Mentor Graphics Reports Fiscal First Quarter Results
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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)
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Three Months Ended April 30,
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2011
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2010
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GAAP net loss
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$
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(2,353
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)
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$
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(23,025
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)
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Non-GAAP adjustments:
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Equity plan-related compensation: (1)
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Cost of revenues
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267
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212
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Research and development
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2,139
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2,438
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Marketing and selling
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1,615
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2,190
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General and administration
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1,659
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1,741
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Acquisition - related items:
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Amortization of purchased assets
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Cost of revenues (2)
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3,357
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3,569
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Amortization of intangible assets (3)
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1,610
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2,361
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Frontline purchased technology and intangible assets (4)
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1,242
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621
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Special charges (5)
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4,547
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3,268
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Other expense, net (6)
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-
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270
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Interest expense (7)
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12,679
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729
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Non-GAAP income tax effects (8)
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(4,042
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3,084
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Total of non-GAAP adjustments
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25,073
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20,483
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Non-GAAP net income (loss)
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$
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22,720
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$
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(2,542
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)
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GAAP weighted average shares (diluted)
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111,769
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103,763
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Non-GAAP adjustment
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3,649
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-
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Non-GAAP weighted average shares (diluted)
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115,418
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103,763
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GAAP net loss per share (diluted)
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$
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(0.02
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)
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$
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(0.22
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Non-GAAP adjustments detailed above
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0.22
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0.20
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Non-GAAP net income (loss) per share (diluted)
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$
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0.20
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$
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(0.02
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)
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(1) Equity plan-related compensation expense.
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(2) Amount represents amortization of purchased technology
resulting from acquisitions. Purchased intangible assets are
amortized over two to five years.
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(3) 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.
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(4) Amount represents amortization of purchased technology
and other identified intangible assets identified as part of the
fair value of the Frontline P.C.B. Solutions Limited Partnership
(Frontline) investment. Mentor Graphics acquired a 50% joint venture
in Frontline as a result of the Valor Computerized Systems, Ltd.
acquisition in the first quarter of fiscal 2011. The purchased
technology will be amortized over three years, other identified
intangible assets will be amortized over three to four years, and
are reflected in the income statement in the equity in earnings of
Frontline results. This expense is the same type as being adjusted
for in notes (2) and (3) above.
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(5) Three months ended April 30, 2011: Special charges
consist of (i) $3,102 in consulting fees associated with our proxy
contest, (ii) $1,147 of costs incurred for employee rebalances which
includes severance benefits, notice pay, and outplacement services,
(iii) $252 related to the abandonment of excess lease space, and
(iv) $46 in acquisition costs.
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Three months ended April 30, 2010: Special charges consist of
(i) $1,589 of costs incurred for employee rebalances which includes
severance benefits, notice pay, and outplacement services, (ii)
$1,175 in advisory fees, (iii) $474 related to the abandonment of
excess leased facility space, (iv) $369 in lease restoration costs,
(v) $200 in acquisition costs, (vi) $(566) related to a casualty
loss, and (vii) $27 in other adjustments.
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(6) Three months ended April 30, 2010 : Loss of $270 on
investment accounted for under the equity method of accounting.
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(7) Three months ended April 30, 2011 : $1,175 in
amortization of original issuance debt discount and bond premium,
and $11,504 for the premium and other costs related to the
retirement of the 6.25% convertible debentures and the term loan.
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Three months ended April 30, 2010 : $729 in amortization of
original issuance debt discount.
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(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 non-GAAP pre-tax income.
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