Mentor Graphics Reports Fiscal Second Quarter Results
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MENTOR GRAPHICS CORPORATION
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UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
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(In thousands, except earnings per share data)
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Three Months Ended July 31,
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Six Months Ended July 31,
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2012
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2011
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2012
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2011
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GAAP net income attributable to Mentor Graphics shareholders
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$
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18,167
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$
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4,334
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$
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46,349
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$
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1,981
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Non-GAAP adjustments:
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Equity plan-related compensation: (1)
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Cost of revenues
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368
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237
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687
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504
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Research and development
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2,215
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1,975
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4,332
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4,114
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Marketing and selling
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1,625
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1,413
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3,174
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3,028
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General and administration
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2,098
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2,204
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3,260
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3,863
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Acquisition - related items:
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Amortization of purchased assets
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Cost of revenues (2)
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2,154
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2,754
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4,333
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6,111
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Frontline purchased technology and intangible assets (3)
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1,242
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1,242
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2,484
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2,484
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Amortization of intangible assets (4)
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1,599
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1,455
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3,305
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3,065
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Special charges (5)
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1,507
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1,677
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2,654
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6,224
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Other income (expense), net (6)
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(59
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52
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(72
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52
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Interest expense (7)
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1,318
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1,228
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2,613
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13,907
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Non-GAAP income tax effects (8)
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(7,670
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(6,141
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(13,861
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(10,183
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Noncontrolling interest (9)
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(333
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-
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(602
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-
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Total of non-GAAP adjustments
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6,064
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8,096
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12,307
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33,169
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Non-GAAP net income attributable to Mentor Graphics shareholders
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$
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24,231
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$
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12,430
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$
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58,656
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$
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35,150
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GAAP and Non-GAAP weighted average shares (diluted)
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113,046
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112,844
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113,078
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113,892
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Net income per share attributable to Mentor Graphics shareholders:
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GAAP (diluted)
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$
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0.16
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$
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0.04
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$
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0.41
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$
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0.02
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Non-GAAP adjustments detailed above
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0.05
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0.07
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0.11
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0.29
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Non-GAAP (diluted)
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$
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0.21
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$
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0.11
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$
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0.52
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$
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0.31
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(1
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Equity plan-related compensation expense is the fair value of all
share-based payments to employees for stock options and restricted
stock units, and purchases made as a result of the employee stock
purchase plans.
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(2
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Amount represents amortization of purchased technology resulting
from acquisitions. Purchased intangible assets are amortized over
two to five years.
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(3
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Amount represents amortization of purchased technology and other
identified intangible assets identified as part of the fair value of
the Frontline P.C.B. Solutions Limited Partnership (Frontline)
investment. Mentor Graphics acquired a 50% joint venture in
Frontline as a result of the Valor Computerized Systems, Ltd.
acquisition in the first quarter of fiscal 2011. The purchased
technology will be amortized over three years, other identified
intangible assets will be amortized over three to four years, and
are reflected in the income statement in the equity in earnings of
Frontline. This expense is the same type as being adjusted for in
note (2) above and (4) below.
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(4
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Other identified intangible assets are amortized to other operating
expense over two to five years. Other identified intangible assets
include trade names, customer relationships, and backlog which are
the result of acquisition transactions.
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(5
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Three months ended July 31, 2012: Special charges consist of
(i) $1,029 of costs incurred for employee rebalances which includes
severance benefits, notice pay, and outplacement services and (ii)
$478 in other adjustments.
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Three months ended July 31, 2011: Special charges consist of
(i) $1,207 of costs incurred for employee rebalances which includes
severance benefits, notice pay, and outplacement services, (ii) $736
of costs related to consulting fees associated with our proxy
contest, and (iii) $(266) in other adjustments.
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Six months ended July 31, 2012: Special charges consist of
(i) $2,017 of costs incurred for employee rebalances which includes
severance benefits, notice pay, and outplacement services and (ii)
$637 in other adjustments.
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Six months ended July 31, 2011: Special charges consist of
(i) $3,838 of costs related to consulting fees associated with our
proxy contest , (ii) $2,354 of costs incurred for employee
rebalances which includes severance benefits, notice pay, and
outplacement services, and (iii) $32 in other adjustments.
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(6
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Three months ended July 31, 2012 : Income of $59 on investment
accounted for under the equity method of accounting.
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Three months ended July 31, 2011 : Loss of $(52) on investment
accounted for under the equity method of accounting.
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Six months ended July 31, 2012 : Income of $72 on investment
accounted for under the equity method of accounting.
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Six months ended July 31, 2011 : Loss of $(52) on investment
accounted for under the equity method of accounting.
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(7
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Three months ended July 31, 2012 : $1,318 in amortization of
original issuance debt discount.
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Three months ended July 31, 2011 : $1,228 in amortization of
original issuance debt discount.
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Six months ended July 31, 2012 : $2,613 in amortization of
original issuance debt discount.
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Six months ended July 31, 2011 : $2,403 in amortization of
original issuance debt discount and bond premium, and $11,504 for
the premium and other costs related to the retirement of the 6.25%
convertible debentures and the term loan.
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(8
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Non-GAAP income tax expense adjustment reflects the application of
our assumed normalized effective 17% tax rate, instead of our GAAP
tax rate, to our non-GAAP pre-tax income.
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(9
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Adjustment for the impact of amortization of intangible assets,
equity plan-related compensation, and income tax expense on
noncontrolling interest.
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