Mentor Graphics Reports Fiscal Fourth Quarter Results
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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)
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Three Months Ended January 31,
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Twelve Months Ended January 31,
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2016
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2015
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2016
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2015
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GAAP net income attributable to Mentor Graphics shareholders
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$
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60,271
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$
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114,488
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$
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96,277
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$
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147,139
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Non-GAAP adjustments:
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Equity plan-related compensation: (1)
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Cost of revenues
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626
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617
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2,607
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2,304
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Research and development
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3,994
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3,824
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16,207
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14,027
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Marketing and selling
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2,309
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2,411
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9,623
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9,103
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General and administration
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2,679
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2,564
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12,060
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10,373
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Acquisition - related items:
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Amortization of purchased assets
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Cost of revenues (2)
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1,807
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1,847
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7,303
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7,099
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Amortization of intangible assets (3)
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1,899
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2,157
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8,716
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8,282
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Special charges (4)
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1,087
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4,081
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45,081
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23,490
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Other income (expense), net (5)
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(39
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38
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(6
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184
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Interest expense (6)
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1,693
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1,576
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6,593
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6,139
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Non-GAAP income tax effects (7)
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(2,343
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(5,449
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(18,399
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(19,708
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Noncontrolling interest (8)
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-
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(198
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(638
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(820
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Total of non-GAAP adjustments
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13,712
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13,468
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89,147
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60,473
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Non-GAAP net income attributable to Mentor Graphics shareholders
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$
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73,983
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$
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127,956
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$
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185,424
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$
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207,612
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GAAP weighted average shares (diluted)
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118,066
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117,466
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119,263
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117,078
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Non-GAAP adjustment
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-
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-
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2,046
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-
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Non-GAAP weighted average shares (diluted)
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118,066
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117,466
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121,309
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117,078
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Net income per share attributable to Mentor Graphics shareholders:
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GAAP (diluted)
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$
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0.51
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$
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0.96
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$
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0.81
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$
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1.26
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Noncontrolling interest adjustment (9)
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-
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0.01
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-
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-
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Convertible debt adjustment (10)
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-
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-
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0.01
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-
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Non-GAAP adjustments detailed above
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0.12
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0.12
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0.73
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0.51
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Non-GAAP (diluted)
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$
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0.63
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$
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1.09
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$
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1.55
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$
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1.77
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(1)
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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.
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(2)
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Amount represents amortization of purchased technology resulting
from acquisitions. Purchased technology is generally amortized over
two to five years.
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(3)
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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 twelve months ended January 31, 2015 also includes
$116 of amortization of other identified intangible assets for
Frontline, which were fully amortized in the first quarter of fiscal
2015.
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(4)
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Three months ended January 31, 2016: Special charges consist
of (i) $(692) of costs incurred for employee rebalances which
include severance benefits and notice pay, (ii) $477 for EVE
litigation costs, and (iii) $1,302 in other adjustments.
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Three months ended January 31, 2015: Special charges consist
of (i) $3,215 for EVE litigation costs, (ii) $458 of costs incurred
for employee rebalances which include severance benefits and notice
pay, and (iii) $408 in other adjustments.
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Twelve months ended January 31, 2016: Special charges consist
of (i) $25,232 for severance costs incurred for the voluntary early
retirement program, (ii) $13,496 of costs incurred for employee
rebalances which include severance benefits and notice pay, (iii)
$4,118 for EVE litigation costs, and (iv) $2,235 in other
adjustments.
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Twelve months ended January 31, 2015: Special charges consist
of (i) $18,408 for EVE litigation costs, (ii) $3,535 of costs
incurred for employee rebalances which include severance benefits
and notice pay, and (iii) $1,547 in other adjustments.
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(5)
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Amount represents (income) loss on an investment accounted for under
the equity method of accounting.
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(6)
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Amount represents the amortization of original issuance debt
discount.
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(7)
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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 twelve
months ended January 31, 2016 and a 17% tax rate for the three and
twelve months ended January 31, 2015.
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(8)
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Adjustment for the impact of amortization of intangible assets,
equity plan-related compensation, and income tax expense on
noncontrolling interest.
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(9)
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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.
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(10)
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We have increased the numerator of our diluted earnings per share
calculation by $2,074 for the twelve months ended January 31, 2016
for the dilutive effect of our convertible debt. Corresponding
dilutive shares of 2,046 for the twelve months ended January 31,
2016 are presented in the reconciliation above.
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