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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
Amendment No. 1
to
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, 1999
COMMISSION FILE NUMBER 0-25864
------------------------------------
AVANT! CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-3133226
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
46871 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(Address of principal executive offices, including Zip Code)
(510) 413-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of
the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value (Title of Class)
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. / /
<PAGE>
PART I
Item 6. Selected Financial Data
Item 10. Directors and Executive Officers of the Registrant
PART III.
Item 11. Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
ITEM 6. Selected Financial Data
Selected Consolidated Financial Data (1)
(In thousands, except earnings per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Earnings Data:
Total revenue ...................... $ 303,620 $ 248,330 $ 181,150 $ 137,438 $ 95,179
Earnings (losses) from operations .. 80,646 42,342 (3,081) 14,782 8,511
Net earnings (2) ................... 56,620 22,578 2,390 8,824 4,520
Earnings per share:
Basic ........................... 1.49 0.62 0.07 0.29 0.18
Diluted ......................... 1.42 0.59 0.07 0.26 0.15
Pro forma earnings per share: (3)
Basic ........................... 1.55 1.23 0.84 0.60 0.39
Diluted ......................... 1.48 1.16 0.78 0.55 0.33
Weighted average shares outstanding:
Basic .............................. 38,084 36,504 34,315 30,687 25,338
Diluted ............................ 39,746 38,454 36,697 33,467 29,247
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 79,766 $126,180 $ 81,982 $ 58,772 $ 57,136
Working capital ....... 216,246 135,399 132,284 152,448 95,901
Total assets .......... 435,527 337,508 272,896 211,656 142,659
Long-term obligations . 1,668 2,535 2,026 13,025 10,101
Stockholders' equity .. 314,301 245,834 208,208 157,959 99,079
</TABLE>
- --------
(1) The Selected Consolidated Financial Data has been restated to reflect the
poolings of interests with Xynetix Design Systems, Inc. and Chrysalis
Symbolic Design, Inc. in 1999.
2
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(2) Pro forma in 1995.
(3) Pro forma earnings per share excludes merger, in-process research and
development expenses and equity income (losses) from venture capital
investment.
Selected Quarterly Financial Data (1)
(In thousands, except earnings per share data)
<TABLE>
<CAPTION>
Q1/99 Q2/99 Q3/99 Q4/99 Q1/98 Q2/98 Q3/98 Q4/98
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue .................... $ 71,679 $ 75,350 $ 75,484 $ 81,107 $ 56,903 $ 59,652 $ 63,406 $ 68,369
Costs of revenue ........... 6,073 6,048 5,277 5,893 5,633 5,491 6,133 6,282
Earnings from operations ... 20,764 21,098 14,762 24,022 3,022 16,643 16,211 6,466
Net earnings (losses) ...... 13,904 13,860 8,837 20,019 (618) 11,214 11,404 578
Earnings (losses) per share:
Basic ................. 0.37 0.37 0.23 0.52 (0.02) 0.31 0.31 0.02
Diluted ............... 0.34 0.35 0.22 0.51 (0.02) 0.28 0.30 0.02
Pro forma earnings per
share: (1)
Basic ................. 0.37 0.37 0.39 0.42 0.28 0.31 0.31 0.33
Diluted ............... 0.34 0.36 0.37 0.41 0.27 0.28 0.30 0.31
</TABLE>
- ----------
(1) The Selected Quarterly Financial Data has been restated to reflect the
poolings of interests with Xynetix Design Systems, Inc. and Chrysalis
Symbolic Design, Inc. in 1999.
(2) Pro forma earnings per share excludes merger, in-process research and
development expenses and equity income (losses) from venture capital
investment.
ITEM 10. Directors and Executive Officers of the Registrant
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, which require them to file reports with respect
to their ownership of the Company's Common Stock and their transactions in such
Common Stock. Based upon (i) the copies of Section 16(a) reports which the
Company received from such persons for their 1999 fiscal year transactions in
the Common Stock and their Common Stock holdings and (ii) the written
representations received from one or more of such persons that no annual Form 5
reports were required to be filed by them for the 1998 fiscal year, the Company
believes that all reporting requirements under Section 16(a) for such fiscal
year were met in a timely manner by its executive officers, Board members and
greater than ten-percent shareholders, except that Gerald Hsu inadvertently
reported one transaction on his Form 5 for fiscal year 1998 that should have
been reported on a Form 4 for September 1998, Sam Chang filed one Form 3
approximately three weeks late, and Muriyuki Chimura and Kenneth Tai filed their
Forms 5 for fiscal year 1999 one day late. Mr. Chimura's Form 5 and Mr. Tai's
Form 5 reported two stock option grants and one stock option grant,
respectively.
3
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ITEM 11. Executive Compensation
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
NAME AND PRINCIPAL ------------------------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- -------------------------------- ---------- ----------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C>
Gerald C. Hsu 1999 $800,000 $1,600,000 300,000 $5,000 (1)
President, Chief 1998 600,000 1,200,000 250,000 5,000 (1)
Executive Officer and 1997 350,000 800,000 800,000 -
Chairman
Moriyuki Chimura (2) 1999 250,000 400,000 80,000 -
1998 150,000 50,000 80,000 -
Stephen Tzyh-Lih Wuu 1999 250,000 400,000 - 5,000 (1)
1998 197,917 - 10,000 4,531 (1)
1997 150,000 180,000 30,000 4,750 (1)
Noriko Ando 1999 250,000 500,000 - -
1998 158,993 (3) 16,800 (4) 68,000 -
1997 122,303 (5) 23,100 (6) 30,000 -
Sam Chang (7) 1999 166,667 100,000 80,000 5,000 (1)
- ----------------------
</TABLE>
(1) Represents amounts contributed to the executive's 401k plan account.
(2) Mr. Chimura's employment with the Company began April 1, 1998
(3) Represents $9,595 paid to Ms. Ando by Avant! Japan and $149,398 paid to Ms.
Ando by Maingate Electronics, KK, a joint venture affiliated with the
Company of which the Company owns approximately 35% and Gerald C. Hsu owns
approximately 40%.
(4) All of this amount was paid to Ms. Ando by Maingate.
(5) Represents $6,807 paid to Ms. Ando by Avant! Japan and $115,496 paid to Ms.
Ando by Maingate.
(6) All of this amount was paid to Ms. Ando by Avant! Japan.
(7) Mr. Chang's employment with the Company began April 26, 1999.
4
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OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (5)
OPTIONS EMPLOYEES EXERCISE ----------------------------
NAME GRANTED (2) IN 1999 (3) PRICE (4) EXPIRATION DATE 5% 10%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu (1) 300,000 25.4% $ 15.1875 March 15, 2010 $2,865,399 $7,261,488
Moriyuki Chimura 80,000 6.8 15.125 December 14, 2009 760,962 1,928,428
Sam Chang 80,000 6.8 14.375 April 26, 2009 723,228 1,832,803
</TABLE>
- ----------------
(1) The options were granted to Mr. Hsu on February 8, 2000 pursuant to the
attainment of performance goals established by the Company's Compensation
Committee on April 8, 1999. The exercise price is the closing price of the
Company's Common Stock on April 8, 1999.
(2) 25% of the option shares vest after the first 12 months of service to the
Company measured from the Vesting Commencement Date, and the remaining 75%
of the option shares vest in a series of successive equal monthly
installments upon the optionee's completion of each of the following
thirty-six months of service to the Company.
(3) Based on options to purchase 1,182,456 shares of Common Stock granted in
1999.
(4) The exercise price for the options may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares, together with any federal and state income tax liability incurred
by the optionee in connection with such exercise. The plan administrator
has the discretionary authority to reprice the options through the
cancellation of those options and the grant of replacement options with an
exercise price based on the fair market value of the option shares on the
regrant date. The options have a maximum term of 10 years measured from the
option grant date, subject to earlier termination in the event of the
optionee's cessation of service with the Company. Under each of the
options, the option shares will vest upon an acquisition of the Company by
merger or asset sale, unless the Company's repurchase right with respect to
the unvested option shares is transferred to the acquiring entity.
(5) The potential realizable value of the options reported above was calculated
by assuming that the market price of the Common Stock of the Company
appreciates 5% and 10% from the date of grant of the options until the
expiration of the options. These assumed annual rates of appreciation were
used in compliance with the rules of the Securities and Exchange Commission
and are not intended to forecast future price appreciation of the Common
Stock of the Company. The actual value realized from the options could be
substantially higher or lower than the values reported above, depending
upon the future appreciation or depreciation of the Common Stock during the
option period and the timing of exercise of
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the options. Unless the executive officer remains employed until he vests
in the option shares and the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants made
to the executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
REALIZED UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES (MARKET PRICE AT FISCAL YEAR-END FISCAL YEAR-END (2)
ACQUIRED ON AT EXERCISE -------------------------------- -------------------------------
NAME EXERCISE PRICE) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------ --------------- -------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Gerald C. Hsu 105,208 $488,229 716,667 425,000 $145,834 $187,500
Moriyuki Chimura - - 33,333 126,667 - -
Stephen Tzyh-Lih Wuu - - 52,794 45,198 87,555 66,867
Noriko Ando - - 66,724 54,273 168,670 103,303
Sam Chang - - - 80,000 - 50,000
</TABLE>
- --------------
(1) The amounts reported in this column reflect the amount by which the fair
market value of the Common Stock of the Company on the date the option was
exercised exceeded the exercise price of the option. The option holder does
not realize any cash until the shares of Common Stock issued upon exercise
of the options are sold.
(2) The amounts reported in these columns reflect the amount by which the fair
market value of the Common Stock of the Company on December 31, 1999
($15.00 per share, which was the closing price on such date as reported on
the Nasdaq National Market), exceeded the exercise price of the option.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors. Mr. St. Clair receives compensation for his services in
the amount of $6,000 per year, and Mr. Taylor will receive $55,000 in 2000 for
his services.
Non-employee Board members are eligible for option grants pursuant to the
provisions of the Automatic Option Grant Program under the Company's 1995 Stock
Option/Stock Issuance Plan. Under the Automatic Option Grant Program, each
individual who first becomes a non-employee Board member after the date of the
Company's initial public offering will be granted an option to purchase 20,000
shares on the date such individual joins the Board, provided such individual has
not been in the prior employ of the Company. In addition, at each Annual
Stockholders Meeting subsequent to the 1996 Annual Stockholders Meeting, each
individual who continues to serve and has served as a non-employee Board member
for at
6
<PAGE>
least six months prior to such Annual Meeting will receive an additional option
grant to purchase 5,000 shares of Common Stock, whether or not such individual
has been in the prior employ of the Company.
Non-employee Board members and directors who are also employees of the
Company are eligible to receive options and be issued shares of Common Stock
directly under the 1995 Stock Option/Stock Issuance Plan. Employee-directors are
also eligible to participate in the Company's Employee Stock Purchase Plan.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into an employment agreement with Mr. Hsu. Under
the terms of the agreement, the Company will pay Mr. Hsu an annual salary of no
less than $600,000. The Company may terminate Mr. Hsu's employment at any time
and for any reason upon 30 days' advance notice. In the event of an involuntary
termination, Mr. Hsu is entitled to a cash payment equal to three times the
amount of his annual base salary in effect on the date of the termination. In
addition, in the event of an involuntary termination, any outstanding options
held by Mr. Hsu will automatically vest in full and any repurchase rights of the
Company in connection with any Common Stock previously issued to Mr. Hsu will
terminate.
"Involuntary termination," as defined in Mr. Hsu's employment agreement,
means a termination of employment by reason of (i) Mr. Hsu's involuntary
dismissal for reasons other than misconduct, (ii) Mr. Hsu's voluntary
resignation within six months after a "change in control" or "a corporate
transaction" (as defined in the Company's 1995 Stock Option/Stock Issuance
Plan) or (iii) Mr. Hsu's voluntary resignation within six months after a
change in his position or title with the Company which materially reduces his
level of responsibility, a reduction by more than 15% in Mr. Hsu's level of
compensation or a relocation of Mr. Hsu's place of employment by more than 50
miles.
In addition, the Board of Directors or the Compensation Committee has
the authority under the 1995 Stock Option/Stock Issuance Plan (the "Option
Plan") to accelerate the vesting of shares of Common Stock subject to
outstanding options held by the Chief Executive Officer and the Company's
other executive officers under that Plan, in the event their employment were
to be terminated (involuntarily or through a forced resignation) following a
hostile takeover of the Company effected through a successful tender offer
for more than 50% of the Company's outstanding Common Stock or through a
change in the majority of the Board as a result of one or more contested
elections for Board membership. Upon the occurrence of either of the
following transactions (a "Corporate Transaction"):
7
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(i) the sale, transfer or other disposition of all or substantially all of
the Company's assets in complete liquidation or dissolution of the Company, or
(ii) a merger or consolidation in which securities possessing more than 50%
of the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction,
each outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option. However, an outstanding option
will not accelerate if and to the extent: (i) such option is, in connection with
the Corporate Transaction, either to be assumed by the successor corporation (or
parent) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent); (ii) such option is to
be replaced with a cash incentive program of the successor corporation which
preserves the spread existing on the unvested option shares at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option; or (iii) the acceleration of
such option is subject to other limitations imposed by the Board of Directors or
Committee at the time of the option grant. Immediately following the
consummation of the Corporate Transaction, all outstanding options will
terminate and cease to be exercisable, except to the extent assumed by the
successor corporation.
In addition, upon a Corporate Transaction, the Company's outstanding
repurchase rights applicable to options granted under the Discretionary Option
Grant Program will terminate automatically unless assigned to the successor
corporation.
Any options which are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time will automatically accelerate (and any
of the Company's outstanding repurchase rights which do not otherwise terminate
at the time of the Corporate Transaction will automatically terminate and the
shares of Common Stock subject to those terminated rights will immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within 18 months following the effective
date of such Corporate Transaction. Any options so accelerated will remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one-year period measured from the
effective date of the involuntary termination.
Upon the occurrence of the following transactions ("Change in Control"):
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) acquires beneficial ownership of more than 50%
of the Company's outstanding voting stock without the Board's recommendation, or
(ii) there is a change in the composition of the Board over a period of 36
consecutive months or less such that a majority of the Board members ceases, by
reason of a
8
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proxy contest, to be comprised of individuals who (a) have been Board members
continuously since the beginning of such period or (b) have been elected or
nominated for election as Board members by a majority of the Board in (a) who
were still in office at the time such election or nomination was approved by the
Board,
the Board of Directors or Committee has the discretion to accelerate outstanding
options and terminate the Company's outstanding repurchase rights. The Board of
Directors or Committee also has the discretion to terminate the Company's
outstanding repurchase rights upon the subsequent termination of the optionee's
service within a specified period following the Change in Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Mr. Charles St. Clair and Mr. Dan Taylor served on the
Compensation Committee. Mr. St. Clair was an officer of the Company but was not
an employee during 1999. Currently, Messrs. St. Clair and Taylor are members of
the Compensation Committee. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has the authority to establish the level of base
salary payable to the Chief Executive Officer ("CEO"), to administer the Option
Plan with respect to executive officers, and to supervise the administration of
the Purchase Plan. In addition, the Committee has the responsibility for
approving the individual bonus program to be in effect for the CEO. The CEO has
the exclusive authority to establish the level of base salary payable to all
other employees of the Company, including all executive officers, subject to the
approval of the Committee. In addition, the CEO has the responsibility for
approving the bonus programs to be in effect for all other executive officers
and other key employees each fiscal year, subject to the approval of the
Committee.
For 1999, the process utilized by the CEO in determining executive officer
compensation levels took into account both qualitative and quantitative factors.
Among the factors considered by the CEO were informal surveys conducted by
Company personnel among local companies. However, the CEO made the final
compensation decisions concerning such officers.
9
<PAGE>
GENERAL COMPENSATION POLICY. The CEO's fundamental policy is to offer the
Company's executive officers competitive compensation opportunities based upon
overall Company performance, their individual contribution to the financial
success of the Company and their personal performance. It is the CEO's objective
to have a substantial portion of each officer's compensation contingent upon the
Company's performance, as well as upon his or her own level of performance.
Accordingly, each executive officer's compensation package consists of: (i) base
salary, (ii) cash bonus awards and (iii) long-term stock-based incentive awards.
BASE SALARY. The base salary for each executive officer is set on the basis
of personal performance and the salary level in effect for comparable positions
at companies that compete for executive talent, based on informal surveys
conducted by the Company.
ANNUAL CASH BONUSES. Each executive officer has an established bonus target
each fiscal year. The annual pool of bonuses for executive officers is
determined on the basis of the Company's achievement of the financial
performance targets established at the start of the fiscal year, a range for the
executive's contribution and a measure of customer satisfaction. For 1999, the
Company exceeded its performance targets. Actual bonuses paid reflect an
individual's accomplishment of both corporate and functional objectives, with
greater weight being given to achievement of corporate rather than functional
objectives.
LONG-TERM INCENTIVE COMPENSATION. During 1999, the Committee, in its
discretion, made option grants to Moriyuki Chimura and Sam Chang under the
Option Plan. Generally, a significant grant is made in the year that an officer
commences employment, and no grant is made in the second year. Generally, the
size of each grant is set at a level that the Committee deems appropriate to
create a meaningful opportunity for stock ownership based upon the individual's
position with the Company, the individual's potential for future responsibility
and promotion, the individual's performance in the recent period and the number
of unvested options held by the individual at the time of the new grant. The
relative weight given to each of these factors will vary from individual to
individual.
Each grant allows the officer to acquire shares of the Company's Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time. The option vests in periodic installments over a
four-year period, contingent upon the executive officer's continued employment
with the Company, and the vesting schedule is adjusted to reflect existing
grants to ensure a meaningful incentive in each year following the year of
grant. Accordingly, the option will provide a return to the executive officer
only if he remains in the Company's employ, and then only if the market price of
the Company's Common Stock appreciates over the option term.
CEO COMPENSATION. Unless otherwise defined, the capitalized terms used in
this "CEO Compensation" section have the meanings assigned to them in the Option
Plan.
1999 SALARY. The 1999 annual base salary for Mr. Hsu, the Company's
President and CEO, was established by the Committee in March 1999 at $800,000,
from $600,000 in 1998. The Committee's decision was made primarily on the basis
of the attainment by the Company and Mr. Hsu of certain performance goals set by
the Compensation Committee on April 8, 1999,
10
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including significant increases of the Company's revenues, net income and
diluted earnings per share from 1997 to 1998, and Mr. Hsu's efforts in 1999
regarding new product development, strategic business combinations and
procedures to reduce costs and improve productivity.
1999 CASH BONUS. In February 1999, the Committee awarded the CEO a cash
bonus of $1.6 million for his services in 1998. The Committee's decision was
made primarily on the basis of the attainment by the Company and Mr. Hsu of
certain performance goals set by the Compensation Committee on April 8, 1999,
including significant increases of the Company's revenues, net income and
diluted earnings per share from 1997 to 1998, and Mr. Hsu's efforts in 1999
regarding new product development, strategic business combinations and
procedures to reduce costs and improve productivity.
1999 STOCK OPTIONS. In February 2000, the Committee awarded the CEO
options to purchase 300,000 shares of the Company's Common Stock pursuant to
the Committee's authorization in April 1999, which tied the award to the
attainment by the Company and Mr. Hsu of certain performance goals as
described above. The exercise price of the stock options is the closing price
of the Company's Common Stock on April 8, 1999.
TAX LIMITATION. As a result of federal tax legislation enacted in 1993, a
publicly held company such as the Company will not be allowed a federal income
tax deduction for compensation paid to certain executive officers to the extent
that compensation exceeds $1 million per officer in any year. The stockholders
approved the Option Plan, which includes a provision that limits the maximum
number of shares of Common Stock for which any one participant may be granted
stock options. Accordingly, any compensation deemed paid to an executive officer
when he exercises an outstanding option granted by the Compensation Committee
under the Option Plan with an exercise price equal to the fair market value of
the option shares on the grant date will not be subject to the $1 million
limitation provided that the Compensation Committee meets certain requirements.
The Board of Directors currently does not have a Compensation Committee meeting
the requirements of Section 162(m). The cash compensation to be paid to the
Company's Chief Executive Officer for the 1999 fiscal year exceeds the $1
million limit and the Committee has decided not to limit the dollar amount of
cash compensation payable to the Company's Chief Executive Officer or other
executive officers to $1 million.
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between June 7, 1995 (the date the Company's
Common Stock commenced public trading) and December 31, 1999 with the cumulative
total return of (i) The Nasdaq Stock Market Total Return Index (U.S. Companies)
(the "Nasdaq Stock Market-U.S. Index") and (ii) The Nasdaq Computer & Data
Processing Stocks Total Return Index for The Nasdaq Stock Market ("Nasdaq CDP
Index") over the same period. This graph assumes the
11
<PAGE>
investment of $100 on June 7, 1995 in the Company's Common Stock, in The Nasdaq
Stock Market-U.S. Index or the Nasdaq CDP Index, and assumes the reinvestment of
dividends, if any.
The comparisons shown in the graph below are based upon historical data,
and the Company cautions that the stock price performance shown in the graph
below is not indicative of, nor intended to forecast, the potential future
performance of the Company's Common Stock. Information used in the graph was
obtained from The Nasdaq Stock Market, a source believed to be reliable, but the
Company is not responsible for any errors or omissions in such information.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN AMONG AVANT! CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ COMPUTER AND DATA PROCESSING
INDEX
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
<TABLE>
<CAPTION>
6/95 12/95 12/96 12/97 12/98 12/99
---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Avant! Corporation 100 73 120 63 60 44
Nasdaq Stock Market (U.S.) 100 123 151 185 260 436
Nasdaq Computer & Data 100 127 157 192 344 692
Processing
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the
Compensation Committee Report and Stock Performance Graph are not deemed filed
with the Securities and Exchange Commission and shall not be deemed incorporated
by reference into any of those prior filings or into any future filings made by
the Company under those statutes.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of Common Stock as of April 1, 2000 for (a) each person who
beneficially owns more than 5% of our outstanding Common Stock, (b) each of
the Company's directors, (c) each of the named executive officers, and (d)
all executive officers and directors as a group. Beneficial ownership is
determined in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, and includes all shares over which the beneficial owner exercises
voting or investment power. Options to purchase Common Stock that are
presently exercisable or exercisable within 60 days of April 1, 2000 are
considered outstanding for the purpose of calculating percentage ownership
and are included in the total number of shares beneficially owned for the
person holding those options. Except as otherwise indicated, and subject to
community property laws where applicable, the Company believes, based on
information provided by these persons, that the persons named in the table
below have sole
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<PAGE>
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them:
<TABLE>
<CAPTION>
BENEFICIAL OWNER (1) NUMBER OF SHARES % OF CLASS (2)
- ---------------- ---------------- ----------
<S> <C> <C>
T Rowe Price and Associates (3) 3,784,100 9.7%
Wellington Management Co., LLP (4) 2,938,400 7.5
Credit Suisse Asset Management (5) 2,496,936 6.4
Gerald C. Hsu (6) 1,239,285 3.1
Moriyuki Chimura (7) 43,025 *
Charles St. Clair (8) 38,741 *
Dan Taylor - -
Kenneth Tai - -
Noriko Ando (9) 199,332 *
Sam Chang (10) 22,667 *
Stephen Wuu (11) 479,994 1.2
All directors and executive officers as a group (8
persons) (12) 2,023,044 5.0
</TABLE>
- ------------------
* Less than 1.0% of the outstanding shares of Common Stock
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of common
stock.
(2) Based on 38,991,164 shares of Common Stock outstanding as of April 1, 2000.
(3) Based on Schedule 13G/A filed with the Securities and Exchange Commission
on February 4, 2000, and other information obtained by the Company, T. Rowe
Price Associates, Inc. held sole voting power as to 303,200 such shares and
sole dispositive power as to 3,784,100 shares. T. Rowe Price Associates,
Inc.'s address is 100 East Pratt Street, Baltimore, Maryland 21202.
(4) Based on Schedule 13G/A filed with the Securities and Exchange Commission
on February 11, 2000, and other information obtained by the Company,
Wellington Management Co., LLP, held shared voting power as to 2,905,400
shares and shared dispositive power as to 2,938,400 shares. Wellington
Management Co., LLP's address is 75 State Street, Boston, Massachusetts
02109.
(5) Based on Schedule 13G/A filed with the Securities and Exchange Commission
on December 31, 1999, and other information obtained by the Company, Credit
Suisse Asset Management, LLC, held sole voting power as to 2,496,936 and
sole dispositive power as to 2,496,936 shares. Credit Suisse Asset
Management LLC's address is 153 East 53rd Street, New York, New York 10022.
(6) Includes options exercisable into 852,082 shares of Common Stock under the
Option Plan as of May 31, 2000.
(7) Includes options exercisable into 41,666 shares of Common Stock under the
Option Plan as of May 31, 2000.
13
<PAGE>
(8) Includes options exercisable into 36,836 shares of Common Stock under the
Option Plan as of May 31, 2000.
(9) Includes options exercisable into 78,332 shares of Common Stock under the
Option Plan as of May 31, 2000.
(10) Includes options exercisable into 21,667 shares of Common Stock under the
Option Plan as of May 31, 2000.
(11) Includes options exercisable into 63,074 shares of Common Stock under the
Option Plan as of May 31, 2000. Also includes 31,250 shares indirectly
owned by Mr. Wuu's spouse.
(12) Includes options exercisable into 1,093,657 shares of Common Stock under
the Option Plan as of May 31, 2000.
ITEM 13. Certain Relationships and Related Transactions
In 1999, the Company paid directly the legal fees of Gerald C. Hsu in the
amount of $275,480 and Stephen Tzyh-Lih Wuu in the amount of $604,596 in
connection with various criminal matters involving the executives and certain
litigation matters involving the Company, including the litigation matter
against Cadence Design Systems, Inc.
During 1997 and 1996, respectively, the Company entered into joint
ventures with Maingate Electronics, KK ("Maingate") of Japan and DavanTech
Co., Ltd, ("DavanTech") of Korea. The joint ventures were formed for the
purpose of consolidating distribution in their respective countries. The
Company has ownership of 35% and 39.6% of Maingate and DavanTech,
respectively, and accounts for them by the equity method. These investments
are included in other assets and the Company's share of equity earnings are
included in the Statement of Earnings as equity income (losses) from
unconsolidated subsidiaries. Gerald C. Hsu, the Company's Chairman of the
Board, President and Chief Executive Officer owns 40% of Maingate and 2.6% of
DavanTech. Noriko Ando, the Company's Executive Operating Officer,
Operations, owns 2% of Maingate. Other than possible appreciation of his
investments in Maingate and DavanTech, neither Ms. Ando nor Mr. Hsu has
derived, directly or indirectly, any remuneration as a result of the
agreements between the Company and either Maingate or DavanTech. The
distributorship agreements that the Company entered into with Maingate and
DavanTech are comparable, from a financial point of view, with the agreements
the Company had with its previous distributors in the region and contain no
better terms, from a financial point of view, than the Company could have
negotiated with other potential distributors.
The Company recognizes software license revenue sold to these joint
ventures when cash is collected by the joint ventures from the end users or
by the Company. Revenues from sales to Maingate and DavanTech during 1999
were $16.8 million and $2.1 million, respectively, up from $14.3 million and
$0.9 million, respectively, in 1998. At December 31, 1999, due from
affiliates included trade receivables of $2.7 million from Maingate and $1.9
million from DavanTech, of which a $1.0 million was a loan to DavanTech made
during 1998. At December 31, 1998, due from affiliates included trade
receivables of $7.9 million from Maingate and a $1 million loan to DavanTech.
14
<PAGE>
During 1998, the Company invested $10 million into Forefront Venture
Partners L.P. ("Forefront"), a limited partnership which invests primarily in
technology start-up companies. This investment represented 53.85% ownership of
the partnership. The partnership is controlled and managed by a General
Partnership; Kenneth Tai, a board member of the Company, is a member of this
partnership. The Company accounts for this investment by the equity method
because the Company does not control Forefront. During 1999, the Company
recorded $5.7 million equity income related to Forefront, which consisted
primarily of unrealized appreciation of the venture capital investments which
occurred in the fourth quarter. The Company believes that, due to the nature of
venture capital investing, its investment in Forefront will be subject to
significant fluctuation which could result in the Company recording significant
income and losses in the future.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the 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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
----------------- ---------------
<S> <C>
/s/ GERALD C. HSU* President, Chief Executive
------------------------------------------------------- Officer and Chairman of the
Gerald C. Hsu Board of Directors
/s/ SAM CHANG* Head of Finance and Treasurer
------------------------------------------------------
Sam Chang
/s/ KENNETH TAI* Director
-----------------------------------------------------
Kenneth Tai
/s/ CHARLES ST. CLAIR* Director and Secretary
-----------------------------------------------------
Charles St. Clair
/s/ MORIYUKI CHIMURA* President, Avant! U.S.A.
-----------------------------------------------------
Moriyuki Chimura
/s/ DANIEL D. TAYLOR* Director
----------------------------------------------------
Daniel D. Taylor
*By: /s/ SAM CHANG
----------------------------------------------------
Sam Chang
Attorney-in-Fact
</TABLE>
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