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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) | ||||||||||||||||||||
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| GAAP net income attributable to Mentor Graphics shareholders | $ | 41,762 | $ | 14,679 | $ | 31,763 | $ | 36,006 | ||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||
| Equity plan-related compensation: (1) | ||||||||||||||||||||
| Cost of revenues | 785 | 665 | 2,277 | 1,981 | ||||||||||||||||
| Research and development | 4,708 | 4,095 | 13,598 | 12,213 | ||||||||||||||||
| Marketing and selling | 2,911 | 2,468 | 8,612 | 7,314 | ||||||||||||||||
| General and administration | 2,687 | 2,797 | 9,031 | 9,381 | ||||||||||||||||
| Acquisition - related items: | ||||||||||||||||||||
| Amortization of purchased assets | ||||||||||||||||||||
| Cost of revenues (2) | 1,828 | 1,844 | 5,400 | 5,496 | ||||||||||||||||
| Amortization of intangible assets (3) | 1,462 | 2,364 | 4,536 | 6,817 | ||||||||||||||||
| Special charges (4) | 1,500 | 4,831 | 5,936 | 43,994 | ||||||||||||||||
| Other income, net (5) | 36 | 72 | 81 | 33 | ||||||||||||||||
| Interest expense (6) | 1,786 | 1,663 | 5,263 | 4,900 | ||||||||||||||||
| Non-GAAP income tax effects (7) | (3,460 | ) | (756 | ) | (11,931 | ) | (16,056 | ) | ||||||||||||
| Noncontrolling interest (8) | - | (238 | ) | - | (638 | ) | ||||||||||||||
| Total of non-GAAP adjustments | 14,243 | 19,805 | 42,803 | 75,435 | ||||||||||||||||
| Non-GAAP net income attributable to Mentor Graphics shareholders | $ | 56,005 | $ | 34,484 | $ | 74,566 | $ | 111,441 | ||||||||||||
| GAAP weighted average shares (diluted) | 114,112 | 120,141 | 110,931 | 121,963 | ||||||||||||||||
| Non-GAAP adjustment | - | 2,695 | 1,071 | - | ||||||||||||||||
| Non-GAAP weighted average shares (diluted) | 114,112 | 122,836 | 112,002 | 121,963 | ||||||||||||||||
| Net income per share attributable to Mentor Graphics shareholders: | ||||||||||||||||||||
| GAAP (diluted) | $ | 0.37 | $ | 0.12 | $ | 0.29 | $ | 0.30 | ||||||||||||
| Non-GAAP adjustments detailed above | 0.13 | 0.16 | 0.38 | 0.62 | ||||||||||||||||
| Non-GAAP (diluted) (9) | $ | 0.50 | $ | 0.28 | $ | 0.67 | $ | 0.92 | ||||||||||||
| (1) | 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. | ||
| (2) | Amount represents amortization of purchased technology resulting from acquisitions. Purchased technology is generally amortized over two to five years. | ||
| (3) | Other identified intangible assets are generally amortized to operating expense over two to five years. Other identified intangible assets include trade names, customer relationships, and backlog resulting from acquisition transactions. | ||
| (4) | Three months ended October 31, 2016: Special charges consist of (i) $354 of costs incurred for employee rebalances which include severance benefits and notice pay, (ii) $(19) for EVE litigation costs, and (iii) $1,165 in other adjustments. | ||
| Three months ended October 31, 2015: Special charges consist of (i) $3,485 of costs incurred for employee rebalances which include severance benefits and notice pay, (ii) $1,122 for EVE litigation costs, (iii) $(203) for severance costs incurred for the voluntary early retirement program, and (iv) $427 in other adjustments. | |||
| Nine months ended October 31, 2016: Special charges consist of (i) $2,884 of costs incurred for employee rebalances which include severance benefits and notice pay, (ii) $1,344 for EVE litigation costs, and (iii) $1,708 in other adjustments. | |||
| Nine months ended October 31, 2015: Special charges consist of (i) $25,232 of severance costs incurred for the voluntary early retirement program, (ii) $14,188 of costs incurred for employee rebalances which include severance benefits and notice pay, (iii) $3,641 for EVE litigation costs, and (iv) $933 in other adjustments. | |||
| (5) | Amount represents loss for an investment accounted for under the equity method of accounting. | ||
| (6) | Amount represents the amortization of original issuance debt discount. | ||
| (7) | Non-GAAP income tax expense adjustment reflects the application of our assumed normalized effective 19% tax rate, instead of our GAAP tax rate, to our non-GAAP pre-tax income. | ||
| (8) | Adjustment for the impact of amortization of intangible assets, equity plan-related compensation, and income tax expense on noncontrolling interest. | ||
| (9) | We have increased the numerator of our diluted earnings per share calculation by $519 for the three and nine months ended October 31, 2016 and 2015 for the dilutive effect of our convertible debt. Corresponding dilutive shares of 2,695 for the three months ended October 31, 2015 and 1,071 for the nine months ended October 31, 2016 are presented in the reconciliation above. Corresponding dilutive shares of 2,496 for the three months ended October 31, 2016 and 2,565 for the nine months ended October 31, 2015 are already included in the GAAP diluted weighted average number of shares outstanding. | ||
