EX-99 2 a4624131ex991.txt MENTOR GRAPHICS CORPORATION EXHIBIT 99.1 Exhibit 99.1 Mentor Graphics Announces Record Bookings For First Quarter WILSONVILLE, Ore.--(BUSINESS WIRE)--April 22, 2004--Mentor Graphics Corporation (Nasdaq:MENT) today announced first quarter pro forma diluted earnings per share of $.07 on revenue of $164.4 million. Earnings on a GAAP basis were $.03 per share. Revenue grew 3% over the year ago quarter, while bookings, climbing 17%, were a first quarter record. "Mentor saw strength within all product areas, but particularly in our Scalable Verification Environment, driven in part by the second largest order in the company's history, for ModelSim," said Walden C. Rhines, chairman and CEO of Mentor Graphics. "But the strength in Scalable was broad-based, with analog-mixed signal bookings up 40% year-on-year and with 18 new customers in the quarter. VStation emulation also made excellent progress and was also up strongly year-on-year." By geography, Asia was particularly robust. Bookings in Japan climbed 65% and Pacific Rim bookings grew 35%. Japanese revenue was 25% of total, a level which Mentor has not achieved since the early 1990s. Revenue by region was 40% Americas, 25% Europe, 25% Japan, and 10% Pacific Rim. Other areas of strength included the Expedition and PADS PCB design tools, Precision FPGA synthesis and TestKompress. The rollout of TestKompress continued to accelerate as five more logos were added in the first quarter, including two major IC companies. Calibre again enjoyed healthy results, paced by activity in Japan. Embedded software and cabling both showed double-digit bookings growth. Book-to-bill was near one and a record for a first quarter. Pro forma gross margin was 85%. Gross margin on a GAAP basis was 83.5%. Foreign exchange effects increased both revenues and expenses, resulting in a net gain of half a million dollars. "With record bookings for the first quarter, and a 20% marketshare according to EDAC numbers for the fourth quarter of 2003, Mentor believes that we continue to outgrow the overall EDA market," said Gregory K. Hinckley, president of Mentor Graphics. "And, still being early in the deployment cycle of Calibre products, as well with a number of strong emerging businesses like TestKompress, cabling, and embedded software, we believe Mentor is positioned to outgrow the market for some time to come." Excluding its entry-level PCB product, PADS, Mentor won 146 new customers in the quarter, up over 20% from the first quarter of 2003. 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, Precision and PADS are registered trademarks and Expedition, Scalable Verification, VStation, FPGA Synthesis are 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, and to manage expenses, during the current slowdown in the electronics industry; (ii) changes in tax laws, regulations or enforcement practices in the jurisdictions where the Company does business; (iii) changes in accounting or reporting rules or interpretations, 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 March 31, ---------------------- 2004 2003 ---------- ---------- Revenues: System and software $ 94,521 $ 91,812 Service and support 69,884 67,528 ---------- ---------- Total revenues 164,405 159,340 ---------- ---------- Cost of revenues: System and software 4,562 4,815 Service and support 20,095 20,703 Amortization of purchased technology 2,466 2,209 ---------- ---------- Total cost of revenues 27,123 27,727 ---------- ---------- Gross margin 137,282 131,613 ---------- ---------- Operating expenses: Research and development 48,383 42,876 Marketing and selling 63,706 59,189 General and administration 18,562 18,983 Amortization of intangible assets 782 1,145 Special charges - 1,363 ---------- ---------- Total operating expenses 131,433 123,556 ---------- ---------- Operating income 5,849 8,057 Other income, net 1,230 487 Interest expense (4,455) (4,045) ---------- ---------- Income before income taxes 2,624 4,499 Income tax expense 446 900 ---------- ---------- Net income $ 2,178 $ 3,599 ========== ========== Net income per share: Basic $ .03 $ .05 ========== ========== Diluted $ .03 $ .05 ========== ========== Weighted average number of shares outstanding: Basic 69,803 67,335 ========== ========== Diluted 72,763 68,255 ========== ========== 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) - Special charges - - - ---------- --------- ---------- 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 446 552 998 ---------- --------- ---------- 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. MENTOR GRAPHICS CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except percentages and earnings per share data-Unaudited) Three Months Ended March 31, 2003 GAAP Adjustments Pro Forma ------------------------------------ Revenues: System and software $ 91,812 $ - $ 91,812 Service and support 67,528 - 67,528 ---------- --------- ---------- Total revenues 159,340 - 159,340 ---------- --------- ---------- Cost of revenues: System and software 4,815 - 4,815 Service and support 20,703 - 20,703 Amortization of purchased technology 2,209 (2,209)(1) - ---------- --------- ---------- Total cost of revenues 27,727 (2,209) 25,518 ---------- --------- ---------- Gross margin 131,613 2,209 133,822 ---------- --------- ---------- Gross margin percentage 82.6% 84.0% ---------- ---------- Operating expenses: Research and development 42,876 - 42,876 Marketing and selling 59,189 - 59,189 General and administration 18,983 - 18,983 Amortization of intangible assets 1,145 (1,145)(1) - Special charges 1,363 (1,363)(2) - ---------- --------- ---------- Total operating expenses 123,556 (2,508) 121,048 ---------- --------- ---------- Operating income 8,057 4,717 12,774 Other income, net 487 - 487 Interest expense (4,045) - (4,045) ---------- --------- ---------- Income before income taxes 4,499 4,717 9,216 Income tax expense 900 943 1,843 ---------- --------- ---------- Net income $ 3,599 $ 3,774 $ 7,373 ========== ========= ========== Net income per share: Basic $ .05 $ .11 ========== ========== Diluted $ .05 $ .11 ========== ========== Weighted average number of shares outstanding: Basic 67,335 67,335 ========== ========== Diluted 68,255 68,255 ========== ========== (1) Non-cash amortization of intangible assets. (2) Merger, acquisition, restructuring and other charges. MENTOR GRAPHICS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands - Unaudited) As of As of March December 31, 31, 2004 2003 ---------------------------------------------------------------------- Assets Current assets: Cash and short-term investments $ 80,183 $ 71,324 Trade accounts receivable, net 99,726 104,043 Term receivables, short-term 110,163 119,627 Prepaid expenses and other 29,755 27,164 Deferred income taxes 18,792 18,787 -------- -------- Total current assets 338,619 340,945 Property, plant and equipment, net 90,296 91,350 Term receivables, long-term 110,264 98,207 Intangibles, net 324,619 326,281 Other assets 87,188 83,905 -------- -------- Total assets $950,986 $940,688 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $ 9,662 $ 6,910 Accounts payable 16,207 18,105 Income taxes payable 35,407 35,122 Accrued payroll and related liabilities 52,630 80,484 Accrued liabilities 37,198 37,719 Deferred revenue 104,226 74,662 -------- -------- Total current liabilities 255,330 253,002 Long-term notes payable 286,390 286,768 Other long-term liabilities 21,844 23,161 -------- -------- Total liabilities 563,564 562,931 -------- -------- Minority Interest 3,383 3,391 Stockholders' equity: Common stock 301,300 294,180 Deferred compensation (1,561) (2,601) Retained earnings 60,470 57,800 Accumulated other comprehensive income 23,830 24,987 -------- -------- Total stockholders' equity 384,039 374,366 -------- -------- Total liabilities and stockholders' equity $950,986 $940,688 ======== ======== MENTOR GRAPHICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - Unaudited) Three Months Ended March 31, ------------------- 2004 2003 --------- --------- Operating Cash Flows: Net income $ 2,178 $ 3,599 Depreciation and amortization 10,327 12,124 Other adjustments to reconcile operating Cash (1,557) (1,488) Changes in working capital (2,435) (575) --------- --------- Net cash provided by operating activities 8,513 13,660 Net cash provided by (used in) investing activities (13,902) 218 Net cash provided by financing activities 10,354 1,899 Effect of exchange rate changes on cash And cash equivalents (79) (61) --------- --------- Net change in cash and cash equivalents 4,886 15,716 Cash and cash equivalents at beginning of period 68,333 34,969 --------- --------- Cash and cash equivalents at end of period $ 73,219 $ 50,685 ========= ========= MENTOR GRAPHICS CORPORATION SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION (In thousands, except for percentages and days sales outstanding-Unaudited) Three Months Ended March 31, --------------------------- 2004 2003 ----------- ----------- Geographic Revenue: Americas $ 65,030 $ 79,526 39.5% 49.9% Europe $ 43,821 $ 42,420 26.7% 26.6% Japan $ 38,795 $ 24,024 23.6% 15.1% Pac Rim $ 16,759 $ 13,370 10.2% 8.4% Other Data: Capital expenditures $ 4,820 $ 3,278 Days sales outstanding 115 89 CONTACT: Mentor Graphics Ryerson Schwark, 503-685-1462 ry_schwark@mentor.com or Dennis Weldon, 503-685-1462 dennis_weldon@mentor.com