Mentor Graphics Reports Annual and Fiscal Fourth Quarter Results
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Mentor Graphics Reports Annual and Fiscal Fourth Quarter Results

WILSONVILLE, Ore. — (BUSINESS WIRE) — February 24, 2011 — Mentor Graphics Corporation (NASDAQ: MENT) today announced results for the fiscal fourth quarter and full year ending January 31, 2011. For the full year, the company reported revenues of $914.8 million, up 14% from fiscal year 2010, non-GAAP earnings per share of $.70, a 49% increase, and GAAP earnings per share of $.25 compared to a GAAP loss per share of $.23 the prior year. For the fiscal fourth quarter, the company reported revenues of $307.3 million, up 30% from the fourth quarter of the prior year, non-GAAP earnings per share up 60% at $.48, and GAAP earnings per share of $.43, up 10% from the prior fourth quarter.

“Driven by over 40% year-over-year bookings growth in our core system design business, Mentor set an all-time revenue record this past year, growing the fastest of the ‘Big 3’ EDA companies,” said Walden C. Rhines, CEO and chairman of Mentor Graphics. “Mentor’s decade-long emphasis on investment in system design software has driven us to a near-50% market share in printed circuit board design (PCB) software and an operating margin percent for PCB software that is twice that of the overall company. We expect this momentum to continue in this fiscal year as we achieve over 9% growth in Mentor’s revenues and a much greater percentage growth in earnings.”

During the quarter, the company teamed up with ARM to provide an automated memory test and repair solution for ARM embedded memories and processor cores. Mentor also combined Veloce® hardware emulation technology with equipment from Rohde and Schwarz, the largest test and measurement supplier in Europe, to deliver a hardware-accelerated debug platform for wireless communication systems-on-chip. The company collaborated with IBM, GLOBALFOUNDRIES and Samsung to design a test chip for 32nm and 28nm IC manufacturing technologies, using the Mentor® Olympus-SoCTM place and route system and the Calibre® physical verification and design for manufacturing platform. Mentor’s leading-edge products continued to receive endorsements from customers such as Broadcom, Infineon, Siemens, Fujitsu and Cypress Semiconductor.

In December, the company announced the acquisition of assets of CodeSourcery, a leading provider of open source toolchains and services for advanced embedded systems development. CodeSourcery software enables customers to maximize the performance of hardware platforms ranging from embedded devices to supercomputers.

“Cost controls remain an intense focus at Mentor Graphics,” said Gregory K. Hinckley, president of Mentor Graphics. “We have reduced SG&A expense as a percent of revenue by five hundred basis points over the last two years, and are on track to reduce it another two hundred basis points this fiscal year. We are committed to continue to further reduce SG&A expense over the next several fiscal years.”

Outlook

For the fiscal first quarter ending April 30, 2011, the company expects revenue of about $225 million, non-GAAP earnings per share of about $.15 and GAAP earnings per share of about $.06. For the full year fiscal 2012, the company expects revenues to be approximately $1 billion, non-GAAP earnings per share of about $1.00 and GAAP earnings per share of approximately $.77. This represents a 9% growth in revenue, over 40% growth in non-GAAP earnings per share, and a non-GAAP operating margin of approximately 15%.

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 and premium on convertible debt, impairment of long-lived assets, impairment of cost method investments, and the equity in income or losses of unconsolidated entities (except Frontline P.C.B Solutions Limited Partnership (Frontline)), 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, 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 the normalized effective tax rate described below 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:

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:

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.

Important Information

This release may be deemed to be solicitation material in respect of the solicitation of proxies from shareholders in connection with the company’s 2011 annual meeting of shareholders. The company, its directors and certain of its executive officers and employees may be deemed to be participants in such solicitation. The company will file a proxy statement with the Securities and Exchange Commission (the “SEC”) in connection with its 2011 annual meeting of shareholders. The proxy statement, any other relevant documents and other material filed with the SEC concerning the company will be, when filed, available free of charge at http://www.sec.gov and http://www.mentor.com/company/investor_relations. Shareholders are urged to read the proxy statement and any other relevant documents filed when they become available because they will contain important information.

Information Regarding Participants

The company, its directors and certain of its executive officers and employees may be deemed to be participants in the solicitation of proxies from shareholders in connection with the company’s 2011 annual meeting of shareholders. Information concerning these participants is available in the company’s proxy statement for the 2010 annual meeting of shareholders filed with the SEC on May 28, 2010, and in subsequent SEC filings on Forms 3 and 4. Shareholders are advised to read the company’s proxy statement for the 2011 annual meeting of shareholders and other relevant documents when they become available, because they will contain important information, including information with respect to such participants. You can obtain free copies of these referenced documents as described above.

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except earnings per share data)
       
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
Revenues:
System and software $ 216,313 $ 153,847 $ 562,355 $ 479,493
Service and support   90,992     83,288     352,398     323,234  
Total revenues   307,305     237,135     914,753     802,727  
Cost of revenues: (1)
System and software 10,710 5,226 31,119 22,592
Service and support 26,204 22,130 95,715 85,265
Amortization of purchased technology   3,343     3,047     13,771     12,012  
Total cost of revenues   40,257     30,403     140,605     119,869  
Gross margin   267,048     206,732     774,148     682,858  
Operating expenses:
Research and development (2) 85,101 68,111 285,005 255,538
Marketing and selling (3) 89,936 82,585 320,825 303,709
General and administration (4) 32,552 24,218 101,670 92,260
Equity in earnings of Frontline (5) (290 ) - (2,051 ) -
Amortization of intangible assets (6) 1,605 2,630 7,347 11,184
Special charges (7)   2,205     5,444     10,257     21,334  
Total operating expenses   211,109     182,988     723,053     684,025  
Operating income (loss) 55,939 23,744 51,095 (1,167 )
Other income (expense), net (8) (755 ) 334 (2,116 ) (928 )
Interest expense (9)   (5,033 )   (4,287 )   (18,411 )   (17,546 )
Income (loss) before income tax 50,151 19,791 30,568 (19,641 )
Income tax expense (benefit) (10)   996     (19,576 )   3,428     2,248  
Net income (loss) $ 49,155   $ 39,367   $ 27,140   $ (21,889 )
Net income (loss) per share:
Basic $ 0.45   $ 0.40   $ 0.25   $ (0.23 )
Diluted* $ 0.43   $ 0.39   $ 0.25   $ (0.23 )
Weighted average number of shares outstanding:
Basic   110,128     98,970     107,743     96,474  
Diluted*   113,082     101,750     109,861     96,474  
 
*Diluted net income per share for the three months ended January 31, 2010 includes $125 of convertible debt interest, net of tax, added back to net income and 1,379 of corresponding dilutive shares added to the diluted weighted average number of shares outstanding.
 
Refer to following page for a description of footnotes.

 

MENTOR GRAPHICS CORPORATION

FOOTNOTES TO UNAUDITED CONDENSED 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 January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
(1) Cost of revenues:
Equity plan-related compensation $ 217 $ 300 $ 888 $ 1,618
Amortization of purchased technology   3,343     3,047     13,771     12,012  
$ 3,560   $ 3,347   $ 14,659   $ 13,630  
 
(2) Research and development:
Equity plan-related compensation $ 1,932   $ 2,052   $ 7,939   $ 10,931  
 
(3) Marketing and selling:
Equity plan-related compensation $ 1,310   $ 1,622   $ 6,112   $ 8,406  
 
(4) General and administration:
Equity plan-related compensation $ 1,905   $ 1,209   $ 7,016   $ 5,204  
 
(5) Equity in earnings of Frontline:

Amortization of purchased technology and other identified intangible assets

$ 1,242   $ -   $ 4,347   $ -  
 
(6) Amortization of intangible assets:
Amortization of other identified intangible assets $ 1,605   $ 2,630   $ 7,347   $ 11,184  
 
(7) Special charges:
Rebalance, restructuring, and other costs $ 2,205   $ 5,444   $ 10,257   $ 21,334  
 
(8) Other income (expense), net:

Equity in losses of unconsolidated entities and impairment of investments

$ 667   $ 257   $ 938   $ 1,108  
 
(9) Interest expense:
Amortization of debt discount and premium, net $ 755 $ 713 $ 2,981 $ 2,764
Premium (discount) and costs related to debt retirement   -     -     345     (354 )
$ 755   $ 713   $ 3,326   $ 2,410  
 
(10) Income tax expense (benefit):
Non-GAAP income tax effects $ (10,110 ) $ (25,877 ) $ (12,298 ) $ (7,028 )

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
       

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP net income (loss) $ 49,155 $ 39,367 $ 27,140 $ (21,889 )
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues 217 300 888 1,618
Research and development 1,932 2,052 7,939 10,931
Marketing and selling 1,310 1,622 6,112 8,406
General and administration 1,905 1,209 7,016 5,204
Acquisition - related items:
Amortization of purchased assets
Cost of revenues (2) 3,343 3,047 13,771 12,012
Amortization of intangible assets (3) 1,605 2,630 7,347 11,184
Frontline purchased technology and intangible assets (4) 1,242 - 4,347 -
Special charges (5) 2,205 5,444 10,257 21,334
Other income (expense), net (6) 667 257 938 1,108
Interest expense (7) 755 713 3,326 2,410
Non-GAAP income tax effects (8)   (10,110 )   (25,877 )   (12,298 )   (7,028 )
Total of non-GAAP adjustments   5,071     (8,603 )   49,643     67,179  
Non-GAAP net income $ 54,226   $ 30,764   $ 76,783   $ 45,290  
 
GAAP weighted average shares (diluted)a 113,082 101,750 109,861 96,474
Non-GAAP adjustment   -     -     -     1,901  
Non-GAAP weighted average shares (diluted)b   113,082     101,750     109,861     98,375  
 
GAAP net income (loss) per share (diluted)a $ 0.43 $ 0.39 $ 0.25 $ (0.23 )
Non-GAAP adjustments detailed above   0.05     (0.09 )   0.45     0.70  
Non-GAAP net income per share (diluted)b $ 0.48   $ 0.30   $ 0.70   $ 0.47  
 
a Diluted GAAP and non-GAAP net income per share for the three months ended January 31, 2010 includes $125 of convertible debt interest, net of tax, added back to GAAP and non-GAAP net income and 1,379 of corresponding dilutive shares added to the diluted weighted average number of shares outstanding.
 
b Diluted non-GAAP net income per share for the twelve months ended January 31, 2010 includes $633 of convertible debt interest, net of tax, added back to non-GAAP net income and 1,415 of corresponding dilutive shares added to the diluted weighted average number of shares outstanding.
                   
(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 of Frontline results. This expense is the same type as being adjusted for in notes (2) and (3) above.
(5) Three months ended January 31, 2011: Special charges consist of (i) $1,474 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, (ii) $412 in lease restoration costs, (iii) $360 related to an asset abandonment, (iv) $96 related to the abandonment of excess lease space, (v) $(138) in acquisition costs, and (vi) $1 in other adjustments.
Three months ended January 31, 2010: Special charges consist of (i) $1,717 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, (ii) $1,547 related to the abandonment of excess leased facility space, (iii) $1,175 in advisory fees, (iv) $405 related to an asset abandonment, (v) $302 in lease restoration costs, and (vi) $298 in acquisition costs.
Twelve months ended January 31, 2011: Special charges consist of (i) $6,114 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, (ii) $2,083 in advisory fees, (iii) $1,432 in lease restoration costs, (iv) $900 related to the abandonment of excess leased facility space, (v) $(566) related to a casualty loss, (vi) $360 related to an asset abandonment, (vii) $(231) in acquisition costs, and (viii) $165 in other costs.
Twelve months ended January 31, 2010: Special charges consist of (i) $10,713 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, (ii) $4,700 in advisory fees, (iii) $2,530 related to the abandonment of excess leased facility space, (iv) $2,067 in acquisition costs, (v) $566 related to a casualty loss, (vi) $405 related to an asset abandonment, (vii) $302 in lease restoration costs, and (viii) $51 in other costs.
(6) Three months ended January 31, 2011: Loss of $667 on investment accounted for under the equity method of accounting.
Three months ended January 31, 2010: Loss of $257 on investment accounted for under the equity method of accounting.
Twelve months ended January 31, 2011: Loss of $938 on investment accounted for under the equity method of accounting.
Twelve months ended January 31, 2010: Other income (expense), net consists of: (i) loss of $995 on investment accounted for under the equity method of accounting and (ii) an impairment of $113 for an investment accounted for under the cost method.
(7) Three months ended January 31, 2011: $755 in amortization of original issuance debt discount and premium.
Three months ended January 31, 2010: $713 in amortization of original issuance debt discount.
Twelve months ended January 31, 2011: $2,981 in amortization of original issuance debt discount and premiums and $345 in premium on partial redemption of the $110.0M convertible debt.
Twelve months ended January 31, 2010: $2,764 in amortization of original issuance debt discount and $(354) 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.

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except percentages)
     

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP gross margin $ 267,048 $ 206,732 $ 774,148 $ 682,858
Reconciling items to non-GAAP gross margin
Equity plan-related compensation 217 300 888 1,618
Amortization of purchased technology   3,343     3,047     13,771     12,012  
Non-GAAP gross margin $ 270,608   $ 210,079   $ 788,807   $ 696,488  
 
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP gross margin as a percent of total revenues 87 % 87 % 85 % 85 %
Non-GAAP adjustments detailed above   1 %   2 %   1 %   2 %
Non-GAAP gross margin as a percent of total revenues   88 %   89 %   86 %   87 %
 
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP operating expenses $ 211,109 $ 182,988 $ 723,053 $ 684,025
Reconciling items to non-GAAP operating expenses

Amortization of Frontline purchased technology and other identified intangible assets

(1,242 ) - (4,347 ) -
Equity plan-related compensation (5,147 ) (4,883 ) (21,067 ) (24,541 )
Amortization of other identified intangible assets (1,605 ) (2,630 ) (7,347 ) (11,184 )
Special charges   (2,205 )   (5,444 )   (10,257 )   (21,334 )
Non-GAAP operating expenses $ 200,910   $ 170,031   $ 680,035   $ 626,966  
 
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP operating income (loss) $ 55,939 $ 23,744 $ 51,095 $ (1,167 )
Reconciling items to non-GAAP operating income

Amortization of Frontline purchased technology and other identified intangible assets

1,242 - 4,347 -
Equity plan-related compensation 5,364 5,183 21,955 26,159
Amortization of purchased intangible assets:
Cost of revenues 3,343 3,047 13,771 12,012
Amortization of intangible assets 1,605 2,630 7,347 11,184
Special Charges   2,205     5,444     10,257     21,334  
Non-GAAP operating income $ 69,698   $ 40,048   $ 108,772   $ 69,522  
 
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP operating income (loss) as a percent of total revenues 18 % 10 % 6 % 0 %
Non-GAAP adjustments detailed above   5 %   7 %   6 %   9 %
Non-GAAP operating income as a percent of total revenues   23 %   17 %   12 %   9 %
 
 

Three Months Ended January 31,

Twelve Months Ended January 31,

  2011     2010     2011     2010  
GAAP other expense, net and interest expense $ (5,788 ) $ (3,953 ) $ (20,527 ) $ (18,474 )

Reconciling items to non-GAAP other income (expense), net and interest expense

Equity in losses of unconsolidated entities 667 257 938 995
Impairment of cost method investment - - - 113
Amortization of debt discount and retirement costs   755     713     3,326     2,410  
Non-GAAP other expense, net and interest expense $ (4,366 ) $ (2,983 ) $ (16,263 ) $ (14,956 )

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
   
January 31, January 31,
  2011     2010  
 
Assets
Current assets:
Cash, cash equivalents, and short-term investments $ 133,113 $ 99,343
Trade accounts receivable, net 153,733 110,839
Term receivables, short-term 193,342 178,911
Prepaid expenses and other 42,605 29,629
Deferred income taxes   15,992     11,891  
 
Total current assets 538,785 430,613
Property, plant, and equipment, net 139,340 121,795
Term receivables, long-term 167,425 164,898
Goodwill and intangible assets, net 541,697 484,342
Other assets   40,731     21,393  
 
Total assets $ 1,427,978   $ 1,223,041  
 
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 15,544 $ 37,874
Current portion of notes payable 2,000 32,272
Accounts payable 16,724 9,985
Income taxes payable 5,517 3,971
Accrued payroll and related liabilities 109,173 77,008
Accrued liabilities 39,513 44,122
Deferred revenue   171,416     153,965  
 
Total current liabilities 359,887 359,197
Long-term notes payable 207,348 156,075
Deferred revenue, long-term 13,952 9,534
Other long-term liabilities   70,076     58,218  
Total liabilities   651,263     583,024  
 
Stockholders' equity:
Common stock 766,624 662,595
Accumulated deficit (21,602 ) (48,742 )
Accumulated other comprehensive income   31,693     26,164  
Total stockholders' equity   776,715     640,017  
 
Total liabilities and stockholders' equity $ 1,427,978   $ 1,223,041  

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION

(In thousands, except days sales outstanding)
     
Three Months Ended January 31, Twelve Months Ended January 31,
  2011     2010     2011     2010  
Operating activities
Net income (loss) $ 49,155 $ 39,367 $ 27,140 $ (21,889 )
Depreciation and amortization (1) 13,902 14,432 57,075 59,684
Other adjustments to reconcile:
Operating cash 3,798 21,755 15,037 37,388
Changes in working capital   8,258     (70,619 )   (17,044 )   (37,294 )
 
Net cash provided by operating activities 75,113 4,935 82,208 37,889
 
Investing activities
Net cash used in investing activities (21,778 ) (30,037 ) (72,750 ) (49,938 )
 
Financing activities
Net cash provided by financing activities 15,234 39,718 22,110 16,942
 
Effect of exchange rate changes on cash and cash equivalents   257     73     2,205     805  
 
Net change in cash and cash equivalents 68,826 14,689 33,773 5,698
Cash and cash equivalents at beginning of period   64,287     84,651     99,340     93,642  
 
Cash and cash equivalents at end of period $ 133,113   $ 99,340   $ 133,113   $ 99,340  
 
 
(1) Depreciation and amortization includes a write-off of note issuance costs in the amount of $132 for the year ended January 31, 2011 and $26 for the year ended January 31, 2010.
 
Other data:
Capital expenditures $ 10,406   $ 28,446   $ 47,175   $ 46,397  
Days sales outstanding   102     110  

 

MENTOR GRAPHICS CORPORATION

UNAUDITED SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION

(Rounded to nearest 5%)
 
  Fiscal year ended January 31, 2011   Fiscal year ended January 31, 2010   Fiscal year ended January 31, 2009
Product Group Bookings (a) Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
Integrated Systems Design 20 %   20 %   20 %   25 %   20 % 20 %   20 %   20 %   20 %   20 % 15 %   20 %   25 %   15 %   20 %
IC Design to Silicon 30 % 35 % 30 % 25 % 30 % 40 % 40 % 35 % 40 % 40 % 40 % 30 % 30 % 40 % 35 %
Scalable Verification 30 % 25 % 20 % 30 % 25 % 20 % 25 % 15 % 20 % 20 % 20 % 20 % 20 % 30 % 20 %
New & Emerging Products 10 % 10 % 25 % 10 % 15 % 10 % 5 % 20 % 15 % 10 % 10 % 20 % 15 % 10 % 15 %
Services & Other (b) 10 %   10 %   5 %   10 %   10 % 10 %   10 %   10 %   5 %   10 % 15 %   10 %   10 %   5 %   10 %
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 %
 
Fiscal year ended January 31, 2011 Fiscal year ended January 31, 2010 Fiscal year ended January 31, 2009
Product Group Revenue (b) Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
Integrated Systems Design 25 % 30 % 25 % 30 % 25 % 20 % 20 % 30 % 25 % 25 % 20 % 20 % 25 % 20 % 20 %
IC Design to Silicon 35 % 30 % 25 % 25 % 30 % 45 % 35 % 30 % 35 % 35 % 40 % 30 % 30 % 35 % 35 %
Scalable Verification 20 % 20 % 30 % 25 % 25 % 20 % 25 % 20 % 20 % 25 % 20 % 25 % 25 % 30 % 25 %
New & Emerging Products 10 % 10 % 15 % 15 % 15 % 10 % 10 % 10 % 15 % 10 % 10 % 15 % 10 % 10 % 10 %
Services & Other (b) 10 %   10 %   5 %   5 %   5 % 5 %   10 %   10 %   5 %   5 % 10 %   10 %   10 %   5 %   10 %
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 %
 
 
Fiscal year ended January 31, 2011 Fiscal year ended January 31, 2010 Fiscal year ended January 31, 2009
Bookings by Geography Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
North America 45 % 40 % 45 % 50 % 45 % 40 % 55 % 45 % 40 % 45 % 40 % 30 % 40 % 35 % 35 %
Europe 20 % 25 % 20 % 20 % 20 % 25 % 25 % 15 % 25 % 20 % 35 % 35 % 35 % 35 % 35 %
Japan 15 % 5 % 15 % 15 % 15 % 25 % 5 % 20 % 15 % 15 % 15 % 20 % 10 % 5 % 15 %
Pac Rim 20 %   30 %   20 %   15 %   20 % 10 %   15 %   20 %   20 %   20 % 10 %   15 %   15 %   25 %   15 %
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 %
 
 
Fiscal year ended January 31, 2011 Fiscal year ended January 31, 2010 Fiscal year ended January 31, 2009
Revenue by Geography Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
North America 35 % 40 % 50 % 50 % 45 % 40 % 50 % 40 % 40 % 45 % 40 % 35 % 40 % 40 % 40 %
Europe 25 % 25 % 25 % 20 % 25 % 20 % 30 % 25 % 30 % 25 % 30 % 30 % 35 % 35 % 30 %
Japan 20 % 10 % 10 % 15 % 10 % 20 % 5 % 15 % 15 % 15 % 20 % 20 % 10 % 10 % 15 %
Pac Rim 20 %   25 %   15 %   15 %   20 % 20 %   15 %   20 %   15 %   15 % 10 %   15 %   15 %   15 %   15 %
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 %
 
Fiscal year ended January 31, 2011 Fiscal year ended January 31, 2010 Fiscal year ended January 31, 2009
Bookings by Business Model (c) Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
Perpetual 40 % 30 % 15 % 15 % 25 % 15 % 25 % 20 % 10 % 15 % 20 % 20 % 20 % 10 % 15 %
Ratable 20 % 15 % 5 % 5 % 10 % 15 % 15 % 15 % 15 % 15 % 25 % 20 % 15 % 10 % 15 %
Up Front 40 %   55 %   80 %   80 %   65 % 70 %   60 %   65 %   75 %   70 % 55 %   60 %   65 %   80 %   70 %
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 % 100 %   100 %   100 %   100 %   100 %
 
Fiscal year ended January 31, 2011 Fiscal year ended January 31, 2010 Fiscal year ended January 31, 2009
Revenue by Business Model (c) Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR Q1   Q2   Q3   Q4   YEAR
Perpetual 20 % 25 % 25 % 15 % 20 % 15 % 25 % 15 % 10 % 15 % 20 % 20 % 20 % 10 % 15 %
Ratable 25 % 15 % 10 % 10 % 15 % 10 % 15 % 15 % 10 % 15 % 20 % 20 % 20 % 10 % 15 %
Up Front 55 %   60 %   65 %   75 %   65 % 75 %   60 %   70 %   80 %   70 % 60 %   60 %   60 %   80 %   70 %
Total 100 %   100 %   100 %   100 %   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 earnings per share for the periods shown below:
 
Q1 FY12 FY12
Diluted GAAP net income per share $ 0.06 $ 0.77
Non-GAAP Adjustments:
Amortization of purchased intangible assets (1) 0.03 0.08
Amortization of other identified intangible assets (2) 0.02 0.09
Equity plan-related compensation (3) 0.05 0.17
Special charges (4) - -
Other expense, net and interest expense (5) 0.01 0.03
Non-GAAP income tax effects (6)   (0.02 )   (0.14 )
Non-GAAP net income per share $ 0.15   $ 1.00  
         
 
(1) Excludes amortization of purchased intangible assets resulting from acquisition transactions. Purchased intangible assets are amortized over two to five years. The guidance for Q1 FY12 and Full Year FY12 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 Q1 FY12 and Full Year FY12 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), and acquisition costs. The guidance for Q1 FY12 and Full Year FY12 assumes no special charges.
(5) Reflects amortization of original issuance debt discount and premium, net.
(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 non-GAAP pre-tax income.



Contact:

Mentor Graphics Corporation
Media Contact
Ry Schwark, 503-685-1660
Email Contact
or
Investor Contact
Joe Reinhart, 503-685-1462
Email Contact