“In a difficult environment, the company performed as we forecast,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “Our investments in new technologies and markets continue to pay dividends, with growth in analog/mixed-signal design, electronic system level (ESL) design, automotive and design-for-test, among others.”
During the quarter, the company launched the Questa® InFact intelligent testbench which offers customers improved design verification, as well as the Questa Multi-view product which allows designers to span different levels of abstraction in their verification flows. The company also simplified the complex task of debugging multicore designs with the Questa Codelink product. Agilent and Mentor Graphics launched a tight integration of their respective tools to simplify and accelerate RF board design.
“During the quarter, we extended our cost management efforts, resulting in virtually flat headcount year over year, despite several acquisitions over the last year and our investment in field benchmarking staff for our Olympus place and route campaigns,” said Gregory K. Hinckley, president of Mentor Graphics. “Looking forward, we continue to see a strong second half driven by renewals.”
Guidance
For fiscal year 2009, the company expects revenue of approximately $915 million, with non-GAAP earnings per share in the range of $1.05 to $1.10 and GAAP earnings per share in the range of $.45 to $.50. For fiscal second quarter, consistent with the previously forecast weaker first half, the company expects revenue of about $173 million, non-GAAP loss per share of $.10 to $.15 and GAAP loss per share of $.18 to $.23.
Discussion of Non-GAAP Financial Measures
Mentor Graphics management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted gross margin, operating margin and net income (loss), which we refer to as non-GAAP gross margin, operating margin, and net income (loss), respectively. These non-GAAP measures are derived from the revenues of our product, maintenance, and services business operations and the costs directly related to the generation of those revenues, such as cost of revenue, research and development, sales and marketing, and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. These non-GAAP measures exclude amortization of purchased and other identified intangible assets, in-process research and development, special charges, equity plan-related compensation expenses and charges, and gains which management does not consider reflective of our core operating business.
Purchased and other identified intangible assets consist primarily of purchased technology, backlog, trade names, customer relationships, and employment agreements. Special charges consist of post-acquisition rebalance costs including severance and benefits, excess facilities, and asset-related charges, and also include strategic reallocations or reductions of personnel resources. Equity plan-related compensation expenses represent the fair value of all share-based payments to employees, including grants of employee stock options, as required under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income (loss) is adjusted by the amount of additional taxes or tax benefit that we would accrue using a normalized effective tax rate applied to the non-GAAP results.
For the three months ended April 30, 2008 and April 30, 2007, we excluded $0 and $164 thousand, respectively, of interest expense attributable to net retirement premiums and write-offs of debt issuance costs. The amounts were expensed in connection with the refinancing or repurchase of certain convertible debt. The amounts were excluded as management does not consider these transactions a part of its core operating performance.
For the three months ended April 30, 2008 and April 30, 2007, we excluded $168 and $0 thousand, respectively, of equity in losses of unconsolidated entities. The amounts represent our equity in the losses of a common stock investment accounted for under the equity method. The amounts were excluded as management does not consider these transactions a part of its core operating performance.
In certain instances our GAAP results of operations may not be profitable when our corresponding non-GAAP results are profitable or vice versa. The number of shares on which our non-GAAP EPS is calculated may therefore differ from the GAAP presentation due to the anti-dilutive effect of stock options in a loss situation.
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.
Management excludes from our non-GAAP measures certain recurring items to facilitate its review of the comparability of our core operating performance on a period-to-period basis because such items are not related to our ongoing core operating performance as viewed by management. Management considers our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Management uses this view of our operating performance for purposes of comparison with our business plan and individual operating budgets and allocation of resources. Additionally, when evaluating potential acquisitions, management excludes the items described above from its consideration of target performance and valuation. More specifically management adjusts for the excluded items for the following reasons:
- Amortization charges for our purchased and other identified intangible assets are inconsistent in amount and frequency and are significantly impacted by the timing and magnitude of our acquisition transactions. We therefore consider our operating results without these charges when evaluating our core performance. Generally, the most significant impact to inter-period comparability of our net income (loss) is in the first twelve months following an acquisition.
- Special charges are primarily severance related and are due to our reallocation or reduction of personnel resources driven by modifications of business strategy or business emphasis and by assimilation of acquired businesses. These costs are originated based on the particular facts and circumstances of business decisions and can vary in size. Special charges also include excess facility and asset-related restructuring charges. These charges are not specifically included in our annual operating plan and related budget due to the rapidly changing technology and competitive environment in our industry. We therefore exclude them when evaluating our managers’ performance internally.
- Management supplementally considers performance without the impact of equity plan-related compensation charges and believes this information is useful to investors to compare our performance to the performance of other companies in our industry who present non-GAAP results adjusted to exclude stock compensation expense. We view equity plan-related compensation as a key element of our employee retention and long-term incentives, not as an expense that should be an element of evaluating core operations in any given period. We therefore exclude these charges for purposes of evaluating our core performance.
- Income tax expense (benefit) is adjusted by the amount of additional tax expense or benefit that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into consideration our long-term tax structure. We use a normalized effective tax rate of 17%, which reflects the weighted average tax rate applicable under the various tax jurisdictions in which we operate. This non-GAAP weighted average tax rate is subject to change over time for various reasons, including changes in the geographic business mix and changes in statutory tax rates. Our GAAP tax rate for the three months ended April 30, 2008 is 18% after consideration of discrete items. Without discrete items of $1,581 thousand, our GAAP tax rate is 23%. Inclusive of discrete items, our full fiscal year 2009 GAAP tax rate is projected to be 31%. The GAAP tax rate considers certain mandatory and other non-scalable tax costs which may adversely or beneficially affect our tax rate depending upon our level of profitability.
Non-GAAP net income (loss) also facilitates comparison with other companies in our industry, which use similar financial measures to supplement their GAAP results. However, non-GAAP net income (loss) has limitations as an analytical tool, and you should not consider this measure 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, though not directly affecting our current cash position, 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 therefore we will continue to experience special charges and merger and acquisition charges on a regular basis. These costs also directly impact our available funds.
- 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 for the foreseeable future 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, may 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 over $850 million and employs approximately 4,200 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 and Questa are registered 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) the company’s ability to successfully offer products and services that compete in the highly competitive EDA industry; (ii) 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; (iii) reductions in the spending on the company’s products by its customers due to cyclical downturns; (iv) weakness in the US or other economies; (v) effects of the increasing volatility of foreign currency fluctuations on the company’s business and operating results; (vi) changes in accounting or reporting rules or interpretations; (vii) 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; (viii) effects of unanticipated shifts in product mix on gross margin; and (ix) effects of customer seasonal purchasing patterns and the timing of significant orders may negatively or positively impact the company’s quarterly results of operations, 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.
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||
| (In thousands, except earnings per share data) | |||||||||||
| Three Months Ended | |||||||||||
| April 30, 2008 | April 30, 2007 | ||||||||||
| Revenues: | |||||||||||
|
System and software (a) |
$ | 96,843 | $ | 117,885 | |||||||
| Service and support | 82,364 | 76,605 | |||||||||
| Total revenues | 179,207 | 194,490 | |||||||||
| Cost of revenues: (1) | |||||||||||
| System and software | 5,282 | 4,488 | |||||||||
| Service and support | 25,342 | 22,183 | |||||||||
| Amortization of purchased technology | 3,238 | 3,042 | |||||||||
| Total cost of revenues | 33,862 | 29,713 | |||||||||
| Gross margin | 145,345 | 164,777 | |||||||||
| Operating expenses: | |||||||||||
| Research and development (2) | 65,497 | 59,190 | |||||||||
| Marketing and selling (3) | 76,648 | 72,560 | |||||||||
| General and administration, and other (4) | 23,061 | 22,940 | |||||||||
|
Other general expense (income), net (a) |
(164 | ) | (230 | ) | |||||||
| Amortization of intangible assets (5) | 2,433 | 1,378 | |||||||||
| Special charges (6) | 9,650 | 4,053 | |||||||||
| Total operating expenses | 177,125 | 159,891 | |||||||||
| Operating income (loss) | (31,780 | ) | 4,886 | ||||||||
|
Other income, net (7) (a) |
2,375 | 1,284 | |||||||||
| Interest expense (8) | (4,162 | ) | (5,118 | ) | |||||||
| (Loss) income before income tax | (33,567 | ) | 1,052 | ||||||||
| Income tax (benefit) expense (9) | (6,079 | ) | 762 | ||||||||
| Net (loss) income | $ | (27,488 | ) | $ | 290 | ||||||
| Net (loss) income per share: | |||||||||||
| Basic | $ | (0.30 | ) | $ | - | ||||||
| Diluted | $ | (0.30 | ) | $ | - | ||||||
| Weighted average number of shares outstanding: | |||||||||||
| Basic | 90,750 | 85,158 | |||||||||
| Diluted | 90,750 | 88,083 | |||||||||
| Refer to following page for a description of footnotes. | |||||||||||
|
(a) |
For the April 30, 2007 presentation, Interest income on term receivables was reclassified from Other income, net, to System and software revenues. Accelerated interest income and interest expense on factored accounts receivable was reclassified from Other income, net, to Other general expense (income), net. The reclassification was made for consistency in presentation with the current year. | ||||||||||
|
Listed below are the items included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. Items are further described under "Discussion of Non-GAAP Financial Measures." |
||||||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| (1) Cost of revenues: | ||||||||||
| Equity plan-related compensation | $ | 376 | $ | 161 | ||||||
| Prepaid royalty costs | 103 | - | ||||||||
| Amortization of purchased intangible assets | 3,238 | 3,042 | ||||||||
| $ | 3,717 | $ | 3,203 | |||||||
| (2) Research and development: | ||||||||||
| Equity plan-related compensation | $ | 2,932 | $ | 1,249 | ||||||
| (3) Marketing and selling: | ||||||||||
| Equity plan-related compensation | $ | 2,105 | $ | 967 | ||||||
| (4) General and administration, and other: | ||||||||||
| Equity plan-related compensation | $ | 1,138 | $ | 688 | ||||||
| (5) Amortization of intangible assets: | ||||||||||
| Amortization of purchased intangible assets | $ | 2,433 | $ | 1,378 | ||||||
| (6) Special charges: | ||||||||||
| Rebalance and restructuring costs | $ | 9,650 | $ | 4,053 | ||||||
| (7) Other income, net: | ||||||||||
| Equity in losses of unconsolidated entities | $ | 168 | $ | - | ||||||
| (8) Interest expense: | ||||||||||
| Debt retirement costs | $ | - | $ | 164 | ||||||
| (9) Income tax (benefit) expense: | ||||||||||
| Income tax effects | $ | (4,137 | ) | $ | (1,406 | ) | ||||
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS |
|||||||||||
| (In thousands, except earnings per share data) | |||||||||||
| Three Months Ended | |||||||||||
| April 30, 2008 | April 30, 2007 | ||||||||||
| GAAP net (loss) income | $ | (27,488 | ) | $ | 290 | ||||||
| Non-GAAP adjustments: | |||||||||||
| Equity plan-related compensation: (1) | |||||||||||
| Cost of revenues | 376 | 161 | |||||||||
| Research and development (R&D) | 2,932 | 1,249 | |||||||||
| Marketing and selling | 2,105 | 967 | |||||||||
| General and administration, and other | 1,138 | 688 | |||||||||
| System and software cost of revenues (2) | 103 | - | |||||||||
| Acquisition - related items: | |||||||||||
| Amortization of purchased intangible assets | |||||||||||
| Cost of revenues (3) | 3,238 | 3,042 | |||||||||
| Amortization of intangible assets (4) | 2,433 | 1,378 | |||||||||
| Special charges (5) | 9,650 | 4,053 | |||||||||
| Other income, net (6) | 168 | - | |||||||||
| Interest expense (7) | - | 164 | |||||||||
| Income tax effects (8) | (4,137 | ) | (1,406 | ) | |||||||
| Total of non-GAAP adjustments | 18,006 | 10,296 | |||||||||
| Non-GAAP net income | $ | (9,482 | ) | $ | 10,586 | ||||||
| GAAP weighted average shares (diluted) | 90,750 | 88,083 | |||||||||
| Non-GAAP adjustment | - | - | |||||||||
| Non-GAAP weighted average shares (diluted) | 90,750 | 88,083 | |||||||||
| GAAP net (loss) income per share (diluted) | $ | (0.30 | ) | $ | - | ||||||
| Non-GAAP adjustments detailed above | 0.20 | 0.12 | |||||||||
| Non-GAAP net income per share (diluted) | $ | (0.10 | ) | $ | 0.12 | ||||||
| (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 IP division. | |||||||||
| (3 | ) | Amount represents purchased intangible assets resulting from acquisition transactions. Purchased intangible assets are amortized over two to five years. | |||||||||
| (4 | ) | Purchased intangible assets are amortized to other operating expense over two to five years. Purchased intangible assets includes tradenames, employment agreements, customer relationships and deferred compensation which are the result of acquisition transactions. | |||||||||
| (5 | ) | 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 IP division. | |||||||||
| Three months ended April 30, 2007: Special charges consist of (i) $3,969 of costs incurred for employee rebalances consisting of severance benefits, notice pay and outplacement services, (ii) $100 for a wind-up services agreement related to the liquidation of a subsidiary, and (iii) ($16) resulting from the true-up of previously accrued items. | |||||||||||
| (6 | ) | Amount represents our equity in the loss of a common stock investment accounted for under the equity method. | |||||||||
| (7 | ) | Premium and unamortized debt costs related to the redemption of convertible debt. | |||||||||
| (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. | |||||||||
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES |
||||||||||
| (In thousands, except percentages) | ||||||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP gross margin | $ | 145,345 | $ | 164,777 | ||||||
| Reconciling items to non-GAAP gross margin | ||||||||||
| Equity plan-related compensation | 376 | 161 | ||||||||
| Prepaid royalty costs | 103 |
- |
||||||||
| Amortization of purchased intangible assets | 3,238 | 3,042 | ||||||||
| Non-GAAP gross margin | $ | 149,062 | $ | 167,980 | ||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP gross margin as a percent of total revenue | 81 | % | 85 | % | ||||||
| Non-GAAP adjustments detailed above | 2 | % | 1 | % | ||||||
| Non-GAAP gross margin as a percent of total revenue | 83 | % | 86 | % | ||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP operating expenses | $ | 177,125 | $ | 159,891 | ||||||
| Reconciling items to non-GAAP operating expenses | ||||||||||
| Equity plan-related compensation | (6,175 | ) | (2,904 | ) | ||||||
| Amortization of purchased intangible assets | (2,433 | ) | (1,378 | ) | ||||||
| Rebalance and restructuring costs | (9,650 | ) | (4,053 | ) | ||||||
| Non-GAAP operating expenses | $ | 158,867 | $ | 151,556 | ||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP operating (loss) income | $ | (31,780 | ) | $ | 4,886 | |||||
| Reconciling items to non-GAAP operating income | ||||||||||
| Equity plan-related compensation | 6,551 | 3,065 | ||||||||
| Prepaid royalty costs | 103 |
- |
||||||||
| Amortization of purchased intangible assets: | ||||||||||
| Cost of revenues | 3,238 | 3,042 | ||||||||
| Amortization of intangible assets | 2,433 | 1,378 | ||||||||
| Rebalance and restructuring costs | 9,650 | 4,053 | ||||||||
| Non-GAAP operating (loss) income | $ | (9,805 | ) | $ | 16,424 | |||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP operating margin as a percent of total revenue | -18 | % | 3 | % | ||||||
| Non-GAAP adjustments detailed above | 13 | % | 5 | % | ||||||
| Non-GAAP operating margin as a percent of total revenue | -5 | % | 8 | % | ||||||
| Three Months Ended | ||||||||||
| April 30, 2008 | April 30, 2007 | |||||||||
| GAAP Other income, net and interest expense | $ | (1,787 | ) | $ | (3,834 | ) | ||||
| Reconciling items to non-GAAP other income, net and interest expense | ||||||||||
| Equity in losses of unconsolidated entities | 168 | - | ||||||||
| Debt retirement costs | - | 164 | ||||||||
| Non-GAAP Other income, net and interest expense | $ | (1,619 | ) | $ | (3,670 | ) | ||||
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED CONSOLIDATED BALANCE SHEETS |
||||||
| (In thousands) | ||||||
| April 30, | January 31, | |||||
| 2008 | 2008 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash, cash equivalents and short-term investments | $ | 142,138 | $ | 126,215 | ||
| Trade accounts receivable, net | 113,285 | 175,564 | ||||
| Term receivables, short-term | 148,971 | 157,077 | ||||
| Income taxes receivable | 5,449 | - | ||||
| Prepaid expenses and other | 40,873 | 38,051 | ||||
| Deferred income taxes | 10,416 | 9,574 | ||||
| Total current assets | 461,132 | 506,481 | ||||
| Property, plant and equipment, net | 100,721 | 100,421 | ||||
| Term receivables, long-term | 118,246 | 134,059 | ||||
| Goodwill and intangible assets, net | 447,433 | 451,881 | ||||
| Other assets | 58,480 | 45,271 | ||||
| Total assets | $ | 1,186,012 | $ | 1,238,113 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Short-term borrowings | $ | 10,291 | $ | 14,178 | ||
| Accounts payable | 15,889 | 23,634 | ||||
| Income taxes payable | - | 6,675 | ||||
| Accrued payroll and related liabilities | 54,655 | 78,948 | ||||
| Accrued liabilities | 43,455 | 40,697 | ||||
| Deferred revenue | 153,100 | 154,821 | ||||
| Total current liabilities | 277,390 | 318,953 | ||||
| Long-term notes payable | 201,102 | 201,102 | ||||
| Deferred revenue, long-term | 19,578 | 18,977 | ||||
| Other long-term liabilities | 65,557 | 59,914 | ||||
| Total liabilities | 563,627 | 598,946 | ||||
| Stockholders' equity: | ||||||
| Common stock | 537,503 | 531,153 | ||||
| Retained earnings | 43,662 | 71,150 | ||||
| Accumulated other comprehensive income | 41,220 | 36,864 | ||||
| Total stockholders' equity | 622,385 | 639,167 | ||||
| Total liabilities and stockholders' equity | $ | 1,186,012 | $ | 1,238,113 | ||
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION |
|||||||||||
| (In thousands, except Day sales outstanding) | |||||||||||
| Three Months Ended | |||||||||||
| April 30, 2008 | April 30, 2007 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | (27,488 | ) | $ | 290 | ||||||
| Depreciation and amortization (1) | 13,991 | 11,524 | |||||||||
| Other adjustments to reconcile: | |||||||||||
| Operating cash | 6,645 | (1,087 | ) | ||||||||
| Changes in working capital | 51,811 | (21,792 | ) | ||||||||
| Net cash provided by (used in) operating activities | 44,959 | (11,065 | ) | ||||||||
| Investing activities | |||||||||||
| Net (used in) provided by investing activities | (35,676 | ) | 8,037 | ||||||||
| Financing activities | |||||||||||
| Net cash (used in) provided by financing activities | (3,812 | ) | 5,343 | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 442 | 926 | |||||||||
| Net change in cash and cash equivalents | 5,913 | 3,241 | |||||||||
| Cash and cash equivalents at beginning of period | 117,926 | 95,232 | |||||||||
| Cash and cash equivalents at end of period | $ | 123,839 | $ | 98,473 | |||||||
| (1) | Depreciation and amortization includes a write-off of note issuance costs in the amount of $62 for the three months ended April 30, 2007. | ||||||||||
| Other data: | |||||||||||
| Capital expenditures | $ | 8,974 | $ | 9,062 | |||||||
| Days sales outstanding | 132 | 129 | |||||||||
|
MENTOR GRAPHICS CORPORATION |
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|
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP |
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|
EARNINGS PER SHARE GUIDANCE |
||||||||
| The following table reconciles management's estimates of the specific items excluded from GAAP in the calculation of expected non-GAAP earnings per share for the periods shown below: | ||||||||
| Q2 FY 2009 | FY 2009 | |||||||
| Diluted GAAP net earnings per share |
$(0.18) to (0.23 |
) |
$ 0.45 to 0.50 | |||||
| Non-GAAP Adjustments: | ||||||||
| Amortization of purchased intangible assets (1) | 0.02 | 0.10 | ||||||
| Amortization of other identified intangible assets (2) | 0.02 | 0.10 | ||||||
| Equity plan-related compensation (3) | 0.08 | 0.31 | ||||||
| Equity in loss of unconsolidated entities (4) | 0.01 | 0.01 | ||||||
| Special Charges (5) | - | 0.10 | ||||||
| Income tax effects (6) | (0.05 | ) | (0.02 | ) | ||||
| Non-GAAP net income |
$(0.10) to (0.15 |
) |
$ 1.05 to 1.10 | |||||
| (1) | Excludes amortization of purchased intangible assets resulting from acquisition transactions. Purchased intangible assets are amortized over two to five years. The guidance for fiscal year 2009 (FY2009) assumes no new acquisition transactions. | |||||||
| (2) | Excludes amortization of other identified intangible assets including trade names, employment agreements and customer relationships resulting from acquisition transactions. Other identified intangible assets are amortized over two to five years. | |||||||
| (3) | Excludes equity plan-related compensation expense recognized in accordance with SFAS 123R, Share-Based Payment. | |||||||
| (4) | Projected loss on equity interest in a common stock investment accounted for under the equity method. | |||||||
| (5) | Excludes special charges incurred during the first three months of FY2009 consisting primarily of costs incurred for employee rebalances, which included severance benefits, notice pay, outplacement services, and facility closures. | |||||||
| (6) | 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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MENTOR GRAPHICS CORPORATION |
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UNAUDITED SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION |
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| (Rounded to nearest 5%) | ||||||||||||||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
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Product Group Bookings (a) |
Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| Integrated Systems Design | 15% | 15% | 20% | 20% | 15% | 20% | 10% | 15% | 20% | 20% | 20% | |||||||||||
| IC Design to Silicon | 40% | 40% | 35% | 30% | 40% | 35% | 50% | 40% | 35% | 25% | 35% | |||||||||||
| Scalable Verification | 20% | 20% | 25% | 20% | 20% | 25% | 20% | 25% | 25% | 30% | 25% | |||||||||||
| New & Emerging Products | 10% | 15% | 15% | 20% | 20% | 15% | 10% | 15% | 15% | 20% | 15% | |||||||||||
| Services & Other | 15% | 10% | 5% | 10% | 5% | 5% | 10% | 5% | 5% | 5% | 5% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
|
Product Group Revenue (b) |
Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| Integrated Systems Design | 20% | 20% | 20% | 25% | 20% | 20% | 25% | 20% | 25% | 25% | 25% | |||||||||||
| IC Design to Silicon | 40% | 40% | 40% | 25% | 30% | 35% | 35% | 30% | 30% | 25% | 30% | |||||||||||
| Scalable Verification | 20% | 20% | 20% | 25% | 30% | 25% | 20% | 25% | 30% | 30% | 25% | |||||||||||
| New & Emerging Products | 10% | 10% | 15% | 15% | 15% | 15% | 10% | 15% | 10% | 15% | 15% | |||||||||||
| Services & Other | 10% | 10% | 5% | 10% | 5% | 5% | 10% | 10% | 5% | 5% | 5% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
| Bookings by Geography | Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| North America | 40% | 50% | 40% | 45% | 30% | 40% | 30% | 50% | 40% | 65% | 50% | |||||||||||
| Europe | 35% | 25% | 30% | 15% | 30% | 25% | 30% | 20% | 20% | 20% | 25% | |||||||||||
| Japan | 15% | 10% | 10% | 20% | 20% | 15% | 25% | 10% | 20% | 5% | 10% | |||||||||||
| Pac Rim | 10% | 15% | 20% | 20% | 20% | 20% | 15% | 20% | 20% | 10% | 15% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
| Revenue by Geography | Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| North America | 40% | 50% | 55% | 40% | 40% | 45% | 35% | 45% | 45% | 55% | 45% | |||||||||||
| Europe | 30% | 25% | 20% | 25% | 30% | 25% | 30% | 20% | 25% | 25% | 25% | |||||||||||
| Japan | 20% | 15% | 10% | 20% | 15% | 15% | 20% | 15% | 20% | 10% | 15% | |||||||||||
| Pac Rim | 10% | 10% | 15% | 15% | 15% | 15% | 15% | 20% | 10% | 10% | 15% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
|
Bookings by Business Model (c) |
Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| Perpetual | 20% | 30% | 25% | 30% | 10% | 20% | 30% | 30% | 25% | 20% | 25% | |||||||||||
| Ratable | 25% | 20% | 20% | 10% | 10% | 15% | 25% | 20% | 10% | 10% | 15% | |||||||||||
| Up Front | 55% | 50% | 55% | 60% | 80% | 65% | 45% | 50% | 65% | 70% | 60% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
| FY 2009 | Fiscal year ended January 31, 2008 | Fiscal year ended December 31, 2006 | ||||||||||||||||||||
|
Revenue by Business Model (c) |
Q1 | Q1 | Q2 | Q3 | Q4 | YEAR | Q1 | Q2 | Q3 | Q4 | YEAR | |||||||||||
| Perpetual | 20% | 25% | 20% | 20% | 15% | 20% | 30% | 30% | 20% | 25% | 25% | |||||||||||
| Ratable | 20% | 15% | 15% | 20% | 10% | 15% | 15% | 15% | 15% | 10% | 15% | |||||||||||
| Up Front | 60% | 60% | 65% | 60% | 75% | 65% | 55% | 55% | 65% | 65% | 60% | |||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | |||||||||||
|
(a) Product Group Bookings excludes support bookings for all sub-flow categories. |
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(b) Product Group Revenue includes support revenue for each sub-flow category as appropriate. |
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(c) Bookings and Revenue by Business Model are System and Software only. |
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MENTOR GRAPHICS CORPORATION |
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UNAUDITED RECLASSIFICATION OF INTEREST INCOME AND FACTORED ACCOUNTS RECEIVABLE INTEREST EXPENSE |
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| (In thousands) | ||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||
| Fiscal year ended January 31, 2008 |
April 30, |
July 31, |
October 31, |
January 31, |
January 31, |
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| 2007 | 2007 | 2007 | 2008 | 2008 | ||||||||||||||||||
| System and software revenue as reported | $ | 113,858 | $ | 123,691 | $ | 104,215 | $ | 196,801 | $ | 538,565 | ||||||||||||
| Interest Income, Term | 4,027 | 4,193 | 4,178 | 4,334 | 16,732 | |||||||||||||||||
| System and software revenue restated | $ | 117,885 | $ | 127,884 | $ | 108,393 | $ | 201,135 | $ | 555,297 | ||||||||||||
| Other general expense (income), net as reported | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Interest Income, Term | (1,076 | ) | - | (2,184 | ) | (1,260 | ) | (4,520 | ) | |||||||||||||
| Factored Accounts Receivable Interest Expense | 846 | 14 | 2,362 | 966 | 4,188 | |||||||||||||||||
| Other general expense (income), net restated | $ | (230 | ) | $ | 14 | $ | 178 | $ | (294 | ) | $ | (332 | ) | |||||||||
| Other income, net as reported | $ | 5,541 | $ | 5,830 | $ | 5,026 | $ | 5,892 | $ | 22,289 | ||||||||||||
| Interest Income, Term | (5,103 | ) | (4,193 | ) | (6,362 | ) | (5,594 | ) | (21,252 | ) | ||||||||||||
| Factored Accounts Receivable Interest Expense | 846 | 14 | 2,362 | 966 | 4,188 | |||||||||||||||||
| Other income, net restated | $ | 1,284 | $ | 1,651 | $ | 1,026 | $ | 1,264 | $ | 5,225 | ||||||||||||
Contact:
Mentor Graphics
Public and Investor Relations Director
Ryerson
Schwark, 503-685-1462
Email Contact
or
Investor
Relations and Business Development Director
Dennis Weldon,
503-685-1462
Email Contact