Cadence Reports Fourth Quarter and Fiscal Year 2014 Financial Results
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Cadence Reports Fourth Quarter and Fiscal Year 2014 Financial Results

SAN JOSE, Calif., Feb. 4, 2015 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2014.

Cadence reported fourth quarter 2014 revenue of $423 million, compared to revenue of $377 million reported for the same period in 2013.  On a GAAP basis, Cadence recognized net income of $65 million, or $0.21 per share on a diluted basis, in the fourth quarter of 2014, compared to net income of $38 million, or $0.13 per share on a diluted basis, for the same period in 2013.  Revenue for 2014 totaled $1.581 billion, compared to revenue of $1.460 billion for 2013.  Net income for 2014 was $159 million, or $0.52 per share on a diluted basis, compared to net income of $164 million, or $0.56 per share on a diluted basis, for 2013.

Using the non-GAAP measure defined below, net income in the fourth quarter of 2014 was $84 million, or $0.27 per share on a diluted basis, as compared to net income of $67 million, or $0.23 per share on a diluted basis, for the same period in 2013.  For 2014, non-GAAP net income was $287 million, or $0.94 per share on a diluted basis, compared to non-GAAP net income of $252 million, or $0.86 per share on a diluted basis, in 2013.

"Fiscal 2014 was a year of excellent progress for our system design enablement strategy for end-product design, as we delivered a growing set of innovative solutions to our expanding systems and SoC customer base," said Lip-Bu Tan, president and chief executive officer.  "Our digital and signoff solutions gained momentum with market-shaping customers, and our IP business had a breakout year with revenue growth of nearly 40 percent.  As we look ahead, we are confident that our strategy and commitment to innovation will continue to drive meaningful customer wins."

"Our focus on execution drove solid financial results in Q4 and throughout 2014," added Geoff Ribar, senior vice president and chief financial officer.  "We are committed to driving efficiency, productivity and sustainable profitability over the long-term as we work to meet the needs of our ongoing business, invest in future growth opportunities and return cash to shareholders under our recently expanded stock repurchase program."

Business Outlook

For the first quarter of 2015, the company expects total revenue in the range of $405 million to $415 million.  First quarter GAAP net income per diluted share is expected to be in the range of $0.08 to $0.10.  Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.20 to $0.22.

For 2015, the company expects total revenue in the range of $1.680 billion to $1.720 billion.  On a GAAP basis, net income per diluted share for 2015 is expected to be in the range of $0.49 to $0.61.  Using the non-GAAP measure defined below, net income per diluted share for 2015 is expected to be in the range of $0.94 to $1.06.

For 2015, the company is forecasting a non-GAAP income tax rate of 23 percent, down from 26 percent used in fiscal 2014, based on forecasted increases in foreign earnings that are expected to lower Cadence's long-term non-GAAP effective income tax rate.

A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is included in this release.

Audio Webcast Scheduled

Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a fourth quarter and fiscal year 2014 financial results audio webcast today, February 4, 2015, at 2 p.m. (Pacific) / 5 p.m. (Eastern).  Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast.  An archive of the webcast will be available starting February 4, 2015 at 5 p.m. (Pacific) and ending March 20, 2015 at 5 p.m. (Pacific).  Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

Cadence enables global electronic design innovation and plays an essential role in the creation of today's integrated circuits and electronics.  Customers use Cadence® software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems.  The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry.  More information about the company and its products and services is available at www.cadence.com.

Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding Cadence's fourth quarter and fiscal year 2014 financial results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, are or include forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.  These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence's control, including, among others: (i) Cadence's ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence's efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence's products; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence's products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence's efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (x) events that affect the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.

For a detailed discussion of these and other cautionary statements related to Cadence's business, please refer to Cadence's filings with the Securities and Exchange Commission.  These include Cadence's most recent reports on Form 10-K and Form 10-Q, including Cadence's future filings.

GAAP to Non-GAAP Reconciliation

To supplement Cadence's financial results presented on a generally accepted accounting principles, or GAAP, basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence's performance.  One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, special charges (comprised of costs related to a voluntary retirement program and executive severance costs), investment gains or losses, income or expenses related to Cadence's non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence's core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence's management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company's core business operations and therefore provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations, facilitates comparisons to the company's historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management.  Cadence's management also uses non-GAAP net income internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP.  Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results.  Investors are encouraged to look at the GAAP results as the best measure of financial performance.

The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

Net Income Reconciliation

 

Three Months Ended

   

January 3, 2015

 

December 28, 2013

   

(unaudited)

(in thousands)

           

Net income on a GAAP basis

 

$

65,030

   

$

37,705

 

Amortization of acquired intangibles

 

17,559

   

12,422

 

Stock-based compensation expense

 

22,974

   

18,798

 

Non-qualified deferred compensation expenses

 

409

   

1,256

 

Restructuring and other charges (credits)

 

(1,145)

   

15,405

 

Acquisition and integration-related costs

 

4,280

   

8,903

 

Special charges*

 

   

216

 

Amortization of debt discount

 

4,782

   

5,515

 

Other income or expense related to investments and non-qualified deferred compensation plan assets**

 

(1,484)

   

(1,553)

 

Income tax effect of non-GAAP adjustments

 

(27,987)

   

(31,775)

 

Net income on a non-GAAP basis

 

$

84,418

   

$

66,892

 
   

*

Comprised of costs related to executive severance costs

   

**

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 or expense.

 

Net Income Reconciliation

 

Years Ended

   

January 3, 2015

 

December 28, 2013

   

(unaudited)

(in thousands)

           

Net income on a GAAP basis

 

$

158,898

   

$

164,243

 

Amortization and sale of acquired intangibles

 

60,924

   

44,134

 

Stock-based compensation expense

 

83,792

   

66,285

 

Non-qualified deferred compensation expenses

 

3,415

   

3,293

 

Restructuring and other charges

 

10,252

   

17,999

 

Acquisition and integration-related costs

 

24,620

   

31,972

 

Special charges*

 

10,816

   

961

 

Amortization of debt discount

 

17,602

   

22,315

 

Other income or expense related to investments and non-qualified deferred compensation plan assets**

 

(4,629)

   

(5,280)

 

Income tax benefit due to a release of an uncertain tax position

 

   

(33,719)

 

Income tax effect of non-GAAP adjustments

 

(78,723)

   

(60,104)

 

Net income on a non-GAAP basis

 

$

286,967

   

$

252,099

 
   

*

Comprised of costs related to a voluntary retirement program and executive severance costs

   

**

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 or expense.

 

Diluted Net Income per Share Reconciliation

 

Three Months Ended

   

January 3, 2015

 

December 28, 2013

   

(unaudited)

(in thousands, except per share data)

           

Diluted net income per share on a GAAP basis

 

$

0.21

   

$

0.13

 

Amortization of acquired intangibles

 

0.06

   

0.04

 

Stock-based compensation expense

 

0.07

   

0.06

 

Non-qualified deferred compensation expenses

 

   

0.01

 

Restructuring and other charges (credits)

 

   

0.05

 

Acquisition and integration-related costs

 

0.01

   

0.03

 

Special charges*

 

   

 

Amortization of debt discount

 

0.01

   

0.02

 

Other income or expense related to investments and non-qualified deferred compensation plan assets**

 

   

 

Income tax effect of non-GAAP adjustments

 

(0.09)

   

(0.11)

 

Diluted net income per share on a non-GAAP basis

 

$

0.27

   

$

0.23

 

Shares used in calculation of diluted net income per share — GAAP***

 

310,273

   

294,663

 

Shares used in calculation of diluted net income per share — non-GAAP***

 

310,273

   

294,663

 
   

*

Comprised of costs related to executive severance costs

   

**

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 or expense.

   

***

Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

 

Diluted Net Income per Share Reconciliation

 

Years Ended

   

January 3, 2015

 

December 28, 2013

   

(unaudited)

(in thousands, except per share data)

           

Diluted net income per share on a GAAP basis

 

$

0.52

   

$

0.56

 

Amortization and sale of acquired intangibles

 

0.20

   

0.15

 

Stock-based compensation expense

 

0.27

   

0.23

 

Non-qualified deferred compensation expenses

 

0.01

   

0.01

 

Restructuring and other charges

 

0.03

   

0.06

 

Acquisition and integration-related costs

 

0.08

   

0.11

 

Special charges*

 

0.04

   

 

Amortization of debt discount

 

0.06

   

0.08

 

Other income or expense related to investments and non-qualified deferred compensation plan assets**

 

(0.01)

   

(0.02)

 

Income tax benefit due to a release of an uncertain tax position

 

   

(0.11)

 

Income tax effect of non-GAAP adjustments

 

(0.26)

   

(0.21)

 

Diluted net income per share on a non-GAAP basis

 

$

0.94

   

$

0.86

 

Shares used in calculation of diluted net income per share — GAAP***

 

306,775

   

294,564

 

Shares used in calculation of diluted net income per share — non-GAAP***

 

306,775

   

294,564

 
   

*

Comprised of costs related to a voluntary retirement program and executive severance costs

   

**

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 or expense.

   

***

Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

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 March 20, 2015, 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 first quarter 2015 earnings release is published, which is currently scheduled for April 27, 2015.

For more information, please contact:
Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
Email Contact

Media and Industry Analysts
Mark Plungy
Cadence Design Systems, Inc.
408-944-7039
Email Contact

 

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

January 3, 2015 and December 28, 2013

(In thousands)

(Unaudited)

                     
               

January 3,
2015

 

December 28,
2013

                     

Current assets:

             
 

Cash and cash equivalents

   

$              932,161

 

$           536,260

 

Short-term investments

   

90,445

 

96,788

 

Receivables, net

     

122,492

 

107,624

 

Inventories

       

56,394

 

50,220

 

2015 notes hedges

     

523,930

 

306,817

 

Prepaid expenses and other

   

126,313

 

123,382

   

Total current assets

   

1,851,735

 

1,221,091

                     

Property, plant and equipment, net of accumulated

   
 

depreciation of $552,551 and $568,494, respectively

230,112

 

238,715

Goodwill

       

553,767

 

456,905

Acquired intangibles, net of accumulated amortization of 

   
 

$154,814 and $139,820, respectively

360,932

 

311,693

Long-term receivables

     

3,644

 

3,672

Other assets

       

209,366

 

196,525

Total assets

       

$           3,209,556

 

$        2,428,601

                     

Current liabilities:

           
 

Convertible notes

     

$              342,499

 

$           324,826

 

2015 notes embedded conversion derivative

523,930

 

306,817

 

Accounts payable and accrued liabilities

225,375

 

216,594

 

Current portion of deferred revenue

301,287

 

299,973

   

Total current liabilities

   

1,393,091

 

1,148,210

                     

Long-term liabilities:

           
 

Long-term portion of deferred revenue

54,726

 

52,850

 

Long-term debt

     

348,676

 

-

 

Other long-term liabilities

   

79,489

 

71,436

   

Total long-term liabilities

 

482,891

 

124,286

                     

Stockholders' equity

     

1,333,574

 

1,156,105

Total liabilities and stockholders' equity

$           3,209,556

 

$        2,428,601

 

                         

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months and Years Ended January 3, 2015 and December 28, 2013

(In thousands, except per share amounts)

(Unaudited)

                         
                         
           

Three Months Ended

 

Years Ended

           

January 3,
2015

 

December 28,
2013

 

January 3,
2015

 

December 28,
2013

                         

Revenue:

                 
 

Product and maintenance

$      393,223

 

$      350,079

 

$  1,479,151

 

$  1,357,934

 

Services

   

29,875

 

26,643

 

101,781

 

102,182

                         
   

Total revenue

 

423,098

 

376,722

 

1,580,932

 

1,460,116

                         

Costs and expenses:

               
 

Cost of product and maintenance

39,475

 

41,757

 

156,333

 

132,245

 

Cost of services

 

18,640

 

17,274

 

67,373

 

67,956

 

Marketing and sales

 

102,367

 

94,384

 

399,688

 

378,157

 

Research and development

155,124

 

135,465

 

603,006

 

534,022

 

General and administrative

26,939

 

29,481

 

113,619

 

121,314

 

Amortization of acquired intangibles

6,912

 

5,157

 

24,017

 

19,416

 

Restructuring and other charges (credits)

(1,145)

 

15,405

 

10,252

 

17,999

                         
   

Total costs and expenses

348,312

 

338,923

 

1,374,288

 

1,271,109

                         
     

Income from operations

74,786

 

37,799

 

206,644

 

189,007

                         
 

Interest expense

 

(11,961)

 

(9,208)

 

(34,121)

 

(37,581)

 

Other income, net

 

3,879

 

842

 

8,479

 

7,570

                         
     

Income before provision (benefit) for income taxes

66,704

 

29,433

 

181,002

 

158,996

                         
 

Provision (benefit) for income taxes

1,674

 

(8,272)

 

22,104

 

(5,247)

                         
     

Net income 

 

$        65,030

 

$        37,705

 

$     158,898

 

$     164,243

                         
                         

Net income per share - basic

$            0.23

 

$            0.13

 

$           0.56

 

$           0.59

                         

Net income per share - diluted

$            0.21

 

$            0.13

 

$           0.52

 

$           0.56

                         

Weighted average common shares outstanding - basic

283,928

 

280,083

 

283,349

 

277,796

                         

Weighted average common shares outstanding - diluted

310,273

 

294,663

 

306,775

 

294,564

 

 

Cadence Design Systems, Inc. 

Condensed Consolidated Statements of Cash Flows

For the Years Ended January 3, 2015 and December 28, 2013

(In thousands)

(Unaudited)

 
         
   

Years Ended

   

January 3,

 

December 28,

   

2015

 

2013

         

Cash and cash equivalents at beginning of year

 

$      536,260

 

$    726,357

Cash flows from operating activities:

       

   Net income

 

158,898

 

164,243

   Adjustments to reconcile net income to net cash provided by operating activities:

      Depreciation and amortization

 

115,634

 

98,308

      Amortization of debt discount and fees

 

20,529

 

25,384

      Stock-based compensation

 

83,792

 

66,285

      Gain on investments, net

 

(4,707)

 

(5,311)

      Deferred income taxes

 

12,478

 

(2,366)

      Other non-cash items

 

6,854

 

3,932

      Changes in operating assets and liabilities, net of effect of acquired businesses:

         Receivables

 

(17,925)

 

(3,609)

         Inventories

 

(11,708)

 

(14,594)

         Prepaid expenses and other

 

(2,501)

 

30,368

         Other assets

 

(42,181)

 

(2,530)

         Accounts payable and accrued liabilities

 

3,856

 

41,727

         Deferred revenue

 

(11,860)

 

2,506

         Other long-term liabilities

 

5,563

 

(36,738)

            Net cash provided by operating activities

 

316,722

 

367,605

         

Cash flows from investing activities:

       

  Purchases of available-for-sale securities

 

(124,165)

 

(111,702)

  Proceeds from the sale of available-for-sale securities

85,384

 

77,621

  Proceeds from the maturity of available-for-sale securities

46,612

 

38,706

  Proceeds from the sale of long-term investments

1,085

 

6,234

  Purchases of property, plant and equipment

 

(39,810)

 

(44,929)

  Cash paid in business combinations and asset acquisitions, net of cash acquired

 

(167,121)

 

(392,825)

           Net cash used for investing activities

 

(198,015)

 

(426,895)

         

Cash flows from financing activities:

       

  Proceeds from issuance of debt

 

348,649

 

-

  Proceeds from revolving credit facility

 

100,000

 

100,000

  Payment on revolving credit facility

 

(100,000)

 

(100,000)

  Payment of convertible notes

 

(1)

 

(144,639)

  Payment of convertible notes embedded conversion derivative liability

(1)

 

-

  Proceeds from convertible notes hedges

 

1

 

-

  Principal payments on receivable financing

 

-

 

(2,526)

  Payment of debt issuance costs

 

(6,500)

 

-

  Payment of acquisition-related contingent consideration

(1,835)

 

(677)

  Tax effect related to employee stock transactions allocated to equity

7,583

 

9,034

  Proceeds from issuance of common stock 

 

65,913

 

42,657

  Stock received for payment of employee taxes on vesting of restricted stock

(24,727)

 

(20,140)

  Payments for repurchases of common stock

 

(100,117)

 

-

           Net cash provided by (used for) financing activities

288,965

 

(116,291)

         

Effect of exchange rate changes on cash and cash equivalents

(11,771)

 

(14,516)

         

Increase (decrease) in cash and cash equivalents 

395,901

 

(190,097)

         

Cash and cash equivalents at end of year

 

$      932,161

 

$    536,260

 

Cadence Design Systems, Inc.

As of February 4, 2015

Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share

(Unaudited)

         
         
   

Three Months Ending

 

Year Ending

   

April 4, 2015

 

January 2, 2016

   

Forecast

 

Forecast

         

Diluted net income per share on a GAAP basis

 $0.08 to $0.10 

 

 $0.49 to $0.61 

         
 

Amortization of acquired intangibles

0.05

 

0.21

 

Stock-based compensation expense

0.07

 

0.31

 

Acquisition and integration-related costs

0.01

 

0.03

 

Amortization of debt discount

0.02

 

0.02

 

Income tax effect of non-GAAP adjustments

(0.03)

 

(0.12)

         

Diluted net income per share on a non-GAAP basis

 $0.20 to $0.22 

 

 $0.94 to $1.06 

         
         
         
         
         

Cadence Design Systems, Inc.

As of February 4, 2015

Impact of Non-GAAP Adjustments on Forward Looking Net Income 

(Unaudited)

         
         
   

Three Months Ending

 

Year Ending

   

April 4, 2015

 

January 2, 2016

($ in millions)

Forecast

 

Forecast

         

Net income on a GAAP basis

 $26 to $33 

 

 $153 to $190 

         
 

Amortization of acquired intangibles

16

 

64

 

Stock-based compensation expense

22

 

95

 

Acquisition and integration-related costs

3

 

8

 

Amortization of debt discount

5

 

7

 

Income tax effect of non-GAAP adjustments

(10)

 

(36)

         

Net income on a non-GAAP basis

 $62 to $69 

 

 $291 to $328 

 

Cadence Design Systems, Inc.

           

(Unaudited)

           
                         
                         

Revenue Mix by Geography (% of Total Revenue)

                 
                         
   

2013

 

2014

GEOGRAPHY

 

 Q1 

 Q2 

 Q3 

 Q4 

 Year 

 

 Q1 

 Q2 

 Q3 

 Q4 

 Year 

                         

 Americas 

 

44%

45%

48%

47%

46%

 

45%

44%

46%

47%

45%

 Asia 

 

19%

21%

20%

19%

20%

 

23%

23%

22%

22%

23%

 Europe, Middle East and Africa 

 

22%

21%

20%

20%

21%

 

20%

22%

21%

21%

21%

 Japan 

 

15%

13%

12%

14%

13%

 

12%

11%

11%

10%

11%

Total

 

100%

100%

100%

100%

100%

 

100%

100%

100%

100%

100%

                         
                         
                         

Revenue Mix by Product Group (% of Total Revenue)

               
                         
   

2013

 

2014

PRODUCT GROUP

 

 Q1 

 Q2 

 Q3 

 Q4 

 Year 

 

 Q1 

 Q2 

 Q3 

 Q4 

 Year 

                         

 Functional Verification, including Emulation Hardware 

22%

22%

24%

25%

23%

 

23%

21%

23%

21%

22%

 Digital IC Design and Signoff 

 

33%

31%

29%

29%

30%

 

30%

30%

29%

28%

29%

 Custom IC Design 

 

28%

28%

28%

26%

27%

 

27%

28%

27%

28%

27%

 System Interconnect and Analysis 

 

10%

11%

10%

10%

11%

 

10%

11%

10%

11%

11%

 IP 

 

7%

8%

9%

10%

9%

 

10%

10%

11%

12%

11%

Total

 

100%

100%

100%

100%

100%

 

100%

100%

100%

100%

100%

 

Cadence Design Systems, Inc.

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

For the Three Months Ended January 3, 2015

(In thousands)

(Unaudited)

                         
               

Three Months Ended

       
               

January 3, 2015

       
           

GAAP

 

Adjustments

 

Non-GAAP

   
                         

Revenue:

                   
 

Product and maintenance

$         393,223

 

$                -

 

$       393,223

   
 

Services

   

29,875

 

-

 

29,875

   
                         
   

Total revenue

 

423,098

 

-

 

423,098

   
                         

Costs and expenses:

               
 

Cost of product and maintenance

39,475

 

(11,297)

 (A) 

28,178

   
 

Cost of services

 

18,640

 

(950)

 (A) 

17,690

   
 

Marketing and sales

 

102,367

 

(5,924)

 (A) 

96,443

   
 

Research and development

155,124

 

(15,795)

 (A) 

139,329

   
 

General and administrative

26,939

 

(4,344)

 (A) 

22,595

   
 

Amortization of acquired intangibles

6,912

 

(6,912)

 (A) 

-

   
 

Restructuring and other charges (credits)

(1,145)

 

1,145

 

-

   
                         
   

Total costs and expenses

348,312

 

(44,077)

 

304,235

   
                         
     

Income from operations

74,786

 

44,077

 

118,863

   
                         
 

Interest expense

 

(11,961)

 

4,782

 (B) 

(7,179)

   
 

Other income, net

 

3,879

 

(1,484)

(C)

2,395

   
                         
     

Income before provision for income taxes

66,704

 

47,375

 

114,079

   
                         
 

Provision for income taxes

1,674

 

27,987

(D)

29,661

   
                         
     

Net income 

$           65,030

 

$        19,388

 

$         84,418

   
                         

Notes: 

                   

(A) For the three months ended January 3, 2015, adjustments to GAAP are as follows for the line items specified:

                         
         

Amortization of
acquired
intangibles

Stock-based
compensation
expense

 

Non-qualified
deferred
compensation
expenses

 

Acquisition and
integration-
related costs

 

Total
adjustments

Cost of product and maintenance

$            10,647

$                644

 

$                 6

 

$                -

 

$        11,297

Cost of services

-

942

 

8

 

-

 

950

Marketing and sales

-

5,494

 

19

 

411

 

5,924

Research and development

-

12,225

 

216

 

3,354

 

15,795

General and administrative

-

3,669

 

160

 

515

 

4,344

Amortization of acquired intangibles

6,912

-

 

-

 

-

 

6,912

 

Total

   

$            17,559

$           22,974

 

$             409

 

$           4,280

 

$        45,222

                         

(B) Amortization of debt discount related to convertible notes

       

(C) Other income or expense related to investments and non-qualified deferred compensation plan assets

(D) Income tax effect of non-GAAP adjustments 

           

 

Cadence Design Systems, Inc.

   

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

   

For the Three Months Ended December 28, 2013

   

(In thousands)

   

(Unaudited)

   
                             
               

Three Months Ended

           
               

December 28, 2013

           
           

GAAP

 

Adjustments

 

Non-GAAP

       
                             

Revenue:

                       
 

Product and maintenance

$         350,079

 

$                -

 

$       350,079

       
 

Services

   

26,643

 

-

 

26,643

       
                             
   

Total revenue

376,722

 

-

 

376,722

       
                             

Costs and expenses:

                 
 

Cost of product and maintenance

41,757

 

(7,743)

 (E) 

34,014

       
 

Cost of services

17,274

 

(698)

 (E) 

16,576

       
 

Marketing and sales

94,384

 

(5,201)

 (E) 

89,183

       
 

Research and development

135,465

 

(15,666)

 (E) 

119,799

       
 

General and administrative

29,481

 

(7,130)

 (E) 

22,351

       
 

Amortization of acquired intangibles

5,157

 

(5,157)

 (E) 

-

       
 

Restructuring and other charges 

15,405

 

(15,405)

 

-

       
                             
   

Total costs and expenses

338,923

 

(57,000)

 

281,923

       
                             
     

Income from operations

37,799

 

57,000

 

94,799

       
                             
 

Interest expense

(9,208)

 

5,515

(F)

(3,693)

       
 

Other income (expense), net

842

 

(1,553)

(G)

(711)

       
                             
     

Income before provision (benefit) for income taxes

29,433

 

60,962

 

90,395

       
                             
 

Provision (benefit) for income taxes

(8,272)

 

31,775

(H)

23,503

       
                             
     

Net income 

$           37,705

 

$        29,187

 

$         66,892

       
                             

Notes: 

                       

(E) For the three months ended December 28, 2013, adjustments to GAAP are as follows for the line items specified:

                             
         

Amortization of
acquired
intangibles

Stock-based
compensation
expense

 

Non-qualified
deferred
compensation
expenses

 

Acquisition and
integration-
related costs

 

Special
charges (I)

 

Total
adjustments

Cost of product and maintenance

$              7,265

$                471

 

$                 7

 

$                -

 

$                -

 

$                  7,743

Cost of services

-

689

 

9

 

-

 

-

 

698

Marketing and sales

-

4,703

 

68

 

430

 

-

 

5,201

Research and development

-

9,605

 

683

 

5,378

 

-

 

15,666

General and administrative

-

3,330

 

489

 

3,095

 

216

 

7,130

Amortization of acquired intangibles

5,157

-

 

-

 

-

 

-

 

5,157

 

Total

   

$            12,422

$           18,798

 

$          1,256

 

$           8,903

 

$             216

 

$                41,595

                             

(F) Amortization of debt discount related to convertible notes

             

(G) Other income or expense related to investments and non-qualified deferred compensation plan assets

   

(H) Income tax effect of non-GAAP adjustments

               

(I) Comprised of executive severance costs

               

 

                             

Cadence Design Systems, Inc.

       

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

       

For the Year Ended January 3, 2015

       

(In thousands)

       

(Unaudited)

       
                             
               

Year Ended

           
               

January 3, 2015

           
           

GAAP

 

Adjustments

 

Non-GAAP

       
                             

Revenue:

                     
 

Product and maintenance

$     1,479,151

 

$                     -

 

$  1,479,151

       
 

Services

   

101,781

 

-

 

101,781

       
                             
   

Total revenue

 

1,580,932

 

-

 

1,580,932

       
                             

Costs and expenses:

                   
 

Cost of product and maintenance

156,333

 

(39,586)

 (J) 

116,747

       
 

Cost of services

 

67,373

 

(3,997)

 (J) 

63,376

       
 

Marketing and sales

399,688

 

(25,410)

 (J) 

374,278

       
 

Research and development

603,006

 

(68,141)

 (J) 

534,865

       
 

General and administrative

113,619

 

(22,416)

 (J) 

91,203

       
 

Amortization of acquired intangibles

24,017

 

(24,017)

 (J) 

-

       
 

Restructuring and other charges

10,252

 

(10,252)

 

-

       
                             
   

Total costs and expenses

1,374,288

 

(193,819)

 

1,180,469

       
                             
     

Income from operations

206,644

 

193,819

 

400,463

       
                             
 

Interest expense

   

(34,121)

 

17,602

 (K) 

(16,519)

       
 

Other income, net

 

8,479

 

(4,629)

(L)

3,850

       
                             
     

Income before provision for income taxes

181,002

 

206,792

 

387,794

       
                             
 

Provision for income taxes

22,104

 

78,723

(M)

100,827

       
                             
     

Net income 

$        158,898

 

$           128,069

 

$     286,967

       
                             

Notes: 

                       

(J) For the year ended January 3, 2015 adjustments to GAAP are as follows for the line items specified:

   
                             
         

Amortization of
acquired
intangibles

Stock-based
compensation
expense

 

Non-qualified
deferred
compensation
expenses

Acquisition and
integration-
related costs

 

Special
charges (N)

 

Total
adjustments

Cost of product and maintenance

$              36,907

$            2,244

 

$                    34

$                      -

 

$          401

 

$     39,586

Cost of services

 

-

3,280

 

50

-

 

667

 

3,997

Marketing and sales

-

20,580

 

149

2,768

 

1,913

 

25,410

Research and development

-

43,173

 

1,886

17,228

 

5,854

 

68,141

General and administrative

-

14,515

 

1,296

4,624

 

1,981

 

22,416

Amortization of acquired intangibles

24,017

-

 

-

-

 

-

 

24,017

 

Total

   

$              60,924

$          83,792

 

$               3,415

$              24,620

 

$     10,816

 

$   183,567

                             

(K) Amortization of debt discount related to convertible notes

           

(L) Other income or expense related to investments and non-qualified deferred compensation plan assets

   

(M) Income tax effect of non-GAAP adjustments 

             

(N) Comprised of costs related to a voluntary retirement program

           

 

Cadence Design Systems, Inc.

       

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

       

For the Year Ended December 28, 2013

       

(In thousands)

       

(Unaudited)

       
                             
               

Year Ended

           
               

December 28, 2013

           
           

GAAP

 

Adjustments

 

Non-GAAP

       
                             

Revenue:

                     
 

Product and maintenance

$   1,357,934

 

$                -

 

$ 1,357,934

       
 

Services

   

102,182

 

-

 

102,182

       
                             
   

Total revenue

1,460,116

 

-

 

1,460,116

       
                             

Costs and expenses:

                   
 

Cost of product and maintenance

132,245

 

(26,352)

 (O) 

105,893

       
 

Cost of services

   

67,956

 

(2,373)

 (O) 

65,583

       
 

Marketing and sales

 

378,157

 

(17,828)

 (O) 

360,329

       
 

Research and development

534,022

 

(53,403)

 (O) 

480,619

       
 

General and administrative

121,314

 

(27,273)

 (O) 

94,041

       
 

Amortization of acquired intangibles

19,416

 

(19,416)

 (O) 

-

       
 

Restructuring and other charges

17,999

 

(17,999)

 

-

       
                             
   

Total costs and expenses

1,271,109

 

(164,644)

 

1,106,465

       
                             
     

Income from operations

189,007

 

164,644

 

353,651

       
                             
 

Interest expense

 

(37,581)

 

22,315

(P)

(15,266)

       
 

Other income, net

7,570

 

(5,280)

(Q)

2,290

       
                             
     

Income before provision (benefit) for income taxes

158,996

 

181,679

 

340,675

       
                             
 

Provision (benefit) for income taxes

(5,247)

 

93,823

(R)

88,576

       
                             
     

Net income 

$      164,243

 

$        87,856

 

$    252,099

       
                             

Notes: 

                       

(O) For the year ended December 28, 2013 adjustments to GAAP are as follows for the line items specified:

   
                             
         

Amortization
and sale of
acquired
intangibles

Stock-based
compensation
expense

 

Non-qualified
deferred
compensation
expenses

Acquisition and
integration-related
costs

 

Special
charges (S)

 

Total
adjustments

Cost of product and maintenance

$           24,718

$          1,596

 

$               38

$                     -

 

$            -

 

$     26,352

Cost of services

 

-

2,321

 

52

-

 

-

 

2,373

Marketing and sales

-

15,642

 

239

1,467

 

480

 

17,828

Research and development

-

32,999

 

1,700

18,704

 

-

 

53,403

General and administrative

-

13,727

 

1,264

11,801

 

481

 

27,273

Amortization of acquired intangibles

19,416

-

 

-

-

 

-

 

19,416

 

Total

   

$           44,134

$        66,285

 

$          3,293

$              31,972

 

$          961

 

$   146,645

                             

(P) Amortization of debt discount related to convertible notes

           

(Q) Other income or expense related to investments and non-qualified deferred compensation plan assets

   

(R) Income tax effect of non-GAAP adjustments

             

(S) Comprised of executive severance costs