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. 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 September 18, 2009, 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 Third Quarter 2009 Earnings Release is published, which is currently scheduled for October 28, 2009.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 4, 2009 and January 3, 2009
(In thousands)
(Unaudited)
July 4, 2009 January 3, 2009
--------------- ---------------
(As Adjusted)*
Current Assets:
Cash and cash equivalents $ 556,925 $ 568,255
Short-term investments 5,481 3,840
Receivables, net of allowances of
$14,901 and $7,524, respectively 225,377 298,665
Inventories 22,634 28,465
Prepaid expenses and other 56,831 54,765
--------------- ---------------
Total current assets 867,248 953,990
Property, plant and equipment, net of
accumulated depreciation of
$618,184 and $625,010, respectively 328,507 354,852
Acquired intangibles, net of accumulated
amortization of $117,620 and $134,688,
respectively 37,604 49,082
Installment contract receivables, net of
allowances of $9,724 and $0, respectively 77,016 160,742
Other assets 142,284 161,187
--------------- ---------------
Total Assets $ 1,452,659 $ 1,679,853
=============== ===============
Current Liabilities:
Accounts payable and accrued liabilities 182,410 261,099
Current portion of deferred revenue 258,645 303,111
--------------- ---------------
Total current liabilities 441,055 564,210
--------------- ---------------
Long-Term Liabilities:
Long-term portion of deferred revenue 116,530 130,354
Convertible notes 426,170 416,572
Other long-term liabilities 382,518 382,004
--------------- ---------------
Total long-term liabilities 925,218 928,930
--------------- ---------------
Stockholders' Equity 86,386 186,713
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,452,659 $ 1,679,853
=============== ===============
* Adjusted for the retrospective adoption of FSP APB 14-1, "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)," on the first day of
fiscal 2009.
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended July 4, 2009 and June 28, 2008
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
---------------------- ----------------------
July 4, June 28, July 4, June 28,
2009 2008 2009 2008
---------- ---------- ---------- ----------
(As (As
Adjusted)* Adjusted)*
Revenue:
Product $ 101,840 $ 175,039 $ 189,363 $ 314,793
Services 27,808 33,694 57,015 65,890
Maintenance 80,281 99,308 169,853 198,108
---------- ---------- ---------- ----------
Total revenue 209,929 308,041 416,231 578,791
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of product 9,752 15,411 17,423 27,412
Cost of services 24,418 27,213 48,463 52,406
Cost of maintenance 11,857 14,439 24,318 28,979
Marketing and sales 71,431 89,907 146,321 182,941
Research and development 90,653 120,087 185,345 245,443
General and
administrative 34,240 34,963 72,579 72,671
Amortization of acquired
intangibles 2,828 5,820 5,968 11,580
Restructuring and other
charges (credits) 18,528 (355) 18,008 (355)
Write-off of acquired
in-process technology - - - 600
---------- ---------- ---------- ----------
Total costs and
expenses 263,707 307,485 518,425 621,677
---------- ---------- ---------- ----------
Income (loss) from
operations (53,778) 556 (102,194) (42,886)
Interest expense (7,266) (6,740) (14,314) (13,654)
Other income (expense),
net (2,533) (1,750) (8,682) 4,013
---------- ---------- ---------- ----------
Loss before provision
(benefit) for income
taxes (63,577) (7,934) (125,190) (52,527)
Provision (benefit) for
income taxes 10,780 10,878 12,424 (573)
---------- ---------- ---------- ----------
Net loss $ (74,357) $ (18,812) $ (137,614) $ (51,954)
========== ========== ========== ==========
Basic and diluted net loss
per share $ (0.29) $ (0.07) $ (0.54) $ (0.20)
========== ========== ========== ==========
Weighted average common
shares outstanding - basic
and diluted 256,883 252,629 255,592 257,724
========== ========== ========== ==========
* Adjusted for the retrospective adoption of FSP APB 14-1, "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)," on the first day of
fiscal 2009.
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 4, 2009 and June 28, 2008
(In thousands)
(Unaudited)
Six Months Ended
----------------------------
July 4, June 28,
2009 2008
------------- -------------
(As Adjusted)*
Cash and Cash Equivalents at Beginning of
Period $ 568,255 $ 1,062,920
------------- -------------
Cash Flows from Operating Activities:
Net loss (137,614) (51,954)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 50,023 64,420
Amortization of debt discount and fees 10,244 8,912
Stock-based compensation 29,235 43,044
Equity in loss from investments, net 231 718
Loss on investments, net 7,991 1,729
Gain on sale and leaseback of land and
buildings (122) (1,070)
Write-down of investment securities 4,606 8,304
Write-off of acquired in-process
technology - 600
Tax benefit of call options - 1,341
Impairment of property, plant and
equipment 3,695 1,490
Deferred income taxes (5,044) (12,857)
Proceeds from the sale of receivables,
net 5,827 29,162
Provisions for losses on trade and
installment contract receivables and
sales returns 18,361 324
Other non-cash items (8,916) (2,993)
Changes in operating assets and
liabilities, net of effect of acquired
businesses:
Receivables 43,134 11,007
Installment contract receivables 89,957 31,051
Inventories 5,847 4,743
Prepaid expenses and other (125) (8,075)
Other assets 6,769 (4,562)
Accounts payable and accrued
liabilities (66,247) (56,677)
Deferred revenue (58,364) (24,124)
Other long-term liabilities 3,518 (5,028)
------------- -------------
Net cash provided by operating
activities 3,006 39,505
------------- -------------
Cash Flows from Investing Activities:
Proceeds from the sale of
available-for-sale securities - 3,693
Purchases of available-for-sale securities - (31,758)
Proceeds from the sale of long-term
investments - 3,250
Purchases of property, plant and equipment (22,282) (60,769)
Purchases of software licenses (394) (375)
Investment in venture capital partnerships
and equity investments (1,550) (1,419)
Cash paid in business combinations and
asset acquisitions, net of cash acquired,
and acquisition of intangibles (4,896) (6,189)
------------- -------------
Net cash used for investing
activities (29,122) (93,567)
------------- -------------
Cash Flows from Financing Activities:
Proceeds from receivable sale financing - 17,970
Principal payments on receivable sale
financing (796) -
Tax benefit from employee stock
transactions - 288
Proceeds from issuance of common stock 19,601 26,637
Stock received for payment of employee
taxes on vesting of restricted stock (2,439) (3,287)
Purchases of treasury stock - (216,236)
------------- -------------
Net cash provided by (used for)
financing activities 16,366 (174,628)
------------- -------------
Effect of exchange rate changes on cash and
cash equivalents (1,580) 2,283
------------- -------------
Decrease in cash and cash equivalents (11,330) (226,407)
------------- -------------
Cash and Cash Equivalents at End of Period $ 556,925 $ 836,513
============= =============
* Adjusted for the retrospective adoption of FSP APB 14-1, "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)," on the first day of
fiscal 2009.
Cadence Design Systems, Inc.
As of July 29, 2009
Impact of Non-GAAP Adjustments on Forward Looking Diluted
Net Income (Loss) Per Share
(Unaudited)
Three Months Ending Year Ending
October 3, 2009 January 2, 2010
----------------- -----------------
Forecast Forecast
----------------- -----------------
Diluted net loss per share on a GAAP
basis $(0.14) to $(0.12) $(0.81) to $(0.69)
Amortization of acquired
intangibles 0.02 0.08
Stock-based compensation expense 0.07 0.23
Non-qualified deferred compensation
expenses (credits) - (0.03)
Restructuring and other charges 0.01 0.09
Equity in losses from investments,
write-down of investments,
gains and losses on non-qualified
deferred compensation plan assets - 0.05
Amortization of debt discount 0.02 0.07
Income tax effect of non-GAAP
adjustments 0.01 0.12
----------------- -----------------
Diluted net income (loss) per share
on a non-GAAP basis $(0.01) to $0.01 $(0.20) to $(0.08)
================= =================
Cadence Design Systems, Inc.
As of July 29, 2009
Impact of Non-GAAP Adjustments on Forward Looking Net Income (Loss)
(Unaudited)
Three Months Ending Year Ending
October 3, 2009 January 2, 2010
---------------- ----------------
($ in Millions) Forecast Forecast
---------------- ----------------
Net loss on a GAAP basis $(33) to $(29) $(208) to $(178)
Amortization of acquired intangibles 4 20
Stock-based compensation expense 17 59
Non-qualified deferred compensation
expenses (credits) - (8)
Restructuring and other charges 2 23
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 - 14
Amortization of debt discount 5 19
Income tax effect of non-GAAP
adjustments 3 30
---------------- ----------------
Net income (loss) on a non-GAAP basis $(2) to $2 $(50) to $(20)
================ ================
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2007
============================
GEOGRAPHY Q1 Q2 Q3 Q4 Year
==== ==== ==== ==== ====
Americas 48% 52% 41% 50% 49%
Europe 15% 17% 25% 17% 18%
Japan 27% 14% 22% 22% 21%
Asia 10% 17% 12% 11% 12%
Total 100% 100% 100% 100% 100%
2008 2009
============================ ==========
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2
==== ==== ==== ==== ==== ==== ====
Americas 43% 48% 43% 45% 45% 42% 48%
Europe 24% 21% 23% 22% 22% 24% 21%
Japan 21% 19% 20% 18% 20% 19% 17%
Asia 12% 12% 14% 15% 13% 15% 14%
Total 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2007
============================
PRODUCT GROUP Q1 Q2 Q3 Q4 Year
==== ==== ==== ==== ====
Functional
Verification 24% 24% 20% 26% 24%
Digital IC Design 26% 29% 27% 27% 27%
Custom IC Design 24% 24% 32% 25% 27%
Design for
Manufacturing 7% 7% 6% 6% 6%
System Interconnect 10% 8% 7% 9% 8%
Services & Other 9% 8% 8% 7% 8%
Total 100% 100% 100% 100% 100%
2008 2009
============================ ==========
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2
==== ==== ==== ==== ==== ==== ====
Functional
Verification 22% 25% 22% 17% 22% 20% 23%
Digital IC Design 24% 24% 20% 26% 24% 19% 24%
Custom IC Design 26% 23% 26% 23% 24% 26% 25%
Design for
Manufacturing 5% 7% 7% 7% 6% 9% 5%
System Interconnect 11% 10% 11% 12% 11% 12% 10%
Services & Other 12% 11% 14% 15% 13% 14% 13%
Total 100% 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
Cadence Design Systems, Inc.
Impact of Retrospective Adoption of FSP APB 14-1 on Previously Reported
Condensed Consolidated Balance Sheets
as of January 3, 2009
(In thousands)
(Unaudited)
As of January 3, 2009
-------------------------------------------
As Previously As
Reported Adjustments Adjusted
------------ ------------ ------------
Current assets $ 954,548 $ (558)(A) $ 953,990
Property, plant and equipment,
net 351,961 2,891 (B) 354,852
Acquired intangibles, net 49,082 - 49,082
Installment contract
receivables, net 160,742 - 160,742
Other assets 162,381 (1,194)(C) 161,187
------------ ------------ ------------
Total Assets $ 1,678,714 $ 1,139 $ 1,679,853
============ ============ ============
Current liabilities $ 564,210 $ - $ 564,210
Long-Term Liabilities:
Long-term portion of
deferred revenue 130,354 - 130,354
Convertible notes 500,178 (83,606)(D) 416,572
Other long-term
liabilities 382,004 - 382,004
------------ ------------ ------------
Total long-term
liabilities 1,012,536 (83,606) 928,930
------------ ------------ ------------
Stockholders' Equity:
Common stock and capital
in excess of par value 1,562,079 97,223 (E) 1,659,302
Treasury stock, at cost (695,152) - (695,152)
Accumulated deficit (802,201) (12,478)(F) (814,679)
Accumulated other
comprehensive income 37,242 - 37,242
------------ ------------ ------------
Total stockholders'
equity 101,968 84,745 186,713
------------ ------------ ------------
------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $ 1,678,714 $ 1,139 $ 1,679,853
============ ============ ============
(A) This amount represents the cumulative adjustments to the current
portion of debt issuance costs associated with Cadence's Convertible
Senior Notes.
(B) This amount represents the cumulative capitalized interest related to
the amortization of debt discount.
(C) This amount represents the cumulative adjustments to the long-term
portion of debt issuance costs associated with Cadence's Convertible
Senior Notes and the cumulative impact on the net deferred tax assets
related to the amortization of debt discount.
(D) This amount represents the remaining unamortized debt discount on
Cadence's Convertible Senior Notes as of January 3, 2009.
(E) This amount represents the equity component of Cadence's Convertible
Senior Notes, net of tax adjustments to the tax benefit of call
options, due to the amortization of debt discount.
(F) This amount represents the cumulative Net loss impact of the
amortization of debt discount and the associated tax adjustments
since inception of Cadence's Convertible Senior Notes.
Cadence Design Systems, Inc.
Impact of Retrospective Adoption of FSP APB 14-1 on Previously Reported
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 28, 2008
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 28, 2008
----------------------------------------
As Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 308,041 $ - $ 308,041
Costs and expenses 307,485 - 307,485
----------- ----------- -----------
Income from operations 556 - 556
----------- ----------- -----------
Interest expense (2,880) (3,860)(G) (6,740)
Other expense, net (1,750) - (1,750)
----------- ----------- -----------
Loss before provision for
income taxes (4,074) (3,860) (7,934)
Provision for income taxes 12,720 (1,842)(H) 10,878
----------- ----------- -----------
Net loss $ (16,794) $ (2,018) $ (18,812)
=========== =========== ===========
Basic and diluted net loss per
share $ (0.07) $ (0.07)
=========== ===========
Six Months Ended June 28, 2008
----------------------------------------
As Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 578,791 $ - $ 578,791
Costs and expenses 621,677 - 621,677
----------- ----------- -----------
Loss from operations (42,886) - (42,886)
----------- ----------- -----------
Interest expense (5,875) (7,779)(G) (13,654)
Other income, net 4,013 - 4,013
----------- ----------- -----------
Loss before provision
(benefit) for income taxes (44,748) (7,779) (52,527)
Provision (benefit) for income
taxes 1,269 (1,842)(H) (573)
----------- ----------- -----------
Net loss $ (46,017) $ (5,937) $ (51,954)
=========== =========== ===========
Basic and diluted net loss per
share $ (0.18) $ (0.20)
=========== ===========
(G) This amount represents the amortization of debt discount, net of the
decrease in interest expense associated with the debt issuance costs.
(H) This amount represents the tax adjustments associated with the
increased expense during the period.
