Mentor Graphics Expects Third Quarter Revenues to be Higher

7/25/2003 - Mentor Graphics Corporation (Nasdaq: MENT) 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:

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.

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