Mentor Graphics Reports Fiscal First Quarter Results

MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(In thousands, except earnings per share data)


			Three Months Ended April 30,
			2009			2008

GAAP net loss^a			$	(12,956	)	$	(25,496	)
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues				499			376
Research and development				3,447			2,932
Marketing and selling				2,537			2,105
General and administration				1,287			1,138
System and software cost of revenues (2)				-			103
Acquisition - related items:
Amortization of purchased intangible assets
Cost of revenues (3)				2,948			3,238
Amortization of intangible assets (4)				2,870			2,433
Special charges (5)				5,695			9,650
Other income, net (6)				437			168
Interest expense (7)				421			615
Income tax effects ^a (8)				1,067			(5,800	)
Total of non-GAAP adjustments				21,208			16,958
Non-GAAP net income (loss) ^a			$	8,252		$	(8,538	)

GAAP weighted average shares diluted				94,168			90,750
Non-GAAP adjustment				3			-
Non-GAAP weighted average shares diluted				94,171			90,750

GAAP net loss per share diluted ^a			$	(0.14	)	$	(0.28	)
Non-GAAP adjustments detailed above				0.23			0.19
Non-GAAP net income (loss) per share diluted ^a			$	0.09		$	(0.09	)

	^a	Adjusted for the retrospective adoption of FSP APB 14-1 and reclassification of the French research and development credit.


(1)	Equity plan-related compensation expense recognized in accordance with SFAS 123R.
(2)	Amount represents the write-off of prepaid royalty amounts associated with the closure of our Intellectual Property division.
(3)	Amount represents purchased intangible assets resulting from acquisitions. Purchased intangible assets are amortized over two to five years.
(4)	Other identified intangible assets are amortized to other operating expense over two to five years. Other identified intangible assets include trade names, employment agreements, customer relationships, and deferred compensation which are the result of acquisition transactions.
(5)	Three months ended April 30, 2009: Special charges consist of (i) $4,028 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, (ii) $1,175 in advisory fees, (iii) $268 in acquisition costs, (iv) $265 related to a casualty loss, and (v) $(41) in other adjustments.
	Three months ended April 30, 2008: Special charges consist of (i) $8,114 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, (ii) $1,443 related to the abandonment of excess leased facility space, and (iii) $93 in fixed asset write-offs related to the closure of our Intellectual Property division.
(6)	Three months ended April 30, 2009: Other income, net consists of (i) equity in losses of Calypto Design Systems of $324 and (ii) an impairment of $113 for an investment accounted for under the cost method.
	Three months ended April 30, 2008: Equity in losses of Calypto Design Systems of $168.
(7)	Three months ended April 30, 2009 : $669 in amortization of original issuance debt discount in accordance with FSP APB 14-1 and $(248) in discounts and unamortized debt costs related to a partial redemption of the $110.0M convertible debt.
	Three months ended April 30, 2008: $615 in amortization of original issuance debt discount in accordance with FSP APB 14-1.
(8)	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 GAAP pre-tax income and the application of the 17% tax rate to our non-GAAP adjustments.

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