-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BlikE37PfQitC/fqdFEVQNfp4t7NVxQ2u6jc7P2Zu5zrme8IGPc/u88zisEpZ2s3 OiJLhGP3JTE9+AnpZwoMFw== 0001157523-03-006021.txt : 20031029 0001157523-03-006021.hdr.sgml : 20031029 20031029162814 ACCESSION NUMBER: 0001157523-03-006021 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031022 ITEM INFORMATION: ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20031029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR GRAPHICS CORP CENTRAL INDEX KEY: 0000701811 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930786033 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13442 FILM NUMBER: 03964085 BUSINESS ADDRESS: STREET 1: 8005 SW BOECKMAN RD CITY: WILSONVILLE STATE: OR ZIP: 97070-7777 BUSINESS PHONE: 5036857000 8-K/A 1 a4504841.txt MENTOR GRAPHICS CORPORATION 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 22, 2003 ------------------------------ MENTOR GRAPHICS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) OREGON 0-13442 93-0786033 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 8005 S.W. BOECKMAN ROAD, 97070-7777 WILSONVILLE, OR - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 685-7000 ----------------------------- NO CHANGE - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) The two press releases attached to this Form 8-K/A are identical to the press releases attached to the original Form 8-K submitted on October 22, 2003. This Form 8-K/A is submitted solely for the purpose of reflecting that the third quarter 2003 earnings release is furnished pursuant to Item 12 rather than Item 9. Item 9. Regulation FD Disclosure. - --------------------------------- Attached as Exhibit 99.2 is a copy of a press release of Mentor Graphics Corporation dated October 22, 2003 providing the Company's outlook for the fourth quarter of 2003 and full year of 2004, which is being furnished to the Securities and Exchange Commission. Item 12. Results of Operations and Financial Condition. - ------------------------------------------------------- Attached as Exhibit 99.1 is a copy of a press release of Mentor Graphics Corporation dated October 22, 2003 announcing the Company's earnings for the third quarter of 2003, which is being furnished to the Securities and Exchange Commission. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MENTOR GRAPHICS CORPORATION (Registrant) Date: October 29, 2003 By: /s/ Gregory K. Hinckley ----------------------- Gregory K. Hinckley President, Chief Operating and Financial Officer 3 EX-99 3 a4504841ex992.txt MENTOR GRAPHICS CORPORATION PRESS RELEASE 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 EX-99 4 a4504841ex991.txt MENTOR GRAPHICS CORPORATION PRESS RELEASE Exhibit 99.1 Mentor Graphics Reports Third Quarter Results WILSONVILLE, Ore.--(BUSINESS WIRE)--Oct. 22, 2003--Mentor Graphics Corporation (Nasdaq:MENT) today announced earnings before goodwill and special charges of $.07 per share on record third quarter revenues of $157 million, ahead of First Call(R) consensus estimates of $.05 per share. Earnings on a GAAP basis were a loss of $.19 per share. "Mentor's performance continues to be driven by new products. Customer spending, while improving, is still constrained, with the bulk of their dollars going to must-have new products," said Walden C. Rhines, chairman and CEO of Mentor Graphics. "This environment benefits Mentor Graphics because of our significant new product technology in areas like printed circuit board (PCB) design, design-for-test (DFT), wire harness, and Calibre(R) resolution enhancement technology (RET). These product areas helped drive us to our fourth consecutive quarter of year-over-year growth in total market share according to the Electronic Design Automation Consortium market statistics service." TestKompress(R), Mentor's patented breakthrough DFT product, began to hit stride as its bookings exceeded those of Mentor's more traditional DFT products in the quarter. Additionally, TestKompress received endorsements from customers including AMD, Infineon, Ricoh and Renesas. At the International Test Conference, Infineon reported that based on the success of TestKompress in three system-on-chip production designs that it has made TestKompress a standard component of Infineon's manufacturing test suite. Mentor also saw growth in its Calibre RET product line as 90nm goes to production and 65nm development is underway. Cabling bookings grew 50 percent, fueled by significant orders from the automotive sector. In system design, Mentor continued to expand its investment in key technologies to support cutting-edge PCB design. In the quarter, Mentor announced an upgraded high-speed analysis tool set, Hyperlynx(R) 7.0, an integration between its FPGA and board design environments called Boardlink(TM) and TeamPCB(TM), a unique collaboration technology that allows multiple designers to easily work simultaneously on the same board design. Additionally, Mentor launched the PADS(R) suite, a complete solution for the ready-to-use PCB design market. During the quarter, the company acquired 157 new customers, which does not include customers of the PADS ready-to-use PCB product. "While North America was weak, we set a third quarter bookings record for Japan and had a strong quarter in Europe," said Gregory K. Hinckley, president of Mentor Graphics. "Bookings were up over 10 percent in Europe, and nearly 75 percent in Japan. The transportation segment was relatively strong in all regions, and we booked significant deals for our Calibre RET, PCB and wire harness product lines. We remain optimistic about our business and confident that our investments to enter new markets and solve new problems will enable the company to continue its growth trend." Special charges were primarily related to the settlement of protracted litigation over emulation and hardware acceleration patents. This settlement frees the company to market its products globally and will end on-going expenses associated with the litigation. 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. Mentor Graphics, Calibre, PADS, HyperLynx and TestKompress are registered trademarks and Boardlink and TeamPCB are trademarks of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners. 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 CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data-Unaudited) Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------------- 2003 2002 2003 2002 --------------------------------------------- Revenues: System and software $86,166 $80,587 $265,769 $215,889 Service and support 70,785 72,063 207,990 200,174 ----------- ---------- ---------- ----------- Total revenues 156,951 152,650 473,759 416,063 ----------- ---------- ---------- ----------- Cost of revenues: System and software 5,945 6,013 15,541 21,895 Service and support 20,344 20,714 61,805 61,173 Amortization of purchased technology 2,319 2,217 6,797 4,473 ----------- ---------- ---------- ----------- Total cost of revenues 28,608 28,944 84,143 87,541 ----------- ---------- ---------- ----------- Gross margin 128,343 123,706 389,616 328,522 ----------- ---------- ---------- ----------- Operating expenses: Research and development 46,522 43,127 133,363 119,040 Marketing and selling 57,781 56,378 175,678 158,458 General and administration 18,011 17,337 54,154 52,598 Amortization of intangible assets 899 859 2,975 1,396 Emulation litigation settlement 20,264 - 20,264 - Special charges 5,008 1,534 8,171 26,640 ----------- ---------- ---------- ----------- Total operating expenses 148,485 119,235 394,605 358,132 ----------- ---------- ---------- ----------- Operating income (loss) (20,142) 4,471 (4,989) (29,610) Other income, net 2,096 1,318 4,508 5,916 Interest expense (4,525) (3,930) (12,499) (7,708) ----------- ---------- ---------- ----------- Income (loss) before income taxes (22,571) 1,859 (12,980) (31,402) Income tax expense (benefit) (9,781) - (7,863) 1,572 ----------- ---------- ---------- ----------- Net income (loss) $(12,790) $1,859 $(5,117) $(32,974) =========== ========== ========== =========== Net income (loss) per share: Basic $(.19) $.03 $(.08) $(.50) =========== ========== ========== =========== Diluted $(.19) $.03 $(.08) $(.50) =========== ========== ========== =========== Weighted average number of shares outstanding: Basic 67,886 65,911 67,554 65,535 =========== ========== ========== =========== Diluted 67,886 66,187 67,554 65,535 =========== ========== ========== =========== MENTOR GRAPHICS CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data-Unaudited) Three Months Ended September 30, 2003 GAAP Adjustments Pro Forma -------------------------------------- Revenues: System and software $86,166 $ - $86,166 Service and support 70,785 - 70,785 ----------- ------------ ---------- Total revenues 156,951 - 156,951 ----------- ------------ ---------- Cost of revenues: System and software 5,945 - 5,945 Service and support 20,344 - 20,344 Amortization of purchased technology 2,319 (2,319)(1) - ----------- ------------ ---------- Total cost of revenues 28,608 (2,319) 26,289 ----------- ------------ ---------- Gross margin 128,343 2,319 130,662 ----------- ------------ ---------- Gross margin percentage 81.8% 83.3% ----------- ---------- Operating expenses: Research and development 46,522 - 46,522 Marketing and selling 57,781 - 57,781 General and administration 18,011 - 18,011 Amortization of intangible assets 899 (899)(1) - Emulation litigation settlement 20,264 (20,264) - Special charges 5,008 (5,008)(2) - ----------- ------------ ---------- Total operating expenses 148,485 (26,171) 122,314 ----------- ------------ ---------- Operating income (loss) (20,142) 28,490 8,348 Other income, net 2,096 - 2,096 Interest expense (4,525) - (4,525) ----------- ------------ ---------- Income (loss) before income taxes (22,571) 28,490 5,919 Income tax expense (benefit) (9,781) 10,965 (3) 1,184 ----------- ------------ ---------- Net income (loss) $(12,790) $17,525 $4,735 =========== ============ ========== Net income (loss) per share: Basic $(.19) $.07 =========== ========== Diluted (4) $(.19) $.07 =========== ========== Weighted average number of shares outstanding: Basic 67,886 67,886 =========== ========== Diluted 67,886 71,380 =========== ========== (1) Non-cash amortization of intangible assets. (2) Merger, acquisition, restructuring and other charges. (3) 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. (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 three months ended September 30, 2003. MENTOR GRAPHICS CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data-Unaudited) Three Months Ended September 30, 2002 GAAP Adjustments Pro Forma ------------------------------------ Revenues: System and software $80,587 $ - $80,587 Service and support 72,063 - 72,063 ---------- ----------- ---------- Total revenues 152,650 - 152,650 ---------- ----------- ---------- Cost of revenues: System and software 6,013 - 6,013 Service and support 20,714 - 20,714 Amortization of purchased technology 2,217 (2,217)(1) - ---------- ----------- ---------- Total cost of revenues 28,944 (2,217) 26,727 ---------- ----------- ---------- Gross margin 123,706 2,217 125,923 ---------- ----------- ---------- Gross margin percentage 81.0% 82.5% ---------- ---------- Operating expenses: Research and development 43,127 - 43,127 Marketing and selling 56,378 - 56,378 General and administration 17,337 - 17,337 Amortization of intangible assets 859 (859)(1) - Special charges 1,534 (1,534)(2) - ---------- ----------- ---------- Total operating expenses 119,235 (2,393) 116,842 ---------- ----------- ---------- Operating income (loss) 4,471 4,610 9,081 Other income, net 1,318 - 1,318 Interest expense (3,930) - (3,930) ---------- ----------- ---------- Income before income taxes 1,859 4,610 6,469 Income tax expense - 1,293 (3) 1,293 ---------- ----------- ---------- Net income $1,859 $3,317 $5,176 ========== =========== ========== Net income per share: Basic $.03 $.08 ========== ========== Diluted $.03 $.08 ========== ========== Weighted average number of shares outstanding: Basic 65,911 65,911 ========== ========== Diluted 66,187 66,187 ========== ========== (1) Non-cash amortization of intangible assets. (2) Merger, acquisition, restructuring and other charges. (3) 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 CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data-Unaudited) Nine Months Ended September 30, 2003 GAAP Adjustments Pro Forma ------------------------------------ Revenues: System and software $265,769 $ - $265,769 Service and support 207,990 - 207,990 ---------- ----------- ---------- Total revenues 473,759 - 473,759 ---------- ----------- ---------- Cost of revenues: System and software 15,541 - 15,541 Service and support 61,805 - 61,805 Amortization of purchased technology 6,797 (6,797)(1) - ---------- ----------- ---------- Total cost of revenues 84,143 (6,797) 77,346 ---------- ----------- ---------- Gross margin 389,616 6,797 396,413 ---------- ----------- ---------- Gross margin percentage 82.2% 83.7% ---------- ---------- Operating expenses: Research and development 133,363 - 133,363 Marketing and selling 175,678 - 175,678 General and administration 54,154 - 54,154 Amortization of intangible assets 2,975 (2,975)(1) - Emulation litigation settlement 20,264 (20,264) - Special charges 8,171 (8,171)(2) - ---------- ----------- ---------- Total operating expenses 394,605 (31,410) 363,195 ---------- ----------- ---------- Operating income (loss) (4,989) 38,207 33,218 Other income, net 4,508 - 4,508 Interest expense (12,499) - (12,499) ---------- ----------- ---------- Income (loss) before income taxes (12,980) 38,207 25,227 Income tax expense (benefit) (7,863) 12,908 (3) 5,045 ---------- ----------- ---------- Net income (loss) $(5,117) $25,299 $20,182 ========== =========== ========== Net income (loss) per share: Basic $(.08) $.30 ========== ========== Diluted (4) $(.08) $.29 ========== ========== Weighted average number of shares outstanding: Basic 67,554 67,554 ========== ========== Diluted 67,554 70,032 ========== ========== (1) Non-cash amortization of intangible assets. (2) Merger, acquisition, restructuring and other charges. (3) 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. (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 nine months ended September 30, 2003. MENTOR GRAPHICS CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data-Unaudited) Nine Months Ended September 30, 2002 GAAP Adjustments Pro Forma ------------------------------------- Revenues: System and software $215,889 $ - $215,889 Service and support 200,174 - 200,174 ----------- ----------- ---------- Total revenues 416,063 - 416,063 ----------- ----------- ---------- Cost of revenues: System and software 21,895 - 21,895 Service and support 61,173 - 61,173 Amortization of purchased technology 4,473 (4,473)(1) - ----------- ----------- ---------- Total cost of revenues 87,541 (4,473) 83,068 ----------- ----------- ---------- Gross margin 328,522 4,473 332,995 ----------- ----------- ---------- Gross margin percentage 79.0% 80.0% ----------- ---------- Operating expenses: Research and development 119,040 - 119,040 Marketing and selling 158,458 - 158,458 General and administration 52,598 - 52,598 Amortization of intangible assets 1,396 (1,396)(1) - Special charges 26,640 (26,640)(2) - ----------- ----------- ---------- Total operating expenses 358,132 (28,036) 330,096 ----------- ----------- ---------- Operating income (loss) (29,610) 32,509 2,899 Other income, net 5,916 - 5,916 Interest expense (7,708) - (7,708) ----------- ----------- ---------- Income (loss) before income taxes (31,402) 32,509 1,107 Income tax expense (benefit) 1,572 (1,351)(3) 221 ----------- ----------- ---------- Net income (loss) $(32,974) $33,860 $886 =========== =========== ========== Net income (loss) per share: Basic $(.50) $.01 =========== ========== Diluted (4) $(.50) $.01 =========== ========== Weighted average number of shares outstanding: Basic 65,535 65,535 =========== ========== Diluted 65,535 67,486 =========== ========== (1) Non-cash amortization of intangible assets. (2) Merger, acquisition, restructuring and other charges. (3) 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. (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 nine months ended September 30, 2002. MENTOR GRAPHICS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands - Unaudited) As of As of September 30, December 31, 2003 2002 - ---------------------------------------------------------------------- Assets Current assets: Cash and short-term investments $86,111 $38,826 Trade accounts receivable, net 81,874 77,960 Term receivables, short-term 98,897 81,697 Prepaid expenses and other 29,172 24,884 Deferred income taxes 17,492 16,827 ------------- ------------ Total current assets 313,546 240,194 Property, plant and equipment, net 87,524 90,259 Term receivables, long-term 77,709 78,431 Intangibles, net 344,785 342,171 Other assets 49,782 53,793 ------------- ------------ Total assets $873,346 $804,848 ============= ============ Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $10,009 $17,670 Accounts payable 15,059 17,110 Income taxes payable 21,529 40,784 Accrued payroll and related liabilities 55,794 51,250 Accrued liabilities 39,310 45,233 Deferred revenue 74,900 72,902 ------------- ------------ Total current liabilities 216,601 244,949 Long-term notes payable 286,945 177,685 Other long-term liabilities 20,115 19,275 ------------- ------------ Total liabilities 523,661 441,909 ------------- ------------ Minority Interest 3,343 3,219 Stockholders' equity: Common stock 283,763 297,995 Deferred compensation (3,226) (4,761) Retained earnings 44,750 49,867 Accumulated other comprehensive income 21,055 16,619 ------------- ------------ Total stockholders' equity 346,342 359,720 ------------- ------------ Total liabilities and stockholders' equity $873,346 $804,848 ============= ============ MENTOR GRAPHICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------- 2003 2002 2003 2002 ---------------------------------------- Operating Cash Flows: Net income (loss) $(12,790) $1,859 $(5,117) $(32,974) Depreciation and amortization 12,057 9,017 36,098 21,913 Other adjustments to reconcile operating cash 219 (436) (2,583) 18,296 Changes in working capital (32,094) (5,325) (34,792) (3,754) --------- --------- --------- ---------- Net cash provided by (used in) operating activities (32,608) 5,115 (6,394) 3,481 Net cash (used in) investing activities (5,715) (10,870) (25,189) (272,921) Net cash provided by financing activities 76,408 17,789 81,998 195,212 Effect of exchange rate changes on cash And cash equivalents 601 (99) 727 400 --------- --------- --------- ---------- Net change in cash and cash equivalents 38,686 11,935 51,142 (73,828) Cash and cash equivalents at beginning of period 47,425 38,266 34,969 124,029 --------- --------- --------- ---------- Cash and cash equivalents at end of period $86,111 $50,201 $86,111 $50,201 ========= ========= ========= ========== MENTOR GRAPHICS CORPORATION SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION (In thousands, except for days sales outstanding -Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------- 2003 2002 2003 2002 -------------------------------------- Geographic Revenue: Americas $70,740 $80,691 $227,027 $209,671 45.1% 52.9% 47.9% 50.4% Europe $44,120 $37,311 $133,380 $107,876 28.0% 24.4% 28.2% 25.9% Japan $29,902 $20,296 $74,591 $61,555 19.1% 13.3% 15.7% 14.8% Pac Rim $12,189 $14,352 $38,761 $36,961 7.8% 9.4% 8.2% 8.9% Other Data: Capital expenditures $5,381 $4,308 $14,343 $14,013 Days sales outstanding 104 89 104 89 CONTACT: Mentor Graphics Ryerson Schwark, 503-685-1462 ry_schwark@mentor.com or Dennis Weldon, 503-685-1462 dennis_weldon@mentor.com -----END PRIVACY-ENHANCED MESSAGE-----