Mentor Graphics Provides Outlook; Raises 2003 Guidance
WILSONVILLE, Ore.--(BUSINESS WIRE)--July 23, 2003--Mentor Graphics
Corporation (Nasdaq:MENT) today provided the outlook for the third
quarter and balance of 2003.
For third quarter 2003, Mentor expects revenues of approximately
$158 million and earnings before goodwill (EBG) of about $.05 per
share. GAAP earnings are expected to be $.01 per share. Gross margin
excluding amortization of intangibles is expected to be approximately
84 percent, while gross margin on a GAAP basis is expected to be in
the range of 82 to 83 percent. Operating expense excluding
amortization of intangibles should be between $125 and $126 million,
up about 5 percent sequentially as a result of acquisition-related
expenses and normal seasonal increases in employee compensation.
Operating expense on a GAAP basis is expected to be between $126 and
$127 million. Other income and expense (OI&E) will be about a $3
million expense reflecting a one-time charge associated with the
cancellation of Mentor's 2001 credit facility. The tax rate is
expected to remain at 20 percent and diluted shares outstanding are
expected to be 71 million.
For 2003, Mentor expects full-year revenues of about $665 million
and EBG of approximately $.60 per share, a $.05 per share increase to
prior guidance reflecting Mentor's increased confidence in the second
half outlook. Earnings on a GAAP basis are expected to be about $.41
per share. Gross margin and operating expense excluding amortization
of intangibles are expected to be approximately 84 percent and $495
million respectively. GAAP gross margin should be between 82 and 83
percent and GAAP operating expense should be about $500 million. OI&E
will be approximately $11 million expense. The tax rate is expected to
remain at 20 percent and diluted shares outstanding are expected to be
70 million.
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 3,500 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: 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. 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 is a registered trademark 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, semiconductor and personal computer 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
completion of customer contracts and the terms of delivery of
software, hardware and other services; (vi) 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; (vii) 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 (viii)
effects of the increasing volatility of foreign currency fluctuations
on the Company's business and operating results, and (ix) 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 July 23, 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
Q3 2003 Q3 2003
GAAP Adjustments Pro Forma
----------------------------------------
Revenue $158 - 158
Gross Margin 82% to 83% $2(a) 84%
Operating Expense $126 to $127 $1(b) $125 to $126
Other Income & Expense ($3) - ($3)
Per share impact of
adjustments $0.05
Per share tax effect of
reconciling items ($0.01)
----------
Diluted earnings per share $0.01 $0.04 $0.05
2003 2003
GAAP Adjustments Pro Forma
----------------------------------------
Revenue $665 - $665
Gross Margin 82% to 83% $9(a) 84%
Operating Expense $500 $5(b) $495
Special charges $3 $3(c) -
Other Income & Expense ($11) - ($11)
Per share impact of
adjustments $0.24
Per share tax effect of
reconciling items ($0.05)
----------
Diluted earnings per share $0.41 $0.19 $0.60
(a) Amortization of purchased technology (in cost of revenues)
(b) Amortization of intangible assets (in operating expense)
(c) Special charges may occur in future periods but amounts and timing
are unknown and therefore are not forecasted.
CONTACT: Mentor Graphics Corporation
Ry Schwark, 503-685-1462
ry_schwark@mentor.com
or
Dennis Weldon, 503-685-1462
dennis_weldon@mentor.com
