Mentor Graphics Reports Fiscal Third Quarter Results

   

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except earnings per share data)
             
Three Months Ended October 31,

 

Nine Months Ended October 31,
  2015     2014     2015   2014  
Revenues:
System and software $ 168,699 $ 178,115 $ 486,831 $ 475,824
Service and support   121,817     114,568     356,890     329,243  
Total revenues   290,516     292,683     843,721     805,067  
Cost of revenues: (1)
System and software 9,759 11,821 36,432 54,977
Service and support 35,286 33,670 100,275 93,684
Amortization of purchased technology   1,844     2,050     5,496     5,252  
Total cost of revenues   46,889     47,541     142,203     153,913  
Gross profit   243,627     245,142     701,518     651,154  
Operating expenses:
Research and development (2) 99,669 96,269 278,237 268,262
Marketing and selling (3) 93,165 89,875 262,857 256,814
General and administration (4) 19,665 19,851 56,298 57,006
Equity in earnings of Frontline (5) (1,755 ) (1,184 ) (3,976 ) (4,625 )
Amortization of intangible assets (6) 2,364 2,233 6,817 6,009
Special charges (7)   4,831     8,375     43,994     19,409  
Total operating expenses   217,939     215,419     644,227     602,875  
Operating income: 25,688 29,723 57,291 48,279
Other income (expense), net (8) 320 (381 ) 849 (743 )
Interest expense (9)   (4,915 )   (4,934 )   (14,381 )   (14,326 )
Income before income tax 21,093 24,408 43,759 33,210
Income tax expense (10)   7,204     3,849     9,763     1,907  
Net income 13,889 20,559 33,996 31,303
Less: Loss attributable to noncontrolling interest (11)   (790 )   (471 )   (2,010 )   (1,348 )
Net income attributable to Mentor Graphics
shareholders $ 14,679   $ 21,030   $ 36,006   $ 32,651  
Net income per share attributable to Mentor Graphics
shareholders:
Basic a $ 0.13   $ 0.18   $ 0.31   $ 0.30  
Diluted a, b $ 0.12   $ 0.18   $ 0.30   $ 0.29  
Weighted average number of shares outstanding:
Basic   117,759     114,405     116,787     114,399  
Diluted   120,141     116,715     121,963     116,928  
 
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:
 
$ 133   $ (267 ) $ 258   $ 1,295  
 
b We have increased the numerator of our diluted earnings per share calculation by $519 for the nine months ended October 31, 2015 for the dilutive effect of our convertible debt. Corresponding dilutive shares of 2,565 are included in the diluted weighted average number of shares outstanding for the same period.
 
Refer to following page for a description of footnotes.
 
 

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 October 31, Nine Months Ended October 31,
  2015     2014     2015     2014  
(1) Cost of revenues:
Equity plan-related compensation $ 665 $ 608 $ 1,981 $ 1,687
Amortization of purchased technology   1,844     2,050     5,496     5,252  
$ 2,509   $ 2,658   $ 7,477   $ 6,939  
 
(2) Research and development:
Equity plan-related compensation $ 4,095   $ 3,651   $ 12,213   $ 10,203  
 
(3) Marketing and selling:
Equity plan-related compensation $ 2,468   $ 2,371   $ 7,314   $ 6,692  
 
(4) General and administration:
Equity plan-related compensation $ 2,797   $ 2,472   $ 9,381   $ 7,809  
 
(5) Equity in earnings of Frontline:
Amortization of other identified intangible assets $ -   $ -   $ -   $ 116  
 
(6) Amortization of intangible assets:
Amortization of other identified intangible assets $ 2,364   $ 2,233   $ 6,817   $ 6,009  
 
(7) Special charges:
Rebalance, restructuring, certain litigation, and other costs $ 4,831   $ 8,375   $ 43,994   $ 19,409  
 
(8) Other income (expense), net:
Net loss of unconsolidated entities $ 72   $ 78   $ 33   $ 146  
 
(9) Interest expense:
Amortization of original issuance debt discount $ 1,663   $ 1,548   $ 4,900   $ 4,563  
 
(10) Income tax expense:
Non-GAAP income tax effects $ (756 ) $ (4,276 ) $ (16,056 ) $ (14,259 )
 
(11) Loss attributable to noncontrolling interest:

Amortization of intangible assets, equity-plan related compensation, and income tax effects

$ (238 ) $ (218 ) $ (638 ) $ (622 )
 

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