Cadence's management believes that non-GAAP net income or net loss provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Cadence's management also uses this information 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.

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

Net Income (Loss) Reconciliation                     Quarters Ended
                                              ----------------------------
                                              September 27,  September 29,
                                                  2008           2007
                                              -------------  -------------
                                                      (unaudited)
(in thousands)
Net income (loss) on a GAAP basis             $    (169,066) $      72,732
  Amortization of acquired intangibles               10,754         12,003
  Stock-based compensation expense                   14,634         24,119
  Non-qualified deferred compensation
   expenses                                             188          2,876
  Costs related to Cadence's withdrawn
   proposal to acquire Mentor Graphics
   Corporation                                        3,153              -
  Restructuring and other charges (credits)          48,120         (7,066)
  Write-off of acquired in-process
   technology                                             -          2,678
  Integration and acquisition-related
   costs                                                234            301
  Equity in losses from investments,
   write-down of investments, gains and
   losses on non-qualified deferred
   compensation plan assets -- recorded in
   Other income (expense), net                        2,798            444
  Loss on sale of Mentor Graphics
   Corporation shares                                 9,379              -
  Income tax related to repatriation of
   foreign earnings                                  71,047              -
  Income tax effect of non-GAAP adjustments         (14,037)       (10,722)
                                              -------------  -------------
Net income (loss) on a non-GAAP basis         $     (22,796) $      97,365
                                              =============  =============




Diluted Net Income (Loss) per Share
 Reconciliation                                      Quarters Ended
                                              ----------------------------
                                              September 27,  September 29,
                                                  2008           2007
                                              -------------  -------------
                                                      (unaudited)
(in thousands, except per share data)
Diluted net income (loss) per share on
 a GAAP basis                                 $       (0.67) $         0.24
    Amortization  of  acquired  intangibles                                  0.04                      0.04
    Stock-based  compensation  expense                                          0.06                      0.08
    Non-qualified  deferred  compensation
      expenses                                                                                              -                      0.01
    Costs  related  to  Cadence's  withdrawn
      proposal  to  acquire  Mentor  Graphics
      Corporation                                                                                  0.01                            -
    Restructuring  and  other  charges  (credits)                        0.19                    (0.02)
    Write-off  of  acquired  in-process
      technology                                                                                          -                      0.01
    Integration  and  acquisition-related
      costs                                                                                                    -                            -
    Equity  in  losses  from  investments,
      write-down  of  investments,  gains  and
      losses  on  non-qualified  deferred
      compensation  plan  assets  --  recorded  in
      Other  income  (expense),  net                                                  0.01                            -
    Loss  on  sale  of  Mentor  Graphics
      Corporation  shares                                                                    0.04                            -
    Income  tax  related  to  repatriation  of
      foreign  earnings                                                                        0.28                            -
    Income  tax  effect  of  non-GAAP  adjustments                      (0.05)                  (0.03)
                                                                                            -------------    -------------
Diluted  net  income  (loss)  per  share  on  a
  non-GAAP  basis                                                              $              (0.09)  $                0.33
                                                                                            =============    =============
Shares  used  in  calculation  of  diluted  net
  income  (loss)  per  share  --  GAAP  (A)                                252,915                299,506
Shares  used  in  calculation  of  diluted  net
  income  (loss)  per  share  --  non-GAAP  (A)                        252,915                299,506


(A)  Shares  used  in  the  calculation  of  GAAP  net  income  (loss)  per  share  are
        expected  to  be  the  same  as  shares  used  in  the  calculation  of  non-GAAP
        net  income  (loss)  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.

 

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