Cadence Design Systems, Inc.

Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures

For the Three Months Ended December 28, 2013

(In thousands)

(Unaudited)

Three Months Ended

December 28, 2013

GAAP

Adjustments

Non-GAAP

Revenue:

Product and maintenance

$         350,079

$                -

$       350,079

Services

26,643

-

26,643

Total revenue

376,722

-

376,722

Costs and expenses:

Cost of product and maintenance

41,757

(7,743)

 (E) 

34,014

Cost of services

17,274

(698)

 (E) 

16,576

Marketing and sales

94,384

(5,201)

 (E) 

89,183

Research and development

135,465

(15,666)

 (E) 

119,799

General and administrative

29,481

(7,130)

 (E) 

22,351

Amortization of acquired intangibles

5,157

(5,157)

 (E) 

-

Restructuring and other charges 

15,405

(15,405)

-

Total costs and expenses

338,923

(57,000)

281,923

Income from operations

37,799

57,000

94,799

Interest expense

(9,208)

5,515

(F)

(3,693)

Other income (expense), net

842

(1,553)

(G)

(711)

Income before provision (benefit) for income taxes

29,433

60,962

90,395

Provision (benefit) for income taxes

(8,272)

31,775

(H)

23,503

Net income 

$           37,705

$        29,187

$         66,892

Notes: 

(E) For the three months ended December 28, 2013, adjustments to GAAP are as follows for the line items specified:

Amortization of
acquired
intangibles

Stock-based
compensation
expense

Non-qualified
deferred
compensation
expenses

Acquisition and
integration-
related costs

Special
charges (I)

Total
adjustments

Cost of product and maintenance

$              7,265

$                471

$                 7

$                -

$                -

$                  7,743

Cost of services

-

689

9

-

-

698

Marketing and sales

-

4,703

68

430

-

5,201

Research and development

-

9,605

683

5,378

-

15,666

General and administrative

-

3,330

489

3,095

216

7,130

Amortization of acquired intangibles

5,157

-

-

-

-

5,157

Total

$            12,422

$           18,798

$          1,256

$           8,903

$             216

$                41,595

(F) Amortization of debt discount related to convertible notes

(G) Other income or expense related to investments and non-qualified deferred compensation plan assets

(H) Income tax effect of non-GAAP adjustments

(I) Comprised of executive severance costs