Mentor Graphics Reports Fiscal First Quarter Results and Announces Dividend

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
   
 
Three Months Ended April 30,
2013 2012
GAAP net income attributable to Mentor Graphics shareholders $ 205 $ 28,182
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues 460 319
Research and development 2,610 2,117
Marketing and selling 1,882 1,549
General and administration 1,614 1,162
Acquisition - related items:
Amortization of purchased assets
Cost of revenues (2) 1,207 2,179
Frontline purchased technology and intangible assets (3) 737 1,242
Amortization of intangible assets (4) 1,654 1,706
Special charges (5) 2,083 1,147
Other income (expense), net (6) (51 ) (13 )
Interest expense (7) 1,391 1,295
Non-GAAP income tax effects (8) (1,767 ) (6,191 )
Noncontrolling interest (9)   (393 )   (269 )
Total of non-GAAP adjustments   11,427     6,243  
Non-GAAP net income attributable to Mentor Graphics shareholders $ 11,632   $ 34,425  
 
GAAP and Non-GAAP weighted average shares (diluted)   115,751     113,243  
 
Net income per share attributable to Mentor Graphics shareholders:
GAAP (diluted) $ 0.01 $ 0.25
Noncontrolling interest adjustment (10) (0.01 ) -
Non-GAAP adjustments detailed above   0.10     0.05  
Non-GAAP (diluted) $ 0.10   $ 0.30  
 
(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. 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 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 April 30, 2013: Special charges consist of (i) $2,079 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services and (ii) $4 in other adjustments.
Three months ended April 30, 2012: Special charges consist of (i) $988 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services and (ii) $159 in other adjustments.
(6) Amount represents income on investment accounted for under the equity method of accounting.
(7) Amount represents the amortization of original issuance debt discount.
(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.
(10) The numerator of our GAAP basic and diluted earnings per share calculation was increased by $468 for the three months ended April 30, 2013 for the adjustment to decrease the noncontrolling interest with redemption feature to its calculated redemption value at April 30, 2013, recorded directly to retained earnings.

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