Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
Commission file number 0 - 13442
MENTOR GRAPHICS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0786033
(State or other jurisdiction of (IRS Employer
ncorporation or organization) Identification No.)
8005 SW Boeckman Road 97070-7777
Wilsonville, Oregon (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (503) 685-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, without par value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve 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 ________
The aggregate market value of the voting stock held by non-
affiliates of the Registrant was approximately $636,268,197 on
March 1, 1994, based upon the last price of the Common Stock on
that date reported in the NASDAQ National Market System. On March
1, 1994, there were 48,017,410 shares of the Registrant's Common
Stock outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or in any amendment to
this Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K into
which incorporated
Portions of 1993 Annual Report Parts I, II and IV
to Shareholders
Portions of the 1994 Proxy Statement Part III
PART I
Item 1. Business
General
Mentor Graphics Corporation (Mentor Graphics or Company), an
Oregon corporation organized in 1981, is headquartered in
Wilsonville, Oregon. The Company's common stock is traded in the
NASDAQ National Market System under the symbol MENT.
Products and Services
The Company designs, manufactures, markets and supports electronic
design automation (EDA) software for the integrated circuit (IC)
and systems design markets. The Company provides a broad range of
EDA tools developed either by the Company or together with third
parties to support the entire electronic design process. The
Company's software products enable engineers and designers to
design, analyze, place and route, and test custom ICs, application
specific ICs (ASICs), printed circuit boards, multichip modules
and other electronic systems and subsystems. The Company^s Falcon
Framework software provides a common foundation for the Company's
EDA software products. Falcon Framework software also allows for
the integration of third party software tools developed by other
commercial EDA vendors and by customers for their own internal
use. The Company's products help customers reduce development
time while producing innovative hardware products of high quality.
In addition to software products, Mentor Graphics' Value Added
Services division also offers consulting, support and training
services to enhance customers' success in the design and
manufacture of hardware products.
Platforms
The Company's software runs on UNIX workstations in a broad range
of price and performance levels, including workstations
manufactured by Hewlett-Packard Company, Sun Microsystems, Inc.,
Digital Equipment Corporation, NEC Corporation and International
Business Machines Corporation. The above major computer
manufacturers have a substantial installed base of workstations,
and make frequent introductions of new products with significant
price/performance improvements.
The Company has written virtually all of its software in the high
level languages C++, C, Pascal, or Fortran to facilitate its
portability to other platforms in the future, should availability
of the Company's software on such platforms prove desirable.
Marketing and Sales
The Company's marketing strategy emphasizes customer support,
Value Added Services, a strong direct sales force and large
corporate account penetration in the semiconductor, aerospace,
computer, telecommunications and consumer electronics industries.
Customers use the Company's products in the design of such diverse
products as supercomputers, automotive electronics, missile
guidance systems, signal processors, personal computers, gallium
arsenide circuits, microprocessors and telecommunication switching
systems.
Mentor Graphics sells and licenses its products primarily through
its direct sales force in the United States, through the direct
sales forces of its wholly-owned subsidiaries in Asia and Europe
and through distributors. During 1993, the Company transitioned
from direct sales to distributorships in some Asian markets by
assisting former employees to set up distributorship businesses
for Company products. The Company is considering making similar
transitions to distributorships in other geographies. During the
years ended December 31, 1993 and 1992, sales outside of North
America accounted for 46 and 48 percent, respectively, of total
sales. Additional information relating to foreign and domestic
operations is contained in Note 15 of Notes to Consolidated
Financial Statements on pages 34-35 of the 1993 Annual Report to
Shareholders and is incorporated by this reference. Fluctuating
exchange rates and other factors beyond the Company's control,
such as tariff and trade policies, domestic and foreign tax and
economic policies and the relative stability of international
economic and monetary conditions should continue to affect the
level and profitability of sales outside the United States.
The Company's OpenDoor program coordinates and supports the
integration of commercial EDA products and customers' internal
products into the Company's EDA environment. Under this program,
the Company enables OpenDoor participant companies to develop
interfaces from their products to the Company's products.
OpenDoor participants can select from a range of integration
technologies to achieve an optimal degree of integration for their
products. There are now approximately 115 OpenDoor participants.
No material portion of the Company's business is dependent on a
single customer. The Company has traditionally experienced some
seasonal fluctuations in receipt of orders, which are typically
stronger in the second and fourth quarters of the year. As is
typical of many other companies in the electronics industry, the
Company generally ships its products to customers within 10 to 90
days after receipt of an order, and a substantial portion of
quarterly shipments tend to be made in the last month of each
quarter. The Company believes that the dollar amount of its
backlog is not material to an understanding of the Company's
business.
The Company sells and licenses its products and some third-party
products pursuant to purchase orders and master purchase and
license agreements. The Company has corporate agreements
providing the general terms and conditions of sales and discounts
to certain of its customers. The Company schedules deliveries
only after receipt of purchase orders under these agreements.
Manufacturing Operations
The Company's manufacturing operations primarily consist of
reproduction of the Company's software and documentation. In
North America, manufacturing occurs at the Company's facility in
Wilsonville, Oregon. Software and documentation distribution
centers in The Netherlands, Japan and Singapore serve their
respective regions. The Company generally does not integrate
Company software with hardware from suppliers. The Company uses a
manufacturing resource planning system which integrates
purchasing, inventory control and accounting in all regions.
Product Development
The EDA market is competitive and characterized by rapid
technological change, which requires continuous high expenditures
for the enhancement of existing products and the development of
new products. The Company is committed to the creation of new
products and intends to continue to enhance its existing products.
During the years ended December 31, 1993, 1992 and 1991, the
Company expensed approximately $77,598,000, $73,947,000 and
$79,539,000 respectively, and capitalized approximately
$3,609,000, $6,120,000, and $9,917,000, respectively, related to
product development. Substantially all of these costs were
related to the development of the Company's proprietary
application software.
Suppliers
The Company contracts with several suppliers who provide software
products which the Company integrates into its product line,
allowing the Company to both concentrate its development efforts
on its core product line and offer its customers a more complete
design solution.
The Company no longer integrates and resells computer hardware
with the Company's products. The Company believes that its
customers realize little value in purchasing hardware through the
Company. As a service to its customers in Europe and Japan, where
some customers prefer to purchase both hardware and software from
one source, the Company will continue to accept orders for
hardware which is shipped directly from the supplier to customers.
Customer Support and Professional Services
The Company has a worldwide organization to meet its customers'
needs for software support, training, consulting, custom IC design
and documentation. The Company offers support contracts providing
software updates and support. Most of the Company's customers are
covered by software support contracts. Some hardware support is
provided to customers under subcontract by third-party hardware
suppliers, although the Company will not be entering into any new
hardware support agreements with customers in 1994. The Company
provides technical support for its products through a direct
telephone support line and an electronic communications system.
Additional professional services are offered through the Company's
Value Added Services division which provides consulting and
training to help the Company's customers improve their design
processes and make the most efficient use of their EDA software
tools.
Competition
The EDA industry is competitive and has been characterized by
rapid technological advances in application software, operating
systems and hardware. The Company's principal competitors are
Cadence Design Systems Inc., Synopsys Inc., Viewlogic Systems,
Inc., COMPASS Design Automation, Inc., Zuken Incorporated, Racal
Redac, Ltd., Intergraph Corporation, and Seiko Corporation. The
Company believes that other companies may be developing EDA
systems.
Some of the Company's competitors and potential competitors may
have greater financial and marketing resources than Mentor
Graphics. However, the Company believes the main competitive
factors in the EDA industry are breadth and quality of application
software, product integration, ability to respond to technological
change, quality of a company's sales force, price, size of the
installed base, level of customer support and value added
services. The Company believes that it generally competes
favorably in these areas. The Company can give no assurance,
however, that it will have the financial resources, marketing,
distribution and service capability, depth of key personnel or
technological knowledge to compete successfully in the EDA market.
Employees
The Company and its subsidiaries employed approximately 2,100
persons full time as of December 31, 1993 compared with
approximately 2,200 persons at the end of 1992. The Company's
success will depend in part on its ability to attract and retain
employees who are in great demand. The Company continues to enjoy
good employee relations. No Company employees are represented by
a collective bargaining unit.
Patents and Licenses
The Company owns United States and Canadian patents covering the
technology underlying several of its software products. The
Company has also filed other patent applications on technology it
has developed and intends to file additional patent applications
in the future. While the Company believes the pending
applications relate to patentable devices, there can be no
assurance that any patent will be issued or that any patent can be
successfully defended. The Company believes that patents are less
significant to the success of its business than technical
competence, management ability, marketing capability and customer
support.
The Company regards its application software as proprietary and
attempts to protect it with copyrights, trade secret laws, and
internal non-disclosure safeguards, as well as patents, when
appropriate, as noted above. The Company typically incorporates
restrictions on disclosure, usage and transferability into its
agreements with customers and other third parties.
Item 2. Properties
The Company's Wilsonville, Oregon facilities are located in six
owned buildings of approximately 570,000 total square feet located
on about 90 acres. All corporate functions, as well as a majority
of research and development and domestic activities, operate from
this site. In January 1993, the Company entered into a five-year
lease with a third party covering the Company's former
manufacturing and warehouse building on its Wilsonville site. The
building size is approximately 150,000 square feet.
The Company leases additional space in San Jose, California, and
in various locations throughout the United States and in foreign
countries, primarily for sales and customer service operations.
The Company believes that it will be able to renew or replace its
existing leases as they expire and that its current facilities
will be adequate through at least 1994.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the security holders of the
Company during the fourth quarter of the fiscal year ended
December 31, 1993.
Executive Officers of Registrant
The following are the executive officers of the Company:
Name Position Age Has Served As
An Officer
of Company Since
Walden C.Rhines President, Chief 47 1993
Executive Officer
and Director
R. Douglas Norby Senior Vice 58 1993
President and Chief
Financial Officer
Waldo J Richards Senior Vice President, 54 1993
Product Operations
Frank S. Delia Vice President, Chief 47 1983
Administrative Officer,
General Counsel and
Secretary
James J.Luttenbacher Corporate Controller 38 1993
and Chief Accounting
Officer
Patricia J.O'Connor Vice President, Human 38 1990
Resources
The officers are elected by the Board of Directors of the Company
at its annual meeting. Officers hold their positions until they
resign, are terminated or their successors are elected. There are
no arrangements or understandings between the officers or any
other person pursuant to which officers were elected and none of
the officers are related.
All of the officers named have been employed by Mentor Graphics
for the last five years except:
1) Mr. Rhines, who was employed from 1972 to 1993 by Texas
Instruments, Incorporated where he held a variety of
technical and management positions and was most
recently Executive Vice President of Texas Instruments
Semiconductor Group;
2) Mr. Norby, who was employed from 1992 to 1993 by Pharmetrix
Corporation as President and Chief Executive Officer
and from 1985 to 1992 by Lucasfilm, Ltd. where he last
held the position of President and Chief Operating
Officer;
3) Mr. Richards, who was employed from 1989 to 1993 by
Sequent Computer Systems Inc. in a variety of
engineering management positions; and
4) Mr. Luttenbacher, who was employed from 1981 to 1992 by
Hewlett-Packard Company in a variety of accounting
positions, the most recent of which was Manager of the
North American Financial Services Group.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
The Company paid a quarterly dividend of $0.06 per share during
1992 and during the first three quarters of 1993. The Company
ceased payment of the dividend in the fourth quarter of 1993 and
does not intend to pay dividends in the foreseeable future.
Additional information required by this item is included under
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 17-22, under "Quarterly Financial
Information" on page 36 and under the shareholder information
included on page 38 of the Company's 1993 Annual Report to
Shareholders.
Item 6. Selected Financial Data
The information required by this item is included under "Selected
Consolidated Financial Data" on page 16 of the Company's 1993
Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
The information required by this item is included under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 17-22 of the Company's 1993 Annual
Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
The financial statements are included in the Company's 1993 Annual
Report to Shareholders on pages 23-37 and are indexed here under
Item 14(a)(1). The supplementary data required by this item is
included under "Quarterly Financial Information" on page 36 of the
Company's 1993 Annual Report to Shareholders. See also the
financial statement schedules appearing here as indexed under Item
14(a)(2).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
The information required by this item concerning the Company's
Directors is included under "Election of Directors" in the
Company's 1994 Proxy Statement and is incorporated herein by
reference. The information concerning the Company's Executive
Officers is included herein on page 6 under the caption "Executive
Officers of the Registrant." No information is included in
response to Item 405 of Regulation S-K.
Item 11. Executive Compensation
The information required by this item is included under
"Compensation of Directors," "Information Regarding Executive
Officer Compensation" and "Certain Transactions" in the Company's
1994 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
The information required by this item is included under "Election
of Directors" and "Information Regarding Beneficial Ownership of
Principal Shareholders and Management" in the Company's 1994 Proxy
Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item is included under "Certain
Transactions" in the Company's 1994 Proxy Statement and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a)
(1) Financial Statements
The documents listed are included on pages indicated in the
Company's 1993 Annual Report to Shareholders:
Page
Consolidated Statements of Operations 23
Consolidated Balance Sheets 24
Consolidated Statements of Cash Flows 25
Consolidated Statements of Stockholders' Equity 26
Notes to Consolidated Financial Statements 27-35
Independent Auditors' Report 37
(2) Financial Statement Schedules
The documents and schedules listed below are filed as part of this
report on the pages indicated:
Schedule Page
I Marketable Securities 11
II Amounts Receivable from Related Parties
and Underwriters, Promoters, and
Employees other than Related Parties 12-13
V Property, Plant and Equipment 14
VI Accumulated Depreciation and Amortization
of Property, Plant and Equipment 15
VIII Valuation and Qualifying Accounts 16
IX Short-Term Borrowings 17
X Supplementary Income Statement
Information 18
Independent Auditors^ Report on Financial
Statement Schedules 19
All other financial statement schedules have been omitted since
they are not required, not applicable or the information is
included in the consolidated financial statements or notes.
(3) Exhibits
3. A. 1987 Restated Articles of Incorporation.
Incorporated by reference to Exhibit 24 to the Company's
Registration Statement on Form S-3 (Registration No. 33-
23024).
B. Bylaws of the Company.
10. *A. 1982 Stock Option Plan. Incorporated by
reference to Exhibit 10.A to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991 (1991
10-K).
*B. Nonqualified Stock Option Plan. Incorporated by
reference to Exhibit 10.C to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989 (1989
10-K).
*C. 1986 Stock Plan. Incorporated by reference to
Exhibit 10.D to the Company's 1989 10-K.
*D. 1987 Non-Employee Directors' Stock Option Plan.
Incorporated by reference to Exhibit 10.E. to the Company's
1989 10-K.
*E. Stock Option Agreement under the 1986 Stock Plan
dated October 15, 1993 between the Company and Walden C.
Rhines.
*F. Form of Indemnity Agreement entered into between
the Registrant and each of its officers and directors.
Incorporated by reference to Exhibit B to the Company's
1987 Proxy Statement.
G. Lease dated November 20, 1991, for 999 Ridder Park
Drive and 1051 Ridder Park Drive, San Jose, California.
Incorporated by reference to Exhibit 10.M to the Company's
Form SE dated March 25, 1992.
H. Amended and Restated Loan Agreement between Mentor
Graphics Corporation and First Interstate Bank of Oregon,
N.A. dated December 31, 1992 as amended. Incorporated by
reference to Exhibit 10.J to the Company's Form SE dated
March 25, 1993.
13. Portions of the 1993 Annual Report to Shareholders that
are incorporated herein by reference.
21. List of Subsidiaries of the Company.
23. Consent of Accountants.
___________________
* Management contract or compensatory plan or arrangement
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 30, 1994.
MENTOR GRAPHICS CORPORATION
By _________________________
Walden C. Rhines
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant on March 30, 1994 in the capacities
indicated.
Signature Title
(1) Principal Executive Officer:
____________________________ President, Chief Executive
Walden C. Rhines Officer and Director
(2) Principal Financial Officer:
____________________________ Senior Vice President and
R. Douglas Norby Chief Financial Officer
(3) Principal Accounting Officer:
_____________________________ Corporate Controller and
James J. Luttenbacher Chief Accounting Officer
(4) Directors:
_____________________________ Chairman of the Board and
Thomas H. Bruggere Director
_____________________________ Director
Marsha B. Congdon
_____________________________ Director
David R. Hathaway
_____________________________ Director
Fontaine K. Richardson
_____________________________ Director
Jon A. Shirley
_____________________________ Director
David N. Strohm
SCHEDULE I
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES (1)
(In Thousands)
Amount of Issue
Carried in the
Market Value Consolidated
Name of Title of Cost of of Issue Balance Sheet
Issuer Issue Issue at 12/31/93 at 12/31/93
Various Certificates $ 14,105 $14,105 $14,105
of Deposit
Bank of Certificate 12,510 12,510 12,510
Tokyo of Deposit
Various Euro CDs 10,477 10,477 10,477
Paper
Various Commercial 5,458 5,458 5,458
Various Money Market 5,000 5,000 5,000
Note
Various Corporate 1,515 1,515 1,515
Notes
Citibank Floating Rate 995 995 995
Notes
Various Money Funds 329 329 329
$ 50,389
________________________________
(1) Individual issues not exceeding 2% of total assets were
grouped according to type of security. This schedule includes
$36,779 of investments classified as cash equivalents on the
consolidated balance sheet.
SCHEDULE II
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(In Thousands)
Beginning Ending
Balance Additions Deductions Balance
Year ended December 31, 1991:
Richard Anderson(1) $ 170 $ 0 $ 0 $ 170
John Goldsworthy(2) 100 0 100 0
Michael Burstein(3) 150 0 150 0
Marvin Wolfson(4) 332 0 186 146
James Hammock(5) 505 0 505 0
Kathleen Herder(6) 140 0 140 0
James Painter(7) 150 0 30 120
Wendell Roberts(8) 100 0 100 0
Gary Geaslen (9) 0 110 0 110
Dottie Wanat (10) 0 125 0 125
Donald Ramble (11) 0 250 0 250
$ 1,647 $ 485 $ 1,211 $ 921
Year ended December 31, 1992:
Richard Anderson $ 170 $ 0 $ 170 $ 0
Marvin Wolfson 146 0 146 0
James Painter 120 0 30 90
Gary Geaslen 110 0 110 0
Dottie Wanat 125 0 125 0
Donald Ramble 250 0 50 200
James Luttenbacher (12) 0 100 100 0
Garry Burt (13) 0 150 0 150
$ 921 $ 250 $ 731 $ 440
Year ended December 31, 1993:
James Painter $ 90 0 90 $ 0
Donald Ramble 200 0 50 150
Garry Burt 150 0 0 150
$ 440 $ 0 $ 140 $ 300
(1) Interest rate was 9% per annum. Note was secured by
shares of the Company's common stock, covered by various stock
options granted to debtor and a second trust deed on real
property owned by debtor. Payment was made in full on
February 26, 1992. Individual is no longer employed by the
Company.
(2) Interest rate was 8% per annum. Note was secured by
a second trust deed on real property owned by debtor. The
employee was terminated and note was forgiven as part of the
restructure in August 1991.
(3) Interest rate was 8.34% per annum. Note was secured
by shares of the Company's common stock. Payment was made in
full on May 2, 1991.
(4) Interest rate was 10.5% per annum (with no interest
payable for the last six months of 1990). Notes were secured
by shares of the Company's common stock. Payment of $186 was
received January 29, 1991. The remaining balance of $146 was
paid in full on March 17, 1992.
(5) Interest rate was 10% per annum. Note was secured by
shares of the Company's common stock. Payment was made in
full on February 13, 1991.
(6) Interest rate was 10% per annum. The Relocation
Bridge Note was secured by a second trust deed on real
property owned by debtor. Payment was made in full on
February 14, 1991.
(7) Interest rate was 8.36% per annum. Note was secured
by a second trust deed on real property owned by debtor. Loan
was to be forgiven at a rate of 20% per year, as long as
employee remained employed by the Company on September 14 of
each year through 1995. Employee was terminated on January
15, 1993 and $40 was forgiven by the Company at that time.
The promissory note was revised to $50. Payment was made in
full on June 29, 1993.
(8) Interest rate was 10% per annum. Note was secured by
a second trust deed on real property owned by debtor. The
employee was terminated and note was forgiven as part of the
restructure in August 1991.
(9) Interest rate was 9% per annum. Notes were secured by
various stock options granted to debtor. Individual is no
longer employed by the Company. Payment of $12 was received
March 14, 1992. The remaining balance of $98 was paid on
September 1, 1992.
(10) Interest rate was 8.5% per annum. Note was secured
by a second trust deed on real property owned by debtor.
Payment was made in full on January 24, 1992.
(11) Interest rate is 8.5% per annum. Note is secured by
a second trust deed on real property owned by debtor. Loan
shall be forgiven a rate of 20% per year, as long as the
employee remains employed by the Company on July 1 of each
year through 1996.
(12) Interest rate was 6% per annum. The Relocation
Bridge Note was secured by a second trust deed on real
property owned by debtor. Payment of $71 was made on December
2, 1992. The remaining balance of $29 was paid in full on
December 19, 1992.
(13) Interest rate is 6.5% per annum. Note is secured by
a second trust deed on real property owned by debtor. A
replacement note was made on December 31, 1993 which requires
payment of net proceeds upon exercise of the Company's common
stock and four annual installments of $20, plus accrued interest
through December 31, 1997. Upon payment of these amounts,
remaining obligations under this note including principal and
interest will be forgiven.
SCHEDULE V
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(In Thousands)
Effect of
Beginning Additions Currency Ending
Classification Balance at Cost Retirements Changes Balance
Year ended
December 31, 1991:
Computer
equipment and
furniture $108,450 $ 33,652 $(28,518) $ (75) $113,509
Buildings
and building
equipment 0 51,815 (14) 0 51,801
Land and
improvements 5,121 9,101 0 0 14,222
Leasehold
improvements 15,942 1,400 (9,141) 40 8,241
Service spare
parts 9,123 1,001 (7,820) 179 2,483
$138,636 $ 96,969 $(45,493) $ 144 $190,256
Year ended
December 31, 1992:
Computer
equipment and
furniture $113,509 $ 16,988 $ (9,505) $ (2,464) $118,528
Buildings and
building
equipment 51,801 1,328 0 0 53,129
Land and
improvements 14,222 345 0 0 14,567
Leasehold
improvements 8,241 4,054 (1,918) (320) 10,057
Service spare
parts 2,483 2,021 (1,542) 36 2,998
$190,256 $ 24,736 $(12,965) $ (2,748) $199,279
Year ended
December 31, 1993:
Computer
equipment and
furniture $118,528 $ 24,893 $ (20,345) $ (1,101) $121,975
Buildings and
building
equipment 53,129 320 (123) 0 53,326
Land and
improvements 14,567 74 0 0 14,641
Leasehold
improvements 10,057 58 (483) (19) 9,613
Service spare
parts 2,998 1,284 (702) 277 3,857
$199,279 $ 26,629 $(21,653) $ (843) $203,412
SCHEDULE VI
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(In Thousands)
Additions
Charged to Effect of
Beginning Costs and Currency Ending
Classification Balance Expenses Retirements Changes Balance
Year ended
December 31, 1991:
Computer
equipment and
furniture $ 57,676 $ 25,212 $(16,251) $ (5) $ 66,632
Buildings and
building
equipment 0 1,411 0 0 1,411
Land and
improvements 0 332 0 0 332
Leasehold
improvements 12,897 1,468 (8,844) 51 5,572
Service spare
parts 5,625 1,278 (4,943) 136 2,096
$ 76,198 $ 29,701 $(30,038) $ 182 $ 76,043
Year ended
December 31, 1992:
Computer
equipment and
furniture $ 66,632 $ 21,434 $ (7,402) $(1,552) $ 79,112
Buildings and
building
equipment 1,411 1,578 0 0 2,989
Land and
improvements 332 357 0 0 689
Leasehold
improvements 5,572 1,316 (1,499) (201) 5,188
Service spare
parts 2,096 1,065 (1,388) (52) 1,721
$ 76,043 $ 25,750 $(10,289) $(1,805) $ 89,699
Year ended
December 31, 1993:
Computer
equipment and
furniture $ 79,112 $ 23,230 $(17,202) $ (733) $ 84,407
Buildings and
building
equipment 2,989 1,578 (29) 0 4,538
Land and
improvements 689 361 0 0 1,050
Leasehold
improvements 5,188 1,398 (379) (11) 6,196
Service spare
parts 1,721 1,033 (595) 150 2,309
$ 89,699 $ 27,600 $(18,205) $ (594) $ 98,500
SCHEDULE VIII
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Additions
Charged to
Beginning Cost & Ending
Description Balance Expenses Deductions Balance
Year ended
December 31, 1991:
Allowance for
deferred
tax assets $ 0 $ 0 $ 0 $ 0
Allowance for
doubtful
accounts $ 3,155 $ 1,224 $ 643 (1) $ 3,736
Allowance for
obsolete
inventory $ 7,392 $11,198 $ 2,951 (2) $15,639
Accrued
restructure
costs $ 0 $27,100 $16,867 (3) $10,233
Year ended
December 31, 1992:
Allowance for
deferred
tax assets $ 0 $ 0 $ 0 $ 0
Allowance for
doubtful
accounts $ 3,736 $ 1,282 $ 642 (1) $ 4,376
Allowance for
obsolete
inventory $15,639 $ 2,665 $ 5,868 (2) $12,436
Accrued
restructure
costs $10,233 $14,500 $12,463 (3) $12,270
Year ended
December 31, 1993:
Allowance for
deferred
tax assets $ 0 $58,495(4) $ 0 $58,495
Allowance for
doubtful
accounts $ 4,376 $ 508 $ 956 (1) $ 3,928
Allowance for
obsolete
inventory $12,436 $ 1,924 $ 6,346 (2) $ 8,014
Accrued
restructure
costs $12,270 $26,200 $10,096 (3) $28,374
(1) Deductions primarily represent accounts written off during
the period.
(2) Deductions primarily represent inventory scrapped during
the period.
(3) Deductions primarily represent payments made to carry out
restructure plans and reversals of accrued restructure charges
due to changes in estimates of $1,400 and $1,600 for the years
ended December 31, 1993 and 1992, respectively.
(4) Addition represents adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" on
January 1, 1993 and increases to the valuation allowance during
the year. As such, the Company established a valuation
allowance for certain deferred tax assets, including net
operating loss and tax credit carryforwards. Statement No. 109
requires that such a valuation allowance be recorded when it is
more likely than not that some portion of the deferred tax
assets will not be realized.
SCHEDULE IX
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS (1)
(In Thousands)
Weighted
Maximum Average Average
Category of Weighted Amount Amount Interest
Aggregate Average Outstanding Outstanding Rate
Short-Term Ending Interest During the During the During the
Borrowings Balance Rate Period Period (3) Period (4)
Year ended
December
31, 1991:
Lines of
credit (2) $ 4,459 8.88% $14,087 $ 8,612 9.13%
Year ended
December
31, 1992:
Lines of
credit (2) $ 5,457 8.48% $11,462 $ 6,825 8.65%
Year ended
December
31, 1993:
Lines of
credit (2) $ 2,843 7.66% $ 6,839 $ 5,160 7.92%
________________
(1) Short-term borrowings on the consolidated balance sheets
consist of drawings on various multi-currency unsecured line of
credit agreements as well as the current portion of long-term
debt of $3,521, $91, and $52 for the years ended 1993, 1992,
and 1991, respectively. See note 8 in the 1993 Annual Report
to Shareholders for a more complete description of the
Company's long-term debt.
(2) The lines of credit generally have terms of one or two
years and are subject to renewal upon expiration.
(3) The average amount outstanding was computed by using the
average monthly balances during the period.
(4) The weighted average interest rates were computed by
dividing the actual interest expense by the total of the
average balance for each month for which an amount was
outstanding, and then multiplying the result by twelve months
to obtain an annual rate.
SCHEDULE X
MENTOR GRAPHICS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands)
Charged to Costs and Expenses
Year Ended December 31
1991 1992 1993
Item (1)
Advertising Costs $ 6,820 $ 8,084 $ 6,868
Maintenance & Repair $ 5,756 $ 6,296 $ 6,407
Royalty Costs $10,139 $ 9,854 $ 9,815
________________________
(1) Items not presented did not exceed 1% of revenues in any
of the above periods.
Independent Auditors' Report
The Board of Directors and Stockholders
Mentor Graphics Corporation:
Under date of February 1, 1994, we reported on the consolidated
balance sheets of Mentor Graphics Corporation and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated
statements of operations, cash flows and stockholders' equity for
each of the years in the three-year period ended December 31,
1993, which are included in the 1993 annual report to
stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report
on Form 10-K for the year 1993. In connection with our audits of
the aforementioned consolidated financial statements, we also have
audited the related consolidated financial statement schedules as
listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in Notes 1 and 4 to the consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" in 1993.
KPMG PEAT MARWICK
Portland, Oregon
February 1, 1994