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MENTOR GRAPHICS CORPORATION |
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UNAUDITED RECLASSIFICATION OF RESEARCH & DEVELOPMENT CREDIT |
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| (In thousands) | ||||||||||||||||
| Quarter Ended | Year-to-Date | |||||||||||||||
| Fiscal year ended January 31, 2008 | April 30, 2007 | July 31, 2007 | October 31, 2007 | October 31, 2007 | ||||||||||||
| Research and development expense prior to reclassification | $ | 59,190 | $ | 65,468 | $ | 64,034 | $ | 188,692 | ||||||||
| Research credit | (331 | ) | (405 | ) | (328 | ) | (1,064 | ) | ||||||||
| Research and development expense after reclassification | $ | 58,859 | $ | 65,063 | $ | 63,706 | $ | 187,628 | ||||||||
| Income tax expense (benefit) prior to reclassification | $ | 762 | $ | 1,034 | $ | (2,480 | ) | $ | (684 | ) | ||||||
| Research credit | 129 | 131 | (26 | ) | 234 | |||||||||||
| Income tax expense after reclassification | $ | 891 | $ | 1,165 | $ | (2,506 | ) | $ | (450 | ) | ||||||
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MENTOR GRAPHICS CORPORATION |
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UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP |
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EARNINGS PER SHARE GUIDANCE |
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| The following table reconciles management's estimates of the specific items excluded from GAAP in the calculation of expected non-GAAP earnings per share for the periods shown below: | ||||||||||||||
| Q4 FY09 | FY09 | Q1 FY10 | ||||||||||||
| Diluted GAAP net earnings per share | $ | 0.65 | $ | (0.65 | ) |
($0.06) - ($0.01 |
) |
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| Non-GAAP Adjustments: | ||||||||||||||
| Amortization of purchased intangible assets (1) | 0.04 | 0.13 | 0.03 | |||||||||||
| Amortization of other identified intangible assets (2) | 0.03 | 0.12 | 0.03 | |||||||||||
| Equity plan-related compensation (3) | 0.08 | 0.31 | 0.09 | |||||||||||
| Special charges (4) | 0.00 | 0.40 | 0.00 | |||||||||||
| Income tax effects (5) | (0.25 | ) | 0.09 | (0.04 | ) | |||||||||
| Non-GAAP net income | $ | 0.55 | $ | 0.40 | $ | 0.05 - $0.10 | ||||||||
| (1) | Excludes amortization of purchased intangible assets resulting from acquisition transactions. Purchased intangible assets are amortized over two to five years. The guidance for Q4 FY09 and Q1 FY10 assumes no additional acquisitions. | |||||||||||||
| (2) | Excludes amortization of other identified intangible assets including trade names, employment agreements and customer relationships resulting from acquisition transactions. Other identified intangible assets are amortized over two to five years. The guidance for Q4 FY09 and Q1 FY10 assumes no additional acquisitions. | |||||||||||||
| (3) | Excludes equity plan-related compensation expense recognized in accordance with SFAS 123R, Share-Based Payment. | |||||||||||||
| (4) | Excludes special charges consisting primarily of costs incurred for in-process research and development, facility closures, and employee rebalances, which includes severance benefits, notice pay, and outplacement services. Fees associated with the unsolicited bid by Cadence Design Systems are included in special charges. The guidance for Q4 FY09 and Q1 FY10 assumes no additional special charges. | |||||||||||||
| (5) | 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. FY09 GAAP forecast reflects a negative tax rate as we expect to realize a net tax expense despite a projected pre-tax net loss. This is primarily due to certain foreign operations where we remain profitable and jurisdictions where we have withholding tax expenses. | |||||||||||||
