Mentor Graphics Corporation (Nasdaq: MENT) today announced second quarter revenues of $119.5 million and earnings-per-share of $.09, before one-time charges. Mentor experienced continued strong growth in worldwide product bookings which were up almost 20%, and North American software bookings which were up about 40% from the quarter a year ago. Operating income before special charges nearly doubled from the second quarter of 1998 to $10.5 million. "While we are disappointed with our revenue, we took steps this quarter to strengthen our business with several key product announcements," said Walden C. Rhines, president and CEO of Mentor Graphics. "Our Calibre physical verification product portfolio which continues to take market share, grew with the availability of integrated optical and process correction software to improve the yields of customers' wafer fabs. We also shipped the second release of the industry's only integrated field-programmable gate-array (FPGA) solution, Packaged Power. Lastly, we continue to build our leadership in design reuse with the announcement of the QuickUse Development System and a multi- million dollar engagement from Toshiba for it." Earnings after charges were essentially break-even. One-time charges were related to a business divestiture and litigation settlement expenses. Revenue was affected by a re-alignment of the HDL division's distribution channels that occurred in the first quarter. Additionally, subscription-licensing contracts increased significantly for the quarter. Subscription licensing recognizes revenue over the life of the contract, which significantly reduces recognizable revenue in a current quarter. "We see multi-hundred million dollar opportunities in two key markets, physical verification and FPGA software," said Gregory K. Hinckley, CFO and COO of Mentor Graphics. "Our Calibre physical verification product revenue nearly doubled over the second quarter of 1998 in a market expected to be a couple of hundred million dollars by 2002. Additionally, we are focusing on growing our HDL division's leadership in FPGA software, expected to be a several hundred million dollar market by 2002." Mentor Graphics Corporation is a world leader in electronic hardware and software design solutions, providing products and consulting services for the world's largest electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of over $500 million and employs approximately 2,600 people worldwide. Company headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com. NOTE: Calibre and Mentor Graphics are registered trademarks of the Mentor companies. Packaged Power and QuickUse are trademarks of the Mentor companies. All other company or product names are the registered trademarks or trademarks of their respective owners. Certain statements contained in the press release 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 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; (ii) effects of the increasing volatility of foreign currency fluctuations on the Company's business and operating results; (iii) the overall instability of Asian or other economies, including changes in regional or worldwide economic or political conditions, government trade restrictions, limitations on repatriation of earnings, licensing and intellectual property rights protection; (iv) the timing of completion of customer contracts and the terms of delivery of software, hardware and other services and (v) the Company's ability to recruit and retain necessary personnel to research and develop, market, sell and service products. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998 Revenues: System and software $66,670 $63,854 $139,410 $122,060 Service and support 52,837 55,263 102,670 105,065 Total revenues 119,507 119,117 242,080 227,125 Cost of revenues: System and software 6,968 8,134 14,414 14,390 Service and support 21,960 24,925 44,342 49,472 Total cost of revenues 28,928 33,059 58,756 63,862 Gross margin 90,579 86,058 183,324 163,263 Operating expenses: Research and development 27,687 29,323 56,556 57,728 Marketing and selling 41,465 40,301 83,780 79,255 General and administration 10,890 10,781 23,786 21,286 Special charges 5,256 4,532 21,831 10,307 Total operating expenses 85,298 84,937 185,953 168,576 Operating income (loss) 5,281 1,121 (2,629) (5,313) Other loss, net (5,687) (90) (8,508) (3,213)
Income (loss) before
income taxes (406) 1,031 (11,137) (8,526) Income tax expense (benefit) (89) 227 (2,450) (1,876)
Net income (loss) $(317) $804 $(8,687) $(6,650) Net income (loss) per share:
Basic $.00 $.01 $(.13) $(.10)
Diluted $.00 $.01 $(.13) $(.10) Weighted average number of
shares outstanding:
Basic 66,355 65,009 66,225 64,802
Diluted 66,355 65,817 66,225 64,802
MENTOR GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
As of As of
June 30, 1999 Dec 31, 1998
(Unaudited) Assets Current assets: Cash and short-term investments $116,956 $137,585 Trade accounts receivable, net 117,100 125,844 Other receivables 7,467 7,575 Prepaid expenses and other 12,955 23,503 Deferred income taxes 10,759 10,937
Total current assets 265,237 305,444 Property, plant and equipment, net 87,213 95,214 Term receivables, long-term 45,453 36,430 Other assets, net 25,892 27,035
Total assets $423,795 $464,123 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings -- 24,000 Accounts payable 6,826 10,101 Income taxes payable 17,183 20,408 Accrued payroll and related liabilities 27,646 41,958 Accrued liabilities 35,748 33,295 Deferred revenue 43,747 36,484
Total current liabilities 131,150 166,246 Other long-term deferrals 1,295 1,425
Total liabilities 132,445 167,671 Minority interest 1,286 1,170 Stockholders' equity: Common stock 308,350 303,352 Accumulated deficit (30,933) (22,246) Accumulated other comprehensive income 12,647 14,176
Total stockholders' equity 290,064 295,282
Total liabilities and stockholders' equity $423,79 $464,123 CONTACT: Ryerson Schwark, Public and Investor Relations, 503-685- 1462, or ry_schwark@mentor.com, or Dennis Weldon, Treasurer, 503- 685-1462, or dennis_weldon@mentor.com, both of Mentor Graphics Corporation ots Original Text Service: Mentor Graphics Corporation Internet: http://www.newsaktuell.de Contact: Ryerson Schwark, Public and Investor Relations, 503-685-1462, or ry_schwark@mentor.com, or Dennis Weldon, Treasurer, 503-685-1462, or dennis_weldon@mentor.com, both of Mentor Graphics Corporation Web site: http://www.mentor.com