-- 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.
-- The company regularly engages in acquisition and assimilation activities as part of its 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 available funds of the company.
-- The company's 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.
-- The company's income tax expense (benefit) will be ultimately based on its 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 for fiscal year 2006 of over $800 million and employs approximately 4,250 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: www.mentor.com/
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) reductions in spending on the company's products by its customers due to cyclical downturns; (ii) the company's ability to successfully offer products and services that compete in the highly competitive EDA industry; (iii) discounting of products and services by competitors, which could force the company to lower its prices or offer other more favorable terms to customers; (iv) changes in accounting or reporting rules or interpretations, limitations on repatriation of earnings; (v) the impact of tax audits by the IRS or other taxing authorities, or changes in tax laws, regulations or enforcement practices where the company does business; (vi) effects of the increasing volatility of foreign currency fluctuations on the company's business and operating results; (vii) effects of unanticipated shifts in product mix on gross margin; (viii) effects of customer seasonal purchasing patterns and the timing of significant orders may negatively or positively impact the company's quarterly results of operations; and (ix) weakness in the US or other economies, 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 UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EARNINGS PER SHARE GUIDANCE
The types of non-GAAP adjustments reflected below are consistent with those applied by the Company in reporting its performance on a non- GAAP basis for historical periods. For discussion of the reasons the Company presents such adjustments and considers non-GAAP net income to be a useful supplemental performance measure, and of the limitations on non-GAAP performance measures, see Discussion of Non- GAAP Financial Measures above. The following table reconciles the estimates of specific items excluded from GAAP earnings per share in the calculation of expected non-GAAP earnings per share for the periods shown below: ------------- --------- Q1 2008 FY 2008 ------------- --------- Diluted GAAP net earnings per share $ .01 to .03 $0.75 Non-GAAP Adjustments: Amortization of purchased intangible assets (1) 0.04 0.10 Amortization of other identified intangible assets (2) 0.02 0.06 Stock-based compensation (3) 0.03 0.16 Income tax effects (4) (0.02) (0.06) ------------- --------- Non-GAAP net income $ .08 to .10 $1.01 ======================= ---------------------------------------------------------------------- (1) Excludes amortization of purchased intangible assets acquired in 20 separate acquisition transactions. Purchased intangible assets are amortized over two to five years. The guidance for 2008 does not assume any new acquisition transactions. (2) Excludes amortization of other identified intangible assets including trade names, employment agreements and customer relationships acquired in 14 separate 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) Non-GAAP income tax expense adjustment is based upon the assumption of a normalized effective rate of 17% on non-GAAP income (loss) before income taxes and tax effect on non-GAAP adjustments.