-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gxQCRHGSldzmLrC3FzdLGYoxPUc68SHHnEj48aNpxGA4wqxTeRpL3QONOmQdZ00t b1I416tPU81kZQBsvvlI/Q== 0000813672-95-000014.txt : 19950530 0000813672-95-000014.hdr.sgml : 19950530 ACCESSION NUMBER: 0000813672-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950516 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CADENCE DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000813672 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 770148231 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10606 FILM NUMBER: 95539982 BUSINESS ADDRESS: STREET 1: 555 RIVER OAKS PKWY CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4089431234 MAIL ADDRESS: STREET 1: 555 RIVER OAKS PARKWAY CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: ECAD INC /DE/ DATE OF NAME CHANGE: 19880609 10-Q 1 FORM 10Q 1 FORM 10-Q ______________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X Quarterly Report PURSUANT TO Section 13 or 15(d) of the ___ Securities Exchange Act of 1934 For the quarterly period ended April 1, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________to_________________ Commission file number 1-10606 CADENCE DESIGN SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 77-0148231 (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 555 River Oaks Parkway, San Jose, California 95134 (Address of principal executive offices) (Zip Code) (408) 943-1234 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ At May 6, 1995 there were 38,159,929 shares of the registrant's Common Stock, $0.01 par value outstanding. 2 CADENCE DESIGN SYSTEMS, INC. INDEX
PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets: April 1, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Income: Three Months Ended April 1, 1995 and March 31,1994 4 Condensed Consolidated Statements of Cash Flows: Three Months Ended April 1, 1995 and March 31,1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 14
3 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
April 1, December 31, 1995 1994 (Unaudited) ASSETS Current Assets: Cash and cash investments $ 97,920 $ 75,011 Short-term investments 13,275 21,865 Accounts receivable, net 63,429 78,629 Inventories 5,867 5,137 Prepaid expenses and other current assets 12,491 11,293 Total current assets 192,982 191,935 Property, plant and equipment, net 124,407 122,064 Software development costs, net 27,393 27,832 Purchased software and other intangibles, net 12,708 10,557 Other assets 9,945 8,660 Total assets $ 367,435 $ 361,048 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term obligations $ 26,176 $ 26,412 Accounts payable 13,328 12,522 Accrued liabilities 49,182 56,359 Income taxes payable 6,494 7,944 Deferred revenue 79,406 61,205 Total current liabilities 174,586 164,442 Long-Term Liabilities: Long-term obligations 1,942 2,098 Lease liabilities 8,348 9,040 Deferred income taxes 1,380 904 Other long-term liabilities 9,884 8,501 Total long-term liabilities 21,554 20,543 Stockholders' Equity: Common stock 487 476 Additional paid-in capital 271,908 264,697 Treasury shares at cost (10,331,202 and 9,686,634 shares, respectively) (151,180) (133,728) Retained earnings 45,559 43,377 Accumulated translation adjustment 4,521 1,241 Total stockholders' equity 171,295 176,063 Total liabilities and stockholders' equity $ 367,435 $361,048
The accompanying notes are an integral part of these statements. CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
Three Months Ended April 1, March 31, 1995 1994 (Unaudited) REVENUE: Product $ 62,110 $ 56,407 Service 10,477 4,740 Maintenance 43,446 35,631 Total revenue 116,033 96,778 COSTS AND EXPENSES: Cost of product 11,853 13,759 Cost of service 9,213 4,564 Cost of maintenance 3,897 3,993 Marketing and sales 42,220 39,024 Research and development 20,863 18,214 General and administrative 9,498 10,599 Unusual items - - - - 12,104 Total costs and expenses 97,544 102,257 INCOME (LOSS) FROM OPERATIONS 18,489 (5,479) Other income (expense), net (423) 347 Income (loss) before provision (benefit) for income taxes 18,066 (5,132) Provision (benefit) for income taxes 4,516 (1,283) NET INCOME (LOSS) $ 13,550 $ (3,849) NET INCOME (LOSS) PER SHARE $ .32 $ (.09) Weighted average common and common equivalent shares outstanding 42,103 41,208
The accompanying notes are an integral part of these statements. 5 CADENCE DESIGN SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended April 1, March 31, 1995 1994 (Unaudited) CASH AND CASH INVESTMENTS AT BEGINNING OF PERIOD $ 75,011 $ 61,382 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) 13,550 (3,849) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 11,496 10,600 Lease liabilities (730) (1,619) Deferred income taxes, noncurrent 476 (235) Write-offs of equipment and other long-term assets 241 807 Increase in other long-term liabilities 1,312 247 Net changes in current assets and liabilities, net of business combinations accounted for as purchases: Decrease in accounts receivable 18,277 14,891 Decrease (increase) in inventories (730) 560 Decrease (increase) in prepaid expenses and other current assets (1,501) 2,267 Decrease in accrued liabilities and payables (5,861) (735) Increase in deferred revenue 17,436 7,698 Net cash provided by operating activities 53,966 30,632 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short-term investments (8,484) (22,874) Maturity of short-term investments 17,074 10,747 Purchase of property and equipment (8,150) (2,340) Capitalization of software development costs (2,968) (3,362) Decrease (increase) in other assets and purchased software and intangibles (4,328) 593 Payment for purchase of third-party interests in partnerships, net of cash acquired - - - - (8,729) Net cash used for investing activities (6,856) (25,965) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable and long-term obligations (1,028) (2,057) Sale of common stock 8,712 678 Purchase of treasury stock (21,376) (1,708) Purchase of warrant (12,125) - - - - Net cash used for financing activities (25,817) (3,087) EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,616 (703) INCREASE IN CASH AND CASH INVESTMENTS 22,909 877 CASH AND CASH INVESTMENTS AT END OF PERIOD $97,920 $62,259
The accompanying notes are an integral part of these statements. 6 CADENCE DESIGN SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior year balances have been reclassified to conform to the current year presentation. 2. Change in Fiscal Year End Effective December 31, 1994 the Company changed its fiscal year from December 31 to the 52-53 week period ending on the Saturday closest to December 31. Beginning in fiscal 1995, each quarter will be 13 weeks in length. The effect of the change is not material to the Company's current year financial statements. 3. Purchase of Redwood Design Automation, Inc. In August 1994 the Company acquired all of the outstanding stock of Redwood Design Automation, Inc. ("Redwood") for approximately 419,000 shares of the Company's common stock valued at $4.6 million and $1.8 million of net advances made to Redwood, prior to the acquisition, which were not repaid. Redwood was a development stage company formed to design, develop and market software for use in electronic system design. The acquisition was accounted for as a purchase, and the results of Redwood from the date of acquisition forward have been recorded in the Company's consolidated financial statements. In connection with the acquisition, net intangibles of $6.8 million were acquired, of which $4.7 million was reflected as a one-time charge to operations in the third quarter of 1994, for the write-off of in-process research and development that had not reached technological feasibility and, in management's opinion, had no probable alternative future use. The one-time charge was reflected in the Company's statement of income for the quarter ended September 30, 1994 as an unusual item within operating expenses. The remaining intangibles of $2.1 million are included in purchased software and intangibles in the accompanying balance sheet and are being amortized over a useful life of two years. 4. Net Income (Loss) Per Share Net income per share for each period is calculated by dividing net income by the weighted average number of common stock and common stock equivalents outstanding during the period (calculated using the modified treasury stock method). Common stock equivalents consist of dilutive shares issuable upon the exercise of outstanding common stock options and warrants. Net loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding. Fully diluted net income (loss) per share is substantially the same as primary net income (loss) per share. 7 5. Inventories Inventories, which consist primarily of testing equipment, are stated at the lower of cost (first-in, first-out method) or market. Cost includes labor, material and manufacturing overhead. Inventories consisted of the following (in thousands):
April 1, December 31, 1995 1994 (Unaudited) Raw materials and supplies $ 1,640 $ 1,268 Work-in-process 2,713 2,250 Finished goods 1,514 1,619 Total $ 5,867 $ 5,137 6. Commitments and Contingencies Securities class action lawsuits were filed against the Company and certain of its officers and directors in the United States District Court for the Northern District of California, San Jose Division, on April 8 and 9, 1991. The lawsuits, which were consolidated into a single action, allege violation of certain federal securities laws by maintaining artificially high market prices for the Company's common stock through alleged misrepresentations and nondisclosures regarding the Company's financial condition. Court rulings in response to the Company's motions to dismiss the lawsuit limited the class period to include purchasers of the Company's common stock between January 29, 1991 and April 3, 1991. On March 23, 1993 a separate class action lawsuit was filed against the Company and certain of its directors and officers in the United States District Court, Northern District of California, San Jose Division. This lawsuit, which was consolidated into a single action with two virtually identical lawsuits filed later in March and in April 1993, alleges violation of certain federal securities laws by maintaining artificially high market prices for the Company's common stock through alleged misrepresentations and nondisclosures regarding the Company's financial condition. On November 18, 1993, the District Court granted the Company's motion to dismiss the 1993 complaint. The effect of the ruling was to dismiss the complaint except as to a statement allegedly made on January 28, 1993, but plaintiffs were granted leave to further amend their complaint. In April 1994 the Company entered into tentative agreements to settle both of the above class action lawsuits for a combined settlement of $16.5 million, of which approximately $7.5 million was covered by the Company's insurance carriers. Reflected in the Company's operating expenses as an unusual item at March 31, 1994 is the net settlement cost of $9.0 million, $1.0 million of legal fees and $2.1 million of additional settlement and legal costs expected to be incurred as the result of a dispute with one of the Company's insurance carriers. In May 1994, after negotiation, the Company's secondary insurance carrier agreed to provide coverage on the second lawsuit. Accordingly, the results of operations for the second quarter ended June 30, 1994 included a $2.1 million credit to operating expenses for the additional insurance proceeds received and the reduction of accruals for legal expenses relating to the provision taken in the first quarter. The total settlement amount has been remitted into escrow. 7. Put Warrants and Call Options The Company has an authorized stock repurchase program. In total, as of April 1, 1995, the Company had authorized the repurchase of 20.2 million shares and approximately 12.4 million shares had been repurchased. The Company repurchases common stock, in part, to satisfy estimated requirements for shares to be issued under its employee stock option and stock purchase plans as well as in connection with acquisitions. Throughout 1994 as part of its authorized stock repurchase program, the Company sold 5.0 million put warrants through private placement. Each warrant entitles the holder to sell one share of common stock to the Company on a specified date at a specified price ranging from $13.13 to $20.59 per share. Additionally, during this same period, the Company purchased approximately 3.8 million call options that entitle the Company to buy on a specified date one share of common stock, at a specified price ranging from $14.94 to $22.84 per share. The Company has the right to settle the put warrants with stock, or a cash or stock settlement equal to the difference between the exercise price and market value at the date of exercise. The put warrants and call options outstanding at April 1, 1995 are exercisable on various dates between April 1995 and November 1995. 8 At April 1, 1995 the Company has both the unconditional right and the intent to settle these put warrants with stock, and therefore, no amount has been classified out of stockholders' equity in the accompanying balance sheet. Gains or losses from the exercise of these put warrants and call options are reported in stockholders' equity. Settlement of the put warrants with stock could cause the Company to issue a substantial number of shares, depending on the amounts of the repurchase obligations and the per share value of the Company's common stock at the time of exercise. In addition, settlement of put warrants in stock or cash could lead to the disposition by put warrant holders of shares of the Company's common stock that such holders may have accumulated in anticipation of the exercise of the put warrants or call options. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Revenue for the first quarter ended April 1, 1995 was $116.0 million compared with $96.8 million for the same period of the prior year, an increase of 20%. Product revenue increased $5.7 million from $56.4 million for the quarter ended March 31, 1994. The increase in product revenue was primarily the result of increased demand for the Company's top-down design (HDL), systems and automated test engineering (ATE) products. Service revenue increased to $10.5 million for the first quarter ended April 1, 1995 from $4.7 million for the first quarter ended March 31, 1994, an increase of $5.7 million. The increase in service revenue was the result of increased demand for the Company's Spectrum Services consulting business. Maintenance revenue was $43.4 million for the quarter ended April 1, 1995, an increase of $7.8 million from the amount reported for the quarter ended March 31, 1994. The increase in maintenance revenue was attributable to an increase in the Company's installed base of products as well as the Company's continued effort toward obtaining customer renewals of maintenance. Revenue from international sources was approximately $63.1 million and $53.5 million or 54% and 55% of total revenue for the three months ended April 1, 1995 and March 31, 1994, respectively. In addition to increased sales volume in Japan, $3.8 million of the $9.6 million increase in international source revenue was due to the favorable impact on revenue of foreign exchange rates as the result of the strengthening of certain foreign currencies in relation to the U.S. dollar as compared to the quarter ended March 31, 1994. Although the Company experienced increased revenue from Japan in the first quarter of 1995 as compared to the first quarter of 1994, there can be no assurance that the Company's revenue volume in Japan will continue to strengthen. It is anticipated that international revenue will continue to constitute a significant portion of total revenue. International revenues are subject to certain additional risks normally associated with international operations, including, among others, adoption and expansion of government trade restrictions, volatile foreign exchange rates, currency conversion risks, limitations on repatriation of earnings and reduced protection of intellectual property rights. Cost of product was $11.9 million and $13.8 million for the three months ended April 1, 1995 and March 31, 1994, respectively. The decrease in cost of product was the result of a $.7 million decrease in product royalties and a $1.0 million decrease in purchased software amortization due to the write-off of purchased software in the first quarter of 1994. Cost of service increased from $4.6 million for the quarter ended March 31, 1994 to $9.2 million for the quarter ended April 1, 1995 due to additional employee related costs attributable to increased headcount required to meet the higher demand for the Spectrum Services consulting business. Cost of maintenance was $3.9 million and $4.0 million for the quarters ended April 1, 1995 and March 31, 1994, respectively. Product gross margin increased from 76% in the quarter ended March 31, 1994 to 81% for the quarter ended April 1, 1995. As more fully described above, the improvement in gross margin was the result of increased product revenue combined with lower product costs in the first quarter of 1995 as compared to the first quarter of 1994. Service gross margin increased from 4% for the quarter ended March 31, 1994 to 12% for the quarter ended April 1, 1995. Service gross margin for the first quarter of 1994 was adversely affected due to the Company's addition of consulting services staff at a faster rate than revenue growth. Maintenance gross margin increased from 89% in the first quarter of 1994 to 91% in the first quarter of 1995 due to the increase in maintenance revenue while the cost of maintenance remained relatively constant. 9 In March 1995 the Company signed a five year $75 million outsourcing agreement with Unisys Corporation to assume substantial portions of Unisys' internal silicon design operation. As part of this agreement, the Company retained approximately 180 hardware and software designers and acquired fixed assets and certain intangibles. While primarily focused on serving the needs of Unisys, the design and service resources acquired by Cadence are also intended to be used to support other customers' design needs. Until these newly acquired design and service resources are more fully utilized through additional revenue contracts or until further operating efficiencies are obtained, service gross margins are expected to be adversely affected. Marketing and sales expenses increased to $42.2 million for the quarter ended April 1, 1995 compared to $39.0 million for the same period in 1994, an increase of 8%. The increase in marketing and sales expenses was the result of a $4.4 million increase in employee related expenses of which approximately $1.7 million was attributable to the effect of the strengthening of certain foreign currencies in relation to the U.S. dollar as compared to the quarter ended March 31, 1994. The remaining increase in employee related expenses was due to an increase in compensation expenses that vary with bookings. These increased costs were partially offset by lower facilities related costs. Research and development expenses for the quarter ended April 1, 1995 were $20.9 million as compared to $18.2 million for the same period of the prior year, an increase of 15%. Capitalization of software development costs for the quarters ended April 1, 1995 and March 31, 1994 were $3.0 million and $3.4 million, which represented 13% and 16% of total research and development expenditures made in each of those periods, respectively. The amount of software development costs capitalized in any given period may vary depending on the exact nature of the development performed. Gross research and development expenditures before capitalization increased from $21.6 million for the three months ended $23.8 million for the same period in the current year. The increase in 1995 was primarily due to $2.4 million of increased employee related expenses primarily resulting from increased headcount. These increased costs were partially offset by lower facilities related costs of $.7 million. General and administrative expenses decreased to $9.5 million for the quarter ended April 1, 1995 from $10.6 million for the same period in 1994, a decrease of 10%. This decrease was primarily the result of decreased bad debt expense of $.5 million and decreased legal fees of $.2 million due to the settlement of the stockholder class action lawsuits at the end of the first quarter of 1994. In March 1994 the Company recorded a provision of $12.1 million for settlement of the stockholder class action lawsuits filed against the Company and certain of its officers and directors in 1991 and 1993. This provision was recorded as an unusual item within operating expenses in the accompanying statement of income. The provision was comprised of a net settlement amount of $9.0 million, $1.0 million of legal fees and $2.1 million of additional settlement and legal costs expected to be incurred as the result of a dispute with one of the Company's insurance carriers. In May 1994, after negotiation, the Company's secondary insurance carrier agreed to provide coverage on the second lawsuit. Accordingly, the results of operations for the second quarter ended June 30, 1994 included a $2.1 million credit to operating expenses for the additional insurance proceeds received and the reduction of accruals for legal expenses relating to the provision taken in the first quarter. Net other expense for the first quarter ended April 1, 1995 was $.4 million compared with $.3 million of net other income for the same period in 1994. The decrease in net other income for the three month period ended April 1, 1995 was primarily the result of a $.5 million increase in interest expense related to a secured loan obtained as part of the Company's acquisition, in the fourth quarter of 1994, of all third party interests in a real estate partnership which owns certain of the Company's facilities. The Company's estimated annual effective tax rate for fiscal 1995 and 1994 is 25%. 10 FACTORS THAT MAY AFFECT FUTURE RESULTS The Company's operating expenses are partially based on its expectations of future revenue. The Company's results of operations may be adversely affected if revenue does not materialize in a quarter as expected. Since expense levels are usually committed in advance of revenues and because only a small portion of expenses vary with revenue, the Company's operating results may be impacted significantly by lower revenue. Based on the Company's operating history and factors that may cause fluctuations in the quarterly results, quarter to quarter comparisons should not be relied upon as indicators of future performance. The Company's future operating results are dependent on the Company's ability to successfully implement its strategy to help its customers meet their business objectives through optimized product design environments ("PDEs"). The Company provides these PDEs through a combination of software products and services. Inherent in implementing this strategy are a number of risks that the Company must manage and which could affect its future operating results. The Company competes in the highly competitive EDA market which continues to be characterized by aggressive pricing practices, rapid technological change and new market entrants. The Company's success is dependent on its ability to develop innovative, cost-competitive EDA software products and to bring them to market in a timely manner. In order to more effectively work with customers to help them build optimized PDEs, the Company has realigned its sales force along industry lines. The Company expects this industry focus will allow the sales force to better understand and prepare solutions to its customers' business needs thereby increasing revenue. Should the benefits of this realignment take longer to realize than expected, the Company's revenues could be adversely affected. Another important part of the Company's strategy is to help its customers through an increased offering of services. While the Company has provided services to its customers for a number of years, there are a number of risks the Company must successfully address in order to develop this portion of its business. These risks include the ability to successfully recruit, train and retain a skilled consulting force and the ability to profitably deliver consulting services that meet customer expectations. The Company's profitability could be adversely affected if it is unable to develop its consulting services business as expected. Due to the foregoing, as well as other factors, past financial performance should not be considered a reliable indicator of future performance. In addition, the Company's participation in a highly dynamic industry often results in significant volatility of the Company's common stock price. Any change in revenues or operating results below levels expected by securities analysts for the Company or its competitors, and the timing of the announcement of such shortfalls, could have an immediate and significant adverse effect on the trading price of the Company's common stock in any given period. LIQUIDITY AND CAPITAL RESOURCES During the three months ended April 1, 1995 the Company's cash and cash investments and short-term investments increased $14.3 million from $96.9 million to $111.2 million. This increase was primarily due to net cash generated by operating activities exceeding net cash used for investing (excluding purchases and maturities of short- term investments) and financing activities. Cash provided by operating activities included a decrease of $18.3 million in accounts receivable due to increased collections and improved days sales outstanding. Also included in the cash generated by operating activities was a $17.4 million increase in deferred revenue attributable to increased deferred maintenance due to a larger customer base and continued focus on customer renewals and an increase in certain deferred product revenue deferred in accordance with the American Institute of Certified Public Accountants Statement of Position 91-1 entitled "Software Revenue Recognition". Cash used for financing activities included approximately $21.4 million of treasury stock purchases and the purchase of a warrant related to 1.0 million shares of the Company's common stock for $12.1 million, partially offset by $8.7 million of cash generated by the sale of common stock through the exercise of stock options. Working capital at April 1, 1995 was $18.4 million compared to $27.5 million at December 31, 1994. The decrease is primarily the result of a decrease of $15.2 million in accounts receivable and an increase of $18.2 million in deferred revenue offset by an increase in cash, cash investments and short-term investments of $14.3 million and a decrease in accrued liabilities of $7.2 million. 11 The Company has an authorized stock repurchase program. Prior to 1993, the Company had authorized the repurchase of up to 2.8 million shares of common stock in the open market. In 1993 and 1994, the Company authorized the repurchase of an additional 4.0 million and 13.4 million shares, respectively, of common stock from time to time. In total, as of April 1, 1995, approximately 12.4 million shares had been repurchased. Some repurchases are necessary to satisfy estimated requirements for shares to be issued under the Company's employee stock option and stock purchase plans as well as in connection with acquisitions. During 1994, as part of its authorized stock repurchase program, the Company sold 5.0 million put warrants and purchased 3.8 million call options through private placement. The Company had a maximum potential obligation related to the put warrants at April 1, 1995 to buy back 5.0 million shares of its common stock at an aggregate price of approximately $81.3 million. The put warrants are exercisable on various dates between April 1995 and November 1995. Alternatively, the Company can elect to settle the put warrants with stock which could cause the Company to issue a substantial number of shares, depending on the amounts of the repurchase obligations and the per share value of the Company's common stock at the time of exercise. In addition, settlement of put warrants in stock or cash could lead to the disposition by put warrant holders of shares of the Company's common stock that such holders may have accumulated in anticipation of the exercise of the put warrants or call options. Subsequent to April 1, 1995 1.0 million of the put warrants expired out of the money and the Company repurchased approximately .8 million shares of common stock through the exercise of call options for a total cost of approximately $17.8 million. In addition to the $111.2 million in cash and cash investments and short-term investments at April 1, 1995, the Company had available $10.0 million under a bank line of credit, which expires in June 1995. The Company is currently in negotiations with the bank regarding possible extension/expansion of this line of credit, but there can be no assurance that mutually acceptable terms can be reached. Anticipated cash requirements for fiscal 1995 include the purchase of treasury stock through the exercise of the Company's call options and in the open market. Excluding the .8 million shares of common stock purchased subsequent to April 1, 1995 and discussed above, the Company has the right to purchase an additional 3.0 million shares through the exercise of call options during 1995 at a cost of approximately $55.0 million. Other cash requirements for the remainder of fiscal 1995 include contemplated additions of capital equipment of approximately $30.0 million and the repayment in August 1995, if not refinanced, of a $23.5 million secured loan assumed as part of a 1994 purchase of corporate facilities. The Company anticipates that current cash and short-term investment balances, cash flows from operations and short and long-term borrowing capabilities will be sufficient to meet its working capital and capital expenditure requirements on a short and long-term basis. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8K (a) The following exhibits are filed herewith:
Exhibit Number Exhibit Title 10.01 The Registrant's 1987 Stock Option Plan, as amended to date, (incorporated by reference to Exhibit 4.01 to the Registrant's Form S-8 Registration Statement (No. 33- 53913) filed on May 31, 1994 (the "1994 Form S-8")). 10.02 Form of Stock Option Agreement and Form of Stock Option Exercise Request, as currently in effect under the Registrant's 1987 Stock Option Plan (incorporated by reference to Exhibit 4.01 to the Registrant's Form S-8 Registration Statement (No. 33-22652) filed on June 20, 1988). 10.03 The Registrant's 1988 Directors Stock Option Plan, as amended to date, including the Stock Option Grant and Stock Option Exercise Notice and Agreement (the first document is incorporated by reference to Exhibit 4.02 of the Registrant's 1994 Form S-8 and the latter two documents are incorporated by reference to Exhibit 10.08 - 10.10 to the Registrant's 1988 Form S-1 Registration Statement (No. 33- 23107) originally filed on July 18, 1988). 10.04 The Registrant's 1993 Directors Stock Option Plan including the Stock Option Grant. 10.05 The Registrant's 1990 Employee Stock Purchase Plan as amended to date (incorporated by reference to Exhibit 4.03 to the 1994 Form S-8). 10.06 The Registrant's Senior Executive Bonus Plan for 1994 (incorporated by reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal year ended December 31, 1993 (the "1993 Form 10-K")). 10.07 The Registrant's Key Contributor Bonus Plan for 1994 (incorporated by reference to Exhibit 10.09 to the 1993 Form 10-K). 12 Exhibit Number Exhibit Title 10.08 The Registrant's Senior Executive Bonus Plan for 1995. (incorporated by reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal year ended December 31, 1994 (the "1994 Form 10-K")). 10.09 The Registrant's Deferred Compensation Plan for 1994 (incorporated by reference to Exhibit 10.09 to the 1994 Form 10-K). 10.10 Amended and Restated Lease, dated June 29, 1989, by and between River Oaks Place Associates, a California limited partnership, ("ROPA") and the Registrant, for the Registrant's executive offices at 555 River Oaks Parkway, San Jose, California (incorporated by reference to Exhibit 10.14 to the Registrant's Form 10-K for the fiscal year ended December 31, 1990 (the "1990 Form 10-K")). 10.11 Lease dated June 29, 1989 by and between ROPA and the Registrant for the Registrant's offices at 575 River Oaks Parkway, San Jose, California (incorporated by reference to Exhibit 10.16 to the 1990 Form 10-K). 10.12 Lease dated June 29, 1989 by and between ROPA and the Registrant for the Registrant's offices at 535 and 545 River Oaks Parkway, San Jose, California (incorporated by reference to Exhibit 10.17 to the 1990 Form 10-K). 10.13 Lease dated September 3, 1985 by and among the Richard T. Peery and John Arrillaga Separate Property Trusts ("P/A Trusts") and Valid Logic Systems Incorporated ("Valid") (which merged into the Registrant) for the Registrant's offices at 75 West Plumeria Avenue, San Jose, California (incorporated by reference to Exhibit 10.16 to the Form 10-K for Valid for the fiscal year ended December 30, 1990 (the "1990 Valid Form 10-K")). 10.14 Amendment Number 1, dated March 2, 1988, to Lease Agreement for 75 West Plumeria Avenue, San Jose, California, by and among Valid and the P/A Trusts (incorporated by reference to Exhibit 10.17 to the 1990 Valid Form 10-K). 10.15 Lease dated December 19, 1988 by and among the P/A Trusts and Valid for the Registrant's offices at 2835 North First Street, San Jose, California (incorporated by reference to Exhibit 10.18 to the 1990 Valid Form 10-K). 10.16 Lease dated September 3, 1985 by and among the P/A Trusts and Valid for the Registrant's offices at 2820 Orchard Parkway, San Jose, California (incorporated by reference to Exhibit 10.14 to the 1990 Valid Form 10-K). 10.17 Amendment Number 1, dated March 2, 1988, to Lease Agreement for 2820 Orchard Parkway, San Jose, California, by and among Valid and the P/A Trusts (incorporated by reference to Exhibit 10.15 to the 1990 Valid Form 10-K). 10.18 Form of Executive Compensation Agreement dated May 1989 between Registrant and Mr. Costello (incorporated by reference to Exhibit 10.20 to the Registrant's Form S-4 registration Statement (No. 33-31673), originally filed on October 18, 1989). 10.19 Offer letter to H. Raymond Bingham dated May 12, 1993 (incorporated by reference to Exhibit 10.24 to the 1993 Form 10-K). 10.20 Offer letter to M. Robert Leach dated May 17, 1993 (incorporated by reference to Exhibit 10.25 to the 1993 Form 10-K). 13 Exhibit Number Exhibit Title 10.21 Letter agreement dated March 9, 1994 by and among C.T. Properties, Inc.("General Partner"), Registrant, Montague Investors, L.P. ("Montague") and David M. Thede ("Thede") whereby Registrant acquired all of Thede's ownership interests in the C.T. Montague I, L.P. and C.T. Montague II, L.P. limited partnerships and the General Partner and all of Montague's interests in C.T. Montague I, L.P. (incorporated by reference to the 1993 Form 10-K). 10.22 1993 Non-Statutory Stock Option Plan (incorporated by reference to Exhibit 4.05 to the 1994 Form S-8). 10.23 Consulting agreement dated May 1, 1994 with Henry E. Johnston, who was made a director on July 5, 1994 by unanimous written consent (incorporated by reference to the Registrant's Form 10-Q for the quarterly period ended June 30, 1994 (the "1994 Second Quarter Form 10-Q")). 10.24 Consulting agreement dated October 26, 1993 with Alberto Sangiovanni-Vincentelli (incorporated by reference to the 1994 Second Quarter Form 10-Q). 10.25 Letter agreement dated August 17, 1994 by and among Registrant, Morris Management Company (the "General Partner"), and Morris Associates VI, L.P. ("Morris") whereby Registrant acquired all of the interests in River Oaks Place Associates, L.P. (incorporated by reference to the Registrant's Form 8-K filed November 14, 1994). 10.26 Agreement of Merger and Plan of Reorganization by and among Registrant, Simon Software, Inc. and Redwood Design Automation, Inc. ("Redwood") dated as of July 8, 1994 (incorporated by reference to the Registrant's Form 10-Q/A, Amendment Number 1 to the 1994 Second Quarter Form 10-Q, filed November 14, 1994 (the "1994 Second Quarter 10-Q/A"). 10.27 Agreement of Merger dated as of August 1, 1994 between Redwood and CDS Corporation (incorporated by reference to the Registrant's 1994 Second Quarter 10-Q/A). 10.28 Form of Stock Option Agreement for Registrant's 1993 Non Statutory Stock Option Plan (incorporated by reference to the Registrant's Form 10-Q for the third quarter ended September 30, 1994). 27.1 Financial data schedule for the period ended April 1,1995. (b) No reports on Form 8-K have been filed during the quarter ended April 1, 1995. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CADENCE DESIGN SYSTEMS, INC. (Registrant) DATE: May 12, 1995 By: /s/ Joseph B. Costello JOSEPH B. COSTELLO President and Chief Executive Officer DATE: May 12, 1995 By: /s/ H. Raymond Bingham H. RAYMOND BINGHAM Executive Vice President and Chief Financial Officer 15
EX-10 2 CADENCE DESIGN SYSTEMS, INC. A Delaware Corporation 1993 DIRECTORS STOCK OPTION PLAN As Adopted July 22, 1993 1. Purpose. This Stock Option Plan ("Plan") is established to provide equity incentives for members of the Board of Directors of Cadence Design Systems, Inc., a Delaware corporation (the "Company") who are not employees of the Company, by granting such persons options to purchase shares of stock of the Company. 2. Adoption and Stockholder Approval. This Plan shall become effective on the date that it is adopted by the Board of Directors (the "Board") of the Company. This Plan shall be approved by the stockholders of the Company within twelve months before or after the date this Plan is adopted by the Board. 3. Types of Options and Shares. Options granted under this Plan (the "Options") shall be nonqualified stock options ("NQSOs"). The shares of stock that may be purchased upon exercise of Options granted under this Plan (the "Shares") are shares of the common stock of the Company. 4. Number of Shares. The maximum number of Shares that may be issued pursuant to Options granted under this Plan is 107,223 Shares*, subject to adjustment as provided in this Plan. If any Option is terminated for any reason without being exercised in whole or in part, the Shares thereby released from such Option shall be available for purchase under other Options subsequently granted under this Plan. At all times during the term of this Plan, the Company shall reserve and keep available such number of Shares as shall be required to satisfy the requirements of outstanding Options under this Plan. 5. Administration. This Plan shall be administered by the Board or by a committee of not less than two members of the Board appointed to administer this Plan (the "Committee"). As used in this Plan, references to the Committee shall mean either such Committee or the Board if no committee has been established. The interpretation by the Committee of any of the provisions of this Plan or any Option granted under this Plan shall be final and binding upon the Company and all persons having an interest in any Option or any Shares purchased pursuant to an Option. 6. Eligibility. The Directors Plan provides that options may be granted only to such directors of the Company (collectively, "Optionees" and individually "Optionee") as the Committee shall select from time to time; provided, however, that no director of the Company who is also an employee of the Company or of any parent or subsidiary of the Company may be granted an Option. Optionees may be granted more than one Option; provided, however, that the aggregate number of shares subject to all Options granted to an Optionee will be as follows: (i) 100,000 shares, in the case of Options granted to the Chairman of the Board and (ii) 50,000 shares, in the case of Options granted to any other director. Options will be granted on the date or dates specified in Section 7(d) below. The provisions of this Section 6 shall not be amended more than once every six months, other than to comply with changes in the Internal Revenue Code of 1986, as amended or the rules thereunder. 16 7. Terms and Conditions of Options. The Committee shall determine all terms and conditions of the Option, subject to the following terms and conditions: (a) Form of Option Grant. Each Option granted under this Plan shall be evidenced by a written Stock Option Grant ("Grant") in such form (which need not be the same for each Optionee) as the Committee shall from time to time approve, which Grant shall comply with and be subject to the terms and conditions of this Plan. (b) Exercise Price. The exercise price of an Option shall be the fair market value of the Shares, at the time that the Option is granted, as determined by the Committee in good faith; provided, however, that where there is a public market for the Company's Common Stock, the fair market value per Share shall be the average of the high and low closing sales price of the Company's Common Stock on the date of grant, as quoted on the New York Stock Exchange. *Does not include 337,777 Options granted under the predecessor plan (the 1988 Directors Stock Option Plan). (c) Exercise Period. Options shall be exercisable as to 1/3rd of the Shares on the first anniversary of the Grant Date and as to an additional 1/36th of the Shares for each full month thereafter, and remain exercisable for a period of ten years; provided, however, that no Option shall be exercisable after the expiration of ten years from the date of grant, and provided further that notwithstanding anything to the contrary, with respect to the initial grant of an Option, if an Optionee ceases to serve as Chairman of the Board but continues to serve as a member of the Board, then Options to purchase in excess of an aggregate of 50,000 shares ("Extra Options") held by such Optionee shall terminate and may not be exercised, except within the time periods and to the extent described in the Grant, with the date of such cessation deemed the Termination Date, and the fact of such cessation deemed the cessation or termination of service as a Director, within the meaning of those Sections with respect only to such Extra Options. (d) Date of Grant. The initial Option grant to a director shall be for 20,000 shares and such Option will be deemed granted on the date of appointment to the position of director. Subsequent grants in increments of 15,000 shares up to the maximum of 50,000 shares shall be immediately after the date on which his or her outstanding options become fully exercisable. The date of grant of an Extra Option for the Chairman of the Board and Chairman of the Compensation Committee shall be immediately upon election to such position, whichever is later, or upon stockholder approval of an amendment to the Plan, authorizing such Extra Option. The Grant representing the Option shall be delivered to the Optionee within a reasonable time after the granting of the Option. 8. Exercise of Options. (a) Notice. Options may be exercised only by delivery to the Company of written notice and exercise agreement in a form approved by the Committee, stating the number of Shares being purchased, the restrictions imposed on the Shares and such representations and agreements regarding the Optionee's investment intent and access to information as may be required by the Company to comply with applicable securities laws, together with payment in full of the exercise price for the number of Shares being purchased. (b) Payment. Payment for the Shares may be made (i) in cash (by check), (ii) by surrender of shares of common stock of the Company having a fair market value equal to the exercise price of the Option: (iii) where permitted by applicable law, by tender of a full recourse promissory note having such terms as may be approved by the Committee; or (iv) by any combination of the foregoing. (c) Withholding Taxes. Prior to issuance of the Shares upon exercise of an Option, the Optionee shall pay or make adequate provision for federal or state withholding obligations of the Company, if applicable. (d) Limitations on Exercise. Notwithstanding the exercise periods set forth in the Grant, exercise of an Option shall always by subject to the following limitations: (i) An Option shall not be exercisable unless such exercise is in compliance with the Securities Act of 1933, as amended, and all applicable state securities laws, as they are in effect on the date of exercise. (ii) An Option shall not be exercisable until this Plan has been approved by the stockholders of the Company. (iii) The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent the Optionee from exercising the full number of Shares as to which the Option is then exercisable. 9. Nontransferability of Options. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee. No Option may be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution. 17 10. Privileges of Stock Ownership. No Optionee shall have any of the rights of a stockholder with respect to any Shares subject to an Option until the Option has been validly exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date of exercise, except as provided in this Plan. The Company shall provide to each Optionee a copy of the annual financial statements of the Company, at such time after the close of each fiscal year of the Company as they are released by the Company to its stockholders. 11. Adjustment of Option Shares. In the event that the number of outstanding shares of common stock of the Company is changed by a stock dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the Company without consideration, the number of Shares available under this Plan and the number of Shares subject to outstanding Options and the exercise price per share of such Options shall be proportionately adjusted, subject to any required action by the Board or stockholders of the Company and compliance with applicable securities laws; provided, however, that no certificate or scrip representing fractional shares shall be issued upon exercise of any Option and any resulting fractions of a Share shall be ignored. 12. No Obligation to Retain. Nothing in this Plan or any Option granted under this Plan shall confer to any Optionee any right to continue as a Director of the Company. 13. Compliance with Laws. The grant of Options and the issuance of Shares upon exercise of any Options shall be subject to and conditioned upon compliance with all applicable requirements of law, including without limitation compliance with the Securities Act of 1933, as amended, any required approval by the Commissioner of Corporations of the State of California, compliance with all other applicable state securities laws and compliance with the requirements of any stock exchange on which the Shares may be listed. The Company shall be under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the registration or qualification requirement of any state securities laws or stock exchange. 14. Acceleration of Options on Acquisition. In the event of a dissolution or liquidation of the Company, a merger in which the Company is not the surviving corporation, or the sale of substantially all of the assets of the Company, any or all outstanding Options shall, notwithstanding any contrary terms of the Grant, accelerate and become exercisable in full prior to the consummation of such dissolution, liquidation, merger or sale of assets. 15. Amendment or Termination of Plan. Subject to the limitations set forth in Section 6 above, the Committee may at any time terminate or amend this Plan in any respect (including, but not limited to, any form of Grant, agreement or instrument to be executed pursuant to this Plan); provided, however, that the Committee shall not, without the approval of the stockholders of the Company, increase the total number of Shares available under this Plan (except by operation of the provisions of this Plan) or change the class of persons eligible to receive Options. In any case, no amendment of this Plan may adversely affect any then outstanding Options or any unexercised portions thereof without the written consent of the Optionee. 16. Term of Plan. Options may be granted pursuant to this Plan from time to time within a period of ten years from the date this Plan is adopted by the Board of Directors. EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1000 QTR-1 DEC-30-1995 APR-01-1995 97,920 13,275 63,429 0 5,867 192,982 229,941 105,534 367,435 174,586 0 121,215 0 0 50,080 367,435 116,033 116,033 24,963 24,963 72,581 0 0 18,066 4,516 13,550 0 0 0 13,550 0.32 0.32
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