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 October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP gross margin	$	199,975		$	161,727		$	507,100		$	476,126
Reconciling items to non-GAAP gross margin
Equity plan-related compensation		221			349			671			1,318
Amortization of purchased technology		3,299			3,089			10,428			8,965
Non-GAAP gross margin	$	203,495		$	165,165		$	518,199		$	486,409


	Three Months Ended October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP gross margin as a percent of total revenues		84	%		85	%		83	%		84	%
Non-GAAP adjustments detailed above		1	%		2	%		2	%		2	%
Non-GAAP gross margin as a percent of total revenues		85	%		87	%		85	%		86	%


	Three Months Ended October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP operating expenses	$	179,334		$	168,995		$	511,944		$	501,037
Reconciling items to non-GAAP operating expenses
Amortization of Frontline purchased technology and other identified intangible assets		(1,242	)		-			(3,105	)		-
Equity plan-related compensation		(4,686	)		(5,360	)		(15,920	)		(19,658	)
Amortization of other identified intangible assets		(1,445	)		(2,796	)		(5,742	)		(8,554	)
Special charges		(1,578	)		(5,993	)		(8,052	)		(15,890	)
Non-GAAP operating expenses	$	170,383		$	154,846		$	479,125		$	456,935


	Three Months Ended October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP operating income (loss)	$	20,641		$	(7,268	)	$	(4,844	)	$	(24,911	)
Reconciling items to non-GAAP operating income
Amortization of Frontline purchased technology and other identified intangible assets		1,242			-			3,105			-
Equity plan-related compensation		4,907			5,709			16,591			20,976
Amortization of purchased intangible assets:
Cost of revenues		3,299			3,089			10,428			8,965
Amortization of intangible assets		1,445			2,796			5,742			8,554
Special Charges		1,578			5,993			8,052			15,890
Non-GAAP operating income	$	33,112		$	10,319		$	39,074		$	29,474


	Three Months Ended October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP operating income (loss) as a percent of total revenues		9	%		-4	%		-1	%		-4	%
Non-GAAP adjustments detailed above		5	%		9	%		7	%		9	%
Non-GAAP operating income as a percent of total revenues		14	%		5	%		6	%		5	%


	Three Months Ended October 31,						Nine Months Ended October 31,
		2010			2009			2010			2009
GAAP other expense, net and interest expense	$	(4,530	)	$	(5,389	)	$	(14,739	)	$	(14,521	)
Reconciling items to non-GAAP other income (expense), net
and interest expense
Equity in losses of unconsolidated entities		-			170			271			738
Impairment of cost method investment		-			-			-			113
Amortization of debt discount and retirement costs		753			698			2,571			1,697
Non-GAAP other expense, net and interest expense	$	(3,777	)	$	(4,521	)	$	(11,897	)	$	(11,973	)

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