Exhibit 99.1
Mentor Graphics Announces First Quarter Results
WILSONVILLE, Ore.--(BUSINESS WIRE)--April 27, 2005--Mentor
Graphics Corporation (Nasdaq:MENT) today announced first quarter
revenues of $164.3 million, approximately flat with the year ago
quarter. GAAP earnings per share were a loss of $.06, while pro forma
earnings per share were $.01, consistent with the company's
pre-announcement of April 4, 2005.
"Weakness in the business was driven primarily by softness in
demand from semiconductor companies, while demand from system
businesses was better. As a result, Mentor systems products like FPGA
synthesis, embedded software and selected PCB products performed
well," said Walden C. Rhines, CEO and chairman of Mentor Graphics. "On
the other hand, Calibre product line bookings were particularly weak
in the quarter. We expect strength in this product line in the second
half of the year based upon the number of current customer
engagements."
The Scalable Verification product line was also down, driven
largely by a tough compare with the year ago quarter when the
company's largest ever ModelSim order occurred.
"As the drive to time-based licensing continues, our business is
increasingly driven into the fourth quarter," said Gregory K.
Hinckley, president of Mentor Graphics. "While we are not satisfied
with our first quarter performance, our second half continues to look
solid."
Revenue by region was 45% North America, 25% Europe, 20% Japan and
10% Pacific Rim. By product line, revenue was 30% scalable
verification, 25% integrated system design, 25% design to silicon, and
20% new and emerging products.
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 over
$700 million and employs approximately 3,850 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 and Calibre are registered trademarks and Scalable
Verification is a trademark of Mentor Graphics Corporation.
In the calculation of pro forma earnings, gross margin and
operating expenses, Mentor Graphics excludes amortization of acquired
intangibles and write-offs of in-process R&D from acquisitions.
Included in pro forma earnings was a $1million gain related to the
sale of a building classified in other income, net. Also, excluded are
non-operating and non-recurring items classified as special charges
such as restructure expenses and asset impairments, as well as income
tax expense in excess of a normalized 17% effective tax rate. 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 based on
current expectations 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 successfully offer products
and services that compete in the highly competitive EDA industry
including the risk that the Company's technology, products or
inventory become obsolete; (ii) reductions in spending on EDA tools by
the Company's customers due to cyclical downturns or initiatives to
increase profitability, (iii) changes in accounting or reporting rules
or interpretations, limitations on repatriation of earnings, licensing
and intellectual property rights protection; (iv) changes in tax laws,
regulations or enforcement practices where the Company does business;
(v) effects of the increasing volatility of foreign currency
fluctuations on the Company's business and operating results; (vi)
effects of unanticipated shifts in product mix on gross margin and
unanticipated shifts in geographic mix on the overall tax rate, (vii)
the Company's ability to successfully integrate and manage its
acquisitions, 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
March 31,
------------------
2005 2004
-------- --------
Revenues:
System and software $ 91,560 $ 94,521
Service and support 72,774 69,884
-------- --------
Total revenues 164,334 164,405
-------- --------
Cost of revenues:
System and software 4,735 4,562
Service and support 19,908 20,095
Amortization of purchased technology 2,713 2,466
-------- --------
Total cost of revenues 27,356 27,123
-------- --------
Gross margin 136,978 137,282
-------- --------
Operating expenses:
Research and development 51,310 48,383
Marketing and selling 67,575 63,706
General and administration 18,708 18,562
Amortization of intangible assets 1,122 782
Special charges 1,313 -
-------- --------
Total operating expenses 140,028 131,433
-------- --------
Operating income (loss)
(3,050) 5,849
Other income, net 3,615 1,230
Interest expense (5,031) (4,455)
-------- --------
Income (loss) before income taxes (4,466) 2,624
Income tax expense (benefit) (80) 446
-------- --------
Net income (loss) $ (4,386)$ 2,178
======== ========
Net income (loss) per share:
Basic $ (0.06)$ 0.03
======== ========
Diluted $ (0.06)$ 0.03
======== ========
Weighted average number of
shares outstanding:
Basic 78,007 69,803
======== ========
Diluted 78,007 72,763
======== ========
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and
earnings per share data-Unaudited)
Three Months Ended March 31, 2005
GAAP Adjustments Pro Forma
--------------------------------
Revenues:
System and software $ 91,560 $ - $ 91,560
Service and support 72,774 - 72,774
-------- -------- --------
Total revenues 164,334 - 164,334
-------- -------- --------
Cost of revenues:
System and software 4,735 - 4,735
Service and support 19,908 - 19,908
Amortization of purchased technology 2,713 (2,713)(1) -
-------- -------- --------
Total cost of revenues 27,356 (2,713) 24,643
-------- -------- --------
Gross margin 136,978 2,713 139,691
-------- -------- --------
Gross margin percentage 83.4% 85.0%
-------- --------
Operating expenses:
Research and development 51,310 - 51,310
Marketing and selling 67,575 - 67,575
General and administration 18,708 - 18,708
Amortization of intangible assets 1,122 (1,122)(1) -
Special charges 1,313 (1,313) -
-------- -------- --------
Total operating
expenses 140,028 (2,435) 137,593
-------- -------- --------
Operating income (loss)
(3,050) 5,148 2,098
Other income, net 3,615 - 3,615
Interest expense (5,031) - (5,031)
-------- -------- --------
Income (loss) before income taxes (4,466) 5,148 682
Income tax expense (benefit) (80) 196 (2) 116
-------- -------- --------
Net income (loss) $ (4,386) $ 4,952 $ 566
======== ======== ========
Net income (loss) per share:
Basic $ (0.06) $ .01
======== ========
Diluted $ (0.06) $ .01
======== ========
Weighted average number of
shares outstanding:
Basic 78,007 78,007
======== ========
Diluted 78,007 80,340
======== ========
(1) Non-cash amortization of intangible assets.
(2) Pro forma income tax expense calculation differs from the GAAP
calculation as it assumed a normalized effective rate of 17% for
2005.
MENTOR GRAPHICS CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except percentages and
earnings per share data-Unaudited)
Three Months Ended March 31, 2004
GAAP Adjustments Pro Forma
--------------------------------
Revenues:
System and software $ 94,521 $ - $ 94,521
Service and support 69,884 - 69,884
-------- -------- --------
Total revenues 164,405 - 164,405
-------- -------- --------
Cost of revenues:
System and software 4,562 - 4,562
Service and support 20,095 - 20,095
Amortization of purchased technology 2,466 (2,466)(1) -
-------- -------- --------
Total cost of revenues 27,123 (2,466) 24,657
-------- -------- --------
Gross margin 137,282 2,466 139,748
-------- -------- --------
Gross margin percentage 83.5% 85.0%
-------- --------
Operating expenses:
Research and development 48,383 - 48,383
Marketing and selling 63,706 - 63,706
General and administration 18,562 - 18,562
Amortization of intangible assets 782 (782)(1) -
-------- -------- --------
Total operating
expenses 131,433 (782) 130,651
-------- -------- --------
Operating income
5,849 3,248 9,097
Other income, net 1,230 - 1,230
Interest expense (4,455) - (4,455)
-------- -------- --------
Income before income taxes 2,624 3,248 5,872
Income tax expense 446 552 (2) 998
-------- -------- --------
Net income $ 2,178 $ 2,696 $ 4,874
======== ======== ========
Net income per share:
Basic $ .03 $ .07
======== ========
Diluted $ .03 $ .07
======== ========
Weighted average number of
shares outstanding:
Basic 69,803 69,803
======== ========
Diluted 72,763 72,763
======== ========
(1) Non-cash amortization of intangible assets.
(2) Pro forma income tax expense calculation differs from the GAAP
calculation as it assumed a normalized effective rate of 17% for
2004.
MENTOR GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands - Unaudited)
As of As of
March 31, December 31,
2005 2004
- ----------------------------------------------------------------------
Assets
Current assets:
Cash and short-term investments $ 108,676 $ 94,287
Trade accounts receivable, net 94,983 116,858
Term receivables, short-term 133,828 125,832
Prepaid expenses and other 33,003 28,457
Deferred income taxes 10,125 10,298
---------- ----------
Total current assets 380,615 375,732
Property, plant and equipment, net 82,723 91,224
Term receivables, long-term 126,393 139,146
Intangibles, net 370,208 374,144
Other assets 40,145 41,661
---------- ----------
Total assets $1,000,084 $1,021,907
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 7,889 $ 9,632
Accounts payable 17,583 18,037
Income taxes payable 31,676 35,299
Accrued payroll and related liabilities 51,847 81,709
Accrued liabilities 36,863 37,098
Deferred revenue 118,482 103,336
---------- ----------
Total current liabilities 264,340 285,111
Long-term notes payable 283,475 283,983
Other long-term liabilities 18,115 19,098
---------- ----------
Total liabilities 565,930 588,192
---------- ----------
Stockholders' equity:
Common stock 372,445 363,455
Deferred compensation (203) (508)
Retained earnings 35,331 39,717
Accumulated other comprehensive income 26,581 31,051
---------- ----------
Total stockholders' equity 434,154 433,715
---------- ----------
Total liabilities and stockholders'
equity $1,000,084 $1,021,907
========== ==========
MENTOR GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - Unaudited)
Three Months Ended
March 31,
---------------------------
2005 2004
------------ -----------
Operating Cash Flows:
Net income (loss) $ (4,386) $ 2,178
Depreciation and amortization 11,320 10,327
Other adjustments to reconcile
operating cash (1,730) (1,557)
Changes in working capital 2,397 (2,435)
------------ -----------
Net cash provided by operating activities 7,601 8,513
Net cash used in investing activities (8,362) (13,902)
Net cash provided by financing activities 7,001 10,354
Effect of exchange rate changes on cash
and cash equivalents (793) (79)
------------ -----------
Net change in cash and cash equivalents 5,447 4,886
Cash and cash equivalents at beginning of
period 67,916 68,333
------------ -----------
Cash and cash equivalents at end of period $ 73,363 $ 73,219
============ ===========
MENTOR GRAPHICS CORPORATION
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
(In thousands, except for percentages and days sales outstanding
-Unaudited)
Three Months Ended
March 31,
----------------------------
2005 2004
------------ ------------
Geographic Revenue:
Americas $ 71,087 $ 65,030
43.3% 39.5%
Europe $ 43,788 $ 43,821
26.6% 26.7%
Japan $ 32,422 $ 38,795
19.7% 23.6%
Pac Rim $ 17,037 $ 16,759
Other Data: 10.4% 10.2%
Capital expenditures $ 7,264 $ 4,820
Days sales outstanding 125 115
CONTACT: Mentor Graphics Corporation
Ryerson Schwark, 503-685-1462
ryschwark@mentor.com
or
Dennis Weldon, 503-685-1462
dennisweldon@mentor.com