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MENTOR GRAPHICS CORPORATION |
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UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS |
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| (In thousands, except earnings per share data) | ||||||||||||||||||||
| Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| GAAP net income attributable to Mentor Graphics shareholders | $ | 31,212 | $ | 14,172 | $ | 21,327 | $ | 11,621 | ||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||
| Equity plan-related compensation: (1) | ||||||||||||||||||||
| Cost of revenues | 608 | 544 | 1,316 | 1,079 | ||||||||||||||||
| Research and development | 3,800 | 3,311 | 8,118 | 6,552 | ||||||||||||||||
| Marketing and selling | 2,366 | 2,143 | 4,846 | 4,321 | ||||||||||||||||
| General and administration | 3,812 | 3,162 | 6,584 | 5,337 | ||||||||||||||||
| Acquisition - related items: | ||||||||||||||||||||
| Amortization of purchased assets | ||||||||||||||||||||
| Cost of revenues (2) | 1,794 | 1,841 | 3,652 | 3,202 | ||||||||||||||||
| Amortization of intangible assets (3) | 2,234 | 2,026 | 4,453 | 3,892 | ||||||||||||||||
| Special charges (4) | 2,186 | 5,108 | 39,163 | 11,034 | ||||||||||||||||
| Other income (expense), net (5) | (14 | ) | 55 | (39 | ) | 68 | ||||||||||||||
| Interest expense (6) | 1,633 | 1,521 | 3,237 | 3,015 | ||||||||||||||||
| Non-GAAP income tax effects (7) | (6,018 | ) | (7,158 | ) | (15,300 | ) | (9,983 | ) | ||||||||||||
| Noncontrolling interest (8) | (200 | ) | (204 | ) | (400 | ) | (404 | ) | ||||||||||||
| Total of non-GAAP adjustments | 12,201 | 12,349 | 55,630 | 28,113 | ||||||||||||||||
| Non-GAAP net income attributable to Mentor Graphics shareholders | $ | 43,413 | $ | 26,521 | $ | 76,957 | $ | 39,734 | ||||||||||||
| GAAP and Non-GAAP weighted average shares (diluted) | 119,368 | 116,551 | 118,986 | 116,960 | ||||||||||||||||
| Net income per share attributable to Mentor Graphics shareholders: | ||||||||||||||||||||
| GAAP (diluted) | $ | 0.26 | $ | 0.13 | $ | 0.18 | $ | 0.11 | ||||||||||||
| Noncontrolling interest adjustment (9) | - | (0.01 | ) | - | (0.01 | ) | ||||||||||||||
| Non-GAAP adjustments detailed above | 0.10 | 0.11 | 0.47 | 0.24 | ||||||||||||||||
| Non-GAAP (diluted) | $ | 0.36 | $ | 0.23 | $ | 0.65 | $ | 0.34 | ||||||||||||
| (1) | Equity plan-related compensation expense is the fair value of all share-based payments to employees for stock options and restricted stock units, and purchases made as a result of the employee stock purchase plans. | ||
| (2) | Amount represents amortization of purchased technology resulting from acquisitions. Purchased technology is generally amortized over two to five years. | ||
| (3) | Other identified intangible assets are generally amortized to operating expense over two to five years. Other identified intangible assets include trade names, customer relationships, and backlog resulting from acquisition transactions. The amount presented for the six months ended July 31, 2014 also includes $116 of amortization of other identified intangible assets for Frontline, which were fully amortized in the first quarter of fiscal 2015. | ||
| (4) | Three months ended July 31, 2015: Special charges consist of (i) $944 for EVE litigation costs, (ii) $840 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $402 in other adjustments. | ||
| Three months ended July 31, 2014: Special charges consist of (i) $4,231 for EVE litigation costs, (ii) $575 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $302 in other adjustments. | |||
| Six months ended July 31, 2015: Special charges consist of (i) $25,435 for severance costs incurred for the voluntary early retirement program, (ii) $10,703 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, (iii) $2,519 for EVE litigation costs, and (iv) $506 in other adjustments. | |||
| Six months ended July 31, 2014: Special charges consist of (i) $8,189 for EVE litigation costs, (ii) $1,700 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $1,145 in other adjustments. | |||
| (5) | Amount represents (income) loss on an investment accounted for under the equity method of accounting. | ||
| (6) | Amount represents the amortization of original issuance debt discount. | ||
| (7) | Non-GAAP income tax expense adjustment reflects the application of our assumed normalized effective 19% tax rate, instead of our GAAP tax rate, to our non-GAAP pre-tax income for the three and six months ended July 31, 2015 and a 17% tax rate for the three and six months ended July 31, 2014. | ||
| (8) | Adjustment for the impact of amortization of intangible assets, equity plan-related compensation, and income tax expense on noncontrolling interest. | ||
| (9) | Non-GAAP EPS excludes from the numerator of our earnings per share calculation the adjustment of the noncontrolling interest to the calculated redemption value, recorded directly to retained earnings. | ||
