WILSONVILLE, Ore.—(BUSINESS WIRE)—February 28, 2008— Mentor Graphics Corporation (NASDAQ: MENT) today announced fiscal 2008 fourth quarter revenue of $284.8 million, and annual revenue of $879.7 million. On a GAAP basis, fiscal 2008 fourth quarter earnings per share were $.39 and $.32 for the full year. On a non-GAAP basis, earnings per share for fiscal 2008 fourth quarter were $.72, and $1.00 for the full year.
"Mentor's focus on building number one positions in the market has
enabled it to continue to thrive and helped drive our record fourth
quarter revenue and earnings," said Walden C. Rhines, chairman and CEO
of Mentor Graphics. "Our Olympus place and route solution received
orders from 8 of the top 20 semiconductor manufacturers, while
bookings from automotive customers climbed 25% to become about 10% of
total bookings for the company."
During the quarter, Mentor Graphics and Cadence Design Systems
delivered the Open Verification Methodology (OVM) to accelerate
adoption of SystemVerilog methodologies. Mentor's Veloce(R) emulator
was picked as one of the Hot 100 products of 2007 by EDN magazine.
Mentor's Catapult C(R) Synthesis product was selected as part of
Fujitsu's Electronic System Level (ESL) reference flow. The company
launched a multi-corner multi-mode signal integrity analysis tool as
part of its Olympus(TM)-SoC product line. The Japanese semiconductor
consortium STARC validated an ESL reference flow featuring the
Catapult C Synthesis product. The company also hosted its 6th annual
Integrated Electrical Solutions Forum in Detroit with representatives
from all of North America's automotive OEMs and tier 1 suppliers.
"The company executed well in fiscal 2008, and we are positioned
to continue to outperform the market in fiscal 2009," said Gregory K.
Hinckley, president of Mentor Graphics. "Additionally, we have
tightened our focus on cost controls, and have taken a number of
actions, including shuttering our IP division, to provide a more
competitive cost basis going forward."
Interest income resulting from the discount of long term accounts
receivables has been historically reported as a component of Other
income, net in the Consolidated Statement of Operations. Since the
significance of the sale of term licenses that result in long term
receivables has been increasing we have reclassified the interest
income from Other income, net to Finance Revenue included as a
component of Total Revenues in the Consolidated Statement of
Operations. Along with the change in the classification of interest
income, we have also reclassified the net gain or loss on the sale of
long term receivables from Other income to General and Administration,
and Other expense. The reclassifications have been made to the
presentation of the prior years' Consolidated Statements of Operations
to conform to current year's presentation. For the fourth quarter of
fiscal 2008, the net adjustment to revenue was $4.3 million and for
the year, it was $16.7 million. Net Income was unaffected.
For fiscal year 2009, the company expects revenue growth of about
4% to about $915 million, and Non-GAAP earnings per share growth
between 5% and 10% to $1.05 to $1.10. GAAP earnings per share is
expected to range between $.65 and $.70.
For the first quarter, revenue is expected to be about $170
million with GAAP earnings per share a loss of about $.15 and Non-GAAP
earnings per share a loss of about $.10.
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. In-process research and development charges
represent products in development that had not reached technological
feasibility at the time of acquisition. 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 SFAS 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.
During the twelve months ended January 31, 2008 and December
31, 2006, $1.1 million and $7.2 million, respectively of interest
expense attributable to net retirement premiums and write-offs of debt
issuance costs related to the refinancing or repurchase of certain
convertible debt was 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.
-- In-process research and development charges are largely
disregarded as acquisition decisions are made, since they
often result in charges that vary significantly in size and
amount. Management excludes these charges when evaluating the
impact of an acquisition transaction and our ongoing