Acquisitions and Acquisition-Related Contingent Consideration

3 Months Ended

Mar. 29, 2014

Business Combinations [Abstract]

ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION

ACQUISITIONS AND ACQUISITION-RELATED CONTINGENT CONSIDERATION

Acquisitions

During the three months ended March 29, 2014, Cadence completed two business combinations for total cash consideration of $27.5 million, after taking into account cash acquired of $2.1 million. The total purchase consideration was preliminarily allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence will continue to evaluate certain tax estimates and assumptions that are subject to change within the measurement period (up to one year from the acquisition date). Cadence recorded a total of $20.8 million of goodwill, $16.9 million of other intangible assets and $8.1 million of net liabilities consisting primarily of long-term deferred income taxes and deferred revenue.

The goodwill related to Cadence’s acquisitions during the three months ended March 29, 2014 is primarily related to expected synergies from combining operations of the acquired companies with Cadence. Cadence expects that approximately $0.5 million of goodwill related to the acquisitions completed during the three months ended March 29, 2014 will be deductible for tax purposes.

Cadence amortizes intangible assets with definite lives on a straight-line basis over the remaining estimated economic life of the underlying products and technologies. The weighted-average amortization period for definite-lived intangible assets acquired during the three months ended March 29, 2014 is approximately nine years.

Transaction costs associated with Cadence’s acquisitions were $1.0 million and $3.4 million for the three months ended March 29, 2014 and March 30, 2013, respectively. These costs consisted of professional fees and administrative costs and were expensed as incurred in Cadence’s condensed consolidated income statements.

Acquisition-related Contingent Consideration

Cadence may be obligated to make cash payments in connection with its business combinations and asset acquisitions completed in prior fiscal years, subject to the satisfaction of future financial measures associated with the acquired technology. If performance is such that these payments are fully achieved, Cadence will be obligated to pay up to an aggregate of $11.8 million over the next 25 months. Of the $11.8 million, up to $9.2 million would be recorded as operating expenses in the condensed consolidated income statements.