Mentor Graphics Reports Fiscal Fourth Quarter Results and

Mentor Graphics Reports Fiscal Fourth Quarter Results and Announces 11% Dividend Increase


MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP gross profit		$	345,003		$	283,770		$	969,266		$	899,037
Reconciling items to non-GAAP gross profit:
Equity plan-related compensation			554			449			1,992			1,529
Amortization of purchased technology			950			1,709			3,598			7,801
Non-GAAP gross profit		$	346,507		$	285,928		$	974,856		$	908,367


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP gross profit as a percent of total revenues			86.0	%		85.7	%		83.8	%		82.6	%
Non-GAAP adjustments detailed above			0.4	%		0.6	%		0.5	%		0.8	%
Non-GAAP gross profit as a percent of total revenues			86.4	%		86.3	%		84.3	%		83.4	%


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP operating expenses		$	227,806		$	212,675		$	786,226		$	737,404
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation			(7,527	)		(6,086	)		(27,358	)		(22,168	)
Amortization of Frontline purchased technology and other identified intangible assets
			(231	)		(1,242	)		(1,430	)		(4,968	)
Amortization of other identified intangible assets			(1,580	)		(1,368	)		(6,230	)		(5,915	)
Special charges ^a			(4,359	)		(3,540	)		(16,929	)		(9,946	)
Non-GAAP operating expenses		$	214,109		$	200,439		$	734,279		$	694,407


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP operating income		$	117,197		$	71,095		$	183,040		$	161,633
Reconciling items to non-GAAP operating income:
Equity plan-related compensation			8,081			6,535			29,350			23,697
Amortization of purchased technology			950			1,709			3,598			7,801
Amortization of Frontline purchased technology and other identified intangible assets
			231			1,242			1,430			4,968
Amortization of other identified intangible assets			1,580			1,368			6,230			5,915
Special Charges ^a			4,359			3,540			16,929			9,946
Non-GAAP operating income		$	132,398		$	85,489		$	240,577		$	213,960


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP operating margin			29.2	%		21.5	%		15.8	%		14.8	%
Non-GAAP adjustments detailed above			3.8	%		4.3	%		5.0	%		4.9	%
Non-GAAP operating margin			33.0	%		25.8	%		20.8	%		19.7	%


		Three Months Ended January 31,						Twelve Months Ended January 31,
			2014			2013			2014			2013
GAAP other expense, net and interest expense		$	(4,444	)	$	(6,076	)	$	(19,972	)	$	(20,298	)
Reconciling items to non-GAAP other expense, net and interest expense:

Equity in earnings of unconsolidated entities			7			(18	)		(119	)		(128	)
Amortization of original issuance debt discount			1,467			1,367			5,715			5,322
Non-GAAP other expense, net and interest expense		$	(2,970	)	$	(4,727	)	$	(14,376	)	$	(15,104	)

	^a See footnote ^a for a discussion of the reclassification of certain litigation costs to special charges.

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