Mentor Graphics Lowers Fiscal 2009 Guidance and Announces Fiscal Third Quarter Conference Call
11 11월 2008 - 11:00PM
Business Wire
Mentor Graphics Corporation (NASDAQ: MENT) announced that slowing
customer activity has reduced the company�s outlook for the second
half of the fiscal year. Revenue is expected to be about $185
million for the fiscal third quarter ending October 31, 2008 with a
non-GAAP loss of approximately $.05 per share. The current estimate
of the GAAP loss per share is approximately $.80, which includes a
GAAP tax provision for the third quarter of approximately $.50 per
share. The tax provision is abnormally high as it includes
recapture of tax benefits previously claimed in prior quarters as
well as the continuing effect of tax expense in non-US
jurisdictions. For the fiscal fourth quarter ending January 31,
2009, the company now expects revenues of approximately $270
million, non-GAAP earnings per share of about $.55, and GAAP
earnings per share of about $.60. For fiscal 2009, the company
expects full year revenues of approximately $815 million, non-GAAP
earnings per share of about $0.40 and a GAAP loss per share of
about $.65. �Typically, our customers had been negotiating contract
renewals a quarter or two before their expiration,� said Walden C.
Rhines, chairman and CEO of Mentor Graphics. �In this economic
environment, customers are now waiting until the contracts come
closer to expiration to renew. We expect a number of sizeable
contracts to renew in the next several quarters, which should lead
to a stronger fiscal 2010 than fiscal 2009.� Given these pending
contract renewals, the company anticipates fiscal first quarter
2010 revenues of $200 to $210 million, non-GAAP earnings per share
between $.05 and $.10, and GAAP loss per share between $.01 and
$.06. �These contract renewal delays should produce greater
business linearity in fiscal 2010,� said Gregory K. Hinckley,
president of Mentor Graphics. �Excluding acquisitions, non-GAAP
expenses for the quarter were less than third quarter last year as
a result of reductions in staffing undertaken earlier in the year,
reduced incentive compensation and an improving foreign exchange
environment.� Mentor Graphics will release financial results for
its third fiscal quarter as well as revised fiscal 2009 guidance,
on Wednesday, November 19 at 5:00 a.m. Pacific Time. Following the
release, Mentor will host a live webcast to discuss the third
quarter results, beginning at 5:30 a.m. Pacific Time. What: Mentor
Graphics live webcast of Q3 Fiscal Year 2009 financial results
When: Wednesday, November 19 at 5:30 a.m. Pacific Time. Webcast:
www.mentor.com/company/investor_relations The company emphasized
that the foregoing results are preliminary and are subject to
adjustments upon final closing of financial results and completion
of the quarterly review by independent accountants. 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 electronics and semiconductor
companies. Established in 1981, the company reported revenues over
the last 12 months of about $850 million and employs approximately
4,500 people worldwide. Corporate headquarters are located at 8005
S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web
site: http://www.mentor.com/. (Mentor is a registered 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 section 21E of
the Securities Exchange Act of 1934, as amended. 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)
reductions in spending on the company�s products and services by
its customers due to the current weakness in the US and other
economies; (ii) the company�s ability to successfully offer
software and hardware 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) effects of the increasing volatility of
foreign currency fluctuations on the company�s business and
operating results; (v) changes in accounting or reporting rules or
interpretations; (vi) 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; (vii)
effects of unanticipated shifts in product mix on gross margin;
(viii) effects of customer seasonal purchasing patterns and the
timing of significant orders which may negatively impact the
company�s quarterly results of operations, (ix) an industry
downturn that could lead to smaller contract renewals by
significant customers, and (x) the effect of any goodwill
impairment analyses the company may perform in the future, 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. Discussion of Non-GAAP
Financial Measures Mentor Graphics management evaluates and makes
operating decisions using various performance measures. In addition
to our GAAP results, we also consider adjusted gross margin,
operating margin and net income (loss), which we refer to as
non-GAAP gross margin, operating margin, and net income (loss),
respectively. These non-GAAP measures are derived from the revenues
of our product, maintenance, and services business operations and
the costs directly related to the generation of those revenues,
such as cost of revenue, research and development, sales and
marketing, and general and administrative expenses, that management
considers in evaluating our ongoing core operating performance.
These non-GAAP measures exclude amortization of purchased and other
identified intangible assets, in-process research and development,
special charges, equity plan-related compensation expenses and
charges, and gains which management does not consider reflective of
our core operating business. Purchased and other identified
intangible assets consist primarily of purchased technology,
backlog, trade names, customer relationships, and employment
agreements. In-process research and development charges represent
products in development that had not reached technological
feasibility at the time of acquisition. Special charges consist of
post-acquisition rebalance costs including severance and benefits,
excess facilities, and asset-related charges, and also include
strategic reallocations or reductions of personnel resources.
Equity plan-related compensation expenses represent the fair value
of all share-based payments to employees, including grants of
employee stock options, as required under Statement of Financial
Accounting Standards No. 123 (revised 2004), �Share-Based Payment�
(SFAS 123R). For purposes of comparability across other periods and
against other companies in our industry, non-GAAP net income (loss)
is adjusted by the amount of additional taxes or tax benefit that
we would accrue using a normalized effective tax rate applied to
the non-GAAP results. In certain instances, our GAAP results of
operations may not be profitable when our corresponding non-GAAP
results are profitable or vice versa. The number of shares on which
our non-GAAP EPS is calculated may therefore differ from the GAAP
presentation due to the anti-dilutive effect of stock options in a
loss situation. 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. Management
excludes from our non-GAAP measures certain recurring items to
facilitate its review of the comparability of our core operating
performance on a period-to-period basis because such items are not
related to our ongoing core operating performance as viewed by
management. Management considers our core operating performance to
be that which can be affected by our managers in any particular
period through their management of the resources that affect our
underlying revenue and profit generating operations during that
period. Management uses this view of our operating performance for
purposes of comparison with our business plan and individual
operating budgets and allocation of resources. Additionally, when
evaluating potential acquisitions, management excludes the items
described above from its consideration of target performance and
valuation. More specifically management adjusts for the excluded
items for the following reasons: Amortization charges for our
purchased and other identified intangible assets are inconsistent
in amount and frequency and are significantly impacted by the
timing and magnitude of our acquisition transactions. We therefore
consider our operating results without these charges when
evaluating our core performance. Generally, the most significant
impact to inter-period comparability of our net income (loss) is in
the first twelve months following an acquisition. Special charges
are primarily severance related and are due to our reallocation or
reduction of personnel resources driven by modifications of
business strategy or business emphasis and by assimilation of
acquired businesses. These costs are originated based on the
particular facts and circumstances of business decisions and can
vary in size. Special charges also include excess facility and
asset-related restructuring charges. These charges are not
specifically included in our annual operating plan and related
budget due to the rapidly changing technology and competitive
environment in our industry. We therefore exclude them when
evaluating our managers� performance internally. In-process
research and development charges are largely disregarded as
acquisition decisions are made, since they often result in charges
that vary significantly in size and amount. Management excludes
these charges when evaluating the impact of an acquisition
transaction and our ongoing performance. Management supplementally
considers performance without the impact of equity plan-related
compensation charges and believes this information is useful to
investors to compare our performance to the performance of other
companies in our industry who present non-GAAP results adjusted to
exclude stock compensation expense. We view equity plan-related
compensation as a key element of our employee retention and
long-term incentives, not as an expense that should be an element
of evaluating core operations in any given period. We therefore
exclude these charges for purposes of evaluating our core
performance. Income tax expense (benefit) is adjusted by the amount
of additional tax expense or benefit that we would accrue if we
used non-GAAP results instead of GAAP results in the calculation of
our tax liability, taking into consideration our long-term tax
structure. We use a normalized effective tax rate of 17%, which
reflects the weighted average tax rate applicable under the various
tax jurisdictions in which we operate. This non-GAAP weighted
average tax rate is subject to change over time for various
reasons, including changes in the geographic business mix and
changes in statutory tax rates. Non-GAAP net income (loss) also
facilitates comparison with other companies in our industry, which
use similar financial measures to supplement their GAAP results.
However, non-GAAP net income (loss) has limitations as an
analytical tool, and you should not consider this measure 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 purchased intangibles,
though not directly affecting our current cash position, 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 therefore we will continue to experience special
charges and in-process research and development charges on a
regular basis. These costs also directly impact our available
funds. 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 for the foreseeable
future under SFAS 123R. 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. Other companies, including other
companies in our industry, may calculate non-GAAP net income (loss)
differently than we do, limiting its usefulness as a comparative
measure. MENTOR GRAPHICS CORPORATION UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP EARNINGS PER SHARE GUIDANCE � � � � � 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: � � � � � Q3 FY09
Q4 FY09 FY09 Q1 FY10 Diluted GAAP net earnings per share $ (0.80 )
$ 0.60 $ (0.65 ) ($0.06) - ($0.01 ) Non-GAAP Adjustments:
Amortization of purchased intangible assets (1) 0.04 0.04 0.14 0.03
Amortization of other identified intangible assets (2) 0.04 0.03
0.12 0.03 Equity plan-related compensation (3) 0.07 0.08 0.31 0.09
Special charges (4) 0.10 0.00 0.41 0.00 Income tax effects (5) �
0.50 � � (0.20 ) � 0.07 � � (0.04 ) Non-GAAP net income $ (0.05 ) $
0.55 � $ 0.40 � $ 0.05 - $0.10 � � � � � � � � � � � � � (1) �
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. (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. FY 2009 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. Tax expense for Q3 FY09 reflects the
recapture of tax benefits previously claimed in prior quarters. Tax
benefit forecasted in Q4 FY09 reflects the application of the
projected annual negative tax rate to forecasted pre-tax profit for
the quarter.
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