Non-GAAP gross margin, operating margin, and net income (loss) are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. We present non-GAAP gross margin, operating margin, and net income (loss) because we consider them to be important supplemental measures of our operating performance and profitability trends, and because we believe they give investors useful information on period-to-period performance as evaluated by management. Non-GAAP net income (loss) also facilitates comparison with other companies in our industry, which use similar financial measures to supplement their GAAP results. Non-GAAP net income (loss) has limitations as an analytical tool, and therefore should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In the future we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP net income (loss) are:
- Amortization of purchased intangibles represents the loss in value as the technology in our industry evolves, is advanced, or is replaced over time. The expense associated with this loss in value is not included in the non-GAAP net income (loss) presentation and therefore does not reflect the full economic effect of the ongoing cost of maintaining our current technological position in our competitive industry, which is addressed through our research and development program.
- We regularly engage in acquisition and assimilation activities as part of our ongoing business and regularly evaluate our businesses to determine whether any operations should be eliminated or curtailed. We therefore will continue to experience special charges on a regular basis. These costs also directly impact our available funds.
- We perform impairment analyses on cost method investments when triggering events occur and adjust the carrying value of assets when we determine it to be necessary. Impairment charges could therefore be incurred in any period.
- Our stock option and stock purchase plans are important components of our incentive compensation arrangements and will be reflected as expenses in our GAAP results under SFAS 123R.
- Our income tax expense (benefit) will be ultimately based on our GAAP taxable income and actual tax rates in effect, which often differ significantly from the 17% rate assumed in our non-GAAP presentation.
- Other companies, including other companies in our industry, calculate non-GAAP net income (loss) differently than we do, limiting its usefulness as a comparative measure.
About Mentor Graphics
Mentor Graphics Corporation (NASDAQ: MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $800 million and employs approximately 4,425 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.
(Mentor Graphics, Calibre, TestKompress and HyperLynx are registered trademarks and FloEFD and Olympus-SoC are trademarks of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners.)
Statements in this press release regarding the company’s guidance for
future periods constitute “forward-looking” statements based on current
expectations within the meaning of section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company
or industry results to be materially different from any results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following:
(i) reductions in the spending on the company’s products and services by
its customers due to the current worldwide downturn; (ii) liquidity
concerns, business insolvencies and bankruptcies by an increasing number
of the company’s customers; (iii) continued weakness or recession in the
US, EU, Japan or other economies; (iv) the company’s ability to
successfully offer products and services that compete in the highly
competitive EDA industry; (v) product bundling or discounting of
products and services by competitors, which could force the company to
lower its prices or offer other more favorable terms to customers; (vi)
effects of the increasing volatility of foreign currency fluctuations on
the company’s business and operating results; (vii) changes in
accounting or reporting rules or interpretations; (viii) the impact of
tax audits by the IRS or other taxing authorities, or changes in the tax
laws, regulations or enforcement practices where the company does
business; (ix) effects of unanticipated shifts in product mix on gross
margin; and (x) effects of customer seasonal purchasing patterns and the
timing of significant orders may negatively or positively impact the
company’s quarterly results of operations, (xi) an industry downturn
that could lead to smaller customer renewals, all as may be discussed in
more detail under the heading “Risk Factors” in the company’s most
recent Form 10-K or Form 10-Q. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such
forward-looking statements. In addition, statements regarding guidance
do not reflect potential impacts of mergers or acquisitions that have
not been announced or closed as of the time the statements are made.
Mentor Graphics disclaims any obligation to update any such factors or
to publicly announce the results of any revisions to any of the
forward-looking statements to reflect future events or developments.
