Mentor Graphics Reports Fiscal Third Quarter Results


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,
		2014			2013			2014			2013
GAAP gross profit	$	245,142		$	229,570		$	651,154		$	624,263
Reconciling items to non-GAAP gross profit:
Equity plan-related compensation		608			520			1,687			1,438
Amortization of purchased technology		2,050			729			5,252			2,648
Non-GAAP gross profit	$	247,800		$	230,819		$	658,093		$	628,349


	Three Months Ended October 31,						Nine Months Ended October 31,
		2014			2013			2014			2013
GAAP gross profit as a percent of total revenues		83.8	%		83.3	%		80.9	%		82.6	%
Non-GAAP adjustments detailed above		0.9	%		0.4	%		0.8	%		0.6	%
Non-GAAP gross profit as a percent of total revenues		84.7	%		83.7	%		81.7	%		83.2	%


	Three Months Ended October 31,						Nine Months Ended October 31,
		2014			2013			2014			2013
GAAP operating expenses	$	215,419		$	196,198		$	602,875		$	558,420
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation		(8,494	)		(6,906	)		(24,704	)		(19,831	)
Amortization of Frontline purchased technology and other identified intangible assets		-			(231	)		(116	)		(1,199	)
Amortization of other identified intangible assets		(2,233	)		(1,440	)		(6,009	)		(4,650	)
Special charges		(8,375	)		(4,688	)		(19,409	)		(12,570	)
Non-GAAP operating expenses	$	196,317		$	182,933		$	552,637		$	520,170


	Three Months Ended October 31,						Nine Months Ended October 31,
		2014			2013			2014			2013
GAAP operating income	$	29,723		$	33,372		$	48,279		$	65,843
Reconciling items to non-GAAP operating income:
Equity plan-related compensation		9,102			7,426			26,391			21,269
Amortization of purchased technology		2,050			729			5,252			2,648
Amortization of Frontline purchased technology and other
identified intangible assets		-			231			116			1,199
Amortization of other identified intangible assets		2,233			1,440			6,009			4,650
Special charges		8,375			4,688			19,409			12,570
Non-GAAP operating income	$	51,483		$	47,886		$	105,456		$	108,179


	Three Months Ended October 31,						Nine Months Ended October 31,
		2014			2013			2014			2013
GAAP operating income as a percent of total revenues		10.2	%		12.1	%		6.0	%		8.7	%
Non-GAAP adjustments detailed above		7.4	%		5.3	%		7.1	%		5.6	%
Non-GAAP operating income as a percent of total revenues		17.6	%		17.4	%		13.1	%		14.3	%


	Three Months Ended October 31,						Nine Months Ended October 31,
		2014			2013			2014			2013
GAAP other income (expense), net and interest expense	$	(5,315	)	$	(4,615	)	$	(15,069	)	$	(15,528	)
Reconciling items to non-GAAP other income (expense), net and interest expense:
Equity in earnings of unconsolidated entities		78			(33	)		146			(126	)
Amortization of original issuance debt discount		1,548			1,441			4,563			4,248
Non-GAAP other income (expense), net and interest expense	$	(3,689	)	$	(3,207	)	$	(10,360	)	$	(11,406	)

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