<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1998 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________to_________
Commission file number: 000-20923
SUMMIT DESIGN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 93-1137888
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9305 S. W. GEMINI DRIVE,
BEAVERTON, OREGON 97008
(Address of principal executive office)
Registrant's Telephone number, including area code: (503) 643-9281
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
--- ---
As of August 11, 1998, the Registrant had outstanding 15,237,624 shares of
Common Stock.
<PAGE>
SUMMIT DESIGN, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1998 (unaudited)
and December 31, 1997. 3
Consolidated Statements of Operations for the three month
periods ended June 30, 1998 and 1997 and for the six month
periods ended June 30, 1998 and 1997 (unaudited). 4
Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1998 and 1997 (unaudited). 5
Notes to Consolidated Financial Statements. 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 1 Not Applicable
Item 2 Changes in Securities and Use of Proceeds 28
Item 3 Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders 28
Item 5 Not Applicable
Item 6 Exhibits and Reports on Form 8-K 29
Signature 30
Exhibit Index 31
This Quarterly Report on Form 10-Q/A ("Form 10-Q/A") is being filed as
Amendment No. 1 to the Registrant's Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on August 14, 1998 ("Form 10-Q") for
the purpose of amending Item 1 in its entirety.
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<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 24,768 $ 19,973
Accounts receivable, net........................ 5,672 5,131
Prepaid expenses and other...................... 323 540
Deferred income taxes........................... 1,268 1,209
------------- -----------------
Total current assets....................... 32,031 26,853
Furniture and equipment, net......................... 3,208 2,698
Intangibles, net..................................... 1,376 1,622
Deferred taxes....................................... 555 533
Deposits and other assets............................ 1,649 1,055
------------- -----------------
Total assets.......................... $ 38,819 $ 32,761
------------- -----------------
------------- -----------------
LIABILITIES
Current liabilities:
Note payable to bank............................ $ - $ 29
Long-term debt, current portion................. 151 105
Capital lease obligation, current portion....... 42 49
Accounts payable................................ 1,307 1,210
Accrued liabilities............................. 6,394 5,190
Deferred revenue................................ 5,462 5,674
------------- -----------------
Total current liabilities.................. 13,356 12,257
Long-term debt, less current portion................. 156 194
Capital lease obligations, less current portion...... 24 43
Deferred revenue, less current portion............... 175 -
------------- -----------------
Total liabilities.......................... 13,711 12,494
------------- -----------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.01 par value.
Authorized 30,000 shares; issued and
outstanding 15,213 shares at June 30, 1998 and
15,841 shares at December 31, 1997.................. 152 159
Additional paid-in capital.......................... 39,791 51,797
Treasury stock, at cost, 939 shares at
December 31, 1997................................... - (11,555)
Accumulated deficit................................. (14,835) (20,134)
------------- -----------------
Total stockholders' equity................ 25,108 20,267
------------- -----------------
Total liabilities and stockholders'
equity............................ $ 38,819 $ 32,761
------------- -----------------
------------- -----------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30,
------------------------ -------------------------
1998 1997 1998 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Product licenses................... $ 8,574 $ 5,611 $ 16,775 $ 10,507
Maintenance and services........... 2,347 1,444 4,411 2,926
Other.............................. 91 125 183 267
-------- -------- --------- ---------
Total revenue................. 11,012 7,180 21,369 13,700
Cost of revenue:
Product licenses................... 205 164 484 349
Maintenance and services........... 279 142 505 252
-------- -------- --------- ---------
Total cost of revenue......... 484 306 989 601
-------- -------- --------- ---------
Gross profit............. 10,528 6,874 20,380 13,099
Operating expenses:
Research and development........... 2,428 1,675 4,807 3,127
Sales and marketing................ 3,257 2,584 6,305 5,115
General and administrative......... 1,344 881 2,442 2,061
-------- -------- --------- ---------
Total operating expenses...... 7,029 5,140 13,554 10,303
Income from operations.................. 3,499 1,734 6,826 2,796
Other income (expense), net............. 204 229 492 440
-------- -------- --------- ---------
Income before income taxes.............. 3,703 1,963 7,318 3,236
Income tax provision.................... 1,041 100 2,019 180
-------- -------- --------- ---------
Net income.............................. $ 2,662 $ 1,863 $ 5,299 $ 3,056
-------- -------- --------- ---------
-------- -------- --------- ---------
Earnings per share:
Basic......................... $ 0.18 $ 0.13 $ 0.35 $ 0.22
-------- -------- --------- ---------
-------- -------- --------- ---------
Diluted....................... $ 0.16 $ 0.12 $ 0.33 $ 0.20
-------- -------- --------- ---------
-------- -------- --------- ---------
Number of shares used in computing
earnings per share:
Basic......................... 15,058 14,167 14,984 14,137
Diluted....................... 16,285 14,965 16,240 15,000
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
SUMMIT DESIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 5,299 $ 3,056
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................... 781 403
Loss on asset disposition............................... - 1
Deferred taxes.......................................... (81) -
Equity in losses and elimination of intercompany
profits of unconsolidated joint venture.............. 350 -
Changes in assets and liabilities:
Accounts receivable..................................... (541) (354)
Prepaid expenses and other.............................. 217 47
Accounts payable........................................ 97 155
Accrued liabilities..................................... 1,204 165
Deferred revenue........................................ (37) (370)
Other, net.............................................. 131 104
-------- -------
Net cash provided by operating activities.................. 7,420 3,207
-------- -------
Cash flows from investing activities:
Additions to furniture and equipment....................... (1,045) (751)
Loan to joint venture...................................... (750) -
Notes receivable, net...................................... (325) (425)
-------- -------
Net cash used in investing activities................... (2,120) (1,176)
-------- -------
Cash flows from financing activities:
Issuance of common stock, net of issuance costs............ 1,046 303
Tax benefit of option exercises............................ 825 -
Payments to acquire treasury stock......................... (2,329) -
Principal payments of debt obligations..................... (21) (81)
Principal payments of capital lease obligations............ (26) (49)
-------- -------
Net cash (used in) provided by financing activities..... (505) 173
-------- -------
Increase in cash and cash equivalents................... 4,795 2,204
Cash and cash equivalents, beginning of period.................. 19,973 19,801
-------- -------
Cash and cash equivalents, end of period........................ $ 24,768 $22,005
-------- -------
-------- -------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 3 $ 9
Income taxes 667 38
Supplemental disclosure of non-cash financing activities:
Retirement of treasury stock $ 11,555 $ -
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
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<PAGE>
SUMMIT DESIGN, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Summit
Design, Inc. ("Summit" or "the Company") in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted in accordance with such rules and regulations. In the
opinion of management, the accompanying unaudited financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company, and its
results of operations and cash flows. These financial statements should be
read in conjunction with the audited financial statements and notes thereto
for the years ended December 31, 1997, 1996 and 1995 included in the
Company's Form 10-K filed for December 31, 1997.
The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998 or any other future interim period, and the Company makes
no representations related thereto.
2. ACQUISITION OF PROSOFT OY
On June 30, 1998, the Company acquired ProSoft Oy ("ProSoft"), a Company
located in Finland. ProSoft develops software tools used to verify embedded
systems software prior to the availability of a hardware prototype. The
aggregate consideration for the acquisition (including shares of common stock
reserved for issuance upon exercise of ProSoft options which were exchanged
for options of the Company) was 248,334 shares of common stock. The
transaction was accounted for as a "pooling of interests" in accordance with
generally accepted accounting principles. In compliance with such principles,
the Company's financial statements have been restated to include the accounts of
ProSoft as if the acquisition had occurred at the beginning of the first
period presented. The effect of the combination did not have a material
impact on the net sales and net income of the combined entity.
3. SOFTWARE REVENUE RECOGNITION
During the first quarter of 1998, the Company adopted Statements of Position
(SOP) 97-2, "Software Revenue Recognition" and 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, "Software Revenue Recognition.""
The provisions of SOP's 97-2 and 98-4 have been applied to transactions
entered into beginning January 1, 1998. SOP 97-2 generally requires revenue
earned on software arrangements involving multiple elements to be allocated
to each element based on vendor-specific objective evidence (VSOE) of the
fair value of the various elements in a multiple element arrangement Revenue
from the sale of software licenses is recognized at the later of the time of
shipment or satisfaction of all acceptance terms. The revenue allocated to
maintenance is recognized ratably over the term of the maintenance agreement
and revenue allocated to services is recognized as the services are
performed.
SOP 98-4 defers for one year, the application of several paragraphs and
examples in SOP 97-2 that limit the definition of vendor specific objective
evidence (VSOE) of the fair value of various elements in a multiple element
arrangement.
The Company analyzed the elements included in its multiple element
arrangements and determined that the Company has sufficient evidence to
allocate revenue to the license and maintenance components of its product
licenses. The adoption of SOP's 97-2 and 98-4 did not have a significant
effect on revenue recognized for the three and six month periods ending June
30, 1998.
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<PAGE>
SUMMIT DESIGN, INC.
Notes To Consolidated Financial Statements
(Unaudited)
4. BALANCE SHEET COMPONENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
Accounts receivable:
Trade receivables........................... $ 6,061 $ 5,723
Less allowance for doubtful accounts........ (389) (592)
--------- ----------
$ 5,672 $ 5,131
--------- ----------
--------- ----------
Furniture and equipment:
Office furniture equipment.................. $ 930 $ 596
Computer equipment.......................... 4,377 3,679
Leasehold improvements...................... 79 66
--------- ----------
5,386 4,341
Less: accumulated depreciation and amortization.. (2,178) (1,643)
--------- ----------
$ 3,208 $ 2,698
--------- ----------
--------- ----------
Accrued expenses:
Payroll and related benefits................ $ 3,369 $ 2,888
Sales and marketing......................... 985 435
Accounting and legal........................ 226 260
Federal and state income taxes payable...... 1,343 819
Sales taxes payable......................... 76 114
Other....................................... 395 674
--------- ----------
Total accrued expenses................. $ 6,394 $ 5,190
--------- ----------
--------- ----------
</TABLE>
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<PAGE>
SUMMIT DESIGN, INC.
Notes To Consolidated Financial Statements
(Unaudited)
5. RECONCILIATION OF EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common equivalent
shares consist of common stock issuable upon exercise of stock options using
the treasury stock method. The following provides a reconciliation of the
numerators and denominators of the basic and diluted per share computations:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ --------------------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 2,662 $ 1,863 $ 5,299 $ 3,056
--------- --------- --------- --------
--------- --------- --------- --------
Denominator:
Denominator for basic earnings per share
weighted average shares 15,058 14,167 14,984 14,137
Effect of dilutive securities:
Employee stock options 1,227 798 1,256 863
--------- --------- --------- --------
Denominator for diluted earnings per share 16,285 14,965 16,240 15,000
--------- --------- --------- --------
--------- --------- --------- --------
Net income per share - basic $ 0.18 $ 0.13 $ 0.35 $ 0.22
--------- --------- --------- --------
--------- --------- --------- --------
Net income per share - diluted $ 0.16 $ 0.12 $ 0.33 $ 0.20
--------- --------- --------- --------
--------- --------- --------- --------
</TABLE>
6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivitive
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivitive instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivitive instrument's fair
value be recognized currently in results of operations unless specific hedge
accounting criteria are met. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company does not expect SFAS No. 133 to
have a material impact on its consolidated financial statements.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT DESIGN, INC.
By: /s/ C. Albert Koob
------------------------------------
C. Albert Koob
Vice President - Finance,
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
Date: August 31, 1998
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