In the fourth quarter and fiscal year 2008, Cadence's non-GAAP net loss also excludes the impact of tax expense associated with recording a valuation allowance against Cadence's deferred tax assets. Cadence's management believes it is useful to exclude the tax expense associated with this valuation allowance as Cadence does not expect changes in the valuation allowance of the magnitude recorded in the fourth quarter of 2008 to be recorded frequently.
In fiscal year 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In fiscal year 2008, Cadence's non-GAAP net loss also excludes costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares Cadence acquired as part of the proposed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.
In the fourth quarter of 2007, Cadence's non-GAAP measure also excluded the income tax benefit of settling a dispute with the Internal Revenue Service related to Cadence's tax years 1997-1999. This benefit had no impact on Cadence's non-GAAP measure of net income for 2007. Management believes it is useful to exclude the income tax benefit associated with this settlement from Cadence's non-GAAP measure of net income as this tax benefit resulted from an event which is 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
--------------------------
January 3, December 29,
2009 2007
------------ ------------
(unaudited)
(in thousands)
Net income (loss) on a GAAP basis $ (1,638,955) $ 119,503
Amortization of acquired intangibles 10,310 12,488
Stock-based compensation expense 23,596 22,587
Non-qualified deferred compensation
expenses (credits) (4,357) 1,759
Impairment of goodwill 1,317,200 -
Impairment of intangible and tangible assets 47,069 -
Restructuring and other charges (credits) (1,318) (102)
Certain termination costs - 15,097
Certain legal costs - 8,070
Executive severance costs 9,232 -
Integration and acquisition-related costs 231 289
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 10,647 (558)
Loss on liquidation of subsidiary 9,327 -
Income tax expense from recording a valuation
allowance against deferred tax assets 332,880 -
Income tax benefit from settlement of IRS
dispute - (27,771)
Income tax related to repatriation of
foreign earnings 30,076 -
Income tax effect of non-GAAP adjustments (157,019) (18,394)
------------ ------------
Net income (loss) on a non-GAAP basis $ (11,081) $ 132,968
============ ============
Net Income (Loss) Reconciliation Years Ended
--------------------------
January 3, December 29,
2009 2007
------------ ------------
(unaudited)
(in thousands)
Net income (loss) on a GAAP basis $ (1,854,038) $ 296,252
Amortization of acquired intangibles 44,185 46,639
Stock-based compensation expense 81,274 101,415
Non-qualified deferred compensation
expenses (credits) (7,321) 8,786
Impairment of goodwill 1,317,200 -
Impairment of intangible and tangible assets 47,069 -
Restructuring and other charges (credits) 46,447 (9,686)
Costs related to Cadence's withdrawn proposal
to acquire Mentor Graphics Corporation 3,153 -
Write off of acquired in-process technology 600 2,678
Certain termination costs - 15,097
Certain legal costs - 8,070
Executive severance costs 9,232 -
Integration and acquisition-related costs 995 1,274
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 26,515 (2,066)
Loss on sale of Mentor Graphics
Corporation shares 9,379 -
Loss on liquidation of subsidiary 9,327 -
Income tax expense from recording a valuation
allowance against deferred tax assets 332,880 -
Income tax benefit from settlement of IRS
dispute - (27,771)
Income tax related to repatriation of
foreign earnings 101,123 -
Income tax effect of non-GAAP adjustments (178,136) (43,843)
------------ ------------
Net income (loss) on a non-GAAP basis $ (10,116) $ 396,845
============ ============
Diluted Net Income (Loss) per Share
Reconciliation Quarters Ended
--------------------------
January 3, December 29,
2009 2007
------------ ------------
(unaudited)
(in thousands, except per share data)
Diluted net income (loss) per share on a GAAP
basis $ (6.57) $ 0.41
Amortization of acquired intangibles 0.04 0.04
Stock-based compensation expense 0.09 0.08
Non-qualified deferred compensation
expenses (credits) (0.02) 0.01
Impairment of goodwill 5.28 -
Impairment of intangible and tangible assets 0.19 -
Restructuring and other charges (credits) - -
Certain termination costs - 0.05
Certain legal costs - 0.03
Executive severance costs 0.04 -
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 0.04 -
Loss on liquidation of subsidiary 0.04 -
Income tax expense from recording a valuation
allowance against deferred tax assets 1.33 -
Income tax benefit from settlement of
IRS dispute - (0.10)
Income tax related to repatriation of
foreign earnings 0.12 -
Income tax effect of non-GAAP adjustments (0.62) (0.06)
------------ ------------
Diluted net income (loss) per share on a
non-GAAP basis $ (0.04) $ 0.46
============ ============
Shares used in calculation of diluted net
income (loss) per share --GAAP (A) 249,481 290,970
Shares used in calculation of diluted net
income (loss) per share --non-GAAP (A) 249,481 290,970
(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.
Diluted Net Income (Loss) per Share
Reconciliation Years Ended
--------------------------
January 3, December 29,
2009 2007
------------ ------------
(unaudited)
(in thousands, except per share data)
Diluted net income (loss) per share on a GAAP
basis $ (7.29) $ 1.01
Amortization of acquired intangibles 0.17 0.16
Stock-based compensation expense 0.32 0.34
Non-qualified deferred compensation
expenses (credits) (0.03) 0.03
Impairment of goodwill 5.18 -
Impairment of intangible and tangible assets 0.19 -
Restructuring and other charges (credits) 0.18 (0.03)
Costs related to Cadence's withdrawn proposal
to acquire Mentor Graphics Corporation 0.01 -
Write off of acquired in-process technology - 0.01
Certain termination costs - 0.05
Certain legal costs - 0.03
Executive severance costs 0.04 -
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 0.10 (0.01)
Loss on sale of Mentor Graphics Corporation
shares 0.04 -
Loss on liquidation of subsidiary 0.04 -
Income tax expense from recording a valuation
allowance against deferred tax assets 1.31 -
Income tax benefit from settlement of IRS
dispute - (0.09)
Income tax related to repatriation of
foreign earnings 0.40 -
Income tax effect of non-GAAP adjustments (0.70) (0.15)
------------ ------------
Diluted net income (loss) per share on a
non-GAAP basis $ (0.04) $ 1.35
============ ============
Shares used in calculation of diluted net
income (loss) per share --GAAP (A) 254,323 295,591
Shares used in calculation of diluted net
income (loss) per share --non-GAAP (A) 254,323 295,591
(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.
