Mentor Graphics Reports Fiscal Second Quarter Results

MENTOR GRAPHICS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)

	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Revenues:
System and software	$	133,755		$	162,201		$	240,459		$	318,132
Service and support		120,589			118,861			241,524			235,073
Total revenues		254,344			281,062			481,983			553,205
Cost of revenues: (1)
System and software		15,330			13,049			23,662			26,673
Service and support		32,513			31,420			65,261			64,989
Amortization of purchased technology		1,787			1,794			3,572			3,652
Total cost of revenues		49,630			46,263			92,495			95,314
Gross profit		204,714			234,799			389,488			457,891
Operating expenses:
Research and development (2)		93,402			89,053			184,538			178,568
Marketing and selling (3)		83,911			84,741			168,170			169,692
General and administration (4)		19,227			18,670			36,762			36,633
Equity in earnings of Frontline		(1,041	)		(1,351	)		(1,677	)		(2,221	)
Amortization of intangible assets (5)		1,520			2,234			3,074			4,453
Special charges (6)		1,445			2,186			4,436			39,163
Total operating expenses		198,464			195,533			395,303			426,288
Operating income (loss):		6,250			39,266			(5,815	)		31,603
Other income, net (7)		638			187			1,527			529
Interest expense (8)		(5,690	)		(4,772	)		(9,828	)		(9,466	)
Income (loss) before income tax		1,198			34,681			(14,116	)		22,666
Income tax expense (benefit) (9)		(2,239	)		4,071			(4,117	)		2,559
Net income (loss)		3,437			30,610			(9,999	)		20,107
Less: Loss attributable to noncontrolling interest (10)		-			(602	)		-			(1,220	)
Net income (loss) attributable to Mentor Graphics shareholders	$	3,437		$	31,212		$	(9,999	)	$	21,327

Net income (loss) per share attributable to Mentor Graphics shareholders:
Basic ^a	$	0.03		$	0.27		$	(0.09	)	$	0.18
Diluted ^a	$	0.03		$	0.26		$	(0.09	)	$	0.18
Weighted average number of shares outstanding:
Basic		107,374			116,584			108,215			116,296
Diluted		109,874			119,368			108,215			118,986

^a We (decreased) increased the numerator of our basic and diluted earnings per share calculation for the adjustment of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings, as follows:

				$	(144	)				$	125

Refer to following page for a description of footnotes.

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