the combined operations only after the December 19, 1996
closing date.
This discussion contains certain forward-looking statements which
involve risks and uncertainties, and the Company's actual results may
differ from those discussed. Some of the factors that might cause such a
difference are discussed below. (See "Factors That May Affect Future Results
and Financial Condition").
The following table sets forth for the periods indicated the percentage
of revenue represented by certain items in the Company's Consolidated
Financial Statements:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue: 100.0% 100.0% 100.0%
Software 61.4 63.6 73.6
Services and other 38.6 36.4 26.4
Costs and expenses:
Cost of software 8.6 9.0 8.1
Cost of services and other 9.8 9.2 7.9
Selling and marketing 43.9 45.4 47.4
Research and development 20.6 18.7 17.1
Purchased research and development 5.0 13.0
General and administrative 8.0 7.5 8.9
-----------------------------------
Total operating expenses 90.9 94.8 102.4
-----------------------------------
Income (loss) from operations 9.1 5.2 (2.4)
Total other income 4.7 1.6 1.3
-----------------------------------
Income (loss) before income taxes 13.8 6.8 (1.1)
Provision for income taxes 5.3 4.4 4.2
-----------------------------------
Net income (loss) 8.5% 2.4% (5.3%)
- --------------------------------------------------------------------------
</TABLE>
Revenue
- -------
The Company derives revenue primarily from the licensing of its software
products. In addition, the Company derives revenue from the provision of
maintenance, consulting and training services to customers. Maintenance
revenue constitutes the majority of services and other revenue.
The Company's revenue increased by 2.0% from $118,580,000 in 1994 to
$120,960,000 in 1995 and increased by 9.9% to $132,919,000 in 1996. Software
revenue decreased 11.8% from 1994 to 1995 and increased 6.1% from 1995 to
1996. The increase in the revenue growth rate from 1995 to 1996 was
primarily due to the strong product sales of the Company's ASIC tool suite
and increased sales in Japan. Product revenue from the Company's ASIC tool
suite, which includes Viewlogic's Chronologic VCS(TM), Quad Design Motive(TM)
and Sunrise Testgen(TM) tools, increased over 50% from 1995 to 1996. These
increases were offset by less than expected sales in the European market. The
European market has historically been more oriented toward system design
products and offers less opportunity for the Company's ASIC tool offerings.
Services and other revenue increased 40.6% from 1994 to 1995 and increased
16.4% from 1995 to 1996. These increases were due to the increase in
maintenance and customer support revenue from a growing installed base of
customers, as well as increased consulting and customization services and
increased training programs. The larger growth rate in services and other
revenue in 1995 was largely attributable to a significant increase in
consulting revenue in 1995. For the immediate future, the Company anticipates
that the rate of growth of services and other revenue will be at least equal
to the software revenue growth rate. The Company's percentage of revenue
attributable to software product licenses decreased from 73.6% in 1994 to
63.6% in 1995 and to 61.4% in 1996 due to a larger increase in services and
other revenue.
International revenue represented 34.5%, 35.1% and 35.1%, respectively,
of total revenue in 1994, 1995 and 1996. International revenues remained
constant in 1996 due to the positive impact of the Company's direct sales
operation in Japan where revenues increased 46.5% from 1995 to 1996, offset
by the decrease in revenues in Europe. Revenue from Europe, including export
sales, was $22,673,000, $22,080,000 and $20,163,000 or 19.1%, 18.3% and
15.2% of total Company revenue, respectively, in 1994, 1995 and 1996. No
customer accounted for more than 10% of revenue in 1994, 1995 or 1996.
37
<PAGE>
Cost of Software Revenue
- ------------------------
Cost of software revenue consists primarily of expenses associated with
product documentation, packaging, royalty costs, amortization of capitalized
software and purchased technology costs, duplication and order administration
costs. Cost of software revenue increased from $9,681,000 in 1994 to
$10,887,000 in 1995 and to $11,472,000 in 1996, representing 11.1%, 14.1% and
14.0% of software revenue, respectively. Cost of software revenue increased
in 1996 primarily due to increased amortization of purchased software
costs, increased amortization of capitalized software and increased costs in
Europe and Japan. These amounts are partially offset by decreased
documentation costs. The increase in cost of software revenue as a percentage
of software revenue from 11.1% in 1994 to the 14.0% range in 1995 and 1996 is
largely attributable to higher royalty costs paid as a result of increased
third-party content in the Company's product offerings.
Cost of Services and Other Revenue
- ----------------------------------
Cost of services and other revenue consists primarily of customer support
and training expenses and the expense of consulting services provided to
customers. Cost of services and other revenue increased from $9,348,000 in
1994 to $11,102,000 in 1995 and to $12,996,000 in 1996, representing 29.9%,
25.2% and 25.4% of services and other revenue, respectively. The increases in
1995 and 1996 reflect higher personnel-related costs associated with
increased customer support and training costs and an increase in outside
consulting fees required to support the Company's growing customer base. The
decrease in the expense as a percentage of revenue from 1994 to 1995 and 1996
reflects better utilization of customer support and consulting services.
Selling and Marketing Expenses
- ------------------------------
Selling and marketing expenses decreased from $56,226,000 in 1994 to
$55,021,000 in 1995 and increased to $58,294,000 in 1996. The decrease in
1995 was due in part to a cost-effective change in sales compensation policies
and lower bad debt expense. The increase in 1996 is due primarily to higher
personnel-related costs due to the increase in the number of sales and
marketing personnel from 259 in 1995 to 292 in 1996 and increased selling
and marketing costs in Japan required to support the establishment of a direct
sales operation. As a percentage of revenue, selling and marketing expenses
decreased from 47.4% in 1994 to 45.4% in 1995 and to 43.9% in 1996.
Research and Development Expenses
- ---------------------------------
Research and development expenses increased from $20,255,000 in 1994 to
$22,644,000 in 1995 and to $27,412,000 in 1996. Research and development
expenses as a percentage of revenue increased from 17.1% in 1994 to 18.7% in
1995 and to 20.6% in 1996. Increased research and development expenses in
1995 and 1996 resulted primarily from higher personnel-related costs and
outside consulting costs associated with the development of new products and
enhancement of existing products. The Company anticipates that it will
continue to devote substantial resources to product research and development.
The increases in research and development expenses as a percentage of revenue
in 1995 and 1996 reflect the Company's commitment to continue to develop new
products and enhance existing products.
Software development costs are accounted for in accordance with SFAS
No. 86, under which the Company is required to capitalize software development
costs once technological feasibility has been established. The amount of
software development costs capitalized for 1994, 1995 and 1996 was
$2,164,000, $2,349,000 and $2,759,000 respectively, representing 9.7%, 9.4%
and 9.1% of total research and development costs in those years. The
Company amortizes such amounts over four years. See Note 1 to Consolidated
Financial Statements. The amortization of capitalized software included in
cost of software revenue was $900,000, $1,837,000 and $2,137,000 in
1994, 1995 and 1996, respectively.
Purchased Research and Development
- ----------------------------------
The Company recorded non-recurring expenses of $15,377,000 in the third
quarter of 1994 and $6,023,000 in the fourth quarter of 1995 for purchased
research and development expenses associated with the Sunrise Test Systems,
Inc. ("Sunrise") and Silerity acquisitions, respectively.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses decreased from $10,572,000 in 1994 to
$9,049,000 in 1995 and increased to $10,619,000 in 1996. As a percentage of
revenue, general and administrative expenses decreased from 8.9% to 7.5%
and increased to 8.0% during such periods. Non-recurring costs of $3,100,000
38
<PAGE>
associated with the merger with Chronologic Simulation ("Chronologic") are
included in the 1994 expenses. Excluding this non-recurring item, general and
administrative expenses as a percentage of revenue were 6.3% in 1994. The
increases in 1995 and 1996 are mainly due to increases in recruitment and
employee relocation costs arising from high turnover in the Company's sales
and product development organizations. The 1995 costs also included legal
fees resulting from increased litigation.
Income (Loss) from Operations
- -----------------------------
The Company's operating income increased from an operating loss of
$2,879,000 in 1994 to operating income of $6,234,000 in 1995 and
$12,126,000 in 1996. Operating income (loss) as a percentage of revenue
increased from (2.4%) in 1994 to 5.2% in 1995 and 9.1% in 1996. Excluding
the non-recurring costs associated with the Chronologic merger and the
Sunrise and Silerity purchases, the Company reported income from operations
in 1994 and 1995 of $15,598,000 and $12,257,000, respectively. Income
from operations as a percentage of revenue, excluding the non-recurring costs,
decreased from 13.2% in 1994 to 10.1% in 1995 and to 9.1% in 1996. The
decreases in 1995 and 1996 are primarily due to lower than anticipated sales
growth in those years on higher fixed expense bases.
Interest Income, Net
- --------------------
Net interest income increased from $1,538,000 in 1994 to $1,991,000 in
1995 and decreased to $1,982,000 in 1996. The increase in 1995 is primarily
due to higher interest income earned on increased cash and marketable
securities balances. The slight decrease in 1996 is primarily due to lower
interest rates earned on cash and marketable securities in that year.
Other Income (Expense), Net
- ---------------------------
Other expense, net in 1994 and 1995 are almost entirely attributable to
foreign exchange transaction losses of $25,000 and $400,000, respectively,
offset by a capital gain of $258,000 on the sale of marketable securities in
1995. Other income in 1996 primarily includes a gain of $6,598,000 on the
sale of an investment offset by $2,174,000 of losses recognized under the
equity method of accounting for the Company's investment in Eagle Design
Automation, Inc. ("Eagle").
Income Taxes
- ------------
The provision for federal and state income taxes increased from
$4,928,000 in 1994 to $5,328,000 in 1995 and $7,056,000 in 1996. These tax
provisions represent effective tax rates of 35.2%, 37.5% and 38.5% in 1994,
1995 and 1996, respectively, after excluding the non-recurring costs of
$15,377,000 in 1994 and $6,023,000 in 1995 related to purchased research and
development associated with the Sunrise and Silerity acquisitions,
respectively, which are not tax deductible. The effective tax rate increases in
1995 and 1996 primarily reflect higher tax rates incurred on increased
profitability in Japan in both of those years and non-deductible expenses
incurred under the equity method of accounting for the Company's investment
in Eagle for 1996.
Net Income (Loss)
- -----------------
Net income increased from a net loss of $6,317,000 ($0.36 per share) in 1994
to net income of $2,861,000 ($0.17 per share) in 1995 and $11,276,000
($0.66 per share) in 1996. Excluding the after-tax effect of non-recurring
items ($17,609,000 in 1994 and $6,023,000 in 1995), net income was
$11,292,000 or $0.65 per share in 1994 and $8,884,000 or $0.52 per share in
1995. After excluding the after-tax effect of the net gain on investments,
net income was $8,877,000, or $0.52 per share, in 1996. See Note 1 to
Consolidated Financial Statements.
Factors That May Affect Future Results and Financial Condition
- --------------------------------------------------------------
Future financial results are difficult or impossible to predict, despite the
Company's past financial performance. Intense competition and rapid
technological changes are inherent in the EDA industry. The Company faces the
many risks and uncertainties posed by that competition and technological
change, including success in continuously developing and marketing new
products; protection of its products by effective utilization of
intellectual property laws; product quality, reliability, ease of use,
feature set and price; diversity of product line; general economic and
business conditions in the United States and abroad; the ability to hire,
retain and motivate highly qualified personnel; business conditions and
growth in the EDA industry; industry-wide price erosion; and customer
acceptance of the Company's products.
The Company's products are in various stages of their life cycles. The
Company's success is dependent on its ability to develop complex and
competitive new products, to introduce them to the marketplace ahead of the
competition and to have them selected by customers. The Company is striving
39
<PAGE>
to bring new products to market to meet customer needs, but there is no
assurance that it will succeed in doing so. Since product life cycles are
continually becoming shorter, if new product introductions are delayed or if
new products do not address market needs then revenues and profits for current
and future products may be affected as customers may shift to competitors to
meet their requirements. The Company's competitors consist of large
companies, many of which have greater market share and substantially greater
financial and other resources than the Company; emerging companies with new
and innovative technology; and customers who develop their own EDA tools.
As is common in the software industry, the Company frequently ships
more product in the third month of each quarter than in either of the first
two months of the quarter, and shipments in the third month are higher at the
end of that month. This pattern is likely to continue. The concentration of
sales in the last month of the quarter makes the Company's quarterly
financial results difficult to predict. Also, if sufficient business does not
materialize or a disruption in the Company's production or shipping occurs
near the end of a quarter, the Company's revenues for that quarter may be
materially adversely affected.
A substantial portion of the Company's revenue is derived from its
international operations. As a result, the Company's operations and financial
results could be significantly affected by international factors, such as
weak economic conditions in foreign markets and differing technology or
product preferences in different countries.
The highly technical nature of the Company's products and services and
the intense competition in the Company's markets heightens the need and
importance of hiring, retaining and motivating highly qualified technical
personnel. The intense competition in the EDA industry increases the
difficulty in doing so and has created a shortage of highly qualified
engineering and sales personnel.
Because of these and other factors, past financial results may not be a
useful predictor of future results and any forward looking statements about
the Company's financial performance, business operations and other factors
should be viewed with caution. Also, the Company's participation in a highly
dynamic industry often results in significant volatility of the
Company's common stock price.
Liquidity and Capital Resources
- -------------------------------
The Company has funded its operations to date primarily through sales of
equity securities, equipment financing leases, and since 1990, positive cash
flows from operations.
As of December 31, 1996, the Company had $67,344,000 of cash and
marketable securities (including $5,565,000 classified as non-current). The
Company has $57,241,000 of working capital. As of December 31, 1996, the
Company had $44,126,000 in current liabilities and $17,141,000 in minimum
operating lease obligations. See Note 8 to Consolidated Financial
Statements.
The Company has consistently generated cash from operations with net
cash generated by operating activities declining by 32.6% from $25,600,000
in 1994 to $17,262,000 in 1995 and growing by 14.7% to $19,808,000 in
1996. The Company's cash and cash equivalents and marketable securities
(both current and non-current) has increased by $12,127,000 over the two
year period from $55,217,000 as of December 31, 1994 to the $67,344,000
balance as of December 31, 1996. The increase occurred even though the
Company expended $6,767,000 to purchase Silerity, TCC and EDAS and
$10,568,000 to repurchase certain outstanding shares of the Company's common
stock. In October 1995, the Company's Board of Directors authorized
the Company to repurchase up to 2,000,000 shares of the Company's common
stock from time to time over the next year as market and business conditions
warrant in open market, negotiated and block transactions. This authorization
was later extended for an additional year to October 1997. The repurchased
shares will be used in the Company's stock option plans and employee stock
purchase plans and for general corporate purposes. As of December 31, 1996
the Company has spent $10,568,000 to repurchase 1,000,000 shares.
On February 19, 1997, the Company purchased the 80% of the capital
stock of Eagle not previously owned by the Company for an initial cash payment
of $5,788,000 and certain future contingent payments. See Note 3 to
Consolidated Financial Statements.
Based on its operating plan, the Company currently believes that its
available cash and cash generated from operations will be sufficient to fund
the Company's operations for the foreseeable future.
The Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," as amended by SFAS No. 127, which is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996. The Company will adopt SFAS
No. 125 in 1997, however management does not believe that adoption will have a
material effect on the Company's consolidated financial statements.
40
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------
(In thousands, except share data) Notes 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents 1 $ 41,297 $ 34,387
Marketable securities 1,4 20,482 23,381
Accounts receivable (less allowance for 32,507 29,054
doubtful accounts, $1,503 in 1996 and
$1,215 in 1995)
Prepaid expenses and other 6,779 5,494
Deferred income taxes 1,7 302 322
-----------------------
Total current assets 101,367 92,638
-----------------------
Marketable securities - non-current 1,4 5,565 3,619
Property and equipment: 1
Equipment 25,360 26,213
Furniture and fixtures 3,625 3,329
-----------------------
Total 28,985 29,542
Less accumulated depreciation 15,236 17,503
-----------------------
Property and equipment - net 13,749 12,039
Other assets: 1
Capitalized software costs - net 5,724 5,102
Purchased technology - net 2 2,261 3,127
Goodwill - net 2 1,582 1,177
Deposits and other 961 1,281
-----------------------
Total other assets 10,528 10,687
-----------------------
Total $ 131,209 $ 118,983
=======================
Liabilities and stockholders' equity:
Current liabilities:
Current portion of capital lease obligations $ 32 $ 77
Accounts payable 3,232 2,926
Accrued compensation 10,684 7,255
Accrued expenses 1 8,551 4,279
Notes payable to Silerity shareholders 1,2 2,805
Deferred revenue 1 20,323 17,447
Deferred income taxes 1,7 1,304 1,412
-----------------------
Total current liabilities 44,126 36,201
Deferred income taxes 1,7 4,609 5,453
Capital lease obligations 38
Commitments and contingencies 2,3,8
Stockholders' equity: 1,6
Preferred stock, $.01 par value; authorized,
5,000,000 shares; issued, none
Common stock, $.01 par value; authorized, 174 170
40,000,000 shares; issued, 17,403,576
and 17,006,396 shares
Additional paid-in capital 73,944 70,093
Retained earnings 18,414 7,138
Unrealized holding gains, net of tax 4 1,470 3,537
Cumulative translation adjustment (960) (82)
-----------------------
93,042 80,856
Less: Treasury stock at cost, 1,000,000 (10,568) (3,565)
and 320,000 shares
-----------------------
Total stockholders' equity 82,474 77,291
-----------------------
Total $ 131,209 $ 118,983
=======================
</TABLE>
- -----------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.
41
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
(In thousands, except per share data) Notes 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue: 1,9
Software $81,661 $ 76,941 $ 87,270
Services and other 51,258 44,019 31,310
---------------------------------
Total revenue 132,919 120,960 118,580
---------------------------------
Costs and expenses:
Cost of software 11,472 10,887 9,681
Cost of services and other 12,996 11,102 9,348
Selling and marketing 58,294 55,021 56,226
Research and development 27,412 22,644 20,255
Purchased research and development 2 6,023 15,377
General and administrative 10,619 9,049 10,572
---------------------------------
Total operating expenses 120,793 114,726 121,459
---------------------------------
Income (loss) from operations 12,126 6,234 (2,879)
---------------------------------
Other income (expense):
Interest income 2,081 2,143 1,642
Interest expense (99) (152) (104)
Other, net 4,224 (36) (48)
---------------------------------
Other income, net 6,206 1,955 1,490
---------------------------------
Income (loss) before income taxes 18,332 8,189 (1,389)
Provision for income taxes 7 7,056 5,328 4,928
---------------------------------
Net income (loss) $11,276 $ 2,861 $ (6,317)
=================================
Net income (loss) per common share 1 $ 0.66 $ 0.17 $ (0.36)
=================================
Weighted average number of common and
common equivalent shares outstanding 1 17,104 17,249 17,391
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
42
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued below)
<TABLE>
<CAPTION>
Common Stock Additional Deferred
(In thousands, --------------- Paid-In Retained Compen-
except share data) Shares Amount Capital Earnings sation
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 15,928,792 $159 $59,167 $11,101 $(375)
Issuance of common stock 471,519 5 4,865
Issuance of common stock in
connection with merger 299,824 3
Issuance of stock by pooled
company 550
Tax benefit arising from
exercise of stock options 1,513
Stock options assumed in
connection with Sunrise Test
Systems, Inc. acquisition 1,430
Deferred compensation 108 375
Dividends paid to pooled
company's shareholders (160)
Redesignation of pooled company's
retained earnings as an
S-Corporation prior to merger 347 (347)
Unrealized holding loss, net of tax
Translation adjustment
Net loss (6,317)
------------------------------------------------
Balance, December 31, 1994 16,700,135 167 67,980 4,277
Issuance of common stock 306,261 3 1,753
Repurchase of common stock
Tax benefit arising from
exercise of stock options 346
Stock options assumed in
connection with Silerity,
Inc. acquisition 14
Unrealized holding gain,
net of tax
Translation adjustment
Net income 2,861
------------------------------------------------
Balance, December 31, 1995 17,006,396 170 70,093 7,138
Issuance of common stock 397,180 4 3,411
Repurchase of common stock
Tax benefit arising from
exercise of stock options 440
Unrealized holding loss,
net of tax
Translation adjustment
Net income 11,276
------------------------------------------------
Balance, December 31, 1996 17,403,576 $174 $73,944 $18,414 $ 0
================================================
</TABLE>
(Continuation of Consolidated Statements of Stockholders' Equity):
<TABLE>
<CAPTION>
Unrealized
Holding Cumulative Treasury Stock
(In thousands, Gains/ Translation ----------------
except share data) (losses) Adjustment Shares Amount Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $ (10) $70,042
Issuance of common stock 4,870
Issuance of common stock
in connection with merger 3
Issuance of stock by
pooled company 550
Tax benefit arising from
exercise of stock options 1,513
Stock options assumed in
connection with Sunrise,
Inc. acquisition 1,430
Deferred Compensation 483
Dividends paid to pooled
company's shareholders (160)
Redesignation of pooled company's
retained earnings as an S-
Corporation prior to merger
Unrealized holding loss,
net of tax $ (69) (69)
Translation adjustment 7 7
Net loss (6,317)
------------------------------------------------
Balance, December 31, 1994 (69) (3) 72,352
Issuance of common stock 1,756
Repurchase of common stock 320,000 $(3,565) (3,565)
Tax benefit arising from
exercise of stock options 346
Stock options assumed in
connection with Silerity,
Inc. acquisition 14
Unrealized holding gain,
net of tax 3,606 3,606
Translation adjustment (79) (79)
Net income 2,861
-------------------------------------------------
Balance, December 31, 1995 3,537 (82) 320,000 (3,565) 77,291
Issuance of common stock 3,415
Repurchase of common stock 680,000 (7,003) (7,003)
Tax benefit arising from
exercise of stock options 440
Unrealized holding loss,
net of tax (2,067) (2,067)
Translation adjustment (878) (878)
Net income 11,276
------------------------------------------------
Balance, December 31, 1996 $1,470 $(960) 1,000,000 $(10,568) $82,474
================================================
- ------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
43
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income (loss) $11,276 $ 2,861 $(6,317)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Purchased research and development 6,023 15,377
Depreciation 5,209 4,703 3,964
Gain on sale of investment (6,598)
Amortization of capitalized software
and purchased technology 3,003 2,660 1,342
Amortization of goodwill 233 234 60
Compensatory stock options and
amortization of deferred
compensation expense 1,033
Deferred income taxes 2 (319) 1,526
Change in assets and liabilities, net of
effects from purchase of Sunrise Test
Systems, Inc., Silerity, Inc., The CAE
Company B.V. and Electronic Design
Automation Services Europe B.V.:
Accounts receivable (2,743) 682 93
Prepaid expense and other (1,010) 715 (1,029)
Accounts payable (417) (411) 714
Accrued compensation 3,429 (1,611) 1,241
Accrued expenses 4,695 796 3,506
Deferred revenue 2,729 929 4,124
Deferred rent (34)
-----------------------------------
Net cash provided by operating activities 19,808 17,262 25,600
-----------------------------------
Cash flows from investing activities:
Purchase of marketable securities (22,283) (22,353) (16,551)
Proceeds from sale of marketable
securities 26,828 21,446 19,178
Expenditures for property and equipment (6,892) (5,390) (4,997)
Capitalized software costs (2,759) (2,349) (2,164)
Purchased technology 68
Decrease in deposits and other 320 361 716
Purchase of Sunrise Test Systems,
Inc., net of cash (3,748) (13,114)
Purchase of Silerity, Inc., net of cash (3,251)
Purchase of The CAE Company B.V. and
Electronic Design Automation Services
Europe B.V., net of cash (711)
-----------------------------------
Net cash used in investing activities (5,497) (15,284) (16,864)
-----------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,533 1,395 1,263
Proceeds from exercise of stock options 1,882 361 3,610
Repurchase of common stock (7,003) (3,565)
Principal payment of capital
lease obligations (85) (313) (476)
Dividends paid by pooled company (160)
Repayment of notes to former Silerity,
Inc. shareholders (2,805)
-----------------------------------
Net cash provided by (used in) financing
activities (6,478) (2,122) 4,237
-----------------------------------
Effect of exchange rate changes on cash (923) (21) 41
-----------------------------------
Net increase (decrease) in cash and
cash equivalents 6,910 (165) 13,014
Cash and cash equivalents, beginning
of the year 34,387 34,552 21,538
-----------------------------------
Cash and cash equivalents, end of the year $41,297 $34,387 $34,552
===================================
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
- ------------------
Viewlogic Systems, Inc. (the "Company") was founded in 1984. Subsidiaries
of the Company operate in the United States, Europe, Japan and India and
include Viewlogic Europe BV, Viewlogic Systems Japan, Viewlogic Systems
India Private Ltd., Quad Design Technology, Inc. ("Quad"), Chronologic
Simulation ("Chronologic"), Sunrise Test Systems, Inc. ("Sunrise"), Silerity,
Inc. ("Silerity"), The CAE Company B.V. ("TCC") and Electronic Design
Automation Services Europe B.V. ("EDAS"). The Company and its subsidiaries
develop, market and support a comprehensive family of software products
that aid engineers in the design of advanced electronic products. The Company
markets its products in the United States, Canada, Europe, Asia, Australia,
Africa and South America.
Use of Estimates
- ----------------
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts and
disclosure of certain assets and liabilities at the balance sheet date.
Actual results may differ from such estimates.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Viewlogic
Systems, Inc. and its subsidiaries, all of which are wholly owned. All
significant intercompany balances and transactions have been eliminated.
Investments in affiliates owned 20% or more are accounted for using the equity
method. Investments in affiliates which are less than 20% owned are recorded
under the cost method and are included in deposits and other.
Foreign Currency Translation
- ----------------------------
The financial statements of foreign subsidiaries are translated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52.
Foreign currency gains and (losses) included in other income and expense were
$130, $(354) and $(25) for the years ended December 31, 1996, 1995 and 1994,
respectively.
Revenue Recognition
- -------------------
SOFTWARE - Revenue from the sale of software licenses is recognized upon
receipt of a signed order and software license agreement and shipment of
the product, provided that no significant obligations remain and collection of
the receivable is considered probable.
SERVICES AND OTHER - Revenue from training and consulting is recognized
as the related services are performed. Maintenance revenue is deferred and
recognized ratably over the maintenance period, generally twelve months.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the related assets
(three to five years). Equipment leased under capital leases is amortized
over the lesser of its useful life or the lease term. During 1996, the Company
wrote off $7,391 of fully depreciated assets.
Capitalization of Software Costs
- --------------------------------
Certain software costs for products and product enhancements are capitalized
after technological feasibility has been established. Amortization is provided
over estimated lives of four years. Accumulated amortization was approximately
$5,523 and $4,280 at December 31, 1996 and 1995, respectively.
Goodwill
- --------
Goodwill is being amortized on a straight-line basis over 7 years. The
carrying value of goodwill is reviewed whenever events or circumstances
occur which indicate that the carrying value may not be recoverable.
Accumulated amortization was $527 and $294 at December 31, 1996 and 1995,
respectively.
Purchased Technology
- --------------------
Purchased technology comprises acquired software and is recorded at cost.
Amortization is provided over estimated lives of five to six years.
Accumulated amortization was approximately $3,054 and $2,189 at December 31,
1996 and 1995, respectively.
Income Taxes
- ------------
Deferred income taxes are provided on items recognized in different periods
for financial reporting purposes than for income tax purposes. Deferred income
taxes relate primarily to temporary differences in the recognition of
depreciation expense, capitalized software costs, provisions for doubtful
accounts and the utilization of net operating losses for financial and tax
reporting purposes.
Foreign Exchange Contracts
- --------------------------
The Company enters into foreign exchange contracts as a hedge against certain
foreign accounts receivable. Market value gains and losses are recognized, and
the resulting credit or debit offsets foreign exchange gains or losses on
those
45
<PAGE>
receivables. Realized and unrealized gains and losses on foreign exchange
contracts for fiscal year 1996 were insignificant.
Cash Equivalents and Marketable Securities
- ------------------------------------------
Cash equivalents include short-term, highly liquid investments, which consist
primarily of time deposits, money market and equity securities, purchased with
remaining maturities of three months or less. Marketable securities consist
primarily of municipal bonds, government debt securities and equity
securities.
Marketable securities, classified as available for sale, consist of
securities having maturity dates of more than three months and equity
securities and are stated at fair value. Marketable securities maturing more
than one year from the balance sheet date are classified as non-current.
Aggregate unrealized holding gains, net of tax, of $1,470 and $3,537 at
December 31, 1996 and 1995, respectively, have been included as a separate
component of stockholders' equity in the accompanying consolidated balance
sheets.
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 303 $ 32 $ 121
Cash paid for income taxes 3,975 3,214 1,761
Increase in capital leases 18 20
TCC and EDAS acquisition:
Assumption of liabilities 1,411
Silerity acquisition:
Payable to shareholders
of Silerity 2,805
Assumption of liabilities 7
Sunrise acquisition:
Payable to shareholders
of Sunrise 3,748
Conversion of subordinated
promissory note 1,000
Assumption of liabilities 1,602
Goodwill resulting from
recording deferred taxes 1,635
</TABLE>
Income (Loss) Per Common Share
- ------------------------------
Income (loss) per common share is computed using the weighted average number
of common and common equivalent shares outstanding during each year. Common
stock equivalents consist of stock options and warrants (using the treasury
stock method). Fully diluted and primary earnings per share are the same for
each year.
Fair Value of Financial Instruments
- -----------------------------------
The estimated fair value of cash, accounts receivable, accounts payable and
debt approximate fair value due to the short-term nature of these
instruments. The fair value of marketable securities is based on current
market values.
Stock-Based Compensation
- -------------------------
The Company uses the intrinsic value-based method of Accounting Principles
Board Opinion No. 25, as permitted by SFAS No. 123, "Accounting for Stock-
Based Compensation," to account for employee stock-based compensation
plans.
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
- ------------------------------------------------------------------------------
The Financial Accounting Standards Board issued SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," as amended by SFAS No. 127, which is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996. The Company will adopt SFAS No. 125 in 1997, however
management does not believe that adoption will have a material effect on
the Company's consolidated financial statements.
2. ACQUISITIONS
The CAE Company B.V. and Electronic Design Automation Services Europe B.V.
- --------------------------------------------------------------------------
On December 19, 1996, the Company acquired all of the outstanding capital
stock of TCC and EDAS, both companies under common ownership, for $900.
This acquisition was accounted for as a purchase and the total purchase
price of $908 including expenses of $8 was allocated to the assets acquired
and the liabilities assumed based upon their estimated fair values.
This allocation resulted in goodwill of $1,049. If TCC and EDAS had been
acquired as of the beginning of 1995, the effect on the consolidated results
of operations would not have been significant.
46
<PAGE>
Silerity, Inc.
- --------------
On December 15, 1995, the Company acquired all of the outstanding capital
stock of Silerity for $6,209 in cash and assumption of stock options valued at
$14, net of $6 in tax benefits plus certain contingent payments. This
acquisition was accounted for as a purchase and the total purchase price of
$6,373, including expenses of $156, was allocated to the assets acquired
and the liabilities assumed based upon their estimated fair values. Of the
total, $6,023 was allocated to purchased research and development and was
charged to expense as of the acquisition date. In addition, the purchase
agreement requires the Company to pay certain employee shareholders on
March 31, 1997 and on March 31 of each of the three subsequent years an
earnout amount based on target revenue from certain products. The maximum
payout for calendar years 1997, 1998 and 1999 is $1,125, $1,500 and $1,875,
respectively. These payouts will be recorded as compensation if earned. There
was no payout for 1996.
In connection with the purchase of Silerity, the Chief Executive Officer
of the Company, who was formerly the President of Silerity, received $1,131
for his 20% share of Silerity's common stock. He will not participate in any
future earnout payments.
Sunrise Test Systems, Inc.
- --------------------------
On September 23, 1994, the Company acquired all of the outstanding capital
stock of Sunrise for $16,412 in cash, assumption of stock options valued at
$1,430, net of $576 in tax benefits, and conversion of a $1,000 convertible
subordinated promissory note owed to the Company. This acquisition was
accounted for as a purchase and the total purchase price of $19,386, including
expenses of $1,120, was allocated to the assets acquired and the liabilities
assumed based upon their estimated fair values. Of the total, $15,377 was
allocated to purchased research and development and was charged to expense
as of the acquisition date. This allocation resulted in goodwill of $1,635
which is being amortized over 7 years and purchased software of $4,088
to be amortized over 5 years.
Chronologic Simulation
- ----------------------
On March 31, 1994 Viewlogic VMS 3 Corporation, a wholly owned subsidiary
of Viewlogic Systems, Inc., was merged with and into Chronologic with
Chronologic being the surviving corporation pursuant to an Agreement of
Reorganization (the "Reorganization Agreement") dated March 30, 1994. Under
the terms of the Reorganization Agreement, the holders of Chronologic's
common stock received 911,593 shares of Viewlogic common stock. The
merger was accounted for as a pooling-of-interests.
In connection with the merger with Chronologic in March 1994 the Company
recorded one-time charges for merger and pooling costs of $3,100 to reflect
the combination of operations of the two companies. Included in these costs are
legal, investment banking and accounting fees associated with the
transactions and costs associated with combining the operations of previously
separate companies and instituting efficiencies. These costs also include
costs associated with the cancellation of original equipment manufacturer
contracts with a competitor of Chronologic, as well as compensation expense of
approximately $960 attributable to grants of options by Chronologic prior to
the merger.
3. OTHER INVESTMENTS
In January 1995, the Company acquired a 20% interest in Eagle Design
Automation, Inc. ("Eagle") for $500 in cash. From 1995 to February 1997, the
Company made additional net advances to Eagle of $2,516. The Company's
aggregate investment in Eagle represents 73% of the capital at risk in Eagle.
Accordingly, the Company has recognized losses of $350 and $2,321 in 1995
and 1996, respectively, representing 73% of Eagle's operating losses.
On February 19, 1997, the Company purchased the 80% of Eagle capital
stock not previously owned for $5,788 in cash and assumption of net
liabilities. The Company is also required to pay the former shareholders of
Eagle additional payments based on the sale by the Company of Eagle's products
over the three year period beginning after certain sales targets have been
met. There are no minimum or maximum payments based on the sale of Eagle's
products; however, if current sales projections are met, such additional
payments could total approximately $5,500.
A director of the Company was the President, director and principal
shareholder of Eagle. Another director of the Company is the President and
Chief Executive Officer of TTI Partners, the General Partner of Transitions
Three, Limited Partnership. Transitions Three, Limited Partnership also
owned 20% of Eagle.
47
<PAGE>
4. MARKETABLE SECURITIES
Certain additional information with respect to the Company's marketable
securities as of December 31, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
Gross
Unrealized
Amortized Holding Fair
Security Type Cost Gains Value
- --------------------------------------------------------------------
<S> <C> <C> <C>
1996
State obligations $ 8,148 $ 32 $ 8,180
City, town and other
local obligations 10,271 68 10,339
U.S. Government obligations 2,248 5 2,253
Certificate of deposit 2,000 2,000
Corporate annuity 1,000 1,000
Equity security 41 2,234 2,275
---------------------------------
Total $23,708 $2,339 $26,047
=================================
1995
State obligations $ 7,701 $ 47 $ 7,748
City, town and other
local obligations 13,260 90 13,350
Certificate of deposit 500 500
Equity security 180 5,222 5,402
---------------------------------
Total $21,641 $5,359 $27,000
=================================
</TABLE>
The unrealized holding gains are reflected net of taxes of $883
and $1,822 in the consolidated balance sheets as of December 31, 1996 and
1995, respectively. In computing realized gains and losses, cost was
determined using the specific identification method.
The fair value of debt securities as of December 31, 1996, by contractual
maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or repay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
<S> <C>
Due in one year or less $15,207
Due after one year 5,565
-------
Total $20,772
=======
</TABLE>
5. LINE OF CREDIT
The Company has a working capital line of credit (unused at December 31,
1996) which allows borrowings up to the lesser of 80% of eligible domestic
and international accounts receivable, or $12.5 million, and expires on
February 28, 1997. Interest is charged at the prime rate which was 8.25% at
December 31, 1996. The Company does not plan to renew this credit line.
The line of credit agreement requires compliance with certain financial
ratios and, among other terms, requires maintenance of minimum levels of
working capital and tangible net worth.
6. STOCKHOLDERS' EQUITY
Stock Option Plan
- -----------------
Under the Company's 1991 Restated Stock Option Plan (the "Plan"), non-
qualified and incentive stock options to purchase up to a maximum of
6,849,000 shares of common stock may be granted to certain employees,
officers, consultants and directors at exercise prices not less than fair
market value at the date of grant. Options become exercisable in installments
of 25% per year on each of the first through the fourth anniversaries of
the grant date and continue for the period determined by the Board of
Directors but may not exceed ten years for incentive stock options and five
years for incentive stock options granted to 10% shareholders. At December 31,
1996, 1,304,026 shares were available for grant under the Plan.
During 1995, the Company adopted a Stock Exchange Program pursuant
to its 1991 Restated Stock Option Plan. The program provided grants to
non-executive officer employees of new stock options with a new vesting
schedule in exchange for the cancellation of one or more of the stock
options then held by each employee. There were 1,325,248 options exchanged
under this program in 1995.
Outside Director's Stock Option Plan
- ------------------------------------
In December 1995, the Company adopted the 1996 Outside Directors' Stock
Option Plan (the "1996 Director Plan") which permits the granting of
non-qualified options to purchase up to a maximum of 400,000 shares of common
stock to non-employee members of the Board of Directors. The exercise price
48
<PAGE>
of the options may not be less than fair market value on the date of grant.
This 1996 Director Plan replaced a similar plan established in 1991. Options
under the 1996 Director Plan become exercisable upon grant and continue for
the period determined by the Board of Directors but may not exceed five years.
As of December 31, 1996, 340,000 shares were available for grant under the
1996 Director Plan.
The following is a summary of all option activity under the Plan,
the 1996 Director Plan and the predecessor plan:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
- ------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1994 2,696,056 $13.13
Granted 1,319,973 21.00
Exercised (692,435) 9.18
Forfeited (301,882) 17.50
-----------------------------
Outstanding at December 31, 1994 3,021,712 $16.55
Granted 2,531,652 10.39
Exercised (138,449) 2.52
Forfeited (2,193,560) 16.94
-----------------------------
Outstanding at December 31, 1995 3,221,355 $12.10
Granted 1,465,692 11.43
Exercised (225,174) 8.38
Forfeited (546,784) 12.26
-----------------------------
Outstanding at December 31, 1996 3,915,089 $12.04
=============================
Exercisable at December 31, 1994 785,310 $12.06
Exercisable at December 31, 1995 764,147 $11.13
Exercisable at December 31, 1996 1,185,881 $12.26
</TABLE>
The grant date weighted average fair value for options granted in 1996
and 1995 was $4.76 and $4.41, respectively.
The following table sets forth information regarding stock options
outstanding at December 31, 1996 under the Plan, the 1996 Director Plan
and the predecessor plan:
<TABLE>
<CAPTION>
Weighted
Weighted Weighted Average
Range of Number Average Average Exercise
Number of Exercise Currently Exercise Remaining Price for
Options Prices Exercisable Price Life Exercisable
- -----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
408,143 $ 1.00 - $ 8.94 153,144 $ 6.59 5.18 $ 3.30
272,806 8.94 - 9.88 52,258 9.40 5.70 9.40
807,278 10.00 - 10.13 178,413 10.12 5.26 10.12
381,900 10.25 - 10.50 15,150 10.49 6.01 10.46
397,842 10.63 - 10.75 1,687 10.74 6.10 10.66
397,245 10.81 - 11.69 269,606 11.08 5.20 11.03
473,925 11.75 - 14.38 84,548 12.85 5.95 12.75
502,200 14.50 - 16.50 336,125 16.19 4.20 16.20
108,750 16.88 - 27.25 80,075 20.67 3.28 20.64
165,000 27.75 - 27.75 14,875 27.75 4.21 27.75
- -----------------------------------------------------------------------------
3,915,089 $ 1.00 - $27.75 1,185,881 $12.04 5.28 $12.26
=============================================================================
</TABLE>
Employee Stock Purchase Plan
- ----------------------------
In February 1996, the Company adopted the 1996 Employee Stock Purchase
Plan (the "1996 Stock Purchase Plan"), which permits eligible employees to
purchase up to a maximum of 600,000 shares of common stock. Under the
terms of the plan, employees can choose semi-annually to have up to 10% of
their annual base earnings withheld to purchase the Company's common stock.
The purchase price of the stock is 85% of the lower of its beginning-of-period
or end-of-period market price. The 1996 Stock Purchase Plan replaced a similar
plan established in 1994. During 1996, 1995 and 1994, there were 169,290,
174,094 and 78,908 shares, respectively, issued under the Company's
1994 and 1996 Stock Purchase Plans.
The weighted average fair value of purchase rights granted in
1996 and 1995 was $4.94 and $4.15, respectively.
Stock Repurchase
- ----------------
In October 1995, the Company's Board of Directors authorized the Company
to repurchase up to 2 million shares of the Company's common stock from
time to time over the next year as market and business conditions warrant
in open market, negotiated and block transactions. This authorization was
later extended to October 1997. The repurchased shares will be used in the
Company's stock option plans and employee stock purchase plans and for
general corporate purposes. During 1996 and 1995, the Company repurchased
49
<PAGE>
680,000 and 320,000 shares of common stock for $7,003 and $3,565,
respectively, which is shown as treasury stock.
Pro forma Disclosures
- ---------------------
As described in Note 1, the Company applies the intrinsic value method of
Accounting Principles Board Opinion No. 25 and related Interpretations in
accounting for its stock option and purchase plans. Accordingly, no
compensation cost has been recognized for its stock option plans and its stock
purchase plan. Had compensation cost been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
FASB Statement 123, the Company's net income and net income per share for the
years ended December 31, 1996 and 1995 would have been as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Net income $7,119 $ 210
Net income per common and
common equivalent share $ 0.42 $ 0.01
</TABLE>
For purposes of the pro forma disclosures, the fair value of the options
granted under the Company's stock option plans during 1996 and 1995 was
estimated on the date of grant using the Black-Scholes option pricing model.
The fair value of employee purchase rights under the Company's stock purchase
plans was also estimated using the Black-Scholes option pricing model.
Key assumptions used to apply this pricing model are as follows:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Stock Option Plans:
Risk-free interest rate 5.69% 6.53%
Expected life of option grants 2.74 years 2.78 years
Expected volatility of underlying stock 63.01% 60.97%
Expected dividend payment rate 0% 0%
-------------------------
Employee Purchase Plan:
Risk-free interest rate 5.46% 6.30%
Expected life of option grants 6 months 6 months
Expected volatility of underlying stock 59.78% 55.37%
Expected dividend payment rate 0% 0%
</TABLE>
The pro forma disclosures only include the effects of options granted
in 1996 and 1995.
7. INCOME TAXES
The components of income (loss) before income taxes comprised the following:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $17,062 $ 6,865 $(1,080)
Foreign 1,270 1,324 (309)
-----------------------------
Total $18,332 $ 8,189 $(1,389)
=============================
The provision for income taxes consisted of the following:
<CAPTION>
Year ended December 31,
-----------------------------
1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $4,181 $3,380 $ 180
State 839 874 294
Foreign 1,594 1,047 1,415
-----------------------------
Total 6,614 5,301 1,889
-----------------------------
Deferred:
Federal 1 (254) 1,725
State 1 (65) 197
Change in valuation allowance (396)
-----------------------------
Total 2 (319) 1,526
-----------------------------
Tax benefit of disposition of
stock options:
Federal 370 250 1,376
State 70 96 137
-----------------------------
Total 440 346 1,513
-----------------------------
Total provision $7,056 $5,328 $4,928
=============================
</TABLE>
50
<PAGE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Current Assets:
Accounts receivable $ 580 $ 465
Deferred compensation 32 151
Other 81
-------------------
693 616
-------------------
Non-Current Assets:
Research and development credits 348 348
Other 36
-------------------
384 348
-------------------
Total Assets $1,077 $ 964
-------------------
Current Liabilities:
Accrued vacation $ 42 $ 41
Cash-to-accrual basis conversion 120 158
Unrealized foreign exchange gain 106
Other 123 95
Foreign tax grant 1,304 1,412
-------------------
1,695 1,706
-------------------
Non-Current Liabilities:
Capitalized software costs 2,282 2,011
Purchased technology 1,014 1,362
Depreciation and amortization 814 606
Unrealized holding gain 883 1,822
-------------------
4,993 5,801
-------------------
Total Liabilities $6,688 $7,507
-------------------
Total net deferred tax liability $5,611 $6,543
===================
</TABLE>
In 1987, one of the Company's subsidiaries received a tax grant from the
government of The Netherlands. The subsidiary's obligation to repay the grant
is reduced each year until 1997 by the amount of income taxes paid to The
Netherlands government. In January 1997 the grant was repaid. For financial
reporting purposes, the grant was recorded as a deferred tax liability.
The change from 1995 to 1996 results from the effect of foreign exchange
rates of $108.
A reconciliation between statutory and effective federal income
tax rates is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% (35.0%)
State income taxes - net of federal
income tax benefit 3.1 7.2 28.1
Foreign taxes (1.0) 4.7 22.7
Tax credits (2.7) (4.2) (32.4)
Change in valuation allowance (28.5)
Tax-exempt income (1.6) (3.9) (21.1)
Equity method for investment 4.1
Purchased research and development 25.7 387.5
Foreign sales corporation benefit (2.5) (4.1) (23.6)
Other 4.1 4.7 57.1
---------------------------
Effective tax rate 38.5% 65.1% 354.8%
===========================
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Leases
- ------
The Company leases its principal office facilities and certain computer
equipment under noncancelable operating leases expiring on various dates
through 2002. The Company's headquarters office lease includes three two-
year renewal options to extend the lease through 2008. The lease contains a
three-month rental abatement and a rental escalation clause, the effects of
which are being recognized ratably over the lease term. At December 31, 1996,
future minimum lease payments under these noncancelable leases were
approximately as follows: 1997, $4,733; 1998, $3,925; 1999, $2,866; 2000,
$2,463; 2001, $1,751; 2002, $1,403. The Company leases other office
facilities under operating lease agreements for which lease terms are one
year or less. Total rent expense was approximately $6,265, $5,874 and $4,587
for the years ended December 31, 1996, 1995 and 1994, respectively.
51
<PAGE>
Contingencies
- -------------
The Company is involved in certain legal proceedings which have arisen in the
ordinary course of business. Management believes the outcome of these
proceedings will not have a material adverse impact on the Company's financial
condition or operating results.
9. SEGMENT INFORMATION
Summarized information about the Company's operations by geographic area
is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1996:
North Elimi- Consoli-
America Europe Japan nations dated
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $111,575 $20,163 $11,635 $(10,454) $132,919
Income (loss)
from operations 11,087 (202) 1,241 12,126
Identifiable
assets 119,402 13,828 9,455 (11,476) 131,209
============================================================================
<CAPTION>
Year Ended December 31, 1995:
North Elimi- Consoli-
America Europe Japan nations dated
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $102,177 $22,009 $9,221 $(12,447) $120,960
Income (loss)
from operations 5,125 (155) 1,264 6,234
Identifiable
assets 108,386 18,425 6,820 (14,648) 118,983
============================================================================
</TABLE>
No customer accounted for more than 10% of revenue in 1996, 1995 or 1994.
Export sales, primarily to Europe and Asia, accounted for approximately
11%, 11% and 14% of total revenue for the years ended December 31, 1996,
1995 and 1994, respectively.
10. RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan established in 1988 covering
substantially all of the Company's domestic employees. Matching Company
contributions are at the discretion of the Board of Directors. The Company
matches 50% of employee contributions, up to 6% of the participants' salaries.
Employer contributions amounted to $906, $851 and $734 for the years
ended December 31, 1996, 1995 and 1994, respectively.
52
<PAGE>
INDEPENDENT AUDITORS' REPORT
Company logo: DELOITTE & TOUCHE LLP
To the Board of Directors and Stockholders of Viewlogic Systems, Inc.:
- ----------------------------------------------------------------------
We have audited the accompanying consolidated balance sheets of Viewlogic
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express anopinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
January 29, 1997
(February 19, 1997 as to the second paragraph of Note 3)
53
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Total revenue $28,812 $32,487 $34,427 $37,193
Income from operations 561 2,895 3,270 5,400
Net income 609 2,042 3,124 5,501
Net income per share $ 0.04 $ 0.12 $ 0.18 $ 0.33
Weighted average number of
common and common equivalent
shares outstanding 16,883 17,601 17,403 16,711
===============================================
<CAPTION>
Quarter ended March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Total revenue $26,256 $29,070 $33,180 $32,454
Income (loss) from operations 36 2,047 4,973 (822)*
Net income (loss) 321 1,497 3,304 (2,261)*
Net income (loss) per share $ 0.02 $ 0.09 $ 0.19 $(0.13)*
Weighted average number of
common and common equivalent
shares outstanding 17,007 17,293 17,592 17,336
===============================================
<CAPTION>
Common stock market price:
Quarter ended March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
High 11 1/4 17 15/64 14 1/2 11 1/2
Low 9 5/8 11 5/8 10 1/2 8 5/8
1995
High 10 5/8 13 3/8 15 1/8 13 1/2
Low 8 8 9/16 11 3/4 9 3/4
- -----------------------------------------------------------------------------
<FN>
The Company's common stock is traded on the over-the-counter market and
is quoted on the NASDAQ National Market System under the symbol "VIEW".
The common stock prices shown are based on the NASDAQ daily close stock price.
* Includes $6,023 in non-recurring acquisition related costs. Excluding these
non-recurring items, net income would have been $3,762 or $0.22 per share.
</TABLE>
Dividends
- ---------
The Company has not paid cash dividends on its common stock and has
historically retained earnings for use in its business. Prior to the pooling,
Chronologic Simulation paid dividends to its shareholders.
54
<PAGE>
Viewlogic Systems, Inc. and Subsidiaries
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data
Total revenue $132,919 $120,960 $118,580 $97,926 $70,964
Income (loss) from
operations 12,126 6,234* (2,879)** 18,376*** 9,774****
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
for income taxes 11,276 2,861 (6,317) 13,702 7,633
Net income (loss) 11,276 2,861* (6,317)** 13,702*** 7,833****
Income (loss) from
operations as a
percentage of total
revenue 9.1% 5.2% (2.4%) 18.8% 13.8%
Per Share Data
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
for income taxes $ 0.66 $ 0.17 $ (0.36) $ 0.79 $ 0.47
Net income (loss) $ 0.66 $ 0.17* $ (0.36)** $ 0.79*** $ 0.48****
Weighted average number
of common and common
equivalent shares
outstanding 17,104 17,249 17,391 16,759 16,092
Balance Sheet Data
As of December 31:
Cash, cash equivalents
and marketable
securities $61,779 $ 57,768 $ 54,151 $44,899 $37,973
Working capital 57,241 56,437 52,302 56,227 43,974
Property and
equipment, net 13,749 12,039 11,252 9,685 6,728
Total assets 131,209 118,983 116,157 95,263 72,835
Stockholders' equity 82,474 77,291 72,352 70,042 51,774
- ----------------------------------------------------------------------------
<FN>
* Includes net effect of $6,023 in non-recurring costs associated with the
merger with Silerity, Inc. Excluding these non-recurring items, income from
operations as a percentage of total revenue is 10.1% and net income per share
is $0.52
** Includes net effect of $17,609 in non-recurring costs associated with the
merger with Chronologic Simulation and purchase of Sunrise Test Systems, Inc.
Excluding these $18,477 pre-tax non-recurring items, income from operations
as a percentage of total revenue is 13.2% and net income per share is $0.65.
*** Includes net effect of $520 in non-recurring costs associated with the
merger with Quad Design Technology, Inc. Excluding the $600 pre-tax non-
recurring items, income from operations as a percentage of total revenue is
19.4% and net income per share is $0.82.
**** Includes net effect of $1,238 in non-recurring costs associated with the
merger with Vantage Analysis Systems, Inc. and credit associated with the
adoption of SFAS 109, Accounting for Income Taxes. Excluding the $1,700
pre-tax non-recurring items, income from operations as a percentage of total
revenue is 16.2% and net income per share is $0.56.
</TABLE>
55
<PAGE>
CORPORATE INFORMATION
Corporate Headquarters
- ----------------------
The Company's corporate headquarters
is located at:
293 Boston Post Road West
Marlboro, MA 01752
Telephone: 508-480-0881
Fax: 508-480-0882
Internet Home Page: http:/www.viewlogic.com
Investor Information
- --------------------
Requests for information about the
Company should be directed to:
K.C. Morrissey, Investor Relations
Viewlogic Systems, Inc.
293 Boston Post Road West
Marlboro, MA 01752
Telephone: 508-480-0881
Report on Form 10-K
- -------------------
Shareholders may obtain additional
financial information about
Viewlogic Systems, Inc. from the
Company's Report on Form 10-K
filed with the Securities and Exchange
Commission. Copies are available
without charge upon request from:
K.C. Morrissey, Investor Relations,
Viewlogic Systems, Inc.
Annual Meeting
- --------------
The Annual Meeting of Shareholders
will be held on: Tuesday, May 13,
1997 at 10:00 am at the Hale and
Dorr Suites, 26th Floor, 60 State
Street, Boston, MA.
Stock Listing
- -------------
NASDAQ National Market
Symbol: VIEW
Legal Counsel
- -------------
Hale and Dorr LLP, Boston, MA
Independent Auditors
- --------------------
Deloitte & Touche LLP, Boston, MA
Transfer Agent and Registrar
- ----------------------------
State Street Bank & Trust
Banks
- -----
State Street Bank & Trust
Silicon Valley Bank
Directors
- ---------
Alain J. Hanover
Chairman of the Board,
Viewlogic Systems, Inc.
William J. Herman
President and Chief Executive Officer,
Viewlogic Systems, Inc.
Gregory T. George
Vice President, Technology Funding,
and General Partner, Technology
Funding, Ltd.
Gordon B. Hoffman
Group Vice President, Software,
Viewlogic Systems, Inc.
Larry E. Reeder
Private Investor
Gregory A. White
Executive Director, Massachusetts
Pension Reserves Investment
Management Board
Allyn C. Woodward, Jr.
President, Adams, Harkness &
Hill, Inc.
Executive Officers
- ------------------
Alain J. Hanover
Chairman of the Board
William J. Herman
President and Chief Executive Officer
David A. Adey
Vice President, Human Resources
Ronald R. Benanto
Senior Vice President of Finance,
Chief Financial Officer, and Treasurer
David P. Burow
Group Vice President, ASIC
Gordon B. Hoffman
Group Vice President, Software
Peter T. Johnson
Vice President, General Counsel and Secretary
Harold E. Julsen
Senior Vice President of World-wide Sales
Richard G. Lucier
Group Vice President, Systems
Lawrence M. Rubin
Group Vice President, Advanced Development
Shiv Tasker
Senior Vice President, Corporate
Marketing and Consulting Services
56
<PAGE>
All company and product trademarks or
registered trademarks are the property of
their respective owners.
(c) Copright 1997, Viewlogic Systems, Inc.
All rights reserved. Printed in the U.S.A.
57
<PAGE>
VIEWLOGIC SYSTEMS, INC.
293 BOSTON POST ROAD WEST
MARLBORO, MA 01752
Company logo: Viewlogic(R)
Back cover photo: front portion of an automobile.
58
<PAGE>
Exhibit 21
VIEWLOGIC SYSTEMS, INC.
Subsidiaries
<TABLE>
<CAPTION>
State or other
Jurisdiction of
Incorporation or
Name Organization
---- ------------
<S> <S>
Viewlogic Asia Corporation Massachusetts
Viewlogic Securities Corporation Massachusetts
Viewlogic Systems (Europe) B.V. Netherlands
Viewlogic Europe B.V. Netherlands
*Viewlogic Systems SRL Italy
*Viewlogic Systems GmbH Germany
*Viewlogic Systems SA France
*Viewlogic Systems Limited United Kingdom
*The CAE Company B.V. Netherlands
*Electronic Design Automation Services Netherlands
Europe B.V.
Quad Design Technology, Inc. California
Chronologic Simulation, Inc. California
Sunrise Test Systems, Inc. California
Eagle Design Automation, Inc. Oregon
Silerity, Inc. California
Vielwogic Foreign Sales Corporation U.S. Virgin Islands
Viewlogic Systems Japan, K.K. Japan
Viewlogic Systems India Private Ltd. India
<FN>
* Wholly owned subsidiaries of Viewlogic Europe B.V.
</TABLE>
59
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statements No. 333-08965, No. 333-08957, No. 333-08947, No. 33-
46065, No. 33-46067, No. 33-80282 and No. 33-62480 on Forms S-8
and No. 33-78018 on Form S-3 of Viewlogic Systems, Inc. of our
reports dated January 29, 1997 (February 19, 1997 as to the
second paragraph of Note 3), appearing in this Annual Report on
Form 10-K of Viewlogic Systems, Inc. for the year ended
December 31, 1996.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 28, 1997
60
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations for the Year ended December 31, 1996 and
the Consolidated Balance Sheet as of December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 41,297
<SECURITIES> 26,047
<RECEIVABLES> 34,010
<ALLOWANCES> 1,503
<INVENTORY> 0
<CURRENT-ASSETS> 101,367
<PP&E> 28,985
<DEPRECIATION> 15,236
<TOTAL-ASSETS> 131,209
<CURRENT-LIABILITIES> 44,126
<BONDS> 0
0
0
<COMMON> 174
<OTHER-SE> 82,300
<TOTAL-LIABILITY-AND-EQUITY> 131,209
<SALES> 81,661
<TOTAL-REVENUES> 132,919
<CGS> 11,472
<TOTAL-COSTS> 24,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,041
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 18,332
<INCOME-TAX> 7,056
<INCOME-CONTINUING> 11,276
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,276
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
