Mentor Graphics Reports Fiscal Q4 Results

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except earnings per share data)
 
 
Three Months Ended January 31, Twelve Months Ended January 31,
  2017   2016     2017   2016  
Revenues:
System and software $ 355,386 $ 213,790 $ 794,450 $ 700,621
Service and support   122,582   123,477     488,017   480,367  
Total revenues   477,968   337,267     1,282,467   1,180,988  

Cost of revenues: (1)

System and software 10,875 11,898 48,250

48,330

Service and support 37,740 33,750 138,650 134,025
Amortization of purchased technology   1,928   1,807     7,328   7,303  
Total cost of revenues   50,543   47,455     194,228     189,658  
Gross profit   427,425   289,812     1,088,239   991,330  
Operating expenses:
Research and development (2) 126,748 103,203 412,309 381,440
Marketing and selling (3) 109,309 88,487 369,125 351,344
General and administration (4) 28,584 17,555 85,361 73,853
Equity in earnings of Frontline (1,123 ) (1,873 ) (3,434 ) (5,849 )
Amortization of intangible assets (5) 1,492 1,899 6,028 8,716
Special charges (6)   9,833   1,087     15,769   45,081  
Total operating expenses   274,843   210,358     885,158   854,585  
Operating income: 152,582 79,454 203,081 136,745
Other income, net (7) 454 763 2,249 1,612
Interest expense (8)   (5,503 )   (5,047 )   (20,474 )   (19,428 )
Income before income tax 147,533 75,170 184,856 118,929
Income tax expense (9)   24,430   14,990     29,990   24,753  
Net income 123,103 60,180 154,866 94,176
Less: Loss attributable to noncontrolling interest (10)   -   (91 )   -   (2,101 )
Net income attributable to Mentor Graphics
shareholders $ 123,103 $ 60,271   $ 154,866 $ 96,277  
Net income per share attributable to Mentor Graphics
shareholders:
Basic a $ 1.12 $ 0.52   $ 1.42 $ 0.83  
Diluted a,b $ 1.05 $ 0.51   $ 1.37 $ 0.81  
Weighted average number of shares outstanding:
Basic   109,845   116,442     108,795   116,701  
Diluted   119,171   118,066     114,322   119,263  
 
a We have increased the numerator of our basic and diluted earnings per share calculation for the adjustment of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings, as follows:
 
 
$ 258  
 
b We have increased the numerator of our diluted earnings per share calculation by $2,074 for the three months ended January 31, 2017 and the twelve months ended January 31, 2017 for the dilutive effect of our convertible debt. Corresponding dilutive shares of 5,671 for the three months ended January 31, 2017 and 2,681 for the twelve months ended January 31, 2017 are included in the diluted weighted average number of shares outstanding.
 
 
Refer to following page for a description of footnotes.
 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands)
 
 
Listed below are the items included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. Items are further described under "Discussion of Non-GAAP Financial Measures."
 
 
 
Three Months Ended January 31,

Twelve Months Ended January 31,

  2017   2016   2017

 

  2016  
(1) Cost of revenues:
Equity plan-related compensation $ 808 $ 626 $ 3,085 $ 2,607
Amortization of purchased technology   1,928   1,807     7,328   7,303  
$ 2,736 $ 2,433   $ 10,413 $ 9,910  
 
(2) Research and development:

Equity plan-related compensation

$ 4,607 $ 3,994   $ 18,205 $ 16,207  
 
(3) Marketing and selling:
Equity plan-related compensation $ 3,662 $ 2,309   $ 12,274 $ 9,623  
 
(4) General and administration:

Equity plan-related compensation

$ 4,198 $ 2,679   $ 13,229 $ 12,060  
 
(5) Amortization of intangible assets:
Amortization of other identified intangible assets $ 1,492 $ 1,899   $ 6,028 $ 8,716  
 
(6) Special charges:
Rebalance, restructuring, certain litigation, and other costs $ 9,833 $ 1,087   $ 15,769 $ 45,081  
 
(7) Other income, net:

Net income (loss) of unconsolidated entities

$ (81 ) $ (39 ) $ - $ (6 )
 
(8) Interest expense:

Amortization of original issuance debt discount

$ 1,818 $ 1,693   $ 7,081 $ 6,593  
 
(9) Income tax expense:

Non-GAAP income tax effects

$ (8,971 ) $ (2,343 ) $ (20,902 ) $ (18,399 )
 
(10) Loss attributable to noncontrolling interest:
Amortization of intangible assets, equity-plan related
compensation, and income tax effects $ - $ -   $ - $ (638 )
 

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