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,
	2009			2008			2009			2008
GAAP gross margin	$	149,664		$	152,026		$	314,399		$	297,371
Reconciling items to non-GAAP gross margin
Equity plan-related compensation		470			375			969			751
Prepaid royalty costs		-			-			-			103
Amortization of purchased technology		2,928			1,992			5,876			5,230
Non-GAAP gross margin	$	153,062		$	154,393		$	321,244		$	303,455


	Three Months Ended July 31,						Six Months Ended July 31,
	2009			2008			2009			2008
GAAP gross margin as a percent of total revenues		82	%		83	%		84	%		82	%
Non-GAAP adjustments detailed above		2	%		2	%		1	%		2	%
Non-GAAP gross margin as a percent of total revenues		84	%		85	%		85	%		84	%


	Three Months Ended July 31,						Six Months Ended July 31,
	2009			2008			2009			2008
GAAP operating expenses	$	161,161		$	181,933		$	332,042		$	357,943
Reconciling items to non-GAAP operating expenses
Equity plan-related compensation		(7,027	)		(7,209	)		(14,298	)		(13,384	)
Amortization of other identified intangible assets		(2,888	)		(2,537	)		(5,758	)		(4,970	)
Rebalance, restructuring, and other costs		(4,202	)		(3,235	)		(9,897	)		(12,885	)
In-process research and development		-			(15,285	)		-			(15,285	)
Non-GAAP operating expenses	$	147,044		$	153,667		$	302,089		$	311,419


	Three Months Ended July 31,						Six Months Ended July 31,
	2009			2008			2009			2008
GAAP operating loss	$	(11,497	)	$	(29,907	)	$	(17,643	)	$	(60,572	)
Reconciling items to non-GAAP operating income
Equity plan-related compensation		7,497			7,584			15,267			14,135
Prepaid royalty costs		-			-			-			103
Amortization of purchased intangible assets:
Cost of revenues		2,928			1,992			5,876			5,230
Amortization of intangible assets		2,888			2,537			5,758			4,970
Rebalance, restructuring, and other costs		4,202			3,235			9,897			12,885
In-process research and development		-			15,285			-			15,285
Non-GAAP operating income (loss)	$	6,018		$	726		$	19,155		$	(7,964	)


	Three Months Ended July 31,						Six Months Ended July 31,
	2009			2008			2009			2008
GAAP operating margin as a percent of total revenues		-6	%		-16	%		-5	%		-17	%
Non-GAAP adjustments detailed above		9	%		16	%		10	%		15	%
Non-GAAP operating margin as a percent of total revenues		3	%		0	%		5	%		-2	%


	Three Months Ended July 31,						Six Months Ended July 31,
	2009			2008			2009			2008
GAAP other income (expense), net and interest expense ^a	$	(5,079	)	$	(3,687	)	$	(9,132	)	$	(6,067	)
Reconciling items to non-GAAP other income, net and interest expense
Equity in losses of unconsolidated entities		244			475			681			643
Amortization of debt discount and debt retirement costs		578			628			999			1,243
Non-GAAP other income (expense), net and interest expense ^a	$	(4,257	)	$	(2,584	)	$	(7,452	)	$	(4,181	)

^a Adjusted for the retrospective adoption of FSP APB 14-1.

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