Exhibit 99.1
CORRECTING AND REPLACING
Mentor Graphics Reports Record Revenue For Fourth Quarter
WILSONVILLE, Ore.--(BUSINESS WIRE)--Jan. 27, 2004--In BW5926
issued Jan. 27, 2004: Third graph, should read: Book-to-bill was
greater than one, though less than expected as a very large deal that
booked in the fourth quarter was amended, and then rebooked in the
first quarter of 2004 (sted: Book-to-bill was greater than one, though
less than expected as a very large deal that booked in the fourth
quarter has been requested to be amended. The transaction is expected
to be rebooked in the first quarter of 2004.
The corrected release reads:
MENTOR GRAPHICS REPORTS RECORD REVENUE FOR FOURTH QUARTER
Mentor Graphics Corporation (Nasdaq:MENT) today announced fourth
quarter earnings before goodwill and special charges of $.30 per share
on record revenue of $202 million. Earnings on a GAAP basis were $.18
per share. Revenue climbed 12% from the fourth quarter of 2002.
Software bookings rose over 15%, while total bookings climbed 5%.
"Mentor's strength in new products continued to outweigh softness
in overall electronic design automation spending," said Walden C.
Rhines, chairman and CEO of Mentor Graphics. "The drive to smaller
process geometries has accelerated the industry adoption of Mentor's
Calibre product family, with particular strength in resolution
enhancement technology (RET). During the quarter, Mentor received an
order for Calibre RET that was the largest single product order in
company history."
Book-to-bill was greater than one, though less than expected as a
very large deal that booked in the fourth quarter was amended, and
then rebooked in the first quarter of 2004.
Mentor saw a sharp sequential rebound in support revenue in the
fourth quarter. Though still lower than the year ago quarter,
customers reinstated lapsed support contracts at record levels. Mentor
Graphics sees its support reinstatements as a positive indicator for
the industry.
Pro forma gross margin was 85% as foreign exchange effects and
emulation reserves offset the benefit of higher revenue. Gross margin
on a GAAP basis was 84%. Operating expenses exceeded guidance as
exceptional performance in the Calibre product line triggered
non-recurring engineering incentive payments. Additionally, foreign
exchange negatively impacted operating expense as the majority of
Mentor's European revenue contracts are dollar denominated, while
international expenses are in local currencies.
During the quarter, Mentor Graphics launched the ModelSim 5.8 tool
as part of its Scalable Verification Environment. The new release
features the industry's broadest language support including the first
commercial version of System Verilog, the first full implementation of
Verilog 2001, native support for System C, assertion support through
the Property Specification Language 1.0 and VHDL.
"Nine product families set annual bookings records in 2003," said
Gregory K. Hinckley, president of Mentor Graphics. "This strength
offset continued weakness in emulation, consulting and FPGA. Printed
circuit board performance did not match the extraordinarily strong
fourth quarter of 2002 when bookings grew 85%."
During the year, Mentor's innovative new test product TestKompress
continued its strong ramp, reaching 16 customers by end of the year.
The PADS ready-to-use PCB design solution hit its stride with orders
up nearly 70% for the fourth quarter. The breadth of the Calibre
Design-to-Silicon platform continued to widen as Mentor's extraction
bookings more than doubled during the year.
During the quarter, the company won 350 new customers. By
geography, North America bookings were up 5%, Japan was up 30%, PacRim
was flat and Europe was down 10%. Special charges were largely a
result of further reserves for abandoned facilities.
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
$675 million and employs approximately 3,700 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/.
Mentor Graphics, Calibre, ModelSim, TestKompress and PADS are
registered trademarks of Mentor Graphics Corporation.
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. 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; (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) effects of the increasing volatility
of foreign currency fluctuations on the Company's business and
operating results; (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) the Company's ability to successfully
integrate and manage its recent and future acquisitions, 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data-Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ --------------------
2003 2002 2003 2002
-------- -------- ---------- --------
Revenues:
System and software $128,680 $106,105 $ 394,449 $321,994
Service and support 73,229 74,011 281,219 274,185
-------- -------- ---------- --------
Total revenues 201,909 180,116 675,668 596,179
-------- -------- ---------- --------
Cost of revenues:
System and software 7,180 5,770 22,721 27,665
Service and support 22,749 21,658 84,554 82,831
Amortization of purchased
technology 2,625 2,215 9,422 6,688
-------- -------- ---------- --------
Total cost of
revenues 32,554 29,643 116,697 117,184
-------- -------- ---------- --------
Gross margin 169,355 150,473 558,971 478,995
-------- -------- ---------- --------
Operating expenses:
Research and development 51,434 45,188 184,797 164,228
Marketing and selling 69,492 60,505 245,170 218,963
General and administration 21,830 19,893 75,984 72,491
Amortization of intangible
assets 908 859 3,883 2,255
Emulation litigation
settlement - - 20,264 -
Special charges 7,809 8,244 15,980 34,884
-------- -------- ---------- --------
Total operating
expenses 151,473 134,689 546,078 492,821
-------- -------- ---------- --------
Operating income (loss) 17,882 15,784 12,893 (13,826)
Other income, net 952 989 5,460 6,905
Interest expense (4,725) (3,988) (17,224) (11,696)
-------- -------- ---------- --------
Income (loss) before
income taxes 14,109 12,785 1,129 (18,617)
Income tax expense (benefit) 1,059 (5,875) (6,804) (4,303)
-------- -------- ---------- --------
Net income
(loss) $ 13,050 $ 18,660 $ 7,933 $(14,314)
======== ======== ========== ========
Net income (loss) per
share:
Basic $ .19 $ .28 $ .12 $ (.22)
======== ======== ========== ========
Diluted $ .18 $ .28 $ .11 $ (.22)
======== ======== ========== ========
Weighted average number
of shares outstanding:
Basic 68,056 66,453 67,680 65,766
======== ======== ========== ========
Diluted 71,066 67,577 70,464 65,766
======== ======== ========== ========
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and earnings per
share data-Unaudited)
Three Months Ended December 31, 2003
GAAP Adjustments Pro Forma
--------------------------------
Revenues:
System and software $128,680 $ - $128,680
Service and support 73,229 - 73,229
-------- --------- --------
Total revenues 201,909 - 201,909
-------- --------- --------
Cost of revenues:
System and software 7,180 - 7,180
Service and support 22,749 - 22,749
Amortization of purchased technology 2,625 (2,625)(1) -
-------- --------- --------
Total cost of revenues 32,554 (2,625) 29,929
-------- --------- --------
Gross margin 169,355 2,625 171,980
-------- --------- --------
Gross margin percentage 83.9% 85.2%
-------- --------
Operating expenses:
Research and development 51,434 - 51,434
Marketing and selling 69,492 - 69,492
General and administration 21,830 - 21,830
Amortization of intangible assets 908 (908)(1) -
Special charges 7,809 (7,809)(2) -
-------- --------- --------
Total operating
expenses 151,473 (8,717) 142,756
-------- --------- --------
Operating income 17,882 11,342 29,224
Other income, net 952 - 952
Interest expense (4,725) - (4,725)
-------- --------- --------
Income before income taxes 14,109 11,342 25,451
Income tax expense 1,059 3,268 (3) 4,327
-------- --------- --------
Net income $ 13,050 $ 8,074 $ 21,124
======== ========= ========
Net income per share:
Basic $ .19 $ .31
======== ========
Diluted $ .18 $ .30
======== ========
Weighted average number of
shares outstanding:
Basic 68,056 68,056
======== ========
Diluted 71,066 71,066
======== ========
(1) Non-cash amortization of intangible assets.
(2) Merger, acquisition, restructuring and other charges.
(3) EBG income tax expense calculation differs from the GAAP
calculation as it assumes a normalized effective tax rate based on
multiple years of historical and forecast future earnings.
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and earnings per
share data-Unaudited)
Three Months Ended December 31, 2002
GAAP Adjustments Pro Forma
--------------------------------
Revenues:
System and software $106,105 $ - $106,105
Service and support 74,011 - 74,011
-------- --------- --------
Total revenues 180,116 - 180,116
-------- --------- --------
Cost of revenues:
System and software 5,770 - 5,770
Service and support 21,658 - 21,658
Amortization of purchased technology 2,215 (2,215)(1) -
-------- --------- --------
Total cost of revenues 29,643 (2,215) 27,428
-------- --------- --------
Gross margin 150,473 2,215 152,688
-------- --------- --------
Gross margin percentage 83.5% 84.8%
-------- --------
Operating expenses:
Research and development 45,188 - 45,188
Marketing and selling 60,505 - 60,505
General and administration 19,893 - 19,893
Amortization of intangible assets 859 (859)(1) -
Special charges 8,244 (8,244)(2) -
-------- --------- --------
Total operating
expenses 134,689 (9,103) 125,586
-------- --------- --------
Operating income 15,784 11,318 27,102
Other income, net 989 - 989
Interest expense (3,988) - (3,988)
-------- --------- --------
Income before income taxes 12,785 11,318 24,103
Income tax expense (benefit) (5,875) 10,695 (3) 4,820
-------- --------- --------
Net income $ 18,660 $ 623 $ 19,283
======== ========= ========
Net income per share:
Basic $ .28 $ .29
======== ========
Diluted $ .28 $ .29
======== ========
Weighted average number of
shares outstanding:
Basic 66,453 66,453
======== ========
Diluted 67,577 67,577
======== ========
(1) Non-cash amortization of intangible assets.
(2) Merger, acquisition, restructuring and other charges.
(3) EBG income tax expense calculation differs from the GAAP
calculation as it assumes a normalized effective tax rate based on
multiple years of historical and forecast future earnings.
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and earnings per
share data-Unaudited)
Twelve Months Ended December 31, 2003
GAAP Adjustments Pro Forma
------------------------------------
Revenues:
System and software $ 394,449 $ - $ 394,449
Service and support 281,219 - 281,219
---------- ---------- ----------
Total revenues 675,668 - 675,668
---------- ---------- ----------
Cost of revenues:
System and software 22,721 - 22,721
Service and support 84,554 - 84,554
Amortization of purchased
technology 9,422 (9,422)(1) -
---------- ---------- ----------
Total cost of
revenues 116,697 (9,422) 107,275
---------- ---------- ----------
Gross margin 558,971 9,422 568,393
---------- ---------- ----------
Gross margin
percentage 82.7% 84.1%
---------- ----------
Operating expenses:
Research and development 184,797 - 184,797
Marketing and selling 245,170 - 245,170
General and administration 75,984 - 75,984
Amortization of intangible
assets 3,883 (3,883)(1) -
Emulation litigation
settlement 20,264 (20,264) -
Special charges 15,980 (15,980)(2) -
---------- ---------- ----------
Total operating
expenses 546,078 (40,127) 505,951
---------- ---------- ----------
Operating income 12,893 49,549 62,442
Other income, net 5,460 - 5,460
Interest expense (17,224) - (17,224)
---------- ---------- ----------
Income before income taxes 1,129 49,549 50,678
Income tax expense (benefit) (6,804) 15,419 (3) 8,615
---------- ---------- ----------
Net income $ 7,933 $ 34,130 $ 42,063
========== ========== ==========
Net income per share:
Basic $ .12 $ .62
========== ==========
Diluted $ .11 $ .60
========== ==========
Weighted average number of
shares outstanding:
Basic 67,680 67,680
========== ==========
Diluted 70,464 70,464
========== ==========
(1) Non-cash amortization of intangible assets.
(2) Merger, acquisition, restructuring and other charges.
(3) EBG income tax expense calculation differs from the GAAP
calculation as it assumes a normalized effective tax rate based on
multiple years of historical and forecast future earnings.
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and earnings per
share data-Unaudited)
Twelve Months Ended December 31, 2002
GAAP Adjustments Pro Forma
----------------------------------
Revenues:
System and software $321,994 $ - $ 321,994
Service and support 274,185 - 274,185
-------- ---------- ----------
Total revenues 596,179 - 596,179
-------- ---------- ----------
Cost of revenues:
System and software 27,665 - 27,665
Service and support 82,831 - 82,831
Amortization of purchased
technology 6,688 (6,688)(1) -
-------- ---------- ----------
Total cost of
revenues 117,184 (6,688) 110,496
-------- ---------- ----------
Gross margin 478,995 6,688 485,683
-------- ---------- ----------
Gross margin
percentage 80.3% 81.5%
-------- ----------
Operating expenses:
Research and development 164,228 - 164,228
Marketing and selling 218,963 - 218,963
General and administration 72,491 - 72,491
Amortization of intangible assets 2,255 (2,255)(1) -
Special charges 34,884 (34,884)(2) -
-------- ---------- ----------
Total operating
expenses 492,821 (37,139) 455,682
-------- ---------- ----------
Operating income (loss) (13,826) 43,827 30,001
Other income, net 6,905 - 6,905
Interest expense (11,696) - (11,696)
-------- ---------- ----------
Income (loss) before income
taxes (18,617) 43,827 25,210
Income tax expense (benefit) (4,303) 9,345 (3) 5,042
-------- ---------- ----------
Net income (loss) $(14,314)$ 34,482 $ 20,168
======== ========== ==========
Net income (loss) per share:
Basic $ (.22) $ .31
======== ==========
Diluted (4) $ (.22) $ .30
======== ==========
Weighted average number of
shares outstanding:
Basic 65,766 65,766
======== ==========
Diluted 65,766 67,724
======== ==========
(1) Non-cash amortization of intangible assets.
(2) Merger, acquisition, restructuring and other charges.
(3) EBG income tax expense calculation differs from the GAAP
calculation as it assumes a normalized effective tax rate based on
multiple years of historical and forecast future earnings.
(4) Common stock equivalents related to stock options and warrants
are anti-dilutive in a net loss period and therefore are not included
in diluted net loss per share for the twelve months ended December 31,
2002.
MENTOR GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands - Unaudited)
As of As of
December December
31, 2003 31, 2002
- ----------------------------------------------------------------------
Assets
Current assets:
Cash and short-term investments $ 71,324 $ 38,826
Trade accounts receivable, net 104,043 77,960
Term receivables, short-term 119,627 81,697
Prepaid expenses and other 27,164 24,884
Deferred income taxes 18,787 16,827
-------- --------
Total current assets 340,945 240,194
Property, plant and equipment, net 91,350 90,259
Term receivables, long-term 98,207 78,431
Intangibles, net 326,281 342,171
Other assets 83,905 53,793
-------- --------
Total assets $940,688 $804,848
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 6,910 $ 17,670
Accounts payable 18,105 17,110
Income taxes payable 35,122 40,784
Accrued payroll and related liabilities 80,484 51,250
Accrued liabilities 37,719 45,233
Deferred revenue 74,662 72,902
-------- --------
Total current liabilities 253,002 244,949
Long-term notes payable 286,768 177,685
Other long-term liabilities 23,161 19,275
-------- --------
Total liabilities 562,931 441,909
-------- --------
Minority Interest 3,391 3,219
Stockholders' equity:
Common stock 294,180 297,995
Deferred compensation (2,601) (4,761)
Retained earnings 57,800 49,867
Accumulated other comprehensive income 24,987 16,619
-------- --------
Total stockholders' equity 374,366 359,720
-------- --------
Total liabilities and stockholders' equity $940,688 $804,848
======== ========
MENTOR GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-----------------------------------------
2003 2002 2003 2002
--------- --------- --------- ----------
Operating Cash Flows:
Net income (loss) $ 13,050 $ 18,660 $ 7,933 $ (14,314)
Depreciation and
amortization 5,752 15,898 41,850 37,811
Other adjustments to
reconcile operating
cash (4,008) 16,510 (6,591) 35,517
Changes in working
capital (23,031) (59,065) (57,823) (63,530)
--------- --------- --------- ----------
Net cash used in operating
activities (8,237) (7,997) (14,631) (4,516)
Net cash used in investing
activities (12,386) (7,676) (37,575) (280,597)
Net cash provided by
financing activities 2,643 503 84,641 195,715
Effect of exchange rate
changes on cash
And cash equivalents 202 (62) 929 338
--------- --------- --------- ----------
Net change in cash and cash
equivalents (17,778) (15,232) 33,364 (89,060)
Cash and cash equivalents at
beginning of
period 86,111 50,201 34,969 124,029
--------- --------- --------- ----------
Cash and cash equivalents at
end of period $ 68,333 $ 34,969 $ 68,333 $ 34,969
========= ========= ========= ==========
MENTOR GRAPHICS CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In thousands, except for percentages and
days sales outstanding-Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Geographic Revenue:
Americas $ 104,280 $ 95,871 $ 331,307 $ 305,542
51.7% 53.2% 49.0% 51.3%
Europe $ 55,277 $ 49,803 $ 188,657 $ 157,679
27.4% 27.7% 27.9% 26.4%
Japan $ 26,146 $ 20,202 $ 100,737 $ 81,757
12.9% 11.2% 14.9% 13.7%
Pac Rim $ 16,206 $ 14,240 $ 54,967 $ 51,201
Other Data: 8.0% 7.9% 8.2% 8.6%
Capital expenditures $ 9,189 $ 6,396 $ 23,532 $ 20,409
Days sales outstanding 100 80 100 80
CONTACT: Mentor Graphics Corporation
Ryerson Schwark, 503-685-1462
ry_schwark@mentor.com
or
Dennis Weldon, 503-685-1462
dennis_weldon@mentor.com