Mentor Graphics Reports Fiscal Second Quarter Results

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


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP gross margin	$	194,235		$	169,848		$	396,770		$	355,238
Reconciling items to non-GAAP gross margin:
Equity plan-related compensation		368			237			687			504
Amortization of purchased technology		2,154			2,754			4,333			6,111
Non-GAAP gross margin	$	196,757		$	172,839		$	401,790		$	361,853


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP gross margin as a percent of total revenues		80.7	%		79.5	%		81.2	%		80.0	%
Non-GAAP adjustments detailed above		1.0	%		1.4	%		1.0	%		1.5	%
Non-GAAP gross margin as a percent of total revenues		81.7	%		80.9	%		82.2	%		81.5	%


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP operating expenses	$	174,328		$	165,004		$	344,041		$	334,221
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation		(5,938	)		(5,592	)		(10,766	)		(11,005	)
Amortization of Frontline purchased technology and other identified intangible assets		(1,242	)		(1,242	)		(2,484	)		(2,484	)
Amortization of other identified intangible assets		(1,599	)		(1,455	)		(3,305	)		(3,065	)
Special charges		(1,507	)		(1,677	)		(2,654	)		(6,224	)
Non-GAAP operating expenses	$	164,042		$	155,038		$	324,832		$	311,443


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP operating income	$	19,907		$	4,844		$	52,729		$	21,017
Reconciling items to non-GAAP operating income:
Equity plan-related compensation		6,306			5,829			11,453			11,509
Amortization of purchased technology		2,154			2,754			4,333			6,111
Amortization of Frontline purchased technology and other identified intangible assets		1,242			1,242			2,484			2,484
Amortization of other identified intangible assets		1,599			1,455			3,305			3,065
Special Charges		1,507			1,677			2,654			6,224
Non-GAAP operating income	$	32,715		$	17,801		$	76,958		$	50,410


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP operating income as a percent of total revenues		8.3	%		2.3	%		10.8	%		4.7	%
Non-GAAP adjustments detailed above		5.3	%		6.0	%		4.9	%		6.7	%
Non-GAAP operating income as a percent of total revenues		13.6	%		8.3	%		15.7	%		11.4	%


	Three Months Ended July 31,						Six Months Ended July 31,
	2012			2011			2012			2011
GAAP other expense, net and interest expense	$	(5,116	)	$	(4,105	)	$	(9,627	)	$	(22,020	)
Reconciling items to non-GAAP other expense, net and interest expense:
Net gain of unconsolidated entities		(59	)		52			(72	)		52
Amortization of debt discount and retirement costs		1,318			1,228			2,613			13,907
Non-GAAP other expense, net and interest expense	$	(3,857	)	$	(2,825	)	$	(7,086	)	$	(8,061	)

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