0000701811-95-000013.txt : 19950815 0000701811-95-000013.hdr.sgml : 19950815 ACCESSION NUMBER: 0000701811-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950814 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR GRAPHICS CORP CENTRAL INDEX KEY: 0000701811 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930786033 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13442 FILM NUMBER: 95562788 BUSINESS ADDRESS: STREET 1: 8005 SW BOECKMAN RD CITY: WILSONVILLE STATE: OR ZIP: 97070 BUSINESS PHONE: 5036857000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended June 30, 1995. Commission File No. 0-13442 MENTOR GRAPHICS CORPORATION (Exact name of registrant as specified in its charter) Oregon 93-0786033 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (503) 685-7000 NO CHANGE Former name, and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of common stock, no par value, outstanding as of July 31, 1995: 54,326,189 MENTOR GRAPHICS CORPORATION Index to Form 10Q PART I FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated Statements of Operations for the three 3 months ended June 30, 1995 and 1994 Consolidated Statements of Operations for the six 4 months ended June 30, 1995 and 1994 Consolidated Balance Sheets as of June 30, 1995 5 and December 31, 1994 Consolidated Statements of Cash Flows for the 6 six months ended June, 1995 and 1994 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9-14 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 16 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Mentor Graphics Corporation Consolidated Statements of Operations (In thousands, except net income per share) (Unaudited) Three Months Ended June 30, 1995 1994 Revenues: System and software $46,956 $44,589 Service and support 46,812 36,717 Total revenues 93,768 81,306 Cost of revenues: System and software 8,271 7,454 Service and support 20,014 15,692 Total cost of revenues 28,285 23,146 Gross margin 65,483 58,160 Expenses: Research and development 17,601 16,132 Marketing, general and administration 37,638 36,562 Restructuring adjustment (2,040) -- Merger related charges 800 -- Total expenses 53,999 52,694 Operating income 11,484 5,466 Other income, net 1,827 345 Income before income taxes 13,311 5,811 Provision for income taxes 1,330 960 Net income $11,981 $4,851 Net income per common and common equivalent share $ .22 $ .09 Weighted average number of common and common equivalent shares outstanding 55,486 52,044 See accompanying notes to unaudited consolidated financial statements. Mentor Graphics Corporat Consolidated Statements of Operations (In thousands, except net income per share) (Unaudited) Six Months Ended June 30, 1995 1994 Revenues: System and software $89,892 $93,821 Service and support 89,601 71,251 Total revenues 179,493 165,072 Cost of revenues System and software 16,437 16,461 Service and support 38,383 30,830 Total cost of revenues 54,820 47,291 Gross margin 124,673 117,781 Expenses: Research and development 34,803 33,566 Marketing, general and administration 72,638 73,760 Restructuring adjustment (2,040) -- Merger related charges 800 -- Total expenses 106,201 107,326 Operating income 18,472 10,455 Other income, net 2,988 908 Income before income taxes 21,460 11,363 Provision for income taxes 3,030 1,900 Net income $18,430 $9,463 Net income per common and common equivalent share $ .34 $ .18 Weighted average number of common and common equivalent shares outstanding 54,972 52,014 See accompanying notes to unaudited consolidated financial statements. Mentor Graphics Corporation Consolidated Balance Sheets (In thousands) As of As of June 30, 1995 December 31, 1994 (Unaudited) ASSETS Current assets: Cash and cash equivalents $145,404 $130,676 Short-term investments 29,290 7,180 Trade accounts receivable, net 76,025 82,285 Other receivables 4,037 4,853 Prepaid expenses and other 11,458 13,012 Total current assets 266,214 238,006 Property, plant and equipment, net 96,693 97,701 Cash and investments, long-term 30,000 30,000 Other assets 29,376 28,090 Total $422,283 $393,797 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 7,588 $ 8,450 Accounts payable 7,539 11,570 Income taxes payable 11,347 12,793 Accrued and other liabilities 43,242 48,765 Deferred revenue 23,033 17,649 Total current liabilities 92,749 99,227 Long-term debt 53,449 53,625 Other long-term deferrals 1,410 1,877 Total liabilities 147,608 154,729 Stockholders' equity: Common stock 265,582 254,271 Accumulated defici (10,703) (27,877) Foreign currency translation adjustment 19,796 12,674 Total stockholders' equity 274,675 239,068 Total $422,283 $393,797 See accompanying notes to unaudited consolidated financial statements. Mentor Graphics Corporation Consolidated Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended June 30, 1995 1994 Operating Cash Flows: Net income $18,430 $ 9,463 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization of property, plant & equipment 11,151 12,530 Deferred taxes (41) (21) Amortization of other assets 4,263 3,694 Charge for in process R&D 400 -- Restructuring adjustment (2,040) -- Changes in operating assets and liabilities: Trade accounts receivable 8,718 (6,235) Prepaid expenses and other assets 2,201 (3,203) Accounts payable (4,273) (3,360) Accrued liabilities (3,901) (5,107) Other liabilities and deferrals 2,590 946 Net cash provided by operating activities 37,498 8,707 Investing Cash Flows: Maturities (purchases) of short-term investments (21,543) 6,523 Purchases of property and equipment (9,260) (6,537) Capitalization of software development costs (3,060) (3,073) Purchase of businesses (2,930) -- Net cash used by investing activities (36,793) (3,087) Financing Cash Flows: Proceeds from issuance of common stock 11,310 6,062 Increase (decrease) in short-term borrowings (1,066) 837 Repayment of long-term debt (176) (11) Adjustment for pooling of interests (331) 899 Cash Distribution -- (463) Net cash provided by financing activities 9,737 7,324 Effect of exchange rate changes on cash and cash equivalents 4,286 2,623 Net change in cash and cash equivalents 14,728 15,567 Cash and cash equivalents at beginning of period 130,676 95,958 Cash and cash equivalents at end of period $145,404 $111,525 See accompanying notes to unaudited consolidated financial statements. MENTOR GRAPHICS CORPORATION Notes to Consolidated Financial Statements (Unaudited) (1) General - The accompanying financial statements have been prepared in conformity with generally accepted accounting principles. However, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the statements include all adjustments necessary for a fair presentation of the results of the interim periods presented. Certain reclassifications have been made in the accompanying financial statements for 1994 to conform with the 1995 presentation. (2) Acquisitions - On May 4, 1995, the Company completed the acquisition of Axiom Datorer Skandinavien AB (Axiom). Axiom is primarily engaged in developing, marketing and supporting software library tools used to model electronic components primarily for the printed circuit board and to a lesser extent the application specific integrated circuit markets of the electronic design automation (EDA) industry. Axiom's product offerings are complementary to the CompanyOs current broad line of EDA tools and systems. The total purchase price was $480 in addition to Axiom's net deficit of $413 for a total acquisition cost basis of $893. The transaction was accounted for as a purchase, and therefore, the Consolidated Balance Sheet of Axiom has been included in the accompanying Consolidated Balance sheets as of June 30, 1995. The cost of the acquisition was allocated on the basis of estimated fair value of the assets and liabilities assumed. This allocation resulted in a charge for in-process R&D of $400, goodwill capitalization of $398 and technology capitalization of $95. The charge for in-process R&D was a result of allocating a portion of the acquisition cost to Axiom's in-process product development that had not reached technological feasibility. The goodwill costs will be amortized over a three year period to R&D expense primarily to recognize the value of the development work-force acquired. The technology costs will be amortized over a three year period to system and software cost of revenues. Financial results subsequent to the acquisition date have been included in the Consolidated Statements of Operations and Cash Flows. The separate operational results of Axiom were not material compared to the CompanyOs overall results of operations, and accordingly pro-forma financial statements of the combined entities have been omitted. On May 31, 1995, the Company issued 1,512 shares of its common stock for all outstanding common stock of Exemplar Logic, Inc. (Exemplar). Exemplar develops, markets and supports a family of software tools for high-level-design-automation for the application specific integrated circuit and field programmable gate array markets. Exemplar's product offerings are complementary to the Company's line of EDA tools and systems. The Company accounted for this transaction as a pooling of interests. The balance sheet of Exemplar is included in the accompanying Consolidated Balance Sheet as of June 30, 1995 and Exemplar's results of operations are included in the accompanying Consolidated Statement of Operations for all of 1995. The Company's prior year financial statements were not restated due to the relative materiality of Exemplar's separate financial statements for 1994 and prior. Merger expenses of $350 were for services rendered to facilitate completion of the merger agreement and severance costs. (3) Restructuring- Implementation of the Company's restructuring plan approved by management in December 1993, and modified in 1994 continued during the second quarter of 1995. Costs remaining to be incurred in executing the restructuring plan consist primarily of direct costs associated with severance and relocation of employees, facilities closures and write-offs of excess equipment and intangible software technology assets related to discontinued product development activities. During the second quarter of 1995, several elements of the restructuring plan were adjusted due to updated information. Costs associated with an international reorganization have been modified due to additional cost information related to implementation activities associated with a new global information system. In addition, certain actions associated with a product discontinuance plan will not be taken as the technology will be used by the Company's consulting organization. As a result, the Company recorded a $2,040 credit during the second quarter of 1995 reflecting these lower costs. (4) Capitalization of Software Development Costs - During the first six months of 1995 and 1994, $3,060 and $3,073 of new product development costs were capitalized and included in other assets on the Consolidated Balance Sheets, respectively. Amortization of previously capitalized software development costs amounted to $2,472 and $3,487 for the six months ended June 30, 1995 and 1994, respectively, and is included in system and software cost of revenues on the Consolidated Statements of Operations. (5) Supplemental Disclosures of Cash Flow Information - The following provides additional information concerning cash flow activities: Six Months Ended June 30, 1995 1994 Interest paid $ 1,099 $ 1,053 Income taxes paid, net of refunds $ 3,822 $ 1,147 (6) Subsequent Event - Stock Repurchase Announcement - On August 4, 1995 the Board of Directors approved a plan to repurchase, from time to time over the next eighteen months on the open market, up to $50,000 in market value of the Company's common shares. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (All numerical references are in thousands, except for percentages) RESULTS OF OPERATIONS REVENUES AND GROSS MARGINS System and Software System and software revenues for the quarter ended June 30, 1995, totaled $46,956, representing an increase of $2,367 or 5% from the second quarter of 1994. For the first six months of 1995, system and software revenues declined $3,929 or 4% from the same period a year ago. Second quarter system and software gross margins slightly decreased to 82% in 1995 compared to 83% in the same period of 1994. For the first six months of 1995 and 1994, system and software gross margins were 82%. System and software revenues were lower in the first half of 1995 versus the same period of 1994 due to a one-time contract which yielded approximately $11,000 in the first quarter of 1994. This year-to-year decline was off-set by the acquisitions of Anacad Electrical Engineering Software GmbH (Anacad), Exemplar and Axiom which contributed approximately $3,600 of system and software revenues for the first six months of 1995 compared to zero for the same period a year ago. System and software product revenues are shifting from maturing product offerings to new product offerings. The extent to which sales of new products will off-set declining sales of older products will remain difficult to predict for some time. System and software gross margin levels are dependent on such factors as third party software content for which royalties are paid, lower margin hardware revenue levels, and amortization of previously capitalized software development costs and purchased technology costs. Third party software royalty costs have been favorably impacted by acquisitions of third parties where existing agreements were in place. The Company continues to have other third party contracts that contribute varying levels of revenues and cost of revenues quarter to quarter. Future trends of third party revenue content are difficult to predict since they are dependent on such variables as new third party agreements, potential acquisitions of third parties where existing agreements are in place, and varying levels of customer demand for third party product offerings. The overall mix of hardware versus software continues to move toward software. The Company experienced some hardware sales to meet customer requests when gross margins were above a minimum level. In the first half of 1995, the hardware component of system and software revenue declined to 8% from 9% for the period last year. The Company expects hardware revenue to decline at a moderate rate for the second half of 1995. Amortization of previously capitalized software development costs to system and software cost of revenues was $1,336 and $2,472 for the second quarter and first six months of 1995, respectively, compared to $1,477 and $3,487 for the same periods a year ago. In 1994, amortization reflected a higher level of capitalized costs accumulated during development of Version 8 software products. The amortization level declined in the first half of 1995 as several capitalized projects became fully amortized during the prior year. Purchased technology amortization to system and software cost of goods sold was $1,109 and $106 for the six months ended June 30, 1995 and 1994, respectively. The increase in purchased technology amortization is due to various technology acquisitions in 1994, including the purchase of Anacad on September 30, 1994. Exclusive of additional acquisitions, amortization of capitalized software development and purchased technology costs are expected to be approximately flat for the next several quarters. Service and Support Service and support revenues for the second quarter of 1995 were $46,812, representing an increase of 27% from the comparable quarter of 1994. For the first six months of 1995, service and support revenues totaled $89,601, representing an increase of 26% from the same period of 1994. Growth in software support revenue is attributable to growth in the Company's installed customer base, and continued success of the Company's software support programs. The Company continues to experience higher renewal rates for its software support program due partially to the improved quality of the current software product offerings. Since growth in software support is dependent on continued success of the software product offerings and increases in the Company's installed customer base, future software support revenue levels are difficult to predict. Professional and other service revenues for the second quarter of 1995 were $13,000, an increase of 71% from the comparable quarter of 1994. For the first six months of 1995, professional and other service revenues totaled $24,900, an increase of 51% from the same period of 1994. Overall professional service revenues are expected to continue to grow. In particular, integrated circuit technology center (ICTC) custom design services are experiencing increased demand. Over the past year, the Company has added resources to the ICTC business in response to the increased demand resulting in higher revenue levels as more design contracts are completed. Service and support gross margins were 57% for each of the quarters ended June 30, 1995 and 1994, and 57% for each of the first six months of 1995 and 1994, respectively. Service and support gross margins were favorably impacted by higher software support revenue volume and unfavorably impacted by professional service margins. Consistent with consulting and training business models, gross margins generated by the Company's professional service activities have been and are expected to continue to be lower than software support. Service and support gross margins are expected to be lower as growth in the professional service business is expected to be higher than growth in software support. OPERATING EXPENSES The following summarizes research and development (R&D) costs: Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Gross R&D $18,697 $18,332 $37,863 $36,639 Capitalized R&D (1,096) (2,200) (3,060) (3,073) Net R&D $17,601 $16,132 $34,803 $33,566 Higher gross R&D expenses are attributable to merger and acquisition activity off-set by lower base business head count. The acquisitions of Anacad, Exemplar and Axiom resulted in additional R&D expenses of $2,866 in the first half of 1995, compared to zero in the same period of 1994. The Company closed an Integrated Circuit Division R&D site during the first quarter of 1994, consolidating activities with other pre-existing locations resulting in lower expense levels for the first six months of 1995 compared to the same period of 1994. R&D expenses are expected to increase as new business opportunities are funded for the second half of 1995. During the second quarter and the first six months of 1995, marketing, general and administration (MG&A) expenses were $37,638 and $72,638, respectively, compared to $36,562 and $73,760 for the same periods of 1994, respectively. The increase in MG&A expenses is principally attributable to merger and acquisition activity discussed above, off-set by lower base business head count. The acquisitions of Anacad, Exemplar and Axiom resulted in additional MG&A expenses of $4,200 in the first half of 1995, compared to zero in the same period of 1994. In 1994, the Company streamlined its North American, European and Japanese organizations to improve the ratio of selling and administrative expense compared to regional revenue levels. This process was executed throughout 1994 resulting in lower expense levels as the year progressed. In addition, corporate administrative costs have been reduced to better align spending levels with industry business model standards. Spending levels should remain approximately flat with second quarter levels exclusive of normal seasonality and possible future acquisitions. Normal seasonality is expected to result in slightly lower MG&A costs in the third quarter and increased MG&A costs in the fourth quarter. MERGER RELATED CHARGES Merger related charges are the result of a write-off of in-process R&D of $400 associated with the Axiom transaction and $400 in expenses primarily associated with the acquisition of Exemplar for services rendered to facilitate completion of the merger agreement and severance costs. On May 4, 1995, the Company completed the acquisition of Axiom. The total purchase price of Axiom was $480 in addition to Axiom's net deficit of $413 for a total acquisition cost basis of $893. The acquisition was accounted for as a purchase. The cost of the acquisition has been allocated on the basis of estimated fair value of the assets and liabilities assumed. This allocation resulted in a one-time charge for in-process R&D of $400, capitalization of goodwill of $398 and capitalization of technology of $95. The charge for in-process R&D was a result of allocating a portion of the acquisition cost to Axiom's in-process product development that had not reached technological feasibility. On May 31, 1995, the Company completed the merger with Exemplar. The transaction was accounted for as a pooling of interests. The CompanyOs prior year financial statements were not restated due to relative materiality of Exemplar's separate financial statements for 1994 and prior years. RESTRUCTURING COSTS Implementation of the Company's restructuring plan approved by management in December 1993, and modified in 1994 continued during the second quarter of 1995. Costs remaining to be incurred in executing the restructuring plan consist primarily of direct costs associated with severance and relocation of employees, facilities closures and write-offs of excess equipment and intangible software technology assets related to discontinued product development activities. During the second quarter of 1995, several elements of the restructuring plan were adjusted due to updated information. Costs associated with an international reorganization have been modified due to additional cost information related to implementation activities associated with a new global information system. In addition, certain actions associated with a product discontinuance plan will not be taken as the technology will be used by the Company's consulting organization. As a result, the Company recorded a $2,040 credit during the second quarter of 1995 reflecting these lower costs. Approximately $9,000 of the December 31, 1995 restructuring accrual of $11,897 should result in cash outflows during 1995. For the first half of 1995, restructure-related cash outflows were approximately $2,300. For the second half of 1995, disbursements are anticipated to be near $7,000. Approximately $1,000, primarily related to facilities closures, is expected to be disbursed after 1995. OTHER INCOME (EXPENSE) During the second quarter and the first six months of 1995, other income was $1,827 and $2,988, compared to other income of $331 and $889 for the same periods of 1994, respectively. Interest income from investments was $2,338 and $4,008 for the second quarter and first six months of 1995, respectively, compared to $990 and $2,082 for the same periods of 1994. The increase in interest income is primarily attributable to higher average cash, cash equivalents and short term investments outstanding during the comparable quarters. During the second quarter and first six months of 1995, interest expense amounted to $465 and $1,106, respectively, down from $869 and $1,504 for the comparable periods in 1993. The decrease in interest expense is due to lower average debt outstanding and lower average interest rates for the comparable periods. PROVISION FOR INCOME TAXES The provision for income taxes amounted to $1,330 for the quarter ended June 30, 1995, as compared to $960 for the same period in 1994. For the first six months of 1995, the provision for income taxes was $3,030 compared to $1,900 for the same period a year ago. Effective January 1, 1993 the Company adopted Statement No. 109, "Accounting for Income Taxes." At that time a valuation allowance for certain current deferred tax assets, and net operating loss and tax credit carryforwards was established. The valuation allowance as of December 31, 1994 was $46,213, of which $1,974 was related to deferred tax assets of the Company's Japanese subsidiary. The reserve was established when it was more likely than not that some portion of the deferred tax asset would not be realized. Based on current operating income levels before tax for the Company's Japanese subsidiary, it has been determined that it is now more likely than not that Japan's deferred tax assets will be realized. As such, the tax provision for the second quarter and the last six months of 1995 has been adjusted for the reversal of the valuation allowance for the Japanese deferred tax assets. This reversal, in addition to changes in operating income forecasts of certain tax jurisdictions, results in a lower effective tax rate than was posted in the first quarter of 1995. The Company's income tax position for each year combines the effects of available tax benefits in certain countries where the Company does business, benefits from available net operating loss carrybacks, and tax expense for subsidiaries with pre- tax income. As such, the Company's income tax position and resultant effective tax rate is uncertain for the remainder of 1995. EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS The Company experienced a net gain from foreign currency transactions of $57 and $153 during the second quarter and first six months of 1995, respectively, compared to a net gain of $38 and a net loss of $53 during the same periods a year ago. These amounts are comprised of realized gains and losses on cash transactions involving various foreign currencies, and unrealized gains and losses related to foreign currency receivables and payables resulting from exchange rate fluctuations between the various currencies in which the Company operates. Foreign currency gains and losses are included as a component of other income. The "foreign currency translation adjustment", as reported in the equity section of the Consolidated Balance Sheet at June 30, 1995, increased to $19,796 from $12,674 at the end of 1994. This reflects the increase in the value of net assets denominated in foreign currencies against the U.S. dollar since year-end 1994. During the period from December 31, 1994 to June 30, 1995, the U.S. dollar weakened approximately 15% against the Japanese yen and 7% against the European currencies. Generally, a weakening of the U.S. dollar makes the Company's products less expensive in foreign markets, which has a positive impact on the Company's revenues over time. In addition, a weakening U.S. dollar results in higher reported revenues and operating expenses due to translation of local currency activity to U.S. dollars for consolidated financial reporting. The Company generally realizes approximately half of its revenue outside the United States and expects this to continue in the future. As such, the Company's business and operating results may be impacted by the effects of future foreign currency fluctuations. LIQUIDITY AND CAPITAL RESOURCES CASH AND INVESTMENTS Total cash and investments at June 30, 1995 were $174,694 compared to $137,856 at the end of 1994. Cash provided by operations was $37,498 for the first six months of 1995 compared to $8,707 during the same period of 1994. Cash provided by operations was positively impacted by net income of $18,430 for the first six months of 1995 compared to $9,463 for the same period of 1994. In addition, strong collection efforts decreased trade receivables by $8,718 offset by decreased accounts payable of $4,273 due primarily to higher year end activity in an attempt to match costs with fiscal year budgets. Cash and short-term investments at June 30, 1995 were positively impacted by proceeds from the issuance of common stock of $11,310, offset by decreased short-term borrowings of $1,066, investment in property, plant and equipment of $9,260, and new business investments of $2,930. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable decreased to $76,025 at June 30, 1995 from $82,285 at year-end 1994. This decrease was attributable to a more evenly distributed shipment pattern during the first six months of 1995 compared to the fourth quarter of 1994. As a result, a higher percent of shipments made during the second quarter of 1995 were converted into cash collections before the period ended. OTHER ASSETS Other assets increased to $29,376 at June 30, 1995 from $28,090 at year-end 1994. Net capitalized software development costs increased by $588 as capitalization and amortization were $3,060 and $2,472, respectively, during the first six months of 1995. This increase was also attributable to the purchase of Axiom for $493 and $1,700 spent on investment in other technology companies in which the Company owns a minority interest. This increase in other assets was offset by amortization of goodwill and purchased technology of $1,791. CAPITAL RESOURCES Total capital expenditures increased to $9,260 through June 30, 1995, compared to $6,537 for the same period of 1994. The increase in capital expenditures is primarily a result of costs associated with a new global information system. These expenditures will continue as the year progresses. The Company anticipates that current cash balances, anticipated cash flows from operating activities, and existing credit facilities will be sufficient to meet its working capital needs for at least the next twelve months. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The 1995 Annual Meeting of Shareholders of Company was held pursuant to notice at 5:00 p.m. Pacific time on May 4, 1995 at Company's offices in Wilsonville, Oregon. There were present at the meeting, in person or represented by proxy, the holders of 48,074,035 shares of the outstanding common stock, which represented approximately 93.07% of the outstanding shares. Voting information set forth below was provided by American Stock Transfer & Trust Company, the Company's Transfer Agent for its common stock, as Inspector of Election. The matters voted on at the meeting and the votes cast are as follows: Issue One-Election of Nominees for Directors. The nominees for directors listed below and presented to the meeting were elected directors of the Company upon each receiving the affirmative vote of the holders of approximately 92.8% of those shares represented at the meeting, to serve until the next annual meeting of the shareholders and until their successors shall have been elected and qualified. FOR WITHHOLD Jon A. Shirley 47,943,846 130,189 Marsha B. Congdon 47,940,071 133,964 James R. Fiebiger 47,941,913 132,122 Walden C. Rhines 47,944,046 129,989 Fontaine K. Richardson 47,943,746 130,289 Issue Two-Amendment of the Company's 1989 Employee Stock Purchase Plan. The shareholders approved certain amendments to the Company's 1989 Employee Stock Purchase Plan by the affirmative vote of the holders of approximately 78.7% of those shares represented at the meeting. FOR AGAINST ABSTAIN BROKER NONVOTES 40,695,427 5,934,967 1,443,646 0 Issue Three-Ratification of KPMG Peat Marwick. The shareholders ratified the engagement of KPMG Peat Marwick as independent auditors of the Company by the affirmative vote of the holders of approximately 92.6% of those shares represented at the meeting. FOR AGAINST ABSTAIN BROKER NONVOTES 47,864,261 45,792 163,982 0 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: None. (b) No reports were filed on Form 8-K during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on August 14, 1995. MENTOR GRAPHICS CORPORATION (Registrant) R. Douglas Norby R. Douglas Norby Senior Vice President, and Chief Financial Officer James J. Luttenbacher James J. Luttenbacher Corporate Controller, and Chief Accounting Officer EX-27 2
5 6-MOS DEC-31-1995 JUN-30-1995 145404 29290 76025 0 0 266214 218799 122106 422283 92749 0 265582 0 0 9093 422283 179492 179492 54820 106201 (2989) 0 1129 2988 3030 18430 0 0 0 18430 .34 .34