Mentor Graphics Reports Fiscal Third Quarter Results

MENTOR GRAPHICS CORPORATION
UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages)


	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP gross margin	$	153,126		$	159,191		$	450,497		$	501,148
Reconciling items to non-GAAP gross margin
Equity plan-related compensation		351			281			1,102			642
Prepaid royalty costs		-			-			103			-
Amortization of purchased intangible assets		3,810			2,139			9,040			7,513
Non-GAAP gross margin	$	157,287		$	161,611		$	460,742		$	509,303



	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP gross margin as a percent of total revenues		83	%		84	%		82	%		84	%
Non-GAAP adjustments detailed above		2	%		1	%		2	%		2	%
Non-GAAP gross margin as a percent of total revenues		85	%		85	%		84	%		86	%



	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP operating expenses	$	178,468		$	166,466		$	536,411		$	496,570
Reconciling items to non-GAAP operating expenses
Equity plan-related compensation		(6,647	)		(4,689	)		(20,031	)		(11,844	)
Amortization of other identified intangible assets		(3,129	)		(2,704	)		(8,099	)		(6,361	)
Rebalance, restructuring and other costs		(2,214	)		(1,115	)		(15,099	)		(5,160	)
In-process research and development		(6,790	)		-			(22,075	)		(4,100	)
Non-GAAP operating expenses	$	159,688		$	157,958		$	471,107		$	469,105



	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP operating income (loss)	$	(25,342	)	$	(7,275	)	$	(85,914	)	$	4,578
Reconciling items to non-GAAP operating income
Equity plan-related compensation		6,998			4,970			21,133			12,486
Prepaid royalty costs		-			-			103			-
Amortization of purchased and other identified intangible assets:
Cost of revenues		3,810			2,139			9,040			7,513
Amortization of intangible assets		3,129			2,704			8,099			6,361
Rebalance, restructuring and other costs		2,214			1,115			15,099			5,160
In-process research and development		6,790			-			22,075			4,100
Non-GAAP operating income (loss)	$	(2,401	)	$	3,653		$	(10,365	)	$	40,198



	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP operating margin as a percent of total revenues		-14	%		-4	%		-16	%		1	%
Non-GAAP adjustments detailed above		13	%		6	%		14	%		6	%
Non-GAAP operating margin as a percent of total revenues		-1	%		2	%		-2	%		7	%



	Three Months Ended						Nine Months Ended
	October 31, 2008			October 31, 2007			October 31, 2008			October 31, 2007
GAAP other income, net and interest expense	$	(2,576	)	$	(4,027	)	$	(7,533	)	$	(11,151	)
Reconciling items to non-GAAP other income, net and interest expense
Equity in losses of unconsolidated entities		445			-			1,088			-
Debt retirement costs		-			288			-			452
Non-GAAP other income, net and interest expense	$	(2,131	)	$	(3,739	)	$	(6,445	)	$	(10,699	)

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