Mentor Graphics Reports Fiscal Fourth Quarter Results, Announces

Mentor Graphics Reports Fiscal Fourth Quarter Results, Announces Quarterly Dividend Increase


MENTOR GRAPHICS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share data)


			Three Months Ended January 31,						Twelve Months Ended January 31,
				2015			2014			2015			2014
Revenues:
	System and software		$	323,327		$	293,468		$	799,151		$	737,790
	Service and support			115,739			107,532			444,982			418,583
		Total revenues		439,066			401,000			1,244,133			1,156,373
Cost of revenues: (1)
	System and software			14,834			25,206			69,811			65,288
	Service and support			33,719			29,841			127,403			118,221
	Amortization of purchased technology			1,847			950			7,099			3,598
		Total cost of revenues		50,400			55,997			204,313			187,107
		Gross profit		388,666			345,003			1,039,820			969,266
Operating expenses:
	Research and development (2)			112,863			101,994			381,125			348,817
	Marketing and selling (3)			108,874			98,135			365,688			342,799
	General and administration (4)			22,187			23,091			79,193			75,543
	Equity in earnings of Frontline (5)			(1,028	)		(1,353	)		(5,653	)		(4,092	)
	Amortization of intangible assets (6)			2,157			1,580			8,166			6,230
	Special charges (7)			4,081			4,359			23,490			16,929
		Total operating expenses		249,134			227,806			852,009			786,226
Operating income				139,532			117,197			187,811			183,040
	Other income (expense), net (8)			(34	)		359			(777	)		(520	)
	Interest expense (9)			(4,950	)		(4,803	)		(19,276	)		(19,452	)
	Income before income tax			134,548			112,753			167,758			163,068
	Income tax expense (10)			20,674			7,646			22,581			9,510
		Net income		113,874			105,107			145,177			153,558
	Less: Loss attributable to noncontrolling interest (11)			(614	)		(429	)		(1,962	)		(1,700	)
		Net income attributable to Mentor Graphics
		shareholders	$	114,488		$	105,536		$	147,139		$	155,258
	Net income per share attributable to Mentor Graphics
	shareholders:
		Basic ^a	$	0.98		$	0.91		$	1.28		$	1.33
		Diluted ^a	$	0.96		$	0.89		$	1.26		$	1.29
	Weighted average number of shares outstanding:
		Basic		115,338			114,978			114,635			113,671
		Diluted		117,466			117,484			117,078			116,702

		^a We have increased (decreased) the numerator of our basic and diluted earnings per share calculation for the adjustment of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings, as follows:


			$	(1,174	)	$	(573	)	$	121		$	(4,486	)




	Refer to description of footnotes below.


MENTOR GRAPHICS CORPORATION
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(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,
				2015			2014			2015			2014
(1) Cost of revenues:
	Equity plan-related compensation		$	617		$	554		$	2,304		$	1,992
	Amortization of purchased technology			1,847			950			7,099			3,598
			$	2,464		$	1,504		$	9,403		$	5,590

(2) Research and development:
	Equity plan-related compensation		$	3,824		$	3,164		$	14,027		$	11,182

(3) Marketing and selling:
	Equity plan-related compensation		$	2,411		$	2,126		$	9,103		$	7,777

(4) General and administration:
	Equity plan-related compensation		$	2,564		$	2,237		$	10,373		$	8,399

(5) Equity in earnings of Frontline:
	Amortization of purchased technology and other identified intangible assets
			$	-		$	231		$	116		$	1,430

(6) Amortization of intangible assets:
	Amortization of other identified intangible assets		$	2,157		$	1,580		$	8,166		$	6,230

(7) Special charges:
	Rebalance, restructuring, certain litigation, and other costs		$	4,081		$	4,359		$	23,490		$	16,929

(8) Other income (expense), net:
	Net income (loss) of unconsolidated entities		$	38		$	7		$	184		$	(119	)

(9) Interest expense:
	Amortization of original issuance debt discount		$	1,576		$	1,467		$	6,139		$	5,715

(10) Income tax expense:
	Non-GAAP income tax effects		$	(5,449	)	$	(14,357	)	$	(19,708	)	$	(28,944	)

(11) Loss attributable to noncontrolling interest:
	Amortization of intangible assets, equity-plan related compensation, and income tax effects		$	(198	)	$	(203	)	$	(820	)	$	(971	)

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