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Mentor Graphics Releases 2005 Guidance

WILSONVILLE, Ore., January 27, 2005 - Mentor Graphics Corporation (Nasdaq: MENT) today released the company's detailed 2005 earnings guidance which remains in-line with previously given guidance for 2005.

For the first quarter, the company expects revenue of approximately $177 million and pro forma earnings per share between $.05 and $.10. First quarter GAAP earnings per share are expected to be in the range of $.01 and $.06. Both the second and third quarters are expected to have revenue of about $180 million, pro forma earnings per share of $.10, and GAAP earnings per share of $.06. For the fourth quarter, revenue should be approximately $223 million, pro forma earnings per share of about $.50, and GAAP earnings per share of $.46.

For the full year 2005, guidance remains consistent with previous guidance. The company expects revenue of about $760 million, a 7% growth from 2004, within the previously guided range of 6% to 8%. Anticipated pro forma earnings per share are expected to range between $.75 and $.80, unchanged from previous guidance, while GAAP earnings per share are expected to range between $.60 and $.65.

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 over $700 million and employs approximately 3,850 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/.

In the calculation of pro forma earnings, gross margin and operating expenses, 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, as well as income tax expense in excess of a normalized 17% effective tax rate. 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 based on current expectations 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 successfully offer products and services that compete in the highly competitive EDA industry including the risk that the Company's technology, products or inventory become obsolete; (ii) the Company's ability to successfully integrate and manage its acquisitions, (iii) changes in accounting or reporting rules or interpretations, limitations on repatriation of earnings, licensing and intellectual property rights protection; (iv) changes in tax laws, regulations or enforcement practices where the Company does business; (v) effects of the increasing volatility of foreign currency fluctuations on the Company's business and operating results; (vi) 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 January 27, 2005
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

Q1 2005





Q1 2005

GAAP

Adjustments

Pro Forma

Revenue

$177

-

$177

Diluted earnings per share

$0.01-$0.06

$0.04

(a)

$0.05-$0.10

Q2 2005





Q2 2005

GAAP

Adjustments

Pro Forma

Revenue

$180

-

$180

Diluted earnings per share

$0.06

$0.04

(a)

$0.10

Q3 2005





Q3 2005

GAAP

Adjustments

Pro Forma

Revenue

$180

-

$180

Diluted earnings per share

$0.06

$0.04

(a)

$0.10

Q4 2005





Q4 2005

GAAP

Adjustments

Pro Forma

Revenue

$223

-

$223

Diluted earnings per share

$0.46

$0.04

(a)

$0.50

2005





2005

GAAP

Adjustments

Pro Forma

Revenue

$760

-

$760

Diluted earnings per share

$0.60 - $0.65

$0.15

(a)

$0.75 - $0.80

(a) GAAP to Pro Forma adjustments include amortization of intangibles and the tax effect on

these adjustments

For more information, please contact:

Ryerson Schwark
Public and Investor Relations
503.685.1462
ry_schwark@mentor.com

Dennis Weldon
Treasurer
503.685.1462
dennis_weldon@mentor.com