Mentor Graphics Reports Fiscal Third Quarter Results


MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP gross margin	$	210,262		$	195,947		$	565,500		$	495,909
Reconciling items to non-GAAP gross margin:
Equity plan-related compensation		249			221			753			671
Amortization of purchased technology		1,761			3,299			7,872			10,428
Non-GAAP gross margin	$	212,272		$	199,467		$	574,125		$	507,008


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP gross margin as a percent of total revenues		84	%		82	%		81	%		82	%
Non-GAAP adjustments detailed above		1	%		1	%		2	%		1	%
Non-GAAP gross margin as a percent of total revenues		85	%		83	%		83	%		83	%


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP operating expenses	$	184,857		$	175,306		$	519,078		$	500,753
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation		(4,865	)		(4,686	)		(15,870	)		(15,920	)
Amortization of Frontline purchased technology and other identified intangible assets		(1,242	)		(1,242	)		(3,726	)		(3,105	)
Amortization of other identified intangible assets		(1,296	)		(1,445	)		(4,361	)		(5,742	)
Special charges		(1,164	)		(1,578	)		(7,388	)		(8,052	)
Non-GAAP operating expenses	$	176,290		$	166,355		$	487,733		$	467,934


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP operating income (loss)	$	25,405		$	20,641		$	46,422		$	(4,844	)
Reconciling items to non-GAAP operating income:
Equity plan-related compensation		5,114			4,907			16,623			16,591
Amortization of purchased technology		1,761			3,299			7,872			10,428
Amortization of Frontline purchased technology and other identified intangible assets		1,242			1,242			3,726			3,105
Amortization of other identified intangible assets		1,296			1,445			4,361			5,742
Special Charges		1,164			1,578			7,388			8,052
Non-GAAP operating income	$	35,982		$	33,112		$	86,392		$	39,074


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP operating income (loss) as a percent of total revenues		10	%		9	%		7	%		-1	%
Non-GAAP adjustments detailed above		4	%		5	%		5	%		7	%
Non-GAAP operating income as a percent of total revenues		14	%		14	%		12	%		6	%


	Three Months Ended October 31,						Nine Months Ended October 31,
	2011			2010			2011			2010
GAAP other expense, net and interest expense	$	(2,779	)	$	(4,530	)	$	(24,799	)	$	(14,739	)
Reconciling items to non-GAAP other expense, net and interest expense:
Net (gain) loss of unconsolidated entities		(1,484	)		-			(1,432	)		271
Amortization of debt discount and retirement costs		1,250			753			15,157			2,571
Non-GAAP other expense, net and interest expense	$	(3,013	)	$	(3,777	)	$	(11,074	)	$	(11,897	)

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