EX-99 3 a4559165ex991.txt EXHIBIT 99.1 FINANCIAL RESULTS PRESS RELEASE 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