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 September 17, 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 Third Quarter 2010 Earnings Release is published, which is currently scheduled for October 27, 2010.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 3, 2010 and January 2, 2010
(In thousands)
(Unaudited)
July 3, 2010 January 2, 2010
--------------- ---------------
Current Assets:
Cash and cash equivalents $ 475,603 $ 569,115
Short-term investments 2,860 2,184
Receivables, net of allowances of $11,194
and $14,020, respectively 191,291 200,628
Inventories 23,874 24,165
Prepaid expenses and other 62,308 54,655
--------------- ---------------
Total current assets 755,936 850,747
Property, plant and equipment, net of
accumulated depreciation of $652,965 and
$637,107, respectively 295,073 311,502
Goodwill 167,367 -
Acquired intangibles, net of accumulated
amortization of $90,983 and $124,507,
respectively 192,422 28,841
Installment contract receivables, net of
allowances of $0 and $9,724, respectively 40,296 58,448
Other assets 244,661 161,049
--------------- ---------------
Total Assets $ 1,695,755 $ 1,410,587
=============== ===============
Current Liabilities:
Accounts payable and accrued liabilities $ 153,220 $ 150,207
Current portion of deferred revenue 290,105 247,691
--------------- ---------------
Total current liabilities 443,325 397,898
--------------- ---------------
Long-Term Liabilities:
Long-term portion of deferred revenue 92,477 92,298
Convertible notes 541,767 436,012
Other long-term liabilities 454,744 376,006
--------------- ---------------
Total long-term liabilities 1,088,988 904,316
--------------- ---------------
Stockholders' Equity 163,442 108,373
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,695,755 $ 1,410,587
=============== ===============
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended July 3, 2010 and July 4, 2009
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
-------------------------- --------------------------
July 3, 2010 July 4, 2009 July 3, 2010 July 4, 2009
------------ ------------ ------------ ------------
Revenue:
Product $ 117,066 $ 101,840 $ 219,832 $ 189,363
Services 25,258 27,808 51,178 57,015
Maintenance 84,740 80,281 177,992 169,853
------------ ------------ ------------ ------------
Total revenue 227,064 209,929 449,002 416,231
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of product 7,123 9,752 12,415 17,423
Cost of services 21,556 24,418 43,481 48,463
Cost of
maintenance 10,481 11,857 21,879 24,318
Marketing and
sales 71,513 71,431 146,275 146,321
Research and
development 91,118 90,653 180,548 185,345
General and
administrative 17,058 34,240 39,892 72,579
Amortization of
acquired
intangibles 2,551 2,828 5,242 5,968
Restructuring and
other charges
(credits) (317) 18,528 (1,391) 18,008
------------ ------------ ------------ ------------
Total costs and
expenses 221,083 263,707 448,341 518,425
------------ ------------ ------------ ------------
Income (loss)
from
operations 5,981 (53,778) 661 (102,194)
Interest expense (7,972) (7,266) (15,403) (14,314)
Other income
(expense), net (3,100) (2,533) 2,874 (8,682)
------------ ------------ ------------ ------------
Loss before
provision
(benefit)
for income
taxes (5,091) (63,577) (11,868) (125,190)
Provision
(benefit) for
income taxes (54,460) 10,780 (49,452) 12,424
------------ ------------ ------------ ------------
Net income
(loss) $ 49,369 $ (74,357) $ 37,584 $ (137,614)
============ ============ ============ ============
Basic net income
(loss) per share $ 0.19 $ (0.29) $ 0.14 $ (0.54)
============ ============ ============ ============
Diluted net income
(loss) per share $ 0.19 $ (0.29) $ 0.14 $ (0.54)
============ ============ ============ ============
Weighted average
common shares
outstanding -
basic 262,163 256,883 262,380 255,592
============ ============ ============ ============
Weighted average
common shares
outstanding -
diluted 266,423 256,883 266,539 255,592
============ ============ ============ ============
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 3, 2010 and July 4, 2009
(In thousands)
(Unaudited)
Six Months Ended
--------------------
July 3, July 4,
2010 2009
--------- ---------
Cash and Cash Equivalents at Beginning of Period $ 569,115 $ 568,255
--------- ---------
Cash Flows from Operating Activities:
Net income (loss) 37,584 (137,614)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 41,333 50,023
Amortization of debt discounts and fees 11,301 10,244
Loss on extinguishment of debt 5,321 -
Stock-based compensation 20,807 29,235
Loss from equity method investments 73 231
(Gain) loss on investments, net (6,935) 7,991
Write-down of investment securities 1,500 4,606
Impairment of property, plant and equipment 427 3,695
Deferred income taxes (69,266) (5,044)
Proceeds from the sale of receivables, net - 5,827
Provisions (recoveries) for losses (gains) on
trade and installment contract receivables (12,978) 18,361
Other non-cash items 3,340 (9,038)
Changes in operating assets and liabilities,
net of effect of acquired businesses:
Receivables (25,384) 43,134
Installment contract receivables 70,479 89,957
Inventories (10,923) 5,847
Prepaid expenses and other (4,638) (125)
Other assets 3,750 6,769
Accounts payable and accrued liabilities 5,264 (66,247)
Deferred revenue 31,882 (58,364)
Other long-term liabilities 1,904 3,518
--------- ---------
Net cash provided by operating activities 104,841 3,006
--------- ---------
Cash Flows from Investing Activities:
Proceeds from the sale of long-term investments 10,133 -
Purchases of property, plant and equipment (18,765) (22,282)
Purchases of software licenses (2,517) (394)
Investment in venture capital partnerships and
equity investments (500) (1,550)
Cash paid in business combinations and asset
acquisitions, net of cash acquired (263,091) (4,896)
--------- ---------
Net cash used for investing activities (274,740) (29,122)
--------- ---------
Cash Flows from Financing Activities:
Principal payments on receivable sale financing (1,719) (796)
Proceeds from issuance of 2015 Notes 350,000 -
Payment of Convertible Senior Notes (187,150) -
Payment of 2015 Notes issuance costs (9,800) -
Purchase of 2015 Notes Hedges (76,635) -
Proceeds from termination of Convertible Senior
Notes Hedges 280 -
Proceeds from sale of 2015 Warrants 37,450 -
Tax benefit from employee stock transactions 59 -
Proceeds from issuance of common stock 8,119 19,601
Stock received for payment of employee taxes on
vesting of restricted stock (4,114) (2,439)
Purchases of treasury stock (39,997) -
--------- ---------
Net cash provided by financing activities 76,493 16,366
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (106) (1,580)
--------- ---------
Decrease in cash and cash equivalents (93,512) (11,330)
--------- ---------
Cash and Cash Equivalents at End of Period $ 475,603 $ 556,925
========= =========
Cadence Design Systems, Inc.
As of July 28, 2010
Impact of Non-GAAP Adjustments on Forward Looking Diluted
Net Income (Loss) Per Share
(Unaudited)
Three Months Ending Year Ending
October 2, 2010 January 1, 2011
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net income (loss) per
share on a GAAP basis $(0.08) to $(0.06) $(0.01) to $0.03
Amortization of acquired
intangibles 0.03 0.08
Stock-based compensation
expense 0.04 0.16
Non-qualified deferred
compensation expenses - 0.01
Restructuring and other charges
(credits) - (0.01)
Shareholder litigation costs - 0.01
Integration and
acquisition-related costs - 0.01
Other income or expense related
to investments and
non-qualified deferred
compensation plan assets* - (0.02)
Loss on extinguishment of debt - 0.02
Amortization of debt discount 0.02 0.09
Acquisition-related income tax
benefit - (0.25)
Income tax effect of non-GAAP
adjustments - 0.03
------------------- -------------------
Diluted net income per share on
a non-GAAP basis $0.01 to $0.03 $0.12 to $0.16
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Cadence Design Systems, Inc.
As of July 28, 2010
Impact of Non-GAAP Adjustments on Forward Looking Net Income (Loss)
(Unaudited)
Three Months Ending Year Ending
October 2, 2010 January 1, 2011
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net income (loss) on a GAAP basis $(22) to $(16) $(2) to $8
Amortization of acquired
intangibles 7 21
Stock-based compensation
expense 12 43
Non-qualified deferred
compensation expenses - 2
Restructuring and other charges
(credits) - (1)
Shareholder litigation costs - 3
Integration and
acquisition-related costs 1 3
Other income or expense related
to investments and
non-qualified deferred
compensation plan assets* - (5)
Loss on extinguishment of debt - 5
Amortization of debt discount 6 23
Acquisition-related income tax
benefit - (67)
Income tax effect of non-GAAP
adjustments (1) 7
------------------- -------------------
Net income on a non-GAAP basis $3 to $9 $32 to $42
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income (expense), net.
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2009 2010
---------------------------- ----------
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2
---- ---- ---- ---- ---- ---- ----
Americas 42% 48% 43% 51% 46% 40% 46%
Europe 24% 21% 20% 24% 22% 22% 23%
Japan 19% 17% 23% 12% 18% 23% 14%
Asia 15% 14% 14% 13% 14% 15% 17%
Total 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2009 2010
---------------------------- ----------
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2
---- ---- ---- ---- ---- ---- ----
Functional Verification 20% 23% 21% 22% 22% 22% 26%
Digital IC Design 19% 24% 19% 22% 21% 21% 21%
Custom IC Design 26% 25% 28% 28% 27% 27% 26%
Design for Manufacturing 9% 5% 9% 7% 7% 9% 6%
System Interconnect 12% 10% 11% 11% 11% 9% 10%
Services & Other 14% 13% 12% 10% 12% 12% 11%
Total 100% 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
