Mentor Graphics Reports Fiscal Second Quarter Results


MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP gross profit	$	211,304		$	208,359		$	406,012		$	394,693
Reconciling items to non-GAAP gross profit:
Equity plan-related compensation		544			458			1,079			918
Amortization of purchased technology		1,841			712			3,202			1,919
Non-GAAP gross profit	$	213,689		$	209,529		$	410,293		$	397,530


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP gross profit as a percent of total revenues		81.2	%		82.3	%		79.2	%		82.3	%
Non-GAAP adjustments detailed above		0.9	%		0.4	%		0.9	%		0.6	%
Non-GAAP gross profit as a percent of total revenues		82.1	%		82.7	%		80.1	%		82.9	%


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP operating expenses	$	194,392		$	181,781		$	387,456		$	362,222
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation		(8,616	)		(6,819	)		(16,210	)		(12,925	)
Amortization of Frontline purchased technology and other
identified intangible assets		-			(231	)		(116	)		(968	)
Amortization of other identified intangible assets		(2,026	)		(1,556	)		(3,776	)		(3,210	)
Special charges		(5,108	)		(3,859	)		(11,034	)		(7,882	)
Non-GAAP operating expenses	$	178,642		$	169,316		$	356,320		$	337,237


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP operating income	$	16,912		$	26,578		$	18,556		$	32,471
Reconciling items to non-GAAP operating income:
Equity plan-related compensation	$	9,160		$	7,277		$	17,289		$	13,843
Amortization of purchased technology		1,841			712			3,202			1,919
Amortization of Frontline purchased technology and other
identified intangible assets		-			231			116			968
Amortization of other identified intangible assets		2,026			1,556			3,776			3,210
Special charges		5,108			3,859			11,034			7,882
Non-GAAP operating income	$	35,047		$	40,213		$	53,973		$	60,293


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP operating income as a percent of total revenues		6.5	%		10.5	%		3.6	%		6.8	%
Non-GAAP adjustments detailed above		7.0	%		5.4	%		6.9	%		5.8	%
Non-GAAP operating income as a percent of total revenues		13.5	%		15.9	%		10.5	%		12.6	%


	Three Months Ended July 31,						Six Months Ended July 31,
		2014			2013			2014			2013
GAAP other income (expense), net and interest expense	$	(4,911	)	$	(5,169	)	$	(9,754	)	$	(10,913	)
Reconciling items to non-GAAP other income (expense), net
and interest expense:
Equity in earnings of unconsolidated entities		55			(42	)		68			(93	)
Amortization of original issuance debt discount		1,521			1,416			3,015			2,807
Non-GAAP other income (expense), net and interest expense	$	(3,335	)	$	(3,795	)	$	(6,671	)	$	(8,199	)

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