Mentor Graphics Reports Fiscal Fourth Quarter Results, Announces Quarterly Dividend Increase
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MENTOR GRAPHICS CORPORATION
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UNAUDITED RECONCILIATION OF NON-GAAP
ADJUSTMENTS
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(In thousands, except earnings per share data)
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Three Months Ended January 31,
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Twelve Months Ended January 31,
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2015
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2014
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2015
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2014
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GAAP net income attributable to Mentor Graphics shareholders
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$
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114,488
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$
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105,536
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$
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147,139
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$
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155,258
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Non-GAAP adjustments:
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Equity plan-related compensation: (1)
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Cost of revenues
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617
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554
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2,304
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1,992
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Research and development
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3,824
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3,164
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14,027
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11,182
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Marketing and selling
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2,411
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2,126
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9,103
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7,777
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General and administration
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2,564
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2,237
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10,373
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8,399
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Acquisition - related items:
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Amortization of purchased assets
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Cost of revenues (2)
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1,847
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950
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7,099
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3,598
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Frontline purchased technology and intangible assets (3)
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-
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231
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116
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1,430
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Amortization of intangible assets (4)
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2,157
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1,580
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8,166
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6,230
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Special charges (5)
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4,081
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4,359
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23,490
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16,929
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Other income (expense), net (6)
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38
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7
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184
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(119
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Interest expense (7)
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1,576
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1,467
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6,139
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5,715
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Non-GAAP income tax effects (8)
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(5,449
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(14,357
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(19,708
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(28,944
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Noncontrolling interest (9)
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(198
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(203
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(820
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(971
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Total of non-GAAP adjustments
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13,468
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2,115
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60,473
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33,218
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Non-GAAP net income attributable to Mentor Graphics shareholders
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$
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127,956
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$
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107,651
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$
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207,612
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$
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188,476
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GAAP and non-GAAP weighted average shares (diluted)
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117,466
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117,484
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117,078
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116,702
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Net income per share attributable to Mentor Graphics shareholders:
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GAAP (diluted)
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$
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0.96
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$
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0.89
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$
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1.26
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$
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1.29
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Noncontrolling interest adjustment (10)
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0.01
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0.01
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-
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0.04
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Non-GAAP adjustments detailed above
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0.12
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0.02
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0.51
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0.29
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Non-GAAP (diluted)
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$
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1.09
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$
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0.92
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$
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1.77
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$
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1.62
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(1
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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.
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(2
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Amount represents amortization of purchased technology resulting
from acquisitions. Purchased technology is amortized over two to
five years.
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(3
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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) joint
venture investment. Mentor Graphics has a 50% interest in Frontline.
The purchased technology was amortized over three years from the
March 2010 acquisition date, other identified intangible assets were
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.
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(4
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Other identified intangible assets are amortized to operating
expense generally over two to five years. Other identified
intangible assets include trade names, customer relationships, and
backlog which are the result of acquisition transactions.
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(5
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Three months ended January 31, 2015: Special charges consist
of (i) $3,215 for EVE litigation costs, (ii) $458 of costs incurred
for employee rebalances which include severance benefits, notice
pay, and outplacement services, and (iii) $408 in other adjustments.
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Three months ended January 31, 2014: Special charges consist
of (i) $3,380 for EVE litigation costs, (ii) $549 of costs incurred
for employee rebalances which include severance benefits, notice
pay, and outplacement services, and (iii) $430 in other adjustments.
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Twelve months ended January 31, 2015: Special charges consist
of (i) $18,408 for EVE litigation costs, (ii) $3,535 of costs
incurred for employee rebalances which include severance benefits,
notice pay, and outplacement services, and (iii) $1,547 in other
adjustments.
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Twelve months ended January 31, 2014: Special charges consist
of (i) $11,597 for EVE litigation costs, (ii) $4,392 of costs
incurred for employee rebalances which include severance benefits,
notice pay, and outplacement services, and (iii) $940 in other
adjustments.
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(6
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Amount represents income (loss) on investment accounted for under
the equity method of accounting.
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(7
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Amount represents the amortization of original issuance debt
discount.
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(8
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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.
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(9
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Adjustment for the impact of amortization of intangible assets,
equity plan-related compensation, and income tax expense on
noncontrolling interest.
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(10
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Non-GAAP EPS excludes from the numerator of our earnings per share
calculation the adjustment of the noncontrolling interest to the
calculated redemption value, recorded directly to retained earnings.
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