Cadence Reports Q3 2008 Revenue of $232 Million and Completion of Accounting Investigation
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Cadence Reports Q3 2008 Revenue of $232 Million and Completion of Accounting Investigation

SAN JOSE, CA -- (MARKET WIRE) -- Dec 10, 2008 -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter of 2008. The Company also announced today that the Audit Committee of its Board of Directors, in conjunction with special counsel, has completed its previously announced investigation of the recognition of revenue related to customer contracts, the results of which are set forth below.

Third Quarter 2008 Results

Cadence reported third quarter 2008 revenue of $232 million, compared to revenue of $401 million reported for the same period in 2007. On a GAAP basis, Cadence recognized a net loss of $169 million, or $(0.67) per share on a diluted basis, in the third quarter of 2008, compared to net income of $73 million, or $0.24 per share on a diluted basis in the same period in 2007.

In addition to using GAAP results in evaluating Cadence's business, management believes it is useful to measure results using a non-GAAP measure of net income or net loss, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, in-process research and development charges, certain termination and legal costs, costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance payments, restructuring charges and credits, losses on extinguishment of debt, equity in losses (income) from investments and write-down of investments. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability. See "GAAP to non-GAAP Reconciliation" below for further information on the non-GAAP measure.

Using this non-GAAP measure, net loss in the third quarter of 2008 was $23 million, or $(0.09) per share on a diluted basis, as compared to net income of $97 million, or $0.33 per share on a diluted basis, in the same period in 2007.

"Over the past two months, the Interim Office of the Chief Executive has been working closely with the management team, and taking aggressive steps to better position the company today and in the future. We remain focused on leveraging the company's many strengths, including our market leadership position, our innovative, cutting-edge technology and our long-standing customer relationships. We believe strongly that Cadence's highly ratable business model and improved cost structure form a solid foundation for enhanced operating and financial performance and long-term growth," said Lip-Bu Tan, Interim Vice Chairman of the Board of Directors and member of the Interim Office of the Chief Executive.

"We are focused on delivering compelling and innovative technology to our customers. As part of this, in November, we restructured our R&D organization into two teams, each led by an experienced industry veteran and supported by some of the best and brightest minds in our field. We expect the new R&D team structure will deliver greater product synergy and tighter integration as we leverage our leadership positions to grow our business. We are also pleased with the quality and breadth of our technology portfolio, which provides our customers with an attractive consolidation option as they seek to optimize their own productivity and efficiency," said Charlie Huang, Senior Vice President and member and chief of staff of the Interim Office of the Chief Executive.

"As we continue to manage through the global economic downturn, we are pleased that our transition to the new ratable mix is on track. During the quarter, we implemented a significant cost reduction program to refocus the company, improve our operational execution and financial performance and bring our expense base and operating structure in-line with our outlook," added Kevin S. Palatnik, Senior Vice President and Chief Financial Officer and member of the Interim Office of the Chief Executive. "We remain focused on improving efficiency and productivity, while continuing to invest in areas that enhance our competitive position and growth."

Results of Accounting Investigation

As announced on October 22, 2008, Cadence will be restating its quarterly financial statements for the periods ending March 29, 2008 and June 28, 2008. Cadence will adjust $24.8 million of product revenue recognized in the first quarter of 2008 and $12.0 million of product revenue recognized in the second quarter of 2008. This revenue will be instead realized over the term of the relevant arrangement. The results of the Audit Committee's investigation into the restatement issues are summarized below.

During the first quarter of 2008, Cadence executed a term license arrangement with a customer and, during the third quarter of 2008, Cadence executed a subscription license arrangement with the same customer. As part of its regular quarterly review process for the third quarter, Cadence identified certain factors that, when evaluated together, indicated that the software arrangements executed with this customer both in the first quarter and in the third quarter were negotiated in contemplation of one another. Accordingly, Cadence determined that the term license arrangement executed during the first quarter and the subscription license arrangement executed during the third quarter collectively represented a multiple element arrangement. Because the subscription arrangement provides the customer with the right to use unspecified additional software products that become commercially available during the term of the arrangement, Cadence determined that the revenue relating to this multiple element arrangement should be recognized during the term of the arrangement, beginning in the fourth quarter of 2008.

Consistent with good corporate governance practices, the Audit Committee of Cadence's Board of Directors, with the assistance of special counsel and other advisors, conducted an investigation of the events that led to the restatement of the Company's financial results. Upon completion of the investigation, the Audit Committee concluded that the circumstances that led to the restatement were not the result of illegal conduct on the part of any of Cadence's directors, officers, or other employees. However, as a result of the investigation, the Company has identified a material weakness relating to the insufficient design and ineffective operation of certain internal controls over the recognition of revenue from term license agreements. The Company has taken and will continue to take actions to remediate the deficiencies identified as promptly as practicable.

As part of the remediation efforts that Cadence has begun implementing in response to the identified material weakness, Cadence reexamined a transaction that occurred during the second quarter of 2008 in which it concurrently cancelled a subscription arrangement and executed both a term license arrangement and hardware arrangement with a customer. Specifically, Cadence determined that, despite the cancellation of the subscription arrangement, the customer did not intend to substantively cancel its right to access future new technology because at the time the subscription license was cancelled the customer intended to re-establish its right to access future new technology at a later time. Accordingly, Cadence has determined that $12.0 million of revenue originally recognized in the second quarter of 2008 relating to the term license and hardware arrangement should be recognized ratably over the term of the arrangement, consistent with the way in which revenue was recognized on the cancelled subscription arrangement.

Lip-Bu Tan, Interim Vice Chairman and member of the Interim Office of the Chief Executive, said, "Cadence is committed to accurate and transparent financial reporting. The Audit Committee of our Board of Directors conducted a thorough investigation and we are pleased to put this matter behind us and focus our efforts on executing our business strategy."

The effect of the restatement on certain line items in Cadence's financial statements for the quarter ended March 29, 2008, the quarter ended June 28, 2008 and the six months ended June 28, 2008 is as set forth in the chart below. The effects set forth below take into account the $24.8 million and $12.0 million of revenue respectively discussed above, product revenue of $8.4 million recognized in the second quarter of 2008 that should have been recognized in the first quarter of 2008, as previously disclosed in Cadence's Form 10-Q for the period ended June 28, 2008, other immaterial adjustments to costs and expenses and the tax effect of the restatement adjustments.

                  Quarter Ended       Quarter Ended      Six Months Ended
                  March 29, 2008      June 28, 2008        June 28, 2008
                ------------------  ------------------  ------------------
                   As                  As                  As
               Previously    As    Previously    As    Previously    As
                Reported  Restated  Reported  Restated  Reported  Restated
                --------  --------  --------  --------  --------  --------
                          (In thousands, except per share data)

Total revenue   $287,189  $270,750  $329,478  $308,041  $616,667  $578,791
Total costs
 and expenses   $314,192  $314,192  $310,092  $307,485  $624,284  $621,677
Income (loss)
 from
 operations     $(27,003) $(43,442) $ 19,386  $    556  $ (7,617) $(42,886)
Provision
 (benefit) for
 income taxes   $ (5,488) $(11,451) $  9,760  $ 12,720  $  4,272  $  1,269
Net income
 (loss)         $(18,747) $(29,223) $  4,996  $(16,794) $(13,751) $(46,017)
Diluted net
 income (loss)
 per share      $  (0.07) $  (0.11) $   0.02  $  (0.07) $  (0.05) $  (0.18)

A reconciliation of Cadence's previously reported and restated Statements of Operations for the quarter ended March 29, 2008, the quarter ended June 28, 2008 and the six months ended June 28, 2008 is included with this release.

Cadence is preparing its third quarter Form 10-Q, together with amended Form 10-Qs for the first and second quarter of 2008, and expects to file all three reports no later than December 12, 2008.

The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.

Business Outlook

For the fourth quarter of 2008, the company expects total revenue in the range of $215 million to $225 million. Fourth quarter GAAP net loss per diluted share is expected to be in the range of $(0.29) to $(0.27). Net loss per diluted share using the non-GAAP measure defined below is expected to be in the range of $(0.06) to $(0.04).

For the full year 2008, the company expects total revenue in the range of $1.025 billion to $1.035 billion. On a GAAP basis, net loss per diluted share for fiscal 2008 is expected to be in the range of $(1.13) to $(1.11). Using the non-GAAP measure defined below, net loss per diluted share for fiscal 2008 is expected to be in the range of $(0.06) to $(0.04).

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

Audio Webcast Scheduled

Lip-Bu Tan, Cadence's Interim Vice Chairman and member of the Interim Office of the Chief Executive, Charlie Huang, Cadence's Senior Vice President and member and chief of staff of the Interim Office of the Chief Executive, and Kevin S. Palatnik, Cadence's Senior Vice President and Chief Financial Officer and member of the Interim Office of the Chief Executive, will host a third quarter 2008 financial results audio webcast today, December 10, 2008, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting December 10, 2008 at 5 p.m. (Pacific) and ending December 17, 2008 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 and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.

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

The statements contained above regarding the company's third quarter 2008 results, and the results of the accounting investigation, as well as the comments in the Business Outlook section and the statements by Lip-Bu Tan, Charlie Huang and Kevin Palatnik include forward-looking statements based on current expectations or beliefs, as well as a number of 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. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence's control, including but not limited to: (i) Cadence's ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) Cadence's ability to successfully complete and realize the expected benefits of the previously announced restructuring without significant unexpected costs or delays; (iii) the mix of products and services sold and the timing of significant orders for its products, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including the possibility that Cadence's previously announced restructuring and management changes could result in delays in customers' purchases of 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; (ix) the effects of the previously announced restructuring and management changes on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) the outcome of the previously announced accounting investigation conducted by the Audit Committee and Cadence's ability to timely remediate the material weakness; (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (xii) the effect of any goodwill impairment analyses Cadence may perform in the future.

For a detailed discussion of these and other cautionary statements, please refer to the company's filings with the Securities and Exchange Commission. These include the company's Annual Report on Form 10-K for the year ended December 29, 2007 and the company's future filings.

GAAP to non-GAAP Reconciliation

Cadence management evaluates and makes operating decisions using various operating measures. These measures are generally based on the revenues of its product, maintenance and services business operations and certain costs of those operations, such as cost of revenues, research and development, sales and marketing and general and administrative expenses. One such measure is non-GAAP net income or net loss, which is a non-GAAP financial measure under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended, and is GAAP net income or net loss excluding, as applicable, amortization of intangible assets, stock-based compensation expense, in-process research and development charges, certain termination and legal costs, costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance payments, restructuring charges and credits, losses on extinguishment of debt, equity in losses (income) from investments and write-down of investments. Intangible assets consist primarily of purchased or licensed technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability.

Cadence's management believes it is useful in measuring Cadence's operations to exclude amortization of intangible assets, in-process research and development charges and integration and acquisition-related costs because these costs are primarily fixed at the time of an acquisition and generally cannot be changed by Cadence's management in the short term. In addition, Cadence's management believes it is useful to exclude stock-based compensation expense because it enhances investors' ability to review Cadence's business from the same perspective as Cadence's management, which believes that stock-based compensation expense is not directly attributable to the underlying performance of the company's business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. During the fourth quarter of 2008, Cadence commenced a restructuring program that it expects to complete in the second half of fiscal 2009. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because Cadence does not undertake significant restructuring on a regular basis, and exclusion of such charges permits consistent evaluations of Cadence's performance before and after such actions are taken. Cadence's management also believes it is useful to exclude executive severance costs and certain termination and legal costs as these costs do not occur frequently. Cadence's management believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets as these gains and expenses are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Finally, Cadence's management believes it is useful to exclude the equity in losses (income) from investments and write-down of investments, as these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income (expense) and are part of the company's investment activities.

In the third quarter of 2008, Cadence's non-GAAP net loss also excludes the impact of tax expense associated with Cadence's repatriation of foreign earnings. Cadence's management believes it is useful to exclude the tax expense associated with the repatriation of foreign earnings as it resulted from an event which is not expected to occur frequently.

In the third quarter of 2008, Cadence's non-GAAP net loss also excludes costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares Cadence acquired as part of the proposed acquisition. Cadence's management believes that in measuring Cadence's operations it is useful to exclude the costs and the losses associated with this proposed acquisition as these items are not directly related to Cadence's operating performance and resulted from events which are not expected to occur frequently.

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.

Investors are encouraged to look at the GAAP results as the best measure of financial performance. For example, amortization of intangibles or in-process technology are important to consider because they may represent initial expenditures that under GAAP are reported across future fiscal periods. Likewise, stock-based compensation expense is an obligation of the company that should be considered. Restructuring charges can be triggered by acquisitions or product adjustments, as well as overall company performance within a given business environment. Losses on extinguishment of debt can be incurred on remaining convertible notes. All of these metrics are important to financial performance generally.

Although Cadence's management finds the non-GAAP measure useful in evaluating the performance of Cadence's business, reliance on this measure 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's management believes that presenting the non-GAAP measure of earnings and earnings per share provides investors with an additional tool for evaluating the performance of the company's business, which Cadence's management uses in its own evaluation of performance, and an additional baseline for assessing the future earnings potential of the company. While the GAAP results are more complete, Cadence's management prefers to allow investors to have this supplemental measure since it may provide additional insights into the company's financial results.

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 Web site.

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 19, 2008, 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 and Fiscal Year 2008 Earnings Release is published, which is currently scheduled for February 4, 2009.




                       Cadence Design Systems, Inc.
                  Condensed Consolidated Balance Sheets
                 September 27, 2008 and December 29, 2007
                              (In thousands)
                                (Unaudited)


                                                September 27, December 29,
                                                    2008          2007
                                                ------------- -------------

Current Assets:
   Cash and cash equivalents                    $     551,753 $   1,062,920
   Short-term investments                               6,068        15,193
   Receivables, net of allowances of $3,355 and
    $2,895, respectively                              278,458       326,211
   Inventories                                         25,545        31,003
   Prepaid expenses and other                          84,112        94,236
                                                ------------- -------------
      Total current assets                            945,936     1,529,563

Property, plant and equipment, net of
 accumulated depreciation of $636,305 and
 $624,680, respectively                               359,196       339,463
Goodwill                                            1,315,217     1,310,211
Acquired intangibles, net                             101,409       127,072
Installment contract receivables                      170,503       238,010
Other assets                                          356,527       326,831
                                                ------------- -------------
Total Assets                                    $   3,248,788 $   3,871,150
                                                ============= =============

Current Liabilities:
   Convertible notes                            $           - $     230,385
   Accounts payable and accrued liabilities           259,062       289,934
   Current portion of deferred revenue                245,901       265,168
                                                ------------- -------------
      Total current liabilities                       504,963       785,487
                                                ------------- -------------

Long-Term Liabilities:
   Long-term portion of deferred revenue              124,703       136,655
   Convertible notes                                  500,178       500,000
   Other long-term liabilities                        413,993       368,942
                                                ------------- -------------
      Total long-term liabilities                   1,038,874     1,005,597
                                                ------------- -------------

Stockholders' Equity                                1,704,951     2,080,066
                                                ------------- -------------
Total Liabilities and Stockholders' Equity      $   3,248,788 $   3,871,150
                                                ============= =============




                       Cadence Design Systems, Inc.
             Condensed Consolidated Statements of Operations
                 For the Quarters and Nine Months Ended
                September 27, 2008 and September 29, 2007
                 (In thousands, except per share amounts)
                                (Unaudited)

                                Quarters Ended        Nine Months Ended
                            ----------------------  ----------------------
                             Sept. 27,   Sept. 29,   Sept. 27,   Sept. 29,
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Revenue:
   Product                  $  107,572  $  273,799  $  422,365  $  775,496
   Services                     32,873      31,225      98,763      95,963
   Maintenance                  92,043      95,900     290,151     285,611
                            ----------  ----------  ----------  ----------

      Total revenue            232,488     400,924     811,279   1,157,070
                            ----------  ----------  ----------  ----------

Costs and Expenses:
   Cost of product              11,829      13,823      39,241      42,302
   Cost of services             25,677      23,364      78,083      70,421
   Cost of maintenance          13,910      15,217      42,889      45,635
   Marketing and sales          91,075      97,163     274,016     297,924
   Research and development    112,486     125,391     357,929     365,418
   General and
    administrative              32,937      40,747     105,608     123,166
   Amortization of acquired
    intangibles                  5,626       4,739      17,206      13,661
   Restructuring and other
    charges (credits)           48,120      (7,066)     47,765      (9,584)
   Write-off of acquired
    in-process technology            -       2,678         600       2,678
                            ----------  ----------  ----------  ----------

      Total costs and
       expenses                341,660     316,056     963,337     951,621
                            ----------  ----------  ----------  ----------

        Income (loss) from
         operations           (109,172)     84,868    (152,058)    205,449

   Interest expense             (3,180)     (2,849)     (9,055)     (9,373)
   Other income (expense),
    net                         (7,714)     14,201      (3,701)     47,938
                            ----------  ----------  ----------  ----------

        Income (loss)
         before provision
         for income taxes     (120,066)     96,220    (164,814)    244,014

   Provision for income
    taxes                       49,000      23,488      50,269      67,265
                            ----------  ----------  ----------  ----------

        Net income (loss)   $ (169,066) $   72,732  $ (215,083) $  176,749
                            ==========  ==========  ==========  ==========


Basic net income (loss) per
 share                      $    (0.67) $     0.27  $    (0.84) $     0.65
                            ==========  ==========  ==========  ==========

Diluted net income (loss)
 per share                  $    (0.67) $     0.24  $    (0.84) $     0.60
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding - basic    252,915     272,977     256,119     272,354
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding -
 diluted                       252,915     299,506     256,119     297,783
                            ==========  ==========  ==========  ==========




                       Cadence Design Systems, Inc.
              Condensed Consolidated Statements of Cash Flows
    For the Nine Months Ended September 27, 2008 and September 29, 2007
                              (In thousands)
                                (Unaudited)


                                                    Nine Months Ended
                                               ---------------------------
                                               September 27,  September 29,
                                                    2008          2007
                                               ------------   ------------


Cash and Cash Equivalents at Beginning of
 Period                                        $  1,062,920   $    934,342
                                               ------------   ------------
Cash Flows from Operating Activities:
   Net income (loss)                               (215,083)       176,749
   Adjustments to reconcile net income (loss)
    to net cash provided by operating
    activities:
      Depreciation and amortization                  97,719         96,798
      Stock-based compensation                       57,678         78,828
      Equity in loss from investments, net              823          2,504
      (Gain) loss on investments, net                11,440        (16,608)
      (Gain) loss on sale and leaseback of land
       and buildings                                    350        (12,606)
      Write-down of investment securities            10,666          2,550
      Write-off of acquired in-process
       technology                                       600          2,678
      Non-cash restructuring and other charges
       (credits)                                        222         (7,106)
      Tax benefit of call options                     7,034          7,036
      Deferred income taxes                         (11,020)         4,848
      Proceeds from the sale of receivables,
       net                                           48,124        163,549
      Provisions (recoveries) for losses
       (gains) on trade accounts receivable and
       sales returns                                    383           (975)
      Other non-cash items                           (1,258)         8,525
      Changes in operating assets and
       liabilities, net of effect of acquired
       businesses:
         Receivables                                 21,489          9,053
         Installment contract receivables            46,198       (273,301)
         Inventories                                  5,486           (681)
         Prepaid expenses and other                  (3,421)       (23,229)
         Other assets                                (1,849)        (2,027)
         Accounts payable and accrued
          liabilities                               (41,582)       (35,516)
         Deferred revenue                           (32,243)         9,411
         Other long-term liabilities                 35,972         18,448
                                               ------------   ------------
            Net cash provided by operating
             activities                              37,728        208,928
                                               ------------   ------------

Cash Flows from Investing Activities:
   Proceeds from the sale of available-for-sale
    securities                                       53,783          6,468
   Purchases of available-for-sale securities       (62,447)             -
   Proceeds from the sale of long-term
    investments                                       3,250          6,323
   Proceeds from the sale of property, plant
    and equipment                                         -         46,500
   Purchases of property, plant and equipment       (81,112)       (57,405)
   Purchases of software licenses                    (1,199)             -
   Investment in venture capital partnerships
    and equity investments                           (4,053)        (3,214)
   Cash paid in business combinations and asset
    acquisitions, net of cash acquired, and
    acquisition of intangibles                      (20,621)       (74,117)
                                               ------------   ------------
            Net cash used for investing
             activities                            (112,399)       (75,445)
                                               ------------   ------------

Cash Flows from Financing Activities:
   Proceeds from receivable sale financing           17,970              -
   Principal payments on term loan                        -        (28,000)
   Payment of convertible notes due 2023           (230,207)             -
   Tax benefit from employee stock transactions         427         20,727
   Proceeds from issuance of common stock            48,116        249,006
   Stock received for payment of employee taxes
    on vesting of restricted stock                   (3,693)       (11,735)
   Purchases of treasury stock                     (273,950)      (372,416)
   Other                                                  -          8,558
                                               ------------   ------------
            Net cash used for financing
             activities                            (441,337)      (133,860)
                                               ------------   ------------

Effect of exchange rate changes on cash and
 cash equivalents                                     4,841          1,622
                                               ------------   ------------

Increase (decrease) in cash and cash
 equivalents                                       (511,167)         1,245
                                               ------------   ------------

Cash and Cash Equivalents at End of Period     $    551,753   $    935,587
                                               ============   ============




                       Cadence Design Systems, Inc.
                         As of December 10, 2008
    Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Loss
                                 Per Share
                                (Unaudited)


                                     Quarter Ended         Year Ended
                                    January 3, 2009      January 3, 2009
                                   -----------------    -----------------
                                        Forecast             Forecast
                                   -----------------    -----------------

Diluted net loss per share on a
 GAAP basis                        $(0.29) to $(0.27)   $(1.13) to $(1.11)

   Amortization of acquired
    intangibles                           0.04                 0.17
   Stock-based compensation
    expense                               0.11                 0.34
   Non-qualified deferred
    compensation expenses
    (credits)                                -                (0.01)
   Costs related to Cadence's
    withdrawn proposal to acquire
    Mentor Graphics Corporation              -                 0.01
   Restructuring and other
    charges                               0.07                 0.25
   Write-off of acquired
    in-process technology                    -                    -
   Integration and
    acquisition-related costs                -                    -
   Equity in losses from
    investments, write-down of
    investments, gains and losses
    on non-qualified deferred
    compensation plan assets                 -                 0.06
   Loss on sale of Mentor
    Graphics Corporation shares              -                 0.04
   Foreign currency charge
    related to liquidation of
    subsidiary                            0.04                 0.04
   Income tax related to
    repatriation of foreign
    earnings                                 -                 0.28
   Income tax effect of non-GAAP
    adjustments                          (0.03)               (0.11)

                                   -----------------    -----------------
Diluted net loss per share on a
 non-GAAP basis                    $(0.06) to $(0.04)   $(0.06) to $(0.04)
                                   =================    =================




                       Cadence Design Systems, Inc.
                         As of December 10, 2008
       Impact of Non-GAAP Adjustments on Forward Looking Net Loss
                               (Unaudited)


                                     Quarter Ended         Year Ended
                                    January 3, 2009      January 3, 2009
                                   -----------------    -----------------
($ in Millions)                         Forecast             Forecast
                                   -----------------    -----------------

Net loss on a GAAP basis           $ (74)  to  $ (68)   $ (289) to $ (283)

   Amortization of acquired
    intangibles                             10                   44
   Stock-based compensation
    expense                                 28                   86
   Non-qualified deferred
    compensation expenses
    (credits)                                -                   (3)
   Costs related to Cadence's
    withdrawn proposal to acquire
    Mentor Graphics Corporation              -                    3
   Restructuring and other
    charges                                 17                   65
   Write-off of acquired
    in-process technology                    -                    1
   Integration and
    acquisition-related costs                -                    1
   Equity in losses from
    investments, write-down of
    investments, gains and losses
    on non-qualified deferred
    compensation plan assets                 -                   16
   Loss on sale of Mentor
    Graphics Corporation shares              -                    9
   Foreign currency charge
    related to liquidation of
    subsidiary                              10                   10
   Income tax related to
    repatriation of foreign
    earnings                                 -                   71
   Income tax effect of non-GAAP
    adjustments                             (7)                 (29)

                                   -----------------    -----------------
Net loss on a non-GAAP basis       $ (16)  to  $ (10)   $ (15)  to   $ (9)
                                   =================    =================




                       Cadence Design Systems, Inc.
                                (Unaudited)


Revenue Mix by Geography (% of Total Revenue)

                                  2006                      2007
                        ========================  ========================
GEOGRAPHY               Q1   Q2   Q3   Q4   Year  Q1   Q2   Q3   Q4   Year
                        ===  ===  ===  ===  ====  ===  ===  ===  ===  ====

   Americas              51%  48%  54%  60%   54%  48%  52%  41%  50%   49%
   Europe                19%  18%  22%  19%   19%  15%  17%  25%  17%   18%
   Japan                 21%  24%  13%  10%   17%  27%  14%  22%  22%   21%
   Asia                   9%  10%  11%  11%   10%  10%  17%  12%  11%   12%
Total                   100% 100% 100% 100%  100% 100% 100% 100% 100%  100%


                                   2008
                        =========================
GEOGRAPHY                  Q1        Q2       Q3
                        ========  ========  =====
                       (Restated)(Restated)

   Americas                43%       48%      43%
   Europe                  24%       21%      23%
   Japan                   21%       19%      20%
   Asia                    12%       12%      14%
Total                     100%      100%     100%



Revenue Mix by Product Group (% of Total Revenue)

                                  2006                      2007
                        ========================  ========================
PRODUCT GROUP           Q1   Q2   Q3   Q4   Year  Q1   Q2   Q3   Q4   Year
                        ===  ===  ===  ===  ====  ===  ===  ===  ===  ====

   Functional
    Verification         26%  22%  24%  23%   24%  24%  24%  20%  26%   24%
   Digital IC Design     20%  26%  19%  26%   24%  26%  29%  27%  27%   27%
   Custom IC Design      27%  27%  30%  26%   27%  24%  24%  32%  25%   27%
   Design for
    Manufacturing         8%   8%   8%   6%    7%   7%   7%   6%   6%    6%
   System Interconnect    9%   8%  10%  11%    9%  10%   8%   7%   9%    8%
   Services & Other      10%   9%   9%   8%    9%   9%   8%   8%   7%    8%
Total                   100% 100% 100% 100%  100% 100% 100% 100% 100%  100%


                                   2008
                        =========================
PRODUCT GROUP              Q1        Q2       Q3
                        ========  ========  =====
                       (Restated)(Restated)

   Functional
    Verification           22%       25%      22%
   Digital IC Design       24%       24%      20%
   Custom IC Design        26%       23%      26%
   Design for
    Manufacturing           5%        7%       7%
   System Interconnect     11%       10%      11%
   Services & Other        12%       11%      14%
Total                     100%      100%     100%


Note: Product Group total revenue includes Product + Maintenance




                       Cadence Design Systems, Inc.
    Impact of Restatement Adjustments on Previously Reported Condensed
                  Consolidated Statements of Operations
               For the Quarter Ended March 29, 2008 and the
                Quarter and Six Months Ended June 28, 2008
                (In thousands, except per share amounts)
                              (Unaudited)



                                          Quarter    Quarter    Six Months
                                           Ended      Ended       Ended
                                         March 29,   June 28,    June 28,
                                           2008        2008        2008
                                        ----------  ----------  ----------

Total revenue as previously reported    $  287,189  $  329,478  $  616,667
Restatement adjustments (A),(B),(C)        (16,439)    (21,437)    (37,876)
                                        ----------  ----------  ----------
Total revenue as restated               $  270,750  $  308,041  $  578,791
                                        ==========  ==========  ==========


Total costs and expenses as previously
 reported                               $  314,192  $  310,092  $  624,284
Restatement adjustments (B),(D)                  -      (2,607)     (2,607)
                                        ----------  ----------  ----------
Total costs and expenses as restated    $  314,192  $  307,485  $  621,677
                                        ==========  ==========  ==========


Provision (benefit) for income taxes as
 previously reported                    $   (5,488) $    9,760  $    4,272
Restatement adjustments (E)                 (5,963)      2,960      (3,003)
                                        ----------  ----------  ----------
Provision (benefit) for income taxes as
 restated                               $  (11,451) $   12,720  $    1,269
                                        ==========  ==========  ==========


Net income (loss) as previously
 reported                               $  (18,747) $    4,996  $  (13,751)
Restatement adjustments                    (10,476)    (21,790)    (32,266)
                                        ----------  ----------  ----------
Net loss as restated                    $  (29,223) $  (16,794) $  (46,017)
                                        ==========  ==========  ==========


Basic net income (loss) per share as
 previously reported                    $    (0.07) $     0.02  $    (0.05)
Restatement adjustments                      (0.04)      (0.09)      (0.13)
                                        ----------  ----------  ----------
Basic net loss per share as restated    $    (0.11) $    (0.07) $    (0.18)
                                        ==========  ==========  ==========


Diluted net income (loss) per share as
 previously reported                    $    (0.07) $     0.02  $    (0.05)
Restatement adjustments                      (0.04)      (0.09)      (0.13)
                                        ----------  ----------  ----------
Diluted net loss per share as restated  $    (0.11) $    (0.07) $    (0.18)
                                        ==========  ==========  ==========


Notes:

(A) This restatement adjustment corrects revenue recognition for one
    arrangement under which $24.8 million of Product revenue was recognized
    during the first quarter of 2008 and $1.0 million of Maintenance
    revenue was recognized during the second quarter of 2008, but should
    be recognized during the term of the arrangement, beginning in the
    fourth quarter of 2008.

(B) This restatement adjustment corrects revenue recognition for one
    arrangement identified during Cadence's remediation efforts under which
    $12.0 million of Product revenue was recognized during the second
    quarter of 2008, but should be recognized during the term of the
    arrangement, beginning in the third quarter of 2008.  As a result of
    reversing this $12.0 million of Product revenue that was previously
    recognized, Cadence also decreased Cost of product by $0.1 million for
    the second quarter of 2008.

(C) Because Cadence is restating its financial results for the first and
    second quarters of 2008 for the revenue arrangements described in
    Notes (A) and (B), Cadence has also recorded two other Product revenue
    adjustments, in the aggregate amount of $8.4 million, that were
    previously disclosed in Cadence's Quarterly Report on Form 10-Q for
    the quarter ended June 28, 2008, initially filed with the SEC on
    July 29, 2008. Cadence determined that Product revenue for these two
    contracts totaling $8.4 million recognized during the second quarter
    of 2008 should have been recognized during the first quarter of 2008.

(D) This restatement adjustment reduces Cost of product for a hardware
    arrangement during the second quarter of 2008 by $2.5 million.

(E) This restatement adjustment represents the tax effect of the
    restatement adjustments noted above.




                       Cadence Design Systems, Inc.
    Impact of Restatement Adjustments on Previously Reported Condensed
                  Consolidated Statements of Operations
                   For the Quarter Ended March 29, 2008
                 (In thousands, except per share amounts)
                              (Unaudited)


                                              Quarter Ended
                                              March 29, 2008
                                ------------------------------------------
                                    As
                                Previously  Restatement             As
                                 Reported   Adjustments          Restated
                                ----------  -----------          ---------
Revenue
   Product                      $  156,193  $   (16,439) (A),(B) $ 139,754
   Services                         32,196            -             32,196
   Maintenance                      98,800            -             98,800
                                ----------  -----------          ---------

      Total revenue                287,189      (16,439)           270,750
                                ----------  -----------          ---------

Costs and Expenses
   Cost of product                  12,001            -             12,001
   Cost of services                 25,193            -             25,193
   Cost of maintenance              14,540            -             14,540
   Marketing and sales              93,034            -             93,034
   Research and development        125,356            -            125,356
   General and administrative       37,708            -             37,708
   Amortization of acquired
    intangibles                      5,760            -              5,760
   Write-off of acquired
    in-process technology              600            -                600
                                ----------  -----------          ---------

      Total costs and expenses     314,192            -            314,192
                                ----------  -----------          ---------

         Loss from operations      (27,003)     (16,439)           (43,442)

   Interest expense                 (2,995)           -             (2,995)
   Other income, net                 5,763            -              5,763
                                ----------  -----------          ---------

         Loss before benefit
          for income taxes         (24,235)     (16,439)           (40,674)

   Benefit for income taxes         (5,488)      (5,963) (C)       (11,451)
                                ----------  -----------          ---------

         Net loss               $  (18,747) $   (10,476)         $ (29,223)
                                ==========  ===========          =========


Basic net loss per share        $    (0.07)                      $   (0.11)
                                ==========                       =========

Diluted net loss per share      $    (0.07)                      $   (0.11)
                                ==========                       =========

Weighted average common shares
 outstanding - basic               262,825                         262,825
                                ==========                       =========

Weighted average common shares
 outstanding - diluted             262,825                         262,825
                                ==========                       =========


Notes:

(A) This restatement adjustment corrects revenue recognition for one
    arrangement under which $24.8 million of Product revenue was recognized
    during the first quarter of 2008, but should be recognized during the
    term of the arrangement, beginning in the fourth quarter of 2008.

(B) Because Cadence is restating its financial results for the first
    quarter of 2008 for the revenue arrangement described in Note (A),
    Cadence has also recorded two other Product revenue adjustments, in the
    aggregate amount of $8.4 million, that were previously disclosed in
    Cadence's Quarterly Report on Form 10-Q for the quarter ended June 28,
    2008, initially filed with the SEC on July 29, 2008. Cadence determined
    that Product revenue for these two contracts totaling $8.4 million
    recognized during the second quarter of 2008 should have been
    recognized during the first quarter of 2008.

(C) This restatement adjustment represents the tax effect of the
    restatement adjustments noted above.




                       Cadence Design Systems, Inc.
    Impact of Restatement Adjustments on Previously Reported Condensed
                  Consolidated Statements of Operations
                    For the Quarter Ended June 28, 2008
                 (In thousands, except per share amounts)
                                (Unaudited)


                                              Quarter Ended
                                              June 28, 2008
                                ------------------------------------------
                                    As
                                Previously  Restatement             As
                                 Reported   Adjustments          Restated
                                ----------  -----------          ---------
Revenue
   Product                      $  195,444  $(20,405) (A),(B),(C) $175,039
   Services                         33,694         -                33,694
   Maintenance                     100,340    (1,032) (A)           99,308
                                ----------  --------              --------

      Total revenue                329,478   (21,437)              308,041
                                ----------  --------              --------

Costs and Expenses
   Cost of product                  18,018    (2,607) (B),(D)       15,411
   Cost of services                 27,213         -                27,213
   Cost of maintenance              14,439         -                14,439
   Marketing and sales              89,907         -                89,907
   Research and development        120,087         -               120,087
   General and administrative       34,963         -                34,963
   Amortization of acquired
    intangibles                      5,820         -                 5,820
   Restructuring and other
    charges (credits)                 (355)        -                  (355)
                                ----------  --------              --------

      Total costs and expenses     310,092    (2,607)              307,485
                                ----------  --------              --------

         Income from operations     19,386   (18,830)                  556

   Interest expense                 (2,880)        -                (2,880)
   Other expense, net               (1,750)        -                (1,750)
                                ----------  --------              --------

         Income (loss) before
          provision for income
          taxes                     14,756   (18,830)               (4,074)

   Provision for income taxes        9,760     2,960  (E)           12,720
                                ----------  --------              --------

         Net income (loss)      $    4,996  $(21,790)             $(16,794)
                                ==========  ========              ========

Basic net income (loss) per
 share                          $     0.02                        $  (0.07)
                                ==========                        ========

Diluted net income (loss) per
 share                          $     0.02                        $  (0.07)
                                ==========                        ========

Weighted average common shares
 outstanding - basic               252,629                         252,629
                                ==========                        ========

Weighted average common shares
 outstanding - diluted             269,060                         252,629
                                ==========                        ========

Notes:

(A) This restatement adjustment corrects revenue recognition for one
    arrangement under which $24.8 million of Product revenue was recognized
    during the first quarter of 2008 and $1.0 million of Maintenance
    revenue was recognized during the second quarter of 2008, but should
    be recognized during the term of the arrangement, beginning in the
    fourth quarter of 2008.

(B) This restatement adjustment corrects revenue recognition for one
    arrangement identified during Cadence's remediation efforts under which
    $12.0 million of Product revenue was recognized during the second
    quarter of 2008, but should be recognized during the term of the
    arrangement, beginning in the third quarter of 2008.  As a result of
    reversing this $12.0 million of Product revenue that was previously
    recognized, Cadence also decreased Cost of product by $0.1 million for
    the second quarter of 2008.

(C) Because Cadence is restating its financial results for the second
    quarter of 2008 for the revenue arrangements described in Notes (A) and
    (B), Cadence has also recorded two other Product revenue adjustments,
    in the aggregate amount of $8.4 million, that were previously disclosed
    in Cadence's Quarterly Report on Form 10-Q for the quarter ended June
    28, 2008, initially filed with the SEC on July 29, 2008. Cadence
    determined that Product revenue for these two contracts totaling $8.4
    million recognized during the second quarter of 2008 should have been
    recognized during first quarter of 2008.

(D) This restatement adjustment reduces Cost of product for a hardware
    arrangement during the second quarter of 2008 by $2.5 million.

(E) This restatement adjustment represents the tax effect of the
    restatement adjustments noted above.




                       Cadence Design Systems, Inc.
    Impact of Restatement Adjustments on Previously Reported Condensed
                  Consolidated Statements of Operations
                  For the Six Months Ended June 28, 2008
                 (In thousands, except per share amounts)
                              (Unaudited)


                                             Six Months Ended
                                              June 28, 2008
                                ------------------------------------------
                                    As
                                Previously  Restatement             As
                                 Reported   Adjustments          Restated
                                ----------  -----------          ---------
Revenue
   Product                      $  351,637  $   (36,844) (A),(B) $ 314,793
   Services                         65,890            -             65,890
   Maintenance                     199,140       (1,032) (A)       198,108
                                ----------  -----------          ---------

      Total revenue                616,667      (37,876)           578,791
                                ----------  -----------          ---------

Costs and Expenses
   Cost of product                  30,019       (2,607) (B),(C)    27,412
   Cost of services                 52,406            -             52,406
   Cost of maintenance              28,979            -             28,979
   Marketing and sales             182,941            -            182,941
   Research and development        245,443            -            245,443
   General and administrative       72,671            -             72,671
   Amortization of acquired
    intangibles                     11,580            -             11,580
   Restructuring and other
    charges (credits)                 (355)           -               (355)
   Write-off of acquired
    in-process technology              600            -                600
                                ----------  -----------          ---------

      Total costs and expenses     624,284       (2,607)           621,677
                                ----------  -----------          ---------

         Loss from operations       (7,617)     (35,269)           (42,886)

   Interest expense                 (5,875)           -             (5,875)
   Other income, net                 4,013            -              4,013
                                ----------  -----------          ---------

         Loss before provision
          for income taxes          (9,479)     (35,269)           (44,748)

   Provision for income taxes        4,272       (3,003) (D)         1,269
                                ----------  -----------          ---------

         Net loss               $  (13,751) $   (32,266)         $ (46,017)
                                ==========  ===========          =========


Basic net loss per share        $    (0.05)                      $   (0.18)
                                ==========                       =========

Diluted net loss per share      $    (0.05)                      $   (0.18)
                                ==========                       =========

Weighted average common shares
 outstanding - basic               257,724                         257,724
                                ==========                       =========

Weighted average common shares
 outstanding - diluted             257,724                         257,724
                                ==========                       =========


Notes:

(A) This restatement adjustment corrects revenue recognition for one
    arrangement under which $24.8 million of Product revenue and $1.0
    million of Maintenance revenue was recognized during the six months
    ended June 28, 2008, but should be recognized during the term of
    the arrangement, beginning in the fourth quarter of 2008.

(B) This restatement adjustment corrects revenue recognition for one
    arrangement identified during Cadence's remediation efforts under which
    $12.0 million of Product revenue was recognized during the six months
    ended June 28, 2008, but should be recognized during the term of
    the arrangement, beginning in the third quarter of 2008.  As a result
    of reversing this $12.0 million of Product revenue that was previously
    recognized, Cadence also decreased Cost of product by $0.1 million for
    the six months ended June 28, 2008.

(C) This restatement adjustment reduces Cost of product for a hardware
    arrangement during the six months ended June 28, 2008 by $2.5 million.

(D) This restatement adjustment represents the tax effect of the
    restatement adjustments noted above.

For more information, please contact:

Investors and Shareholders
Jennifer Jordan
Cadence Design Systems, Inc.
408-944-7100

Email Contact

Media and Industry Analysts
Adolph Hunter
Cadence Design Systems, Inc.
408-914-6016

Email Contact