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 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 Fourth Quarter 2009 Earnings Release is published, which is currently scheduled for February 3, 2010.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
October 3, 2009 and January 3, 2009
(In thousands)
(Unaudited)
October 3, 2009 January 3, 2009
--------------- ---------------
(As Adjusted)*
Current Assets:
Cash and cash equivalents $ 570,617 $ 568,255
Short-term investments 4,756 3,840
Receivables, net of allowances of $15,208
and $7,524, respectively 195,468 298,665
Inventories 25,626 28,465
Prepaid expenses and other 64,694 54,765
--------------- ---------------
Total current assets 861,161 953,990
Property, plant and equipment, net of
accumulated depreciation of $630,155 and
$625,010, respectively 313,398 354,852
Acquired intangibles, net of accumulated
amortization of $122,677 and
$134,688, respectively 33,438 49,082
Installment contract receivables, net of
allowances of $9,724 and $0, respectively 64,859 160,742
Other assets 141,361 161,187
--------------- ---------------
Total Assets $ 1,414,217 $ 1,679,853
=============== ===============
Current Liabilities:
Accounts payable and accrued liabilities 159,728 261,099
Current portion of deferred revenue 245,528 303,111
--------------- ---------------
Total current liabilities 405,256 564,210
--------------- ---------------
Long-Term Liabilities:
Long-term portion of deferred revenue 108,941 130,354
Convertible notes 431,072 416,572
Other long-term liabilities 372,756 382,004
--------------- ---------------
Total long-term liabilities 912,769 928,930
--------------- ---------------
Stockholders' Equity 96,192 186,713
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,414,217 $ 1,679,853
=============== ===============
* Adjusted for the retrospective adoption of new accounting principles,
as required by the "Debt with Conversion and Other Options" subtopic
of the FASB Accounting Standards Codification, on the first day of
fiscal 2009.
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended October 3, 2009 and September 27, 2008
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------- --------------------------
October 3, September 27, October 3, September 27,
2009 2008 2009 2008
------------ ------------ ------------ ------------
(As (As
Adjusted)* Adjusted)*
Revenue:
Product $ 96,932 $ 107,572 $ 286,295 $ 422,365
Services 26,669 32,873 83,684 98,763
Maintenance 92,521 92,043 262,374 290,151
------------ ------------ ------------ ------------
Total revenue 216,122 232,488 632,353 811,279
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of product 6,405 11,829 23,828 39,241
Cost of services 21,139 25,677 69,602 78,083
Cost of
maintenance 11,105 13,910 35,423 42,889
Marketing and
sales 68,282 91,075 214,603 274,016
Research and
development 88,049 112,486 273,394 357,929
General and
administrative 28,732 32,937 101,311 105,608
Amortization of
acquired
intangibles 2,726 5,626 8,694 17,206
Restructuring and
other charges
(credits) (175) 48,120 17,833 47,765
Write-off of
acquired
in-process
technology - - - 600
------------ ------------ ------------ ------------
Total costs and
expenses 226,263 341,660 744,688 963,337
------------ ------------ ------------ ------------
Loss from
operations (10,141) (109,172) (112,335) (152,058)
Interest expense (7,278) (7,042) (21,592) (20,696)
Other income
(expense), net 2,917 (7,714) (5,765) (3,701)
------------ ------------ ------------ ------------
Loss before
provision
(benefit)
for income
taxes (14,502) (123,928) (139,692) (176,455)
Provision
(benefit) for
income taxes (455) 46,728 11,969 46,155
------------ ------------ ------------ ------------
Net loss $ (14,047) $ (170,656) $ (151,661) $ (222,610)
============ ============ ============ ============
Basic and diluted
net loss per share $ (0.05) $ (0.67) $ (0.59) $ (0.87)
============ ============ ============ ============
Weighted average
common shares
outstanding -
basic and diluted 259,193 252,915 256,792 256,119
============ ============ ============ ============
* Adjusted for the retrospective adoption of new accounting principles,
as required by the "Debt with Conversion and Other Options" subtopic of
the FASB Accounting Standards Codification, on the first day of fiscal
2009.
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 3, 2009 and September 27, 2008
(In thousands)
(Unaudited)
Nine Months Ended
------------------------------
October 3, September 27,
2009 2008
-------------- --------------
(As Adjusted)*
Cash and Cash Equivalents at Beginning of
Period $ 568,255 $ 1,062,920
-------------- --------------
Cash Flows from Operating Activities:
Net loss (151,661) (222,610)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 71,334 96,037
Amortization of debt discount and fees 15,557 13,323
Stock-based compensation 43,690 57,678
Equity in loss from investments, net 369 823
Loss on investments, net 4,307 11,440
(Gain) loss on sale and leaseback of
land and buildings (122) 350
Write-down of investment securities 5,207 10,666
Write-off of acquired in-process
technology - 600
Tax benefit of call options - 2,994
Impairment of property, plant and
equipment 6,603 2,004
Deferred income taxes (6,520) (11,094)
Proceeds from the sale of
receivables, net 5,827 48,124
Provisions for losses on trade and
installment contract receivables and
sales returns 18,668 462
Other non-cash items (3,962) (3,119)
Changes in operating assets and
liabilities, net of effect of
acquired businesses:
Receivables 56,444 21,489
Installment contract receivables 122,302 46,198
Inventories 2,846 5,486
Prepaid expenses and other (4,041) (3,421)
Other assets 11,809 (1,849)
Accounts payable and accrued
liabilities (79,395) (41,582)
Deferred revenue (83,760) (32,243)
Other long-term liabilities (10,773) 35,972
-------------- --------------
Net cash provided by operating
activities 24,729 37,728
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from the sale of
available-for-sale securities 139 53,783
Purchases of available-for-sale
securities - (62,447)
Proceeds from the sale of long-term
investments - 3,250
Purchases of property, plant and
equipment (30,504) (81,112)
Purchases of software licenses (774) (1,199)
Investment in venture capital
partnerships and equity investments (2,300) (4,053)
Cash paid in business combinations and
asset acquisitions, net of cash
acquired, and acquisition of
intangibles (14,126) (20,621)
-------------- --------------
Net cash used for investing
activities (47,565) (112,399)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from receivable sale financing - 17,970
Principal payments on receivable sale
financing (2,467) -
Payment of convertible notes due 2023 - (230,207)
Tax benefit from employee stock
transactions - 427
Proceeds from issuance of common stock 27,862 48,116
Stock received for payment of employee
taxes on vesting of restricted stock (4,055) (3,693)
Purchases of treasury stock - (273,950)
-------------- --------------
Net cash provided by (used for)
financing activities 21,340 (441,337)
-------------- --------------
Effect of exchange rate changes on cash and
cash equivalents 3,858 4,841
-------------- --------------
Increase (decrease) in cash and cash
equivalents 2,362 (511,167)
-------------- --------------
Cash and Cash Equivalents at End of Period $ 570,617 $ 551,753
============== ==============
* Adjusted for the retrospective adoption of new accounting principles,
as required by the "Debt with Conversion and Other Options" subtopic of
the FASB Accounting Standards Codification, on the first day of fiscal
2009.
Cadence Design Systems, Inc.
As of October 28, 2009
Impact of Non-GAAP Adjustments on Forward Looking Diluted
Net Loss Per Share
(Unaudited)
Three Months Ending Year Ending
January 2, 2010 January 2, 2010
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net loss per share on a
GAAP basis $(0.08) to $(0.06) $(0.66) to $(0.64)
Amortization of acquired
intangibles 0.02 0.08
Stock-based compensation
expense 0.05 0.22
Non-qualified deferred
compensation expenses
(credits) - (0.02)
Restructuring and other charges 0.01 0.08
Equity in losses from
investments, write-down of
investments, gains and losses
on non-qualified deferred
compensation plan assets - 0.04
Amortization of debt discount 0.02 0.07
Income tax effect of non-GAAP
adjustments - 0.09
------------------- -------------------
Diluted net income (loss) per
share on a non-GAAP basis $0.02 to $0.04 $(0.10) to $(0.08)
=================== ===================
Cadence Design Systems, Inc.
As of October 28, 2009
Impact of Non-GAAP Adjustments on Forward Looking Net Loss
(Unaudited)
Three Months Ending Year Ending
January 2, 2010 January 2, 2010
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net loss on a GAAP basis $(19) to $(15) $(171) to $(167)
Amortization of acquired
intangibles 4 20
Stock-based compensation
expense 13 56
Non-qualified deferred
compensation expenses
(credits) - (4)
Restructuring and other charges 2 20
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 - 10
Amortization of debt discount 5 19
Income tax effect of non-GAAP
adjustments 1 24
------------------- -------------------
Net income (loss) on a non-GAAP
basis $6 to $10 $(25) to $(21)
=================== ===================
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2007 2008
============================ ============================
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Americas 48% 52% 41% 50% 49% 43% 48% 43% 45% 45%
Europe 15% 17% 25% 17% 18% 24% 21% 23% 22% 22%
Japan 27% 14% 22% 22% 21% 21% 19% 20% 18% 20%
Asia 10% 17% 12% 11% 12% 12% 12% 14% 15% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
2009
================
GEOGRAPHY Q1 Q2 Q3
==== ==== ====
Americas 42% 48% 43%
Europe 24% 21% 20%
Japan 19% 17% 23%
Asia 15% 14% 14%
Total 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2007 2008
============================ ============================
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Functional
Verification 24% 24% 20% 26% 24% 22% 25% 22% 17% 22%
Digital IC
Design 26% 29% 27% 27% 27% 24% 24% 20% 26% 24%
Custom IC
Design 24% 24% 32% 25% 27% 26% 23% 26% 23% 24%
Design for
Manufacturing 7% 7% 6% 6% 6% 5% 7% 7% 7% 6%
System
Interconnect 10% 8% 7% 9% 8% 11% 10% 11% 12% 11%
Services &
Other 9% 8% 8% 7% 8% 12% 11% 14% 15% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
2009
================
PRODUCT GROUP Q1 Q2 Q3
==== ==== ====
Functional
Verification 20% 23% 21%
Digital IC
Design 19% 24% 19%
Custom IC
Design 26% 25% 28%
Design for
Manufacturing 9% 5% 9%
System
Interconnect 12% 10% 11%
Services &
Other 14% 13% 12%
Total 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
Cadence Design Systems, Inc.
Impact of Retrospective Adoption of the
"Debt with Conversion and Other Options"
Subtopic of the FASB Accounting Standards Codification
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 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 the
"Debt with Conversion and Other Options"
Subtopic of the FASB Accounting Standards Codification
On Previously Reported Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 27, 2008
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 27, 2008
-----------------------------------------
As
Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 232,488 $ - $ 232,488
Costs and expenses 341,660 - 341,660
----------- ----------- -----------
Loss from operations (109,172) - (109,172)
----------- ----------- -----------
Interest expense (3,180) (3,862) (G) (7,042)
Other expense, net (7,714) - (7,714)
----------- ----------- -----------
Loss before provision for
income taxes (120,066) (3,862) (123,928)
Provision for income taxes 49,000 (2,272) (H) 46,728
----------- ----------- -----------
Net loss $ (169,066) $ (1,590) $ (170,656)
=========== =========== ===========
Basic and diluted net loss per
share $ (0.67) $ (0.67)
=========== ===========
Nine Months Ended September 27, 2008
-----------------------------------------
As
Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 811,279 $ - $ 811,279
Costs and expenses 963,337 - 963,337
----------- ----------- -----------
Loss from operations (152,058) - (152,058)
----------- ----------- -----------
Interest expense (9,055) (11,641) (G) (20,696)
Other expense, net (3,701) - (3,701)
----------- ----------- -----------
Loss before provision for
income taxes (164,814) (11,641) (176,455)
Provision for income taxes 50,269 (4,114) (H) 46,155
----------- ----------- -----------
Net loss $ (215,083) $ (7,527) $ (222,610)
=========== =========== ===========
Basic and diluted net loss per
share $ (0.84) $ (0.87)
=========== ===========
(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.
