Mentor Graphics Reports Fiscal Second Quarter Results

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
         
Three Months Ended July 31, Six Months Ended July 31,
2009 2008 2009 2008
GAAP net lossa $ (21,266 ) $ (17,798 ) $ (34,222 ) $ (43,294 )
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues 470 375 969 751
Research and development 3,058 2,919 6,505 5,851
Marketing and selling 2,391 2,116 4,928 4,221
General and administration 1,578 2,174 2,865 3,312
System and software cost of revenues (2) - - - 103
Acquisition - related items:
Amortization of purchased intangible assets
Cost of revenues (3) 2,928 1,992 5,876 5,230
Amortization of intangible assets (4) 2,888 2,537 5,758 4,970
In-process research and development (5) - 15,285 - 15,285
Special charges (6) 4,202 3,235 9,897 12,885
Other income (expense), net (7) 244 475 681 643
Interest expense (8) 578 628 999 1,243
Income tax effects a (9)   4,391     (15,480 )   5,458     (21,280 )
Total of non-GAAP adjustments   22,728     16,256     43,936     33,214  
Non-GAAP net income (loss) a $ 1,462   $ (1,542 ) $ 9,714   $ (10,080 )
 
GAAP weighted average shares (diluted) 94,853 91,352 94,514 91,054
Non-GAAP adjustment   387     -     13     -  
Non-GAAP weighted average shares (diluted)   95,240     91,352     94,527     91,054  
 
GAAP net loss per share (diluted) a $ (0.22 ) $ (0.19 ) $ (0.36 ) $ (0.48 )
Non-GAAP adjustments detailed above   0.24     0.17     0.46     0.37  
Non-GAAP net income (loss) per share (diluted) a $ 0.02   $ (0.02 ) $ 0.10   $ (0.11 )
 
a Adjusted for the retrospective adoption of FSP APB 14-1.
                   
(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 Intellectual Property division.
(3) Amount represents amortization of purchased technology resulting from acquisitions. Purchased intangible assets are amortized over two to five years.
(4) 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.
(5) Write-off of $1,300 for in-process research and development related to the Ponte acquisition and $13,985 related to the acquisition of technology which has not yet reached technological feasibility and provided no alternative future uses. The technology is expected to be the basis for a new offering in the Calibre product family once development is completed.
(6) Three months ended July 31, 2009 : Special charges consist of (i) $1,599 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, (ii) $1,175 in advisory fees, (iii) $865 related to the abandonment of excess leased facility space, (iv) $270 in acquisition costs, (v) $242 related to a facility fire, and (vi) $51 in other adjustments.
Three months ended July 31, 2008 : Special charges consist of (i) $1,513 related to the abandonment of excess leased facility space, (ii) $1,073 in advisory fees, (iii) $730 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, and (iv) $(81) in other costs and adjustments, net.
Six months ended July 31, 2009 : Special charges consist of (i) $5,627 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, (ii) $2,350 in advisory fees, (iii) $824 related to the abandonment of excess leased facility space, (iv) $538 in acquisition costs, (v) $507 related to a facility fire, and (vi) $51 in other costs.
Six months ended July 31, 2008 : Special charges consist of (i) $8,844 of costs incurred for employee rebalances consisting of severance benefits, notice pay, and outplacement services, (ii) $2,956 related to the abandonment of excess leased facility space, (iii) $1,073 in advisory fees, (iv) $93 in fixed asset write-offs related to the closure of our Intellectual Property division, and (v) $(81) in other costs and adjustments, net.
(7) Three months ended July 31, 2009 : Equity in losses of Calypto Design Systems of $244.
Three months ended July 31, 2008 : Equity in losses of Calypto Design Systems of $475.
Six months ended July 31, 2009 : Other income, net consists of (i) equity in losses of Calypto Design Systems of $568 and (ii) an impairment of $113 for an investment accounted for under the cost method.
Six months ended July 30, 2008 : Equity in losses of Calypto Design Systems of $643.
(8) Three months ended July 31, 2009 : $684 in amortization of original issuance debt discount in accordance with FSP APB 14-1 and $(106) in discounts and unamortized debt costs related to a partial redemption of the $110.0M convertible debt.
Six months ended July 31, 2009 : $1,353 in amortization of original issuance debt discount in accordance with FSP APB 14-1 and $(354) in discounts and unamortized debt costs related to a partial redemption of the $110.0M convertible debt.
Three and six months ended April 30, 2008 : Amortizaton of original issuance debt discount in accordance with FSP APB 14-1.
(9) 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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