Exhibit 99.2
Mentor Graphics Reaffirms 2003 Outlook And Provides Initial 2004 Outlook
WILSONVILLE, Ore.--(BUSINESS WIRE)--Oct. 22, 2003--For fourth
quarter 2003, Mentor Graphics Corporation (Nasdaq:MENT) expects
revenues of approximately $190 million and earnings before goodwill
(EBG) of about $.30 per share. GAAP earnings are expected to be $.14
per share. Gross margin excluding amortization of intangibles is
expected to be approximately 85 percent, while gross margin on a GAAP
basis is expected to be about 84 percent. Operating expense excluding
amortization of intangibles should be about $134 million, up about 10
percent sequentially due to normal seasonal increases. Operating
expense on a GAAP basis is expected to be about $135 million. OI&E
will be about a $3 million expense. The EBG tax rate is expected to
remain at a normalized 20 percent, while tax expense on a GAAP basis
is expected to be $14 million. Diluted shares outstanding are expected
to be 72 million.
On the strength of new products, Mentor expects 2004 product
revenue to grow faster than the EDA average, but expects maintenance
revenue to be essentially flat as customers with large installed bases
continue to reduce their maintenance commitments. For the full year
2004, Mentor expects revenues of approximately $710 million and EBG of
about $.80 per share. GAAP earnings, including the impact of
amortization of intangibles, are expected to be $.50 per share.
The EBG income tax expense calculation differs from a GAAP
calculation as it assumes a normalized effective tax rate based on
multiple years of historical and forecast future earnings.
About Mentor Graphics
Mentor Graphics Corporation (Nasdaq:MENT) is a world leader in
electronic hardware and software design solutions, providing products,
consulting services and award-winning support for the world's most
successful electronics and semiconductor companies. Established in
1981, the company reported revenues over the last 12 months of about
$650 million and employs approximately 3,600 people worldwide.
Corporate headquarters are located at 8005 S.W. Boeckman Road,
Wilsonville, Oregon 97070-7777; Silicon Valley headquarters are
located at 1001 Ridder Park Drive, San Jose, California 95131-2314.
World Wide Web site: http://www.mentor.com/.
In the calculation of earnings, gross margin and operating
expenses before amortization of acquired intangibles and special
charges, Mentor Graphics excludes amortization of acquired intangibles
and write-offs of in-process R&D from acquisitions. Also excluded are
non-operating and non-recurring items classified as special charges
such as restructure expenses and asset impairments. These excluded
items are generally infrequent, less predictable and are often
non-cash in nature. Earnings before goodwill (EBG) income tax expense
calculation differs from a GAAP calculation as it assumes a normalized
effective tax rate based on multiple years of historical and forecast
future earnings. Mentor Graphics believes that excluding these items
provides investors with a representation of its core performance, and
a pro forma base line for assessing the future earnings potential of
Mentor Graphics.
These pro forma measures should be assessed in conjunction with
GAAP earnings measures for a more complete understanding of the
Company's results. Since pro forma measures exclude certain items,
differences in earnings from GAAP can be significant; Mentor Graphics
management evaluates its performance under both measures for a
complete understanding of its results. Investors are encouraged to
review both measures for their evaluations and consider the GAAP
earnings measures as the most complete measure of Mentor Graphics
overall performance.
Statements in this press release regarding the Company's outlook
for future periods constitute "forward-looking" statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or industry
results to be materially different from any results, performance or
achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: (i) the Company's
ability to continue selling products and services during the
continuing slowdown in the electronics industry, particularly in the
telecommunications and semiconductor segments; (ii) the Company's
ability to manage expenses during the current slowdown in the
electronics industry; (iii) changes in accounting or reporting rules
or interpretations, changes in the tax environment worldwide,
limitations on repatriation of earnings, licensing and intellectual
property rights protection; (iv) the Company's ability to successfully
integrate and manage its recent and future acquisitions; (v) the
Company's ability to successfully offer products and services that
compete in the highly competitive and dynamic EDA industry including
the risk that the Company's technology, products or inventory become
obsolete; (vi) the overall instability of diverse economies, including
changes in regional or worldwide economic or political conditions,
government trade restrictions, or war in the Middle East or elsewhere
(vii) effects of the increasing volatility of foreign currency
fluctuations on the Company's business and operating results, and
(viii) effects of unanticipated shifts in product mix on gross margin
and unanticipated shifts in geographic mix on the overall tax rate,
all as may be discussed in more detail under the heading "Factors That
May Affect Future Results and Financial Condition" in the Company's
most recent Form 10-K or Form 10-Q. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on
such forward-looking statements. In addition, statements regarding
outlook do not reflect potential impacts of mergers or acquisitions
that have not been announced or closed as of the time the statements
are made. Mentor Graphics disclaims any obligation to update any such
factors or to publicly announce the results of any revisions to any of
the forward-looking statements to reflect future events or
developments.
Mentor Graphics Corporation
As of October 22, 2003
Reconciliation of Forward Looking Diluted Net Income per Share Between
GAAP and Earnings Before Amortization of Acquired Intangibles and
Special Charges
(Unaudited)
$ in Millions except per share data
Q4 2003 Q4 2003
GAAP Adjustments Pro Forma
-------------- -------------- ------------
Revenue $190 - $190
Gross Margin 84% $2 (a) 85%
Operating Expense $135 $1 (b) $134
Other Income & Expense ($3) - ($3)
Tax Expense ($14) $9 (c) ($5)
Diluted earnings per share $0.14 $0.16 $0.30
2003 2003
GAAP Adjustments (d) Pro Forma
-------------- --------------- ------------
Revenue $665 - $665
Diluted earnings per share $0.07 $0.53 $0.60
2004 2004
GAAP Adjustments (d) Pro Forma
-------------- --------------- ------------
Revenue $710 - $710
Diluted earnings per share $0.50 $0.30 $0.80
(a) Amortization of purchased technology (in cost of revenues)
(b) Amortization of intangible assets (in operating expense)
(c) Earnings before goodwill (EBG) income tax expense calculation
differs from a GAAP calculation as it assumes a normalized
effective tax rate based on multiple years of historical and
forecast future earnings.
(d) Adjustments for the 2003 and 2004 year to date outlook include
items described more fully under footnotes (a), (b) and (c)
above.
CONTACT: Mentor Graphics
Ryerson Schwark, 503-685-1462
ry_schwark@mentor.com
Dennis Weldon, 503-685-1462
dennis_weldon@mentor.com