Mentor Graphics Reports Fiscal Third Quarter Results
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Mentor Graphics Reports Fiscal Third Quarter Results

WILSONVILLE, Ore. — (BUSINESS WIRE) — November 29, 2012 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal third quarter ended October 31, 2012. The company reported revenue of $268.8 million, non-GAAP earnings per share of $0.32, and GAAP earnings per share of $0.27.

“Revenue and earnings were records for a Q3. Mentor and the Electronic Design Automation industry continue to benefit from the semiconductor industry’s transition to the next generations of technology,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “For Mentor, exceptional strength in bookings for system design, including mechanical analysis, and new applications of EDA to automotive design and embedded software development provided unique growth opportunities.”

During the quarter, the company announced a major new design rule checking product in the HyperLynx® suite, the market-leading, high-speed analysis product line. Mentor also introduced new formal-based technologies in the Questa® Verification Platform that provide mainstream users with the ability to more easily perform exhaustive formal verification analysis. The next generation of high-performance, multi-core Linux-based embedded systems development software was also announced this quarter, along with new design, verification and test solutions for 20 nm process nodes.

“Our continued focus on controlling costs, and a favorable currency environment, resulted in a 70% drop-through of incremental year-over-year revenue to operating income,” said Gregory K. Hinckley, president of Mentor Graphics. “Mentor delivered record third quarter emulation revenue. Even with record hardware shipments and associated costs of goods sold, we exceeded our full-year non-GAAP operating margin target of 18% in the quarter, and achieved a GAAP operating margin of 14.1%. We reaffirm our full year revenue guidance of $1.1 billion and raise the full-year non-GAAP earnings estimate modestly.”

Outlook

For the full fiscal year 2013, the company continues to expect revenue of about $1.1 billion, approximately $1.39 in non-GAAP earnings per share and about $1.22 in GAAP earnings per share. For the fourth fiscal quarter 2013, the company expects revenues of about $343 million, non-GAAP earnings per share of about $0.55, and GAAP earnings per share of approximately $0.54.

Fiscal Year Definition

Mentor Graphics’ fiscal year runs from February 1 to January 31. The fiscal year is dated by the calendar year in which the fiscal year ends. As a result, the first three fiscal quarters of any fiscal year will be dated with the next calendar year, rather than the current calendar year.

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, net income, and earnings per share which we refer to as non-GAAP gross margin, operating margin, net income, and earnings per share, 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 intangible assets, special charges, equity plan-related compensation expenses, interest expense attributable to net retirement premiums or discounts on the early retirement of debt and associated debt issuance costs, interest expense associated with the amortization of debt discount and premium on convertible debt, and the equity in income (loss) of unconsolidated entities (except Frontline PCB Solutions Limited Partnership (Frontline)), which management does not consider reflective of our core operating business.

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:

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 earnings per share is calculated may therefore differ from the GAAP presentation due to the anti-dilutive effect of stock options and restricted stock units in a loss situation.

Non-GAAP gross margin, operating margin, and net income 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 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. Non-GAAP net income also facilitates comparison with other companies in our industry, which use similar financial measures to supplement their GAAP results. Non-GAAP net income has limitations as an analytical tool, and therefore should not be considered 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 are:

About Mentor Graphics

Mentor Graphics Corporation 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 electronic, semiconductor and systems companies. Established in 1981, the company reported revenues in the last fiscal year of about $1,015 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.

(Mentor Graphics, HyperLynx and Questa are registered trademarks of Mentor Graphics Corporation. All other company and/or product names are the trademarks and/or registered 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 the Securities Exchange Act of 1934. 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) recession or weakness in the EU, US, Japan, China or other economies, including recession or weakness associated with the ongoing EU debt crisis; (ii) the company’s ability to successfully offer products and services that compete in the highly competitive EDA industry, including the risk of production delays or obsolescence for our hardware products; (iii) 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; (iv) effects of unanticipated shifts in hardware and software product mix on gross margin; (v) effects of the 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) possible delayed or canceled customer orders resulting from the uncertainty created by actions of activist shareholders; and (ix) effects of customer seasonal purchasing patterns and the timing of significant orders which 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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except earnings per share data)
       
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
Revenues:
System and software $ 166,301 $ 154,363 $ 455,614 $ 411,503
Service and support   102,459     96,145     301,875     282,780  
Total revenues   268,760     250,508     757,489     694,283  
Cost of revenues: (1)
System and software 19,214 10,864 49,296 41,235
Service and support 29,290 27,621 86,834 79,676
Amortization of purchased technology   1,759     1,761     6,092     7,872  
Total cost of revenues   50,263     40,246     142,222     128,783  
Gross margin   218,497     210,262     615,267     565,500  
Operating expenses:
Research and development (2) 76,214 81,305 220,211 220,578
Marketing and selling (3) 84,673 83,036 243,493 236,718
General and administration (4) 17,794 17,922 54,308 52,055
Equity in (earnings) loss of Frontline (5) (381 ) 134 (1,630 ) (2,022 )
Amortization of intangible assets (6) 1,242 1,296 4,547 4,361
Special charges (7)   1,146     1,164     3,800     7,388  
Total operating expenses   180,688     184,857     524,729     519,078  
Operating income 37,809 25,405 90,538 46,422
Other income (expense), net (8) 57 1,836 (239 ) 1,890
Interest expense (9)   (4,652 )   (4,615 )   (13,983 )   (26,689 )
Income before income tax 33,214 22,626 76,316 21,623
Income tax expense (benefit) (10)   1,148     (1,445 )   (835 )   (4,429 )
Net income 32,066 24,071 77,151 26,052
Less: Income attributable to noncontrolling interest (11)   1,425     -     161     -  
Net income attributable to Mentor Graphics
shareholders $ 30,641   $ 24,071   $ 76,990   $ 26,052  
Net income per share attributable to Mentor Graphics
shareholders:
Basic $ 0.27   $ 0.22   $ 0.70   $ 0.24  
Diluted $ 0.27   $ 0.22   $ 0.68   $ 0.23  
Weighted average number of shares outstanding:
Basic   111,575     109,501     110,454     110,423  
Diluted   114,721     111,563     113,584     113,181  
 
Refer to following page for a description of footnotes.
 
 

MENTOR GRAPHICS CORPORATION

FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands)
 
 
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 October 31, Nine Months Ended October 31,
2012 2011 2012 2011
(1) Cost of revenues:
Equity plan-related compensation $ 393 $ 249 $ 1,080 $ 753
Amortization of purchased technology   1,759     1,761     6,092     7,872  
$ 2,152   $ 2,010   $ 7,172   $ 8,625  
 
(2) Research and development:
Equity plan-related compensation $ 2,272   $ 2,005   $ 6,604   $ 6,119  
 
(3) Marketing and selling:
Equity plan-related compensation $ 1,644   $ 1,365   $ 4,818   $ 4,393  
 
(4) General and administration:
Equity plan-related compensation $ 1,400   $ 1,495   $ 4,660   $ 5,358  
 
(5) Equity in (earnings) loss of Frontline:

Amortization of purchased technology and other identified intangible assets

$ 1,242   $ 1,242   $ 3,726   $ 3,726  
 
(6) Amortization of intangible assets:
Amortization of other identified intangible assets $ 1,242   $ 1,296   $ 4,547   $ 4,361  
 
(7) Special charges:
Rebalance, restructuring, and other costs $ 1,146   $ 1,164   $ 3,800   $ 7,388  
 
(8) Other income (expense), net:
Net (gain) loss of unconsolidated entities $ (38 ) $ (1,484 ) $ (110 ) $ (1,432 )
 
(9) Interest expense:
Amortization of debt discount and premium, net $ 1,342 $ 1,250 $ 3,955 $ 3,653
Premium and costs related to debt retirement   -     -     -     11,504  
$ 1,342   $ 1,250   $ 3,955   $ 15,157  
 
(10) Income tax expense (benefit):
Non-GAAP income tax effects $ (6,607 ) $ (7,050 ) $ (20,468 ) $ (17,233 )
 
(11) Income attributable to noncontrolling interest:
Amortization of intangible assets and income tax effects $ 96   $ -   $ (506 ) $ -  

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
       
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
GAAP net income attributable to Mentor Graphics shareholders $ 30,641 $ 24,071 $ 76,990 $ 26,052
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues 393 249 1,080 753
Research and development 2,272 2,005 6,604 6,119
Marketing and selling 1,644 1,365 4,818 4,393
General and administration 1,400 1,495 4,660 5,358
Acquisition - related items:
Amortization of purchased assets
Cost of revenues (2) 1,759 1,761 6,092 7,872
Frontline purchased technology and intangible assets (3) 1,242 1,242 3,726 3,726
Amortization of intangible assets (4) 1,242 1,296 4,547 4,361
Special charges (5) 1,146 1,164 3,800 7,388
Other income (expense), net (6) (38 ) (1,484 ) (110 ) (1,432 )
Interest expense (7) 1,342 1,250 3,955 15,157
Non-GAAP income tax effects (8) (6,607 ) (7,050 ) (20,468 ) (17,233 )
Noncontrolling interest (9)   96     -     (506 )   -  
Total of non-GAAP adjustments   5,891     3,293     18,198     36,462  
Non-GAAP net income attributable to Mentor Graphics shareholders $ 36,532   $ 27,364   $ 95,188   $ 62,514  
 
GAAP and Non-GAAP weighted average shares (diluted)   114,721     111,563     113,584     113,181  
 

Net income per share attributable to Mentor Graphics shareholders:

GAAP (diluted) $ 0.27 $ 0.22 $ 0.68 $ 0.23
Non-GAAP adjustments detailed above   0.05     0.03     0.16     0.32  
Non-GAAP (diluted) $ 0.32   $ 0.25   $ 0.84   $ 0.55  
 
(1) Equity plan-related compensation expense is the fair value of all share-based payments to employees for stock options and restricted stock units, and purchases made as a result of the employee stock purchase plans.
(2) Amount represents amortization of purchased technology resulting from acquisitions. Purchased intangible assets are amortized over two to five years.
(3) 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. This expense is the same type as being adjusted for in note (2) above and (4) below.
(4) Other identified intangible assets are amortized to other operating expense over two to five years. Other identified intangible assets include trade names, customer relationships, and backlog which are the result of acquisition transactions.
(5) Three months ended October 31, 2012: Special charges consist of (i) $612 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services and (ii) $534 in other adjustments.
Three months ended October 31, 2011: Special charges consist of (i) $1,227 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, (ii) $129 of costs related to consulting fees associated with our proxy contest, and (iii) $(192) in other adjustments.
Nine months ended October 31, 2012: Special charges consist of (i) $2,629 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services and (ii) $1,171 in other adjustments.
Nine months ended October 31, 2011: Special charges consist of (i) $3,967 of costs related to consulting fees associated with our proxy contest , (ii) $3,581 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, and (iii) $(160) in other adjustments.
(6) Three months ended October 31, 2012: Income of $38 on investment accounted for under the equity method of accounting.
Three months ended October 31, 2011: Gain of $1,519 resulting from a change from an equity method investment to a controlling interest and loss of $(35) on investments accounted for under the equity method of accounting.
Nine months ended October 31, 2012: Income of $110 on investment accounted for under the equity method of accounting.
Nine months ended October 31, 2011: Gain of $1,519 resulting from a change from an equity method investment to a controlling interest and loss of $(87) on investments accounted for under the equity method of accounting.
(7) Three months ended October 31, 2012: $1,342 in amortization of original issuance debt discount.
Three months ended October 31, 2011: $1,250 in amortization of original issuance debt discount.
Nine months ended October 31, 2012: $3,955 in amortization of original issuance debt discount.
Nine months ended October 31, 2011: $3,653 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.
(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.
(9) Adjustment for the impact of amortization of intangible assets, equity plan-related compensation, and income tax expense on noncontrolling interest.

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except percentages)
       
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
GAAP gross margin $ 218,497 $ 210,262 $ 615,267 $ 565,500
Reconciling items to non-GAAP gross margin:
Equity plan-related compensation 393 249 1,080 753
Amortization of purchased technology   1,759     1,761     6,092     7,872  
Non-GAAP gross margin $ 220,649   $ 212,272   $ 622,439   $ 574,125  
 
 
Three Months Ended October 31,   Nine Months Ended October 31,
2012 2011 2012 2011
GAAP gross margin as a percent of total revenues 81.3 % 83.9 % 81.2 % 81.5 %
Non-GAAP adjustments detailed above   0.8 %   0.8 %   1.0 %   1.2 %
Non-GAAP gross margin as a percent of total revenues   82.1 %   84.7 %   82.2 %   82.7 %
 
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
GAAP operating expenses $ 180,688 $ 184,857 $ 524,729 $ 519,078
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation (5,316 ) (4,865 ) (16,082 ) (15,870 )

Amortization of Frontline purchased technology and other identified intangible assets

(1,242 ) (1,242 ) (3,726 ) (3,726 )
Amortization of other identified intangible assets (1,242 ) (1,296 ) (4,547 ) (4,361 )
Special charges   (1,146 )   (1,164 )   (3,800 )   (7,388 )
Non-GAAP operating expenses $ 171,742   $ 176,290   $ 496,574   $ 487,733  
 
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
GAAP operating income $ 37,809 $ 25,405 $ 90,538 $ 46,422
Reconciling items to non-GAAP operating income:
Equity plan-related compensation 5,709 5,114 17,162 16,623
Amortization of purchased technology 1,759 1,761 6,092 7,872

Amortization of Frontline purchased technology and other identified intangible assets

1,242 1,242 3,726 3,726
Amortization of other identified intangible assets 1,242 1,296 4,547 4,361
Special Charges   1,146     1,164     3,800     7,388  
Non-GAAP operating income $ 48,907   $ 35,982   $ 125,865   $ 86,392  
 
 
Three Months Ended October 31,   Nine Months Ended October 31,
2012 2011 2012 2011
GAAP operating income as a percent of total revenues 14.1 % 10.1 % 12.0 % 6.7 %
Non-GAAP adjustments detailed above   4.1 %   4.3 %   4.6 %   5.7 %
Non-GAAP operating income as a percent of total revenues   18.2 %   14.4 %   16.6 %   12.4 %
 
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
GAAP other expense, net and interest expense $ (4,595 ) $ (2,779 ) $ (14,222 ) $ (24,799 )

Reconciling items to non-GAAP other expense, net and interest expense:

Net gain of unconsolidated entities (38 ) (1,484 ) (110 ) (1,432 )
Amortization of debt discount and retirement costs   1,342     1,250     3,955     15,157  
Non-GAAP other expense, net and interest expense $ (3,291 ) $ (3,013 ) $ (10,377 ) $ (11,074 )

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
   
 
October 31, January 31,
2012 2012
 
Assets
Current assets:
Cash and cash equivalents $ 159,730 $ 146,499
Restricted cash - 4,237
Trade accounts receivable, net 171,916 133,494
Term receivables, short-term 232,867 221,430
Prepaid expenses and other 44,165 43,972
Deferred income taxes   16,249   17,803
 
Total current assets 624,927 567,435
Property, plant, and equipment, net 161,260 148,019
Term receivables, long-term 207,639 220,355
Goodwill and intangible assets, net 547,156 555,671
Other assets   65,827   59,195
 
Total assets $ 1,606,809 $ 1,550,675
 
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 2,836 $ 14,617
Current portion of notes payable 1,381 1,349
Accounts payable 16,686 17,261
Income taxes payable 9,723 2,538
Accrued payroll and related liabilities 68,328 112,349
Accrued and other liabilities 36,812 34,284
Deferred revenue   202,292   191,540
 
Total current liabilities 338,058 373,938
Long-term notes payable 217,179 213,224
Deferred revenue, long-term 18,331 14,883
Other long-term liabilities   53,628   73,290
Total liabilities   627,196   675,335
 
Noncontrolling interest with redemption feature 8,685 9,266
 
Stockholders' equity:
Common stock 804,793 775,362
Retained earnings 139,706 62,032
Accumulated other comprehensive income   26,429   28,680
Total stockholders' equity   970,928   866,074
 
Total liabilities and stockholders' equity $ 1,606,809 $ 1,550,675

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION

(In thousands, except days sales outstanding)
     
 
Three Months Ended October 31, Nine Months Ended October 31,
2012 2011 2012 2011
Operating activities
Net income $ 32,066 $ 24,071 $ 77,151 $ 26,052
Depreciation and amortization (1) 13,189 13,157 40,201 49,347
Other adjustments to reconcile:
Operating cash 4,117 5,770 14,310 18,686
Changes in working capital   (30,887 )   (32,660 )   (78,790 )   (58,893 )
 
Net cash provided by operating activities 18,485 10,338 52,872 35,192
 
Investing activities
Net cash used in investing activities (13,534 ) (7,571 ) (37,520 ) (26,231 )
 
Financing activities
Net cash provided by (used in) financing activities 7,936 (13,380 ) (136 ) (30,789 )
 
Effect of exchange rate changes on cash and cash equivalents   482     (867 )   (1,985 )   704  
 
Net change in cash and cash equivalents 13,369 (11,480 ) 13,231 (21,124 )
Cash and cash equivalents at beginning of period   146,361     123,469     146,499     133,113  
 
Cash and cash equivalents at end of period $ 159,730   $ 111,989   $ 159,730   $ 111,989  
 
 

(1) Depreciation and amortization includes a write-off of note issuance costs in the amount of $8,010 for the nine months ended October 31, 2011.

 
 
Other data:
Capital expenditures $ 13,392   $ 8,438   $ 35,575   $ 25,062  
Days sales outstanding   136     105  

 

MENTOR GRAPHICS CORPORATION

UNAUDITED SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION

(Rounded to nearest 5%)
     
2013 2012 2011
Product Group Bookings (a) Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
IC DESIGN TO SILICON 35% 25% 30% 30% 20% 25% 60% 40% 40% 35% 40% 45% 30% 35%
SCALABLE VERIFICATION 15% 30% 25% 25% 35% 30% 15% 35% 30% 35% 25% 25% 30% 25%
INTEGRATED SYSTEMS DESIGN 25% 25% 25% 25% 25% 25% 15% 15% 15% 15% 25% 20% 25% 25%
NEW & EMERGING MARKETS 10% 10% 15% 15% 10% 15% 5% 5% 10% 10% 5% 5% 10% 10%
SERVICES / OTHER 15% 10% 5% 5% 10% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2013 2012 2011
Product Group Revenue (b) Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
IC DESIGN TO SILICON 40% 35% 25% 35% 40% 25% 40% 45% 40% 40% 40% 35% 30% 35%
SCALABLE VERIFICATION 25% 25% 30% 25% 25% 30% 25% 25% 25% 20% 20% 30% 25% 25%
INTEGRATED SYSTEMS DESIGN 25% 25% 30% 25% 20% 25% 25% 20% 25% 25% 25% 25% 30% 30%
NEW & EMERGING MARKETS 5% 10% 10% 10% 10% 10% 5% 5% 5% 5% 5% 5% 10% 5%
SERVICES / OTHER 5% 5% 5% 5% 5% 10% 5% 5% 5% 10% 10% 5% 5% 5%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2013 2012 2011
Bookings by Geography Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
North America 35% 40% 50% 45% 45% 45% 40% 50% 45% 45% 40% 45% 50% 45%
Europe 20% 35% 20% 25% 20% 30% 15% 25% 20% 20% 25% 20% 20% 20%
Japan 10% 5% 5% 5% 15% 5% 5% 10% 10% 15% 5% 15% 15% 15%
Pac Rim 35% 20% 25% 25% 20% 20% 40% 15% 25% 20% 30% 20% 15% 20%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2013 2012 2011
Revenue by Geography Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
North America 50% 45% 50% 50% 40% 50% 45% 35% 40% 35% 40% 50% 45% 40%
Europe 20% 20% 20% 20% 25% 20% 25% 25% 25% 25% 25% 25% 25% 25%
Japan 10% 15% 10% 10% 15% 10% 10% 5% 10% 15% 10% 10% 15% 15%
Pac Rim 20% 20% 20% 20% 20% 20% 20% 35% 25% 25% 25% 15% 15% 20%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2013 2012 2011
Bookings by Business Model (c) Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Perpetual 25% 20% 20% 20% 40% 20% 15% 25% 20% 40% 30% 10% 15% 20%
Ratable 25% 15% 10% 15% 20% 10% 5% 5% 10% 20% 15% 10% 5% 10%
Up Front 50% 65% 70% 65% 40% 70% 80% 70% 70% 40% 55% 80% 80% 70%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2013 2012 2011
Revenue by Business Model (c) Q1 Q2 Q3 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Perpetual 20% 25% 25% 25% 30% 25% 15% 15% 20% 20% 25% 20% 15% 20%
Ratable 10% 10% 10% 10% 10% 10% 10% 5% 10% 25% 15% 10% 5% 10%
Up Front 70% 65% 65% 65% 60% 65% 75% 80% 70% 55% 60% 70% 80% 70%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
(a) Product Group Bookings excludes support bookings for all sub-flow categories.
(b) Product Group Revenue includes support revenue for each sub-flow category as appropriate.
(c) Bookings and Revenue by Business Model are System and Software only, excluding finance fee revenue.

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP

EARNINGS PER SHARE

   
The following table reconciles management's estimates of the specific items excluded from GAAP in the calculation of estimated non-GAAP net income per share for Q4'13 and fiscal 2013.
 
Estimated Estimated
Q4'13 FY'13
Diluted GAAP net income per share $ 0.54 $ 1.22
Non-GAAP Adjustments:
Amortization of purchased intangible assets (1) 0.01 0.07
Amortization of other identified intangible assets (2) 0.02 0.10
Equity plan-related compensation (3) 0.06 0.21
Special charges (4) - 0.03
Other expense, net and interest expense (5) 0.01 0.05
Non-GAAP income tax effects (6)   (0.09 )   (0.29 )
Non-GAAP net income per share $ 0.55   $ 1.39  
 
 
(1) Excludes amortization of purchased intangible assets resulting from acquisitions. Purchased intangible assets are amortized over two to five years.
(2) 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.
(3) Equity plan-related compensation expense is the fair value of all share-based payments to employees for stock options and restricted stock units, and purchases made as a result of the employee stock purchase plans.
(4) Excludes special charges consisting primarily of costs incurred for employee rebalances (which includes severance benefits, notice pay and outplacement services), facility closures, and acquisition costs.
(5) Adjustment for fiscal 2013 reflects the amortization of original issuance debt discount for our 4.00% Convertible Subordinated Debentures due 2031.
(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 non-GAAP pre-tax income.



Contact:

Mentor Graphics Corporation
Joe Reinhart, 503-685-1462
Email Contact