Net Income Per Share

3 Months Ended

Apr. 30, 2013

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share—We compute basic net income per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of common shares issuable upon vesting of restricted stock units, common shares issuable upon exercise of stock options, and purchase rights from ESPPs using the treasury stock method, and common shares issuable upon conversion of the convertible subordinated debentures, if dilutive.

The following provides the computation of basic and diluted net income per share:

Three months ended April 30,	2013		2012
Net income attributable to Mentor Graphics shareholders	$	205	$	28,182
Noncontrolling interest adjustment to redemption value	468		—
Adjusted net income attributable to Mentor Graphics shareholders	$	673	$	28,182
Weighted average common shares used to calculate basic net income per share	112,711		109,907
Employee stock options, restricted stock units, and employee stock purchase plan	3,040		3,336
Weighted average common and potential common shares used to calculate diluted net income per share	115,751		113,243
Net income per share attributable to Mentor Graphics shareholders:
Basic	$	0.01	$	0.26
Diluted	$	0.01	$	0.25

We excluded from the computation of diluted net income per share stock options and ESPP purchase rights to purchase 1,188 shares of common stock for the three months ended April 30, 2013 compared to 3,022 for the three months ended April 30, 2012. These stock options and ESPP purchase rights were determined to be anti-dilutive as a result of applying the treasury stock method.

We have increased the numerator of our basic and diluted earnings per share calculation by $468 for the three months ended April 30, 2013 for the adjustment to decrease the noncontrolling interest with redemption feature to its calculated redemption value at April 30, 2013, recorded directly to retained earnings. For the three months ended April 30, 2012, we excluded a similar adjustment from the calculation of basic and diluted earnings per share, as the amount was not significant.

We assume that the 4.00% Debentures will be settled in common stock for purposes of calculating the dilutive effect of the 4.00% Debentures. The effect of the assumed conversion of the 4.00% Debentures was anti-dilutive and therefore excluded from the computation of diluted net income per share.

The conversion features of the 4.00% Debentures, which allow for settlement in cash or a combination of cash and common stock, are further described in Note 6. “Notes Payable.”