Mentor Graphics Corporation (NASDAQ: MENT) today announced
results for the fiscal first quarter ending April 30, 2010. For the
fiscal first quarter, the company reported revenues of $180.6
million, a non-GAAP loss per share of $.02, and a GAAP loss per
share of $.22.
“While the quarter’s bookings were lower than last year due to
the concentration of scheduled renewals in the second half of this
year, the renewals that did occur in the first quarter were very
strong, growing 25% from their prior contract values for the
renewals within our top ten contracts,” said Walden C. Rhines, CEO
and chairman of Mentor Graphics. “Leading indicators that we have
historically tracked were also very positive: support
reinstatements grew 70%; our base business, orders less than $1
million typically from smaller customers, grew 20% over the year
ago quarter; and consulting and training bookings grew 25% over
last year.”
During the quarter, the company extended its customer
partnerships with three significant new relationships. Mentor
joined the Nano2012 program led by STMicroelectronics, in
partnership with the French government, to develop leading-edge
technologies for 32nm and below processes. Freescale Semiconductor
named Mentor Graphics its commercial Linux strategic partner.
NetLogic Microsystems entered into a strategic collaboration with
Mentor Graphics to provide multi-core multi-threaded Linux for
their processors.
“Despite two sizeable acquisitions in the last year, our
operating expense is still down on an absolute basis year on year.
We expect our continued strong emphasis on cost controls, as well
as an improving foreign exchange environment, particularly the
Euro, positions us well for the year,” said Gregory K. Hinckley,
president of Mentor Graphics. “This fifth consecutive quarter of
meeting or beating guidance, given our transparent real-time
financial model, gives us confidence that the recovery is
continuing.”
During the quarter, Mentor strengthened its offerings to the
DO-254 market with a joint announcement of a product flow with The
MathWorks, extensions to Mentor’s HDL Designer product to support
DO-254 coding standards, and a new product, the ReqTracer™ tool,
that helps automate requirements capture. The company’s Mechanical
Analysis Division launched FloTHERM® IC for semiconductor package
thermal characterization and design. Mentor launched 3D
electromagnetic analysis for its HyperLynx® printed circuit board
product line. The company completed its previously announced
acquisition of Valor Computerized Systems which offers PCB
manufacturing software and also acquired technology that provides
on-demand electrical schematics for automobile dealerships. In
early May, Mentor launched its Calibre® InRoute software which
fully integrates its Calibre tools into its Olympus-SOC™ place and
route environment. This allows designers to invoke Calibre
verification and design-for-manufacturing tools from within the
place and route environment to verify and improve designs much
faster, significantly speeding time to design closure.
In April, the Valor® MSS Software suite won the Circuits
Assembly New Product Introduction Award and the 2010 Surface Mount
Technology Vision Award. Design News granted FloEFD™ mechanical
analysis technology its Golden Mousetrap Award for Best Product. In
February, the International Engineering Consortium honored
HyperLynx Power Integrity with its annual Design Vision Award in
the System Modeling and Simulation Tool Category. Additionally,
Mentor’s Dr. Vladimir Székely received the Dennis Gabor Award for
Innovation, the country of Hungary’s highest technical honor.
Outlook
For the fiscal second quarter ending July 31, 2010, the company
expects revenues of about $180 million, non-GAAP earnings per share
of break-even to a loss of $.05, and GAAP loss per share of $.17 to
$.22. For the full fiscal year 2011 the company expects revenues of
$870 million, non-GAAP earnings per share of $.60 to $.65 and GAAP
earnings per share of $.10 to $.15.
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 $800 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, FloTHERM, HyperLynx, Calibre, and Valor are
registered trademarks and ReqTracer, Olympus-SOC, and FloEFD are
trademarks 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) reductions in spending on the company’s
products and services by its customers due to the troubled
worldwide economic environment, and the company’s ability to
appropriately reduce its expenses in response; (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; (iv) effects of the
increasing volatility of foreign currency fluctuations on the
company’s business; (v) changes in accounting or reporting rules or
interpretations; (vi) the impact of tax audits, or changes in
the tax laws, regulations or enforcement practices;
(vii) effects of unanticipated shifts in product mix on gross
margin; and (viii) effects of customer seasonal purchasing
patterns and the timing of significant orders which 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.
Fiscal Year Definition
Mentor Graphics fiscal year runs from February 1 to January 31.
The fiscal year is dated by the calendar year in which the fiscal
year ends. As a result, the first three fiscal quarters of any
fiscal year will be dated with the next calendar year, rather than
the current calendar year.
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, net income (loss), and earnings (loss) per share which we
refer to as non-GAAP gross margin, operating margin, net income
(loss), and earnings (loss) per share, 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 intangible assets, special charges, equity
plan-related compensation expenses and charges, interest expense
attributable to net retirement premiums or discounts on the early
retirement of debt and associated debt issuance costs, interest
expense associated with the amortization of debt discount on
convertible debt, impairment of long-lived assets, impairment of
cost method investments, and the equity in income or losses of
unconsolidated entities, which management does not consider
reflective of our core operating business.
Identified intangible assets consist primarily of purchased
technology, backlog, trade names, customer relationships, and
employment agreements. Special charges primarily consist of costs
incurred for employee terminations due to a reduction of personnel
resources driven by modifications of business strategy or business
emphasis. Special charges may also include expenses incurred
related to potential acquisitions, abandonment of in-process
research and development acquired in an acquisition, excess
facility costs, asset-related charges, post-acquisition rebalance
costs and restructuring costs, including severance and benefits.
Equity plan-related compensation expenses represent the fair value
of all share-based payments to employees, including grants of
employee stock options. 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 tax expense
or benefit that we would accrue using a normalized effective tax
rate applied to the non-GAAP results.
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
intangible assets are excluded as they 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 incurred
based on the particular facts and circumstances of acquisition and
restructuring decisions and can vary in size and frequency. These
charges are excluded as they are not ordinarily included in our
annual operating plan and related budget due the unpredictability
of economic trends and the rapidly changing technology and
competitive environment in our industry. We therefore exclude them
when evaluating our managers' performance internally.
- We view equity plan-related
compensation as a key element of our employee retention and
long-term incentives, not as an expense that we use in evaluating
core operations in any given period. Management also 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.
- Interest expense attributable to
net retirement premiums or discounts on the early retirement of
debt, the write-off of associated debt issuance costs and the
amortization of the debt discount on convertible debt are excluded.
Management does not consider these charges as a part of our core
operating performance. The early retirement of debt and the
associated debt issuance costs is not included in our annual
operating plan and related budget due to unpredictability of market
conditions which could facilitate an early retirement of debt. We
do not consider the amortization of the debt discount on
convertible debt to be a direct cost of operations. We also believe
this presentation is more useful to investors in comparing our
performance to the performance of other companies in our industry
who present non-GAAP results adjusted to exclude such items.
- Impairment of cost method
investments can occur when the fair value of the investment is less
than its cost. This can occur when there is a significant
deterioration in the investee’s earnings performance, significant
adverse changes in the general market conditions of the industry in
which the investee operates, or indications that the investee may
no longer be able to conduct business. These charges are
inconsistent in amount and frequency. We therefore consider our
operating results without these charges when evaluating our core
performance.
- Equity in earnings or losses of
unconsolidated subsidiaries, with the exception of our investment
in Frontline P.C.B. Solutions Limited Partnership, represents the
net income (losses) in an investment accounted for under the equity
method. The amounts represent our equity in the net income (losses)
of a common stock investment. The carrying amount of our investment
is adjusted for our share of earnings or losses of the investee.
The amounts are excluded as we do not control the results of
operations for these investments, we do not participate in regular
and periodic operating activities and management does not consider
these businesses a part of our core operating performance.
- In connection with the Company’s
acquisition of Valor on March 18, 2010, we also acquired Valor’s
50% interest in a joint venture, Frontline P.C.B. Solutions Limited
Partnership (“Frontline”). We report our equity in the earnings or
losses of Frontline within operating income. We actively
participate in regular and periodic activities such as budgeting,
business planning, marketing and direction of research and
development projects. Accordingly, we do not exclude our share of
Frontline’s earnings or losses from our non-GAAP results as
management considers the joint venture to be core to our operating
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 jurisdictions in which we operate. This non-GAAP tax
rate eliminates the effects of non-recurring and period specific
items which are often attributable to acquisition decisions and can
vary in size and frequency and considers our US loss carryforwards
that have not been previously benefited. This rate is subject to
change over time for various reasons, including changes in the
geographic business mix and changes in statutory tax rates. Our
GAAP tax rate for the three months ended April 30, 2010 is (13)%,
after the consideration of period specific items. Without period
specific items of $353 thousand, our GAAP tax rate is (11)%. Our
full fiscal year 2011 GAAP tax rate, inclusive of period specific
items, is projected to be 57%. The GAAP tax rate considers certain
mandatory and other non-scalable tax costs which may adversely or
beneficially affect our tax rate depending upon our level of
profitability in various jurisdictions.
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 earnings
per share 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. 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.
- 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.
MENTOR GRAPHICS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except earnings per share data)
Three Months Ended April 30, 2010
2009 Revenues: System and software $ 97,450 $ 115,418
Service and support 83,127 78,357 Total
revenues 180,577 193,775
Cost of
revenues: (1) System and software 3,954 4,889 Service and
support 22,320 21,203 Amortization of purchased technology
3,569 2,948 Total cost of revenues
29,843 29,040 Gross margin 150,734
164,735
Operating expenses: Research
and development (2) 64,132 62,291 Marketing and selling (3) 73,652
76,601 General and administration (4) 22,499 23,424 Equity in
(earnings) losses of Frontline (5) (184 ) - Amortization of
intangible assets (6) 2,361 2,870 Special charges (7) 3,268
5,695 Total operating expenses 165,728
170,881
Operating loss (14,994 ) (6,146
) Other income (expense), net (8) (1,141 ) 98 Interest expense (9)
(4,327 ) (4,151 ) Loss before income tax (20,462 )
(10,199 ) Income tax expense (10) 2,563 2,757
Net loss $ (23,025 ) $ (12,956 ) Net loss per share: Basic $
(0.22 ) $ (0.14 ) Diluted $ (0.22 ) $ (0.14 ) Weighted average
number of shares outstanding: Basic 103,763
94,168 Diluted 103,763 94,168
Refer to following table for a
description of footnotes.
MENTOR GRAPHICS CORPORATION
FOOTNOTES TO UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands) Listed below are
the items included in net income that management excludes in
computing the non-GAAP financial measures referred to in the text
of this press release. Items are further described under
"Discussion of Non-GAAP Financial Measures."
Three
Months Ended April 30, 2010 2009 (1) Cost of
revenues: Equity plan-related compensation $ 212 $ 499
Amortization of purchased technology 3,569 2,948
$ 3,781 $ 3,447
(2) Research and
development: Equity plan-related compensation $ 2,438 $ 3,447
(3) Marketing and selling: Equity plan-related
compensation $ 2,190 $ 2,537
(4) General and
administration: Equity plan-related compensation $ 1,741 $
1,287
(5) Equity in (earnings) losses of
Frontline Amortization of purchased technology and other
identified intangible assets $ 621 $ -
(6)
Amortization of intangible assets: Amortization of other
identified intangible assets $ 2,361 $ 2,870
(7)
Special charges: Rebalance, restructuring, and other costs $
3,268 $ 5,695
(8) Other income (expense), net:
Equity in losses of unconsolidated
entities and impairment of investments
$ 270 $ 437
(9) Interest expense: Amortization
of debt discount $ 729 $ 669 Debt retirement costs -
(248 ) $ 729 $ 421
(10) Income tax expense:
Income tax effects $ 3,084 $ 1,067
MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP
ADJUSTMENTS
(In thousands, except earnings per share data)
Three Months Ended April 30, 2010 2009 GAAP
net loss $ (23,025 ) $ (12,956 ) Non-GAAP adjustments: Equity
plan-related compensation: (1) Cost of revenues 212 499 Research
and development 2,438 3,447 Marketing and selling 2,190 2,537
General and administration 1,741 1,287 Acquisition - related items:
Amortization of purchased
assets
Cost of revenues (2) 3,569 2,948 Amortization of intangible assets
(3) 2,361 2,870
Frontline purchased technology and
intangible assets (4)
621 - Special charges (5) 3,268 5,695 Other income, net (6) 270 437
Interest expense (7) 729 421 Income tax effects (8) 3,084
1,067 Total of non-GAAP adjustments
20,483 21,208 Non-GAAP net income (loss) $
(2,542 ) $ 8,252 GAAP weighted average shares
(diluted) 103,763 94,168 Non-GAAP adjustment -
3 Non-GAAP weighted average shares (diluted) 103,763
94,171 GAAP net loss per share
(diluted) $ (0.22 ) $ (0.14 ) Non-GAAP adjustments detailed above
0.20 0.23 Non-GAAP net income (loss)
per share (diluted) $ (0.02 ) $ 0.09
(1)
Equity plan-related compensation
expense.
(2)
Amount represents amortization of
purchased technology resulting from acquisitions. Purchased
intangible assets are amortized over two to five years.
(3)
Other identified intangible assets
are amortized to other operating expense over two to five years.
Other identified intangible assets include trade names, employment
agreements, customer relationships, and deferred compensation which
are the result of acquisition transactions.
(4)
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. Mentor
Graphics acquired a 50% joint venture in Frontline as a result of
the Valor Computerized Systems, Ltd. acquisition in the first
quarter of fiscal 2011. 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) losses of Frontline results.
This expense is the same type as being adjusted for in notes (2)
and (3) above.
(5)
Three months ended April 30, 2010:
Special charges consist of (i) $1,589 of costs incurred for
employee rebalances which includes severance benefits, notice pay,
and outplacement services, (ii) $1,175 in advisory fees, (iii) $843
related to the abandonment of excess leased facility space, (iv)
$200 in acquisition costs, (v) a recovery of $(566) related to a
prior casualty loss, and (vi) $27 in other charges.
Three months ended April 30, 2009:
Special charges consist of (i) $4,028 of costs incurred for
employee rebalances which includes severance benefits, notice pay
and outplacement services, (ii) $1,175 in advisory fees, (iii) $268
in acquisition costs, (iv) $265 related to a casualty loss, and (v)
$(41) in other adjustments.
(6)
Three months ended April 30, 2010:
Loss of $270 on investment accounted for under the equity method of
accounting.
Three months ended April 30, 2009:
Other income, net consists of: (i) loss of $324 on an investment
accounted for under the equity method of accounting and (ii) an
impairment of $113 for investments accounted for under the cost
method.
(7)
Three months ended April 30, 2010:
$729 in amortization of original issuance debt discount.
Three months ended April 30, 2009:
$669 in amortization of original issuance debt discount and $(248)
in discounts and unamortized debt costs related to a partial
redemption of the $110.0M convertible debt.
(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 and the application of the 17% tax rate to
our non-GAAP adjustments.
MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF GAAP FINANCIAL
MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)
Three Months Ended April 30, 2010 2009 GAAP
gross margin $ 150,734 $ 164,735 Reconciling items to non-GAAP
gross margin Equity plan-related compensation 212 499 Amortization
of purchased technology 3,569 2,948
Non-GAAP gross margin $ 154,515 $ 168,182
Three Months Ended April 30, 2010 2009
GAAP gross margin as a percent of total revenues 83 % 85 % Non-GAAP
adjustments detailed above 3 % 2 % Non-GAAP gross
margin as a percent of total revenues 86 % 87 %
Three Months Ended April 30, 2010
2009 GAAP operating expenses $ 165,728 $ 170,881 Reconciling
items to non-GAAP operating expenses
Amortization of Frontline
purchased technology and other identified intangible assets
(621 ) - Equity plan-related compensation (6,369 ) (7,271 )
Amortization of other identified intangible assets (2,361 ) (2,870
) Special charges (3,268 ) (5,695 ) Non-GAAP
operating expenses $ 153,109 $ 155,045
Three Months Ended April 30, 2010 2009 GAAP
operating loss $ (14,994 ) $ (6,146 ) Reconciling items to non-GAAP
operating income
Amortization of Frontline
purchased technology and other identified intangible assets
621 - Equity plan-related compensation 6,581 7,770 Amortization of
purchased intangible assets: Cost of revenues 3,569 2,948
Amortization of intangible assets 2,361 2,870 Special Charges
3,268 5,695 Non-GAAP operating income $
1,406 $ 13,137
Three Months Ended
April 30, 2010 2009 GAAP operating loss as a
percent of total revenues -8 % -3 % Non-GAAP adjustments detailed
above 9 % 10 % Non-GAAP operating income as a percent
of total revenues 1 % 7 %
Three
Months Ended April 30, 2010 2009 GAAP other
income (expense), net and interest expense $ (5,468 ) $ (4,053 )
Reconciling items to non-GAAP
other income (expense), net and interest expense
Equity in losses of unconsolidated entities 270 324 Impairment of
cost method investments - 113 Amortization of debt discount and
retirement costs 729 421 Non-GAAP other
income (expense), net and interest expense $ (4,469 ) $ (3,195 )
MENTOR GRAPHICS CORPORATION
UNAUDITED CONSOLIDATED BALANCE
SHEETS
(In thousands)
April 30,
January 31, 2010 2010 Assets
Current assets: Cash, cash equivalents, and short-term
investments $ 99,732 $ 99,343 Trade accounts receivable, net 86,041
110,839 Term receivables, short-term 175,052 178,911 Prepaid
expenses and other 35,579 29,629 Deferred income taxes
12,662 11,891 Total current assets
409,066 430,613
Property, plant, and equipment, net 120,299
121,795
Term receivables, long-term 135,097 164,898
Goodwill and intangible assets, net 527,586 484,342
Other
assets 43,547 21,393 Total
assets $ 1,235,595 $ 1,223,041
Liabilities
and Stockholders' Equity Current liabilities: Short-term
borrowings $ 6,588 $ 37,874 Current portion of notes payable 34,272
32,272 Accounts payable 9,154 9,985 Income taxes payable 304 3,971
Accrued payroll and related liabilities 53,472 77,008 Accrued
liabilities 35,421 44,122 Deferred revenue 170,138
153,965 Total current liabilities 309,349
359,197
Long-term notes payable 174,822 156,075
Deferred
revenue, long-term 10,631 9,534
Other long-term
liabilities 64,027 58,218 Total
liabilities 558,829 583,024
Stockholders' equity: Common stock 725,522 662,595
Accumulated deficit (71,767 ) (48,742 ) Accumulated other
comprehensive income 23,011 26,164
Total stockholders' equity 676,766 640,017
Total liabilities and stockholders' equity $
1,235,595 $ 1,223,041
MENTOR GRAPHICS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS AND SUPPLEMENTAL INFORMATION
(In thousands, except days sales outstanding)
Three Months Ended April 30, 2010 2009
Operating activities Net loss $ (23,025 ) $ (12,956 )
Depreciation and amortization (1) 14,390 16,063 Other adjustments
to reconcile:
Operating cash
4,715 10,220
Changes in working capital
31,568 (14,297 ) Net cash provided by
(used in) operating activities 27,648 (970 )
Investing
activities Net cash used in investing activities (17,395 )
(4,723 )
Financing activities Net cash used in
financing activities (9,555 ) (8,794 )
Effect of exchange rate changes on
cash and cash equivalents
(309 ) (378 ) Net change in cash and cash
equivalents 389 (14,865 ) Cash and cash equivalents at beginning of
period 99,340 93,642 Cash and
cash equivalents at end of period $ 99,729 $ 78,777
(1) Depreciation and amortization includes a
write-off of note issuance costs in the amount of $132 for the
three months ended April 30, 2010 and $16 for the three months
ended April 30, 2009.
Other data:
Capital expenditures
$ 7,608 $ 4,570
Days sales outstanding
130 117
MENTOR GRAPHICS CORPORATION
UNAUDITED SUPPLEMENTAL BOOKINGS AND REVENUE
INFORMATION
(Rounded to nearest 5%)
FY 2011
Fiscal year ended January 31, 2010
Fiscal year ended January 31, 2009 Product Group
Bookings (a) Q1 Q1 Q2
Q3 Q4 YEAR Q1
Q2 Q3 Q4 YEAR
Integrated Systems Design 20% 20% 20% 20% 20%
20% 15% 20% 25% 15%
20% IC Design to Silicon 30% 40% 40% 35% 40%
40% 40%
30% 30% 40%
35% Scalable Verification 30% 20% 25% 15% 20%
20% 20% 20% 20% 30%
20% New & Emerging Products
10% 10% 5% 20% 15%
10% 10% 20% 15% 10%
15% Services
& Other (b) 10% 10% 10% 10% 5%
10% 15% 10% 10% 5%
10%
Total 100% 100% 100%
100% 100% 100% 100%
100% 100% 100%
100% FY 2011 Fiscal year ended January 31,
2010
Fiscal year ended January 31,
2009
Product Group Revenue (b) Q1 Q1
Q2 Q3 Q4 YEAR
Q1 Q2 Q3 Q4
YEAR Integrated Systems Design 25% 20% 20% 30% 25%
25% 20% 20% 25% 20%
20% IC Design to Silicon 35% 45%
35% 30% 35%
35% 40% 30% 30% 35%
35% Scalable
Verification 20% 20% 25% 20% 20%
25% 20% 25% 25% 30%
25% New & Emerging Products 10% 10% 10% 10% 15%
10% 10% 15% 10% 10%
10% Services & Other (b) 10%
5% 10% 10% 5%
5% 10% 10%
10% 5%
10% Total 100%
100% 100% 100%
100% 100% 100% 100%
100% 100% 100%
FY 2011 Fiscal year ended January 31, 2010
Fiscal year ended January 31, 2009 Bookings by
Geography Q1 Q1 Q2 Q3
Q4 YEAR Q1 Q2
Q3 Q4 YEAR North America
45% 40% 55% 45% 40%
45% 40% 30% 40% 35%
35% Europe
20% 25% 25% 15% 25%
20% 35% 35% 35% 35%
35% Japan 15%
25% 5% 20% 15%
15% 15% 20% 10% 5%
15% Pac Rim 20% 10%
15% 20% 20%
20% 10% 15%
15% 25%
15% Total 100%
100% 100% 100%
100% 100% 100% 100%
100% 100% 100%
FY 2011 Fiscal year ended January 31, 2010
Fiscal year ended January 31, 2009 Revenue by
Geography Q1 Q1 Q2 Q3
Q4 YEAR Q1 Q2
Q3 Q4 YEAR North America
35% 40% 50% 40% 40%
45% 40% 35% 40% 40%
40% Europe
25% 20% 30% 25% 30%
25% 30% 30% 35% 35%
30% Japan 20%
20% 5% 15% 15%
15% 20% 20% 10% 10%
15% Pac Rim 20%
20% 15% 20% 15%
15% 10%
15% 15% 15%
15% Total
100% 100% 100% 100%
100% 100% 100%
100% 100% 100%
100% FY 2011 Fiscal year ended January 31,
2010 Fiscal year ended January 31, 2009 Bookings by
Business Model (c) Q1 Q1 Q2
Q3 Q4 YEAR Q1
Q2 Q3 Q4 YEAR
Perpetual 40% 15% 25% 20% 10%
15% 20% 20% 20% 10%
15%
Ratable 20% 15% 15% 15% 15%
15% 25% 20% 15% 10%
15%
Up Front 40% 70% 60% 65% 75%
70%
55% 60% 65% 80%
70% Total
100% 100% 100% 100%
100% 100% 100%
100% 100% 100%
100% FY 2011 Fiscal year ended January 31,
2010 Fiscal year ended January 31, 2009 Revenue by
Business Model (c) Q1 Q1 Q2
Q3 Q4 YEAR Q1
Q2 Q3 Q4 YEAR
Perpetual 20% 15% 25% 15% 10%
15% 20% 20% 20% 10%
15%
Ratable 25% 10% 15% 15% 10%
15% 20% 20% 20% 10%
15%
Up Front 55% 75% 60% 70% 80%
70%
60% 60% 60% 80%
70% Total
100% 100% 100% 100%
100% 100% 100%
100% 100% 100%
100% (a) Product Group Bookings excludes support
bookings for all sub-flow categories. (b) Product Group Revenue
includes support revenue for each sub-flow category as appropriate.
(c) Bookings and Revenue by Business Model are System and Software
only.
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 loss per share for the periods shown below:
Q2 FY11 FY11 Diluted GAAP net income (loss)
per share $(0.17) - (0.22) $0.10 - 0.15 Non-GAAP Adjustments:
Amortization of purchased intangible assets (1) 0.05 0.17
Amortization of other identified intangible assets (2) 0.03 0.09
Equity plan-related compensation (3) 0.04 0.16 Special charges (4)
0.00 0.03 Other income and interest expense (5) 0.01 0.04 Income
tax effects (6) 0.04 0.01 Non-GAAP net income (loss) per share
$0.00 - (0.05) $0.60 - 0.65
(1) Excludes
amortization of purchased intangible assets resulting from
acquisition transactions. Purchased intangible assets are amortized
over two to five years. The guidance for Q2 FY11 and Full Year FY11
assumes no additional acquisitions.
(2) Excludes
amortization of other identified intangible assets including trade
names, employment agreements, customer relationships, and deferred
compensation resulting from acquisition transactions. Other
identified intangible assets are amortized over two to five years.
The guidance for Q2 FY11 and Full Year FY11 assumes no additional
acquisitions.
(3) Excludes equity plan-related compensation
expense.
(4) Excludes special charges consisting primarily
of costs incurred for facility closures, employee rebalances,
(which includes severance benefits, notice pay and outplacement
services), advisory fees, and acquisition costs. The guidance for
Q2 FY11 and Full Year FY11 assumes no additional special charges.
(5) Reflects amortization of original issuance debt discount
and equity in losses of an equity method investment.
(6)
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.
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