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 Sept. 12, 2008, 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 2008 Earnings Release is published, which is currently scheduled for Oct. 22, 2008.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
June 28, 2008 and December 29, 2007
(In thousands)
(Unaudited)
June 28, December 29,
2008 2007
------------ ------------
Current Assets:
Cash and cash equivalents $ 836,513 $ 1,062,920
Short-term investments 52,751 15,193
Receivables, net of allowances of $3,218
and $2,895, respectively 315,677 326,211
Inventories 23,689 31,003
Prepaid expenses and other 99,153 94,236
------------ ------------
Total current assets 1,327,783 1,529,563
Property, plant and equipment, net of
accumulated depreciation of $640,382 and
$624,680, respectively 359,023 339,463
Goodwill 1,314,238 1,310,211
Acquired intangibles, net 112,191 127,072
Installment contract receivables 192,503 238,010
Other assets 320,585 326,831
------------ ------------
Total Assets $ 3,626,323 $ 3,871,150
============ ============
Current Liabilities:
Convertible notes $ 230,385 $ 230,385
Accounts payable and accrued liabilities 246,981 289,934
Current portion of deferred revenue 247,758 265,168
------------ ------------
Total current liabilities 725,124 785,487
------------ ------------
Long-term Liabilities:
Long-term portion of deferred revenue 122,116 136,655
Convertible notes 500,000 500,000
Other long-term liabilities 350,422 368,942
------------ ------------
Total long-term liabilities 972,538 1,005,597
------------ ------------
Stockholders' Equity 1,928,661 2,080,066
------------ ------------
Total Liabilities and Stockholders' Equity $ 3,626,323 $ 3,871,150
============ ============
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Quarters and Six Months Ended June 28, 2008 and June 30, 2007
(In thousands, except per share amounts)
(Unaudited)
Quarters Ended Six Months Ended
-------------------- --------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue:
Product $ 195,444 $ 263,793 $ 351,637 $ 501,697
Services 33,694 32,816 65,890 64,738
Maintenance 100,340 94,352 199,140 189,711
--------- --------- --------- ---------
Total revenue 329,478 390,961 616,667 756,146
--------- --------- --------- ---------
Costs and Expenses:
Cost of product 18,018 12,827 30,019 28,479
Cost of services 27,213 23,442 52,406 47,057
Cost of maintenance 14,439 15,295 28,979 30,418
Marketing and sales 89,907 98,063 182,941 200,761
Research and development 120,087 122,962 245,443 240,027
General and administrative 34,963 41,808 72,671 82,419
Amortization of acquired
intangibles 5,820 4,413 11,580 8,922
Restructuring and other
charges (credits) (355) (1,573) (355) (2,518)
Write-off of acquired
in-process technology - - 600 -
--------- --------- --------- ---------
Total costs and expenses 310,092 317,237 624,284 635,565
--------- --------- --------- ---------
Income (loss) from
operations 19,386 73,724 (7,617) 120,581
Interest expense (2,880) (3,064) (5,875) (6,524)
Other income (expense), net (1,750) 14,207 4,013 33,737
--------- --------- --------- ---------
Income (loss) before
provision for income
taxes 14,756 84,867 (9,479) 147,794
Provision for income taxes 9,760 25,271 4,272 43,777
--------- --------- --------- ---------
Net income (loss) $ 4,996 $ 59,596 $ (13,751) $ 104,017
========= ========= ========= =========
Basic net income (loss) per
share $ 0.02 $ 0.22 $ (0.05) $ 0.38
========= ========= ========= =========
Diluted net income (loss) per
share $ 0.02 $ 0.20 $ (0.05) $ 0.35
========= ========= ========= =========
Weighted average common shares
outstanding - basic 252,629 274,425 257,724 272,043
========= ========= ========= =========
Weighted average common shares
outstanding - diluted 269,060 302,746 257,724 297,048
========= ========= ========= =========
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 28, 2008 and June 30, 2007
(In thousands)
(Unaudited)
Six Months Ended
------------------------
June 28, June 30,
2008 2007
----------- -----------
Cash and Cash Equivalents at Beginning of Period $ 1,062,920 $ 934,342
----------- -----------
Cash Flows from Operating Activities:
Net income (loss) (13,751) 104,017
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 65,553 63,308
Stock-based compensation 43,044 54,709
Equity in loss from investments, net 718 1,720
(Gain) loss on investments, net 1,729 (12,093)
Gain on sale and leaseback of land and
buildings (1,070) (12,071)
Write-down of investment securities 8,304 550
Write-off of acquired in-process technology 600 -
Tax benefit of call options - 4,292
Deferred income taxes 880 1,332
Proceeds from the sale of receivables, net 46,025 76,311
Provisions (recoveries) for losses (gains)
on trade accounts receivable and sales
returns 324 (106)
Other non-cash items (1,503) 5,045
Changes in operating assets and
liabilities, net of effect of acquired
businesses:
Receivables 11,007 24,168
Installment contract receivables 7,298 (153,636)
Inventories 7,350 (972)
Prepaid expenses and other (8,075) (7,760)
Other assets (4,562) 810
Accounts payable and accrued liabilities (56,629) (19,493)
Deferred revenue (37,187) (16,926)
Other long-term liabilities (12,580) 6,940
----------- -----------
Net cash provided by operating
activities 57,475 120,145
----------- -----------
Cash Flows from Investing Activities:
Proceeds from the sale of available-for-sale
securities 3,693 3,256
Purchase of available-for-sale investments (31,758) -
Proceeds from the sale of long-term investments 3,250 6,241
Proceeds from the sale of property, plant and
equipment - 46,500
Purchases of property, plant and equipment (60,769) (37,996)
Purchases of software licenses (375) -
Investment in venture capital partnerships and
equity investments (1,419) (1,948)
Cash paid in business combinations and asset
acquisitions, net of cash acquired,
and acquisition of intangibles (6,189) (7,394)
----------- -----------
Net cash provided by (used for)
investing activities (93,567) 8,659
----------- -----------
Cash Flows from Financing Activities:
Principal payments on term loan - (28,000)
Tax benefit from employee stock transactions 288 17,732
Proceeds from issuance of common stock 26,637 205,219
Stock received for payment of employee taxes on
vesting of restricted stock (3,287) (10,337)
Purchases of treasury stock (216,236) (121,455)
----------- -----------
Net cash provided by (used for)
financing activities (192,598) 63,159
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents 2,283 2,224
----------- -----------
Increase (decrease) in cash and cash equivalents (226,407) 194,187
----------- -----------
Cash and Cash Equivalents at End of Period $ 836,513 $ 1,128,529
=========== ===========
Cadence Design Systems, Inc.
As of July 23, 2008
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income (Loss)
Per Share
(Unaudited)
Quarter ended Year ended
September 27, 2008 January 3, 2009
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net loss per share on a
GAAP basis $(0.27) to $(0.25) $(0.54) to $(0.50)
Amortization of acquired
intangibles 0.04 0.17
Stock-based compensation
expense 0.08 0.33
Non-qualified deferred
compensation expenses
(credits) - (0.01)
Write-off of acquired
in-process technology - -
Integration and
acquisition-related costs - -
Equity in losses from
investments, gains and losses
on non-qualified deferred
compensation plan assets - 0.05
Income tax effect of non-GAAP
adjustments 0.04 0.01
------------------- -------------------
Diluted net income (loss) per
share on a non-GAAP basis $(0.11) to $(0.09) $0.01 to $0.05
=================== ===================
Cadence Design Systems, Inc.
As of July 23, 2008
Impact of Non-GAAP Adjustments on Forward Looking Net Income (Loss)
(Unaudited)
Quarter ended Year ended
September 27, 2008 January 3, 2009
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net loss on a GAAP basis $(72) to $(66) $(138) to $(128)
Amortization of acquired
intangibles 11 44
Stock-based compensation
expense 21 84
Non-qualified deferred
compensation expenses
(credits) - (3)
Write-off of acquired
in-process technology - 1
Integration and
acquisition-related costs - 1
Equity in losses from
investments, gains and losses
on non-qualified deferred
compensation plan assets - 13
Income tax effect of non-GAAP
adjustments 10 2
------------------- -------------------
Net income (loss) on a non-GAAP
basis $(30) to $(24) $4 to $14
=================== ===================
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2006 2007 2008
======================== ======================== ========
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2
=== === === === ==== === === === === ==== === ===
Americas 51% 48% 54% 60% 54% 48% 52% 41% 50% 49% 40% 49%
Europe 19% 18% 22% 19% 19% 15% 17% 25% 17% 18% 22% 21%
Japan 21% 24% 13% 10% 17% 27% 14% 22% 22% 21% 26% 18%
Asia 9% 10% 11% 11% 10% 10% 17% 12% 11% 12% 12% 12%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2006 2007 2008
======================== ======================== ========
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2
=== === === === ==== === === === === ==== === ===
Functional
Verification 26% 22% 24% 23% 24% 24% 24% 20% 26% 24% 20% 25%
Digital IC
Design 20% 26% 19% 26% 24% 26% 29% 27% 27% 27% 27% 23%
Custom IC
Design 27% 27% 30% 26% 27% 24% 24% 32% 25% 27% 25% 26%
Design for
Manufacturing 8% 8% 8% 6% 7% 7% 7% 6% 6% 6% 6% 7%
System
Interconnect 9% 8% 10% 11% 9% 10% 8% 7% 9% 8% 11% 9%
Services &
Other 10% 9% 9% 8% 9% 9% 8% 8% 7% 8% 11% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
