Non-GAAP gross margin, operating margin, and net income (loss) are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. We present non-GAAP gross margin, operating margin, and net income (loss) because we consider them to be important supplemental measures of our operating performance and profitability trends, and because we believe they give investors useful information on period-to-period performance as evaluated by management. Non-GAAP net income (loss) also facilitates comparison with other companies in our industry, which use similar financial measures to supplement their GAAP results. Non-GAAP net income (loss) has limitations as an analytical tool, and therefore should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In the future we expect to continue to incur expenses similar to the non-GAAP adjustments described above and exclusion of these items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP net income (loss) are:
- Amortization of intangibles represents the loss in value as the technology in our industry evolves, is advanced, or is replaced over time. The expense associated with this loss in value is not included in the non-GAAP net income (loss) presentation and therefore does not reflect the full economic effect of the ongoing cost of maintaining our current technological position in our competitive industry, which is addressed through our research and development program.
- We regularly engage in acquisition and assimilation activities as part of our ongoing business and regularly evaluate our businesses to determine whether any operations should be eliminated or curtailed. We therefore will continue to experience special charges on a regular basis. These costs also directly impact our available funds.
- We perform impairment analyses on cost method investments when triggering events occur and adjust the carrying value of assets when we determine it to be necessary. Impairment charges could therefore be incurred in any period.
- Our stock option and stock purchase plans are important components of our incentive compensation arrangements and will be reflected as expenses in our GAAP results.
- Our income tax expense (benefit) will be ultimately based on our GAAP taxable income and actual tax rates in effect, which often differ significantly from the 17% rate assumed in our non-GAAP presentation. In addition, if we have a GAAP loss and non-GAAP net income, our non-GAAP results will not reflect any projected GAAP tax benefits. Similarly, in the event we were to have GAAP net income and a non-GAAP loss, our GAAP tax expense would be replaced by a credit in our non-GAAP presentation.
- Other companies, including other companies in our industry, calculate non-GAAP net income (loss) differently than we do, limiting its usefulness as a comparative measure.
About Mentor Graphics
Mentor Graphics Corporation (NASDAQ: MENT) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronic, semiconductor and systems companies. Established in 1981, the company reported revenues over the last 12 months of about $915 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.
(Mentor Graphics, Mentor, Veloce, and Calibre are registered trademarks and Olympus-SoC is a trademark of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners.)
Statements in this press release regarding the company’s guidance for
future periods constitute “forward-looking” statements based on current
expectations within the meaning of the Securities Exchange Act of 1934.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results,
performance or achievements of the company or industry results to be
materially different from any results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: (i) weakness or recession in the
US, EU, Japan or other economies; (ii) the company’s ability to
successfully offer products and services that compete in the highly
competitive EDA industry; (iii) product bundling or discounting of
products and services by competitors, which could force the company to
lower its prices or offer other more favorable terms to customers; (iv)
possible delayed or canceled customer orders resulting from the business
disruption and uncertainty of prolonged proxy fights or offers to
purchase the company’s securities; (v) effects of the increasing
volatility of foreign currency fluctuations on the company’s business
and operating results; (vi) changes in accounting or reporting rules or
interpretations; (vii) the impact of tax audits by the IRS or other
taxing authorities, or changes in the tax laws, regulations or
enforcement practices where the company does business; (viii) effects of
unanticipated shifts in product mix on gross margin; and (ix) effects of
customer seasonal purchasing patterns and the timing of significant
orders may negatively or positively impact the company’s quarterly
results of operations, all as may be discussed in more detail under the
heading “Risk Factors” in the company’s most recent Form 10-K or Form
10-Q. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. In addition,
statements regarding guidance do not reflect potential impacts of
mergers or acquisitions that have not been announced or closed as of the
time the statements are made. Mentor Graphics disclaims any obligation
to update any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements to reflect future
events or developments.