Although Cadence's management finds the non-GAAP measures useful in evaluating the performance of Cadence's business, reliance on these measures is limited because items excluded from such measures often have a material effect on Cadence's earnings and earnings per share calculated in accordance with GAAP. Therefore, Cadence's management typically uses the non-GAAP earnings and earnings per share measures, in conjunction with the GAAP earnings and earnings per share measures, to address these limitations.
Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.
Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence's current expectations on matters covered unless Cadence publishes a notice stating otherwise.
Beginning December 16, 2011, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company's current expectations. During the Quiet Period, the business outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. During the Quiet Period, Cadence's representatives will not comment on Cadence's business outlook, financial results or expectations. The Quiet Period will extend until the day when Cadence's Fourth Quarter 2011 Earnings Release is published, which is currently scheduled for February 1, 2012.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
October 1, 2011 and January 1, 2011
(In thousands)
(Unaudited)
October 1, 2011 January 1, 2011
--------------- ---------------
Current Assets:
Cash and cash equivalents $ 696,101 $ 557,409
Short-term investments 2,959 12,715
Receivables, net of allowances of $65 and
$7,604, respectively 152,433 191,893
Inventories 47,056 39,034
Prepaid expenses and other 59,910 78,355
--------------- ---------------
Total current assets 958,459 879,406
Property, plant and equipment, net of
accumulated depreciation of $650,786 and
$648,676, respectively 259,940 285,115
Goodwill 192,153 158,893
Acquired intangibles, net of accumulated
amortization of $84,725 and $105,158,
respectively 180,045 179,198
Installment contract receivables 9,178 23,380
2015 notes hedges 179,658 130,211
Other assets 81,244 75,913
--------------- ---------------
Total Assets $ 1,860,677 $ 1,732,116
=============== ===============
Current Liabilities:
Convertible notes $ 148,530 $ 143,258
Accounts payable and accrued liabilities 140,422 216,864
Current portion of deferred revenue 360,580 337,426
--------------- ---------------
Total current liabilities 649,532 697,548
--------------- ---------------
Long-Term Liabilities:
Long-term portion of deferred revenue 88,039 85,400
Convertible notes 420,982 406,404
2015 notes embedded conversion derivative 179,658 130,211
Other long-term liabilities 145,870 135,899
--------------- ---------------
Total long-term liabilities 834,549 757,914
--------------- ---------------
Stockholders' Equity 376,596 276,654
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,860,677 $ 1,732,116
=============== ===============
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended October 1, 2011 and October 2, 2010
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------- ----------------------
October 1, October 2, October 1, October 2,
2011 2010 2011 2010
---------- ---------- ---------- ----------
Revenue:
Product $ 163,966 $ 118,221 $ 463,723 $ 338,053
Services 29,102 23,945 86,384 75,123
Maintenance 99,389 95,768 291,722 273,760
---------- ---------- ---------- ----------
Total revenue 292,457 237,934 841,829 686,936
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of product 18,185 10,757 52,453 23,172
Cost of services 20,410 19,102 61,101 62,583
Cost of maintenance 11,223 9,960 32,837 31,839
Marketing and sales 79,914 76,065 235,292 222,340
Research and development 103,154 97,275 303,721 278,585
General and
administrative 24,041 25,081 68,720 64,973
Amortization of acquired
intangibles 3,786 4,459 12,750 9,701
Restructuring and other
charges (credits) (433) (1,682) 277 (3,073)
---------- ---------- ---------- ----------
Total costs and
expenses 260,280 241,017 767,151 690,120
---------- ---------- ---------- ----------
Income (loss) from
operations 32,177 (3,083) 74,678 (3,184)
Interest expense (10,830) (10,476) (32,584) (25,879)
Other income (expense),
net 7,244 (2,907) 20,107 (33)
---------- ---------- ---------- ----------
Income (loss) before
provision (benefit)
for income taxes 28,591 (16,466) 62,201 (29,096)
Provision (benefit) for
income taxes 485 (143,219) 864 (192,671)
---------- ---------- ---------- ----------
Net income $ 28,106 $ 126,753 $ 61,337 $ 163,575
========== ========== ========== ==========
Basic net income per share $ 0.11 $ 0.49 $ 0.23 $ 0.63
========== ========== ========== ==========
Diluted net income per
share $ 0.10 $ 0.48 $ 0.23 $ 0.62
========== ========== ========== ==========
Weighted average common
shares outstanding - basic 264,723 258,606 263,149 261,122
========== ========== ========== ==========
Weighted average common
shares outstanding -
diluted 270,741 263,302 270,068 265,383
========== ========== ========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 1, 2011 and October 2, 2010
(In thousands)
(Unaudited)
Nine Months Ended
----------------------
October 1, October 2,
2011 2010
---------- ----------
Cash and Cash Equivalents at Beginning of Period $ 557,409 $ 569,115
---------- ----------
Cash Flows from Operating Activities:
Net income 61,337 163,575
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 68,934 64,795
Amortization of debt discount and fees 22,068 18,331
Loss on extinguishment of debt - 5,321
Stock-based compensation 31,589 32,817
Loss from equity method investments 104 105
Gain on investments, net (19,324) (5,133)
Gain on sale of property, plant and equipment - (799)
Write-down of investment securities - 1,500
Non-cash restructuring and other charges 202 272
Impairment of property, plant and equipment - 491
Deferred income taxes (4,741) (70,617)
Provisions (recoveries) for losses (gains) on
trade and installment contract receivables (6,596) (13,339)
Other non-cash items 3,689 1,987
Changes in operating assets and liabilities,
net of effect of acquired businesses:
Receivables (8,906) (44,422)
Installment contract receivables 72,635 97,818
Inventories (9,767) (16,005)
Prepaid expenses and other 19,718 (23,828)
Other assets 3,718 5,396
Accounts payable and accrued liabilities (71,832) 3,308
Deferred revenue 20,245 45,229
Other long-term liabilities (4,868) (124,673)
---------- ----------
Net cash provided by operating activities 178,205 142,129
---------- ----------
Cash Flows from Investing Activities:
Proceeds from the sale of available-for-sale
securities 9,588 -
Proceeds from the sale of long-term investments 4,824 10,276
Proceeds from the sale of property, plant and
equipment - 900
Purchases of property, plant and equipment (17,703) (28,940)
Purchases of software licenses - (2,706)
Investment in venture capital partnerships and
equity investments (608) (3,000)
Cash paid in business combinations and asset
acquisitions, net of cash acquired (44,052) (256,117)
---------- ----------
Net cash used for investing activities (47,951) (279,587)
---------- ----------
Cash Flows from Financing Activities:
Principal payments on receivable sale financing (2,829) (3,540)
Proceeds from issuance of 2015 Notes - 350,000
Payment of 2011 Notes and 2013 Notes - (187,150)
Payment of 2015 Notes issuance costs - (10,419)
Purchase of 2015 Notes Hedges - (76,635)
Proceeds from termination of 2011 and 2013 Notes
Hedges - 280
Proceeds from sale of 2015 Warrants - 37,450
Tax effect related to employee stock transactions
allocated to equity 2,897 (9,624)
Proceeds from issuance of common stock 16,994 13,269
Stock received for payment of employee taxes on
vesting of restricted stock (9,926) (5,875)
Purchases of treasury stock - (39,997)
---------- ----------
Net cash provided by financing activities 7,136 67,759
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents 1,302 9,619
---------- ----------
Increase (decrease) in cash and cash equivalents 138,692 (60,080)
---------- ----------
Cash and Cash Equivalents at End of Period $ 696,101 $ 509,035
========== ==========
Cadence Design Systems, Inc.
As of October 26, 2011
Impact of Non-GAAP Adjustments on Forward Looking
Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
December 31, 2011 December 31, 2011
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net income per share on a
GAAP basis $0.08 to $0.10 $0.31 to $0.33
Amortization of acquired
intangibles 0.03 0.10
Stock-based compensation
expense 0.04 0.16
Non-qualified deferred
compensation expenses - 0.01
Shareholder litigation costs - -
Executive and other employee
severance costs - 0.01
Integration and
acquisition-related costs - 0.01
Amortization of debt discount 0.02 0.10
Other income or expense related
to investments and
non-qualified deferred
compensation plan assets* - (0.07)
Acquisition-related income tax
benefit - (0.02)
Income tax benefit of IRS
settlement - (0.02)
Income tax effect of non-GAAP
adjustments (0.03) (0.11)
------------------- -------------------
Diluted net income per share on a
non-GAAP basis $0.14 to $0.16 $0.48 to $0.50
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Cadence Design Systems, Inc.
As of October 26, 2011
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
December 31, 2011 December 31, 2011
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net income on a GAAP basis $21 to $27 $83 to $89
Amortization of acquired
intangibles 7 27
Stock-based compensation
expense 12 43
Non-qualified deferred
compensation expenses - 3
Shareholder litigation costs - 1
Executive and other employee
severance costs - 3
Integration and
acquisition-related costs - 3
Amortization of debt discount 6 26
Other income or expense related
to investments and
non-qualified deferred
compensation plan assets* - (19)
Acquisition-related income tax
benefit - (5)
Income tax benefit of IRS
settlement - (6)
Income tax effect of non-GAAP
adjustments (8) (29)
------------------- -------------------
Net income on a non-GAAP basis $38 to $44 $130 to $136
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2010 2011
---------------------------- ----------------
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3
---- ---- ---- ---- ---- ---- ---- ----
Americas 40% 46% 43% 45% 43% 44% 47% 44%
Europe 22% 23% 20% 23% 22% 21% 20% 21%
Japan 23% 14% 20% 14% 18% 19% 17% 18%
Asia 15% 17% 17% 18% 17% 16% 16% 17%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2010 2011
---------------------------- ----------------
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3
---- ---- ---- ---- ---- ---- ---- ----
Functional Verification
and Design IP 22% 26% 25% 22% 24% 28% 33% 30%
Digital IC Design 21% 21% 23% 26% 23% 24% 21% 22%
Custom IC Design 27% 26% 24% 27% 26% 20% 22% 23%
Design for Manufacturing 9% 6% 8% 7% 7% 8% 6% 6%
System Interconnect 9% 10% 10% 8% 9% 10% 8% 9%
Services & Other 12% 11% 10% 10% 11% 10% 10% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
