Cadence reported fourth quarter 2009 revenue of $220 million, compared to revenue of $227 million reported for the same period in 2008. On a GAAP basis, Cadence recognized net income of $2 million, or $0.01 per share on a diluted basis, in the fourth quarter of 2009, compared to a net loss of $1.63 billion, or $(6.55) per share on a diluted basis in the same period in 2008. Revenue for fiscal year 2009 totaled $853 million, compared to revenue of $1.04 billion in fiscal year 2008. The net loss for fiscal year 2009 was $150 million, or $(0.58) per share on a diluted basis, compared to a net loss of $1.86 billion, or $(7.30) per share on a diluted basis for fiscal year 2008. The GAAP net loss for the fourth quarter and fiscal year 2008 included a non-cash impairment charge of $1.36 billion, related to Cadence's goodwill, intangible assets, and fixed assets. The impairment charge, which was driven by adverse economic conditions and a decline in Cadence's market capitalization, had no effect on Cadence's cash flows.
In addition to using GAAP results to evaluate 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of intangible assets, stock-based compensation expense, in-process research and development charges, costs related to a withdrawn acquisition proposal and losses on the sale of shares of the target company stock, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, amortization of discount on convertible notes, equity in losses (income) from investments, write-down of investments, impairment charges related to goodwill, intangible assets and fixed assets, and losses related to the liquidation of a subsidiary. 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 income in the fourth quarter of 2009 was $15 million, or $0.06 per share on a diluted basis, as compared to a net loss of $11 million, or $(0.04) per share on a diluted basis, in the same period in 2008. For fiscal year 2009, non-GAAP net loss was $16 million, or $(0.06) per share on a diluted basis, compared to a net loss of $10 million and $(0.04) per share on a diluted basis in fiscal year 2008.
"In 2009, we positioned Cadence for future growth. We improved our customer engagement, strengthened our foundation technology, and reduced our cost structure. We've identified new opportunities for growth, and renewed Cadence's culture of innovation and accountability," said Lip-Bu Tan, president and chief executive officer. "Our primary operational focus in the year was to enhance the level of research and development engagement at key accounts and open new business opportunities for the company."
"In 2009, we significantly improved operating efficiency while strategically redeploying resources," said Kevin S. Palatnik, senior vice president and chief financial officer, adding, "I believe that with continued strong focus on execution, we will expand our position with customers, grow the top line and improve profitability over time."
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook
For the first quarter of 2010, the company expects total revenue in the range of $210 million to $220 million. First quarter GAAP net loss per diluted share is expected to be in the range of $(0.10) to $(0.08). Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.00 to $0.02.
For the full year 2010, the company expects total revenue in the range of $865 million to $900 million. On a GAAP basis, net loss per diluted share for fiscal 2010 is expected to be in the range of $(0.29) to $(0.19). Using the non-GAAP measure defined below, net income per diluted share for fiscal 2010 is expected to be in the range of $0.05 to $0.15.
A schedule showing a reconciliation of the business outlook from GAAP net loss and diluted net loss per share to non-GAAP net income and diluted net income per share is included with this release.
Audio Webcast Scheduled
Lip-Bu Tan, Cadence's President and Chief Executive Officer, and Kevin S. Palatnik, Cadence's Senior Vice President and Chief Financial Officer, will host a fourth quarter and fiscal year 2009 financial results audio webcast today, February 3, 2010, 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 February 3, 2010 at 5 p.m. (Pacific) and ending February 17, 2010 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. Cadence 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 and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
The statements contained above regarding Cadence's fourth quarter and fiscal year 2009 results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Kevin S. 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, among others: (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 disclosed restructurings without significant unexpected costs or delays, and the success of Cadence's other efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence's 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 the previously disclosed restructurings and other efforts to improve operational efficiency 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 disclosed restructurings and other efforts to improve operational efficiency on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) events that affect the reserves Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.
For a detailed discussion of these and other cautionary statements related to our business, please refer to Cadence's filings with the Securities and Exchange Commission. These include Cadence's Annual Report on Form 10-K for the year ended January 3, 2009, Cadence's Quarterly Report on Form 10-Q for the period ended October 3, 2009, and Cadence's future filings.
Adoption of accounting principles required by the "Debt with Conversion and Other Options" subtopic of the FASB Accounting Standards Codification
On the first day of fiscal 2009, Cadence adopted new accounting principles as required by the "Debt with Conversion and Other Options" subtopic of the FASB Accounting Standards Codification. Accordingly, Cadence has adjusted the applicable prior period balance sheets and statements of operations to reflect the adjusted balance of the convertible notes and related items, and to record the amortization of the discount on the convertible notes as non-cash interest expense. A reconciliation of Cadence's as-adjusted Condensed Consolidated Balance Sheets as of January 3, 2009 and its as-adjusted Condensed Consolidated Statements of Operations for the quarter and fiscal year ended January 3, 2009 to their respective statements as initially reported is included with this release.
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, costs related to a withdrawn acquisition proposal and losses on the sale of shares of the target company stock, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, amortization of discount on convertible notes, equity in losses (income) from investments, write-down of investments, impairment charges related to goodwill, intangible assets and fixed assets, and losses related to the liquidation of a subsidiary. 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 Cadence's business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. During fiscal 2009 and the second half of fiscal 2008, Cadence commenced restructuring programs that it expects to complete by the end of fiscal 2010. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because 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 because 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 because 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. Cadence's management also believes it is useful to exclude the amortization of the discount on convertible notes because this incremental cost recorded as interest expense does not represent a cash obligation of the company and is not part of Cadence's direct cost of operations. Cadence's management also believes it is useful to exclude the equity in losses (income) from investments and write-down of investments because 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. Finally, Cadence's management also believes it is useful to exclude impairment charges related to goodwill, intangible assets and fixed assets, and losses related to the liquidation of a subsidiary because these do not occur on a regular basis and are not part of the company's direct costs of operations.
During fiscal year 2009, Cadence's non-GAAP net loss also excluded the impact of an income tax benefit associated with the temporary increase in the net operating loss carryback period for operating losses Cadence incurred in the United States. Cadence's management believes it is useful to exclude the tax benefit associated with this change in the United States tax law because the extended net operating loss carryback period is only applicable for operating losses incurred during either fiscal 2008 or fiscal 2009.
During fiscal year 2008, Cadence's non-GAAP net loss also excluded 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 because Cadence does not expect changes in the valuation allowance of the magnitude recorded in the fourth quarter of 2008 to be recorded frequently.
During fiscal year 2008, Cadence's non-GAAP net loss also excluded 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 because it resulted from an event that is not expected to occur frequently.
During fiscal year 2008, Cadence's non-GAAP net loss also excluded costs related to a withdrawn acquisition proposal and losses on the sale of shares of the target company stock which 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 because these items are not directly related to Cadence's operating performance and resulted from events that 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 Three Months Ended
------------------------------
January 2, January 3,
2010 2009
-------------- --------------
(As Adjusted)*
(unaudited)
(in thousands)
Net income (loss) on a GAAP basis $ 1,790 $ (1,634,105)
Amortization of acquired intangibles 4,391 10,310
Stock-based compensation expense 11,016 23,596
Non-qualified deferred compensation
expenses (credits) 3,389 (4,357)
Impairment of goodwill - 1,317,200
Impairment of intangible and tangible
assets - 47,069
Restructuring and other charges
(credits) 13,543 (1,318)
Executive severance costs - 9,232
Integration and acquisition-related
costs 135 231
Amortization of debt discount 4,870 4,276
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 (3,177) 10,647
Loss on liquidation of subsidiary - 9,327
Income tax expense from recording a
valuation allowance against deferred
tax assets - 332,880
Income tax related to repatriation of
foreign earnings - 30,076
Income tax effect of the increase in
United States net operating loss
carryback period (14,825) -
Income tax effect of non-GAAP
adjustments (6,070) (166,049)
-------------- --------------
Net income (loss) on a non-GAAP basis $ 15,062 $ (10,985)
============== ==============
* 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.
Net Loss Reconciliation Years Ended
------------------------------
January 2, January 3,
2010 2009
-------------- --------------
(As Adjusted)*
(unaudited)
(in thousands)
Net loss on a GAAP basis $ (149,871) $ (1,856,715)
Amortization of acquired intangibles 19,941 44,185
Stock-based compensation expense 54,706 81,274
Non-qualified deferred compensation
expenses (credits) (644) (7,321)
Impairment of goodwill - 1,317,200
Impairment of intangible and tangible
assets - 47,069
Restructuring and other charges 31,376 46,447
Costs related to a withdrawn acquisition
proposal - 3,153
Write-off of acquired in-process
technology - 600
Executive severance costs - 9,232
Integration and acquisition-related
costs 665 995
Amortization of debt discount 19,104 16,460
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 6,738 26,515
Losses on the sale of shares of
withdrawn acquisition target company
stock - 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 related to repatriation of
foreign earnings - 101,123
Income tax effect of the increase in
United States net operating loss
carryback period (14,825) -
Income tax effect of non-GAAP
adjustments 16,812 (191,421)
-------------- --------------
Net loss on a non-GAAP basis $ (15,998) $ (9,618)
============== ==============
* 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.
Diluted Net Income (Loss) per Share
Reconciliation Three Months Ended
------------------------------
January 2, January 3,
2010 2009
-------------- --------------
(As Adjusted)*
(unaudited)
(in thousands, except per share data)
Diluted net income (loss) per share on a
GAAP basis $ 0.01 $ (6.55)
Amortization of acquired intangibles 0.02 0.04
Stock-based compensation expense 0.04 0.09
Non-qualified deferred compensation
expenses (credits) 0.01 (0.02)
Impairment of goodwill - 5.28
Impairment of intangible and tangible
assets - 0.19
Restructuring and other charges
(credits) 0.05 -
Executive severance costs - 0.04
Amortization of debt discount 0.02 0.02
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) 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 related to repatriation of
foreign earnings - 0.12
Income tax effect of the increase in
United States net operating loss
carryback period (0.06) -
Income tax effect of non-GAAP
adjustments (0.02) (0.66)
-------------- --------------
Diluted net income (loss) per share on a
non-GAAP basis $ 0.06 $ (0.04)
============== ==============
Shares used in calculation of diluted net
income (loss) per share -- GAAP (A) 265,093 249,481
Shares used in calculation of diluted net
income (loss) per share -- non-GAAP (A) 265,093 249,481
(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.
* 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.
Diluted Net Loss per Share Reconciliation Years Ended
------------------------------
January 2, January 3,
2010 2009
-------------- --------------
(As Adjusted)*
(unaudited)
(in thousands, except per share data)
Diluted net loss per share on a GAAP basis $ (0.58) $ (7.30)
Amortization of acquired intangibles 0.08 0.17
Stock-based compensation expense 0.21 0.32
Non-qualified deferred compensation
expenses (credits) - (0.03)
Impairment of goodwill - 5.18
Impairment of intangible and tangible
assets - 0.19
Restructuring and other charges 0.12 0.18
Costs related to a withdrawn acquisition
proposal - 0.01
Executive severance costs - 0.04
Amortization of debt discount 0.07 0.06
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 0.03 0.10
Losses on the sale of shares of
withdrawn acquisition target company
stock - 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 related to repatriation of
foreign earnings - 0.40
Income tax effect of the increase in
United States net operating loss
carryback period (0.06) -
Income tax effect of non-GAAP
adjustments 0.07 (0.75)
-------------- --------------
Diluted net income (loss) per share on a
non-GAAP basis $ (0.06) $ (0.04)
============== ==============
Shares used in calculation of diluted net
loss per share --GAAP (A) 257,782 254,323
Shares used in calculation of diluted net
loss per share --non-GAAP (A) 257,782 254,323
(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.
* 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.
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 measures useful in evaluating the performance of Cadence's business, reliance on these measures 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 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 March 19, 2010, 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 First Quarter 2010 Earnings Release is published, which is currently scheduled for April 28, 2010.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 2, 2010 and January 3, 2009
(In thousands)
(Unaudited)
January 2, 2010 January 3, 2009
--------------- ---------------
(As Adjusted)*
Current Assets:
Cash and cash equivalents $ 569,115 $ 568,255
Short-term investments 2,184 3,840
Receivables, net of allowances of
$14,020 and $7,524, respectively 200,628 298,665
Inventories 24,165 28,465
Prepaid expenses and other 54,655 54,765
--------------- ---------------
Total current assets 850,747 953,990
Property, plant and equipment, net of
accumulated depreciation of $637,107 and
$625,010, respectively 311,502 354,852
Acquired intangibles, net of accumulated
amortization of $124,507 and $134,688,
respectively 28,841 49,082
Installment contract receivables, net of
allowances of $9,724 and $0, respectively 58,448 160,742
Other assets 161,049 161,187
--------------- ---------------
Total Assets $ 1,410,587 $ 1,679,853
=============== ===============
Current Liabilities:
Accounts payable and accrued liabilities 150,207 261,099
Current portion of deferred revenue 247,691 303,111
--------------- ---------------
Total current liabilities 397,898 564,210
--------------- ---------------
Long-Term Liabilities:
Long-term portion of deferred revenue 92,298 130,354
Convertible notes 436,012 416,572
Other long-term liabilities 376,006 382,004
--------------- ---------------
Total long-term liabilities 904,316 928,930
--------------- ---------------
Stockholders' Equity 108,373 186,713
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,410,587 $ 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 Months and Years Ended January 2, 2010 and January 3, 2009
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
-------------------------- --------------------------
January 2, January 3, January 2, January 3,
2010 2009 2010 2009
------------ ------------ ------------ ------------
(As (As
Adjusted)* Adjusted)*
Revenue:
Product $ 114,478 $ 94,238 $ 400,773 $ 516,603
Services 22,871 34,735 106,555 133,498
Maintenance 82,930 98,362 345,304 388,513
------------ ------------ ------------ ------------
Total revenue 220,279 227,335 852,632 1,038,614
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of product 8,286 11,062 32,114 50,303
Cost of services 20,934 25,254 90,536 103,337
Cost of
maintenance 11,170 12,951 46,593 55,840
Marketing and
sales 72,230 84,393 286,833 358,409
Research and
development 81,309 99,984 354,703 457,913
General and
administrative 21,337 46,424 122,648 152,032
Amortization of
acquired
intangibles 2,726 5,526 11,420 22,732
Impairment of
goodwill - 1,317,200 - 1,317,200
Impairment of
intangible and
tangible assets - 47,069 - 47,069
Restructuring and
other charges
(credits) 13,543 (1,318) 31,376 46,447
Write-off of
acquired
in-process
technology - - - 600
------------ ------------ ------------ ------------
Total costs and
expenses 231,535 1,648,545 976,223 2,611,882
------------ ------------ ------------ ------------
Loss from
operations (11,256) (1,421,210) (123,591) (1,573,268)
Interest expense (7,280) (6,706) (28,872) (27,402)
Other income
(expense), net 4,723 (13,142) (1,042) (16,843)
------------ ------------ ------------ ------------
Loss before
provision
(benefit)
for income
taxes (13,813) (1,441,058) (153,505) (1,617,513)
Provision
(benefit) for
income taxes (15,603) 193,047 (3,634) 239,202
------------ ------------ ------------ ------------
Net income
(loss) $ 1,790 $ (1,634,105) $ (149,871) $ (1,856,715)
============ ============ ============ ============
Basic net income
(loss) per share $ 0.01 $ (6.55) $ (0.58) $ (7.30)
============ ============ ============ ============
Diluted net income
(loss) per share $ 0.01 $ (6.55) $ (0.58) $ (7.30)
============ ============ ============ ============
Weighted average
common shares
outstanding -
basic 260,752 249,481 257,782 254,323
============ ============ ============ ============
Weighted average
common shares
outstanding -
diluted 265,093 249,481 257,782 254,323
============ ============ ============ ============
* 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 Years Ended January 2, 2010 and January 3, 2009
(In thousands)
(Unaudited)
Years Ended
------------------------------
January 2, January 3,
2010 2009
-------------- --------------
(As Adjusted)*
Cash and Cash Equivalents at Beginning of
Period $ 568,255 $ 1,062,920
-------------- --------------
Cash Flows from Operating Activities:
Net loss (149,871) (1,856,715)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Impairment of goodwill - 1,317,200
Impairment of intangible and tangible
assets - 47,069
Depreciation and amortization 93,139 126,489
Amortization of debt discount and
fees 20,912 18,019
Stock-based compensation 54,706 81,274
Equity in loss from investments, net 481 945
(Gain) loss on investments, net (1,292) 15,263
Gain on sale and leaseback of land
and buildings (122) (185)
Write-down of investment securities 5,207 16,653
Write-off of acquired in-process
technology - 600
Loss on liquidation of subsidiary - 9,327
Tax benefit of call options - 4,389
Impairment of property, plant and
equipment 6,730 2,170
Deferred income taxes (3,438) 198,784
Proceeds from the sale of
receivables, net 5,827 52,232
Provisions for losses on trade and
installment contract receivables and
sales returns 20,947 4,578
Other non-cash items (995) 2,086
Changes in operating assets and
liabilities, net of effect of
acquired businesses:
Receivables 61,966 (31,205)
Installment contract receivables 114,346 79,635
Inventories 3,896 2,584
Prepaid expenses and other (1,393) (4,618)
Other assets 12,044 (2,778)
Accounts payable and accrued
liabilities (94,851) (42,882)
Deferred revenue (95,135) 25,648
Other long-term liabilities (27,467) 3,724
-------------- --------------
Net cash provided by operating
activities 25,637 70,286
-------------- --------------
Cash Flows from Investing Activities:
Proceeds from the sale of
available-for-sale securities 4,135 56,529
Purchases of available-for-sale
securities - (62,447)
Proceeds from the sale of long-term
investments - 4,028
Proceeds from the sale of property, plant
and equipment 3,864 -
Purchases of property, plant and
equipment (41,308) (97,290)
Purchases of software licenses (774) (2,388)
Investment in venture capital
partnerships and equity investments (2,300) (4,386)
Cash paid in business combinations and
asset acquisitions, net of cash
acquired, and acquisition of intangibles (14,126) (20,931)
-------------- --------------
Net cash used for investing
activities (50,509) (126,885)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from receivable sale financing - 17,970
Principal payments on receivable sale
financing (2,467) (793)
Payment of convertible notes due 2023 - (230,207)
Tax benefit from employee stock
transactions 1,383 483
Proceeds from issuance of common stock 28,010 48,192
Stock received for payment of employee
taxes on vesting of restricted stock (5,959) (5,114)
Purchases of treasury stock - (273,950)
-------------- --------------
Net cash provided by (used for)
financing activities 20,967 (443,419)
-------------- --------------
Effect of exchange rate changes on cash and
cash equivalents 4,765 5,353
-------------- --------------
Increase (decrease) in cash and cash
equivalents 860 (494,665)
-------------- --------------
Cash and Cash Equivalents at End of Period $ 569,115 $ 568,255
============== ==============
* 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 February 3, 2010
Impact of Non-GAAP Adjustments on Forward Looking Diluted
Net Loss Per Share
(Unaudited)
Three Months Ending Year Ending
April 3, 2010 January 1, 2011
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net loss per share on a
GAAP basis $(0.10) to $(0.08) $(0.29) to $(0.19)
Amortization of acquired
intangibles 0.02 0.04
Stock-based compensation
expense 0.04 0.18
Restructuring and other charges - -
Equity in losses from
investments, write-down of
investments, gains and losses
on non-qualified deferred
compensation plan assets - -
Amortization of debt discount 0.02 0.08
Income tax effect of non-GAAP
adjustments 0.02 0.04
------------------- -------------------
Diluted net income per share on
a non-GAAP basis $0.00 to $0.02 $0.05 to $0.15
=================== ===================
Cadence Design Systems, Inc.
As of February 3, 2010
Impact of Non-GAAP Adjustments on Forward Looking Net Loss
(Unaudited)
Three Months Ending Year Ending
April 3, 2010 January 1, 2011
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net loss on a GAAP basis $(26) to $(20) $(78) to $(52)
Amortization of acquired
intangibles 5 12
Stock-based compensation
expense 11 48
Restructuring and other charges - 1
Equity in losses from
investments, write-down of
investments, gains and losses
on non-qualified deferred
compensation plan assets - 1
Amortization of debt discount 5 21
Income tax effect of non-GAAP
adjustments 5 10
------------------- -------------------
Net income on a non-GAAP basis $0 to $6 $15 to $41
=================== ===================
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 Q4 Year
==== ==== ==== ==== ====
Americas 42% 48% 43% 51% 46%
Europe 24% 21% 20% 24% 22%
Japan 19% 17% 23% 12% 18%
Asia 15% 14% 14% 13% 14%
Total 100% 100% 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 Q4 Year
==== ==== ==== ==== ====
Functional
Verification 20% 23% 21% 22% 22%
Digital IC
Design 19% 24% 19% 22% 21%
Custom IC
Design 26% 25% 28% 28% 27%
Design for
Manufacturing 9% 5% 9% 7% 7%
System
Interconnect 12% 10% 11% 11% 11%
Services &
Other 14% 13% 12% 10% 12%
Total 100% 100% 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 Months and Year Ended January 3, 2009
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended January 3, 2009
-----------------------------------------
As Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 227,335 $ - $ 227,335
Costs and expenses 1,648,545 - 1,648,545
----------- ----------- -----------
Loss from operations (1,421,210) - (1,421,210)
----------- ----------- -----------
Interest expense (2,559) (4,147) (G) (6,706)
Other expense, net (13,142) - (13,142)
----------- ----------- -----------
Loss before provision for
income taxes (1,436,911) (4,147) (1,441,058)
Provision for income taxes 202,044 (8,997) (H) 193,047
----------- ----------- -----------
Net loss $(1,638,955) $ 4,850 $(1,634,105)
=========== =========== ===========
=========== ===========
Basic and diluted net loss per
share $ (6.57) $ (6.55)
=========== ===========
Year Ended January 3, 2009
-----------------------------------------
As Previously As
Reported Adjustments Adjusted
----------- ----------- -----------
Revenue $ 1,038,614 $ - $ 1,038,614
Costs and expenses 2,611,882 - 2,611,882
----------- ----------- -----------
Loss from operations (1,573,268) - (1,573,268)
----------- ----------- -----------
Interest expense (11,614) (15,788) (G) (27,402)
Other expense, net (16,843) - (16,843)
----------- ----------- -----------
Loss before provision for
income taxes (1,601,725) (15,788) (1,617,513)
Provision for income taxes 252,313 (13,111) (H) 239,202
----------- ----------- -----------
Net loss $(1,854,038) $ (2,677) $(1,856,715)
=========== =========== ===========
=========== ===========
Basic and diluted net loss per
share $ (7.29) $ (7.30)
=========== ===========
(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.
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For more information, please contact: Investors and Shareholders Jennifer Jordan Cadence Design Systems, Inc. 408-944-7100 Email Contact Media and Industry Analysts Lynne Cox Cadence Design Systems, Inc. 408-914-6016 Email Contact